0000891836-01-500310.txt : 20011030 0000891836-01-500310.hdr.sgml : 20011030 ACCESSION NUMBER: 0000891836-01-500310 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 20011025 GROUP MEMBERS: AT&TCORP. GROUP MEMBERS: HOWARD S. JONAS GROUP MEMBERS: IDT DOMESTIC TELECOM, INC. GROUP MEMBERS: IDT DOMESTIC-UNION, LLC GROUP MEMBERS: IDT INVESTMENTS INC. GROUP MEMBERS: IDT NEVADA HOLDINGS, INC. GROUP MEMBERS: IDT TELECOM, INC. GROUP MEMBERS: ITELTECH, LLC GROUP MEMBERS: NET2PHONE HOLDINGS, L.L.C. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: NET2PHONE INC CENTRAL INDEX KEY: 0001086472 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 223559037 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-56655 FILM NUMBER: 1766697 BUSINESS ADDRESS: STREET 1: 520 BROAD STREET CITY: NEWARK STATE: NJ ZIP: 07102 BUSINESS PHONE: 9734122800 MAIL ADDRESS: STREET 1: 17 MAIN STREET CITY: HACKENSACK STATE: NJ ZIP: 07601 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: IDT CORP CENTRAL INDEX KEY: 0001005731 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 223415036 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 190 MAIN ST CITY: HACKENSACK STATE: NJ ZIP: 07601 BUSINESS PHONE: 2019281000 MAIL ADDRESS: STREET 1: 294 STATE STREET CITY: HACKENSACK STATE: NJ ZIP: 07601 SC 13D/A 1 sc0150.txt SCHEDULE 13D, AMENDMENT NO. 1 ----------------------------- OMB APPROVAL ----------------------------- OMB Number: 3235-0145 Expires: October 31, 2002 Estimated average burden hours per response....14.90 ----------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. 1) NET2PHONE, INC. -------------------------------------------------------------------------------- (Name of Issuer) COMMON STOCK, PAR VALUE $0.01 PER SHARE -------------------------------------------------------------------------------- (Title of Class of Securities) 64108N10 ------------------------------------------------------------- (CUSIP Number) JOYCE J. MASON, ESQ. MARILYN J. WASSER, ESQ. GENERAL COUNSEL AND SECRETARY VICE PRESIDENT - LAW AND SECRETARY IDT CORPORATION AT&T CORP. 520 BROAD STREET 295 NORTH MAPLE AVENUE NEWARK, NEW JERSEY 07102 BASKING RIDGE, NEW JERSEY 07920 (973) 438-1000 (908) 221-2000 -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) OCTOBER 19, 2001 ------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of ss.ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box [x]. NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See ss. 240.13d-7 for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. ------------------ ------------------ CUSIP No. 64108N10 Page 2 of 22 Pages ------------------ ------------------ ________________________________________________________________________________ 1 NAME OF REPORTING PERSONS. NET2PHONE HOLDINGS, L.L.C. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY). 52-2348660 ________________________________________________________________________________ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) [_] (b) [x] ________________________________________________________________________________ 3 SEC USE ONLY ________________________________________________________________________________ 4 SOURCE OF FUNDS (SEE INSTRUCTIONS) OO ________________________________________________________________________________ 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [_] ________________________________________________________________________________ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware ________________________________________________________________________________ 7 SOLE VOTING POWER 28,896,750 NUMBER OF SHARES _________________________________________________________________ BENEFICIALLY 8 SHARED VOTING POWER N/A OWNED BY EACH _________________________________________________________________ REPORTING 9 SOLE DISPOSITIVE POWER 28,896,750 PERSON WITH _________________________________________________________________ 10 SHARED DISPOSITIVE POWER N/A ________________________________________________________________________________ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 28,896,750 ________________________________________________________________________________ 12 CHECK IF AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) [_] ________________________________________________________________________________ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 79.34%* ________________________________________________________________________________ 14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) OO ________________________________________________________________________________ * All the shares beneficially held by the Reporting Person are shares of Class A Common Stock, par value $0.01 per share, of the Issuer ("Class A Stock"). Each share of Class A Stock is convertible into one share of Common Stock, par value $0.01 per share, of the Issuer ("Common Stock") without consideration being paid therefor. Each share of Class A Stock has two votes per share and each share of Common Stock has one vote per share. The Class A Stock beneficially owned by the Reporting Person represents approximately 60.59% of the aggregate voting power of the Issuer. The calculations are based on a total of 58,963,113 shares outstanding, consisting of 22,541,613 shares of Common Stock and 36,421,500 shares of Class A Stock, as last reported by Net2Phone in its Form 10-Q for the three months ended April 30, 2001. ------------------ ------------------ CUSIP No. 64108N10 Page 3 of 22 Pages ------------------ ------------------ ________________________________________________________________________________ 1 NAME OF REPORTING PERSONS. IDT DOMESTIC-UNION, LLC ________________________________________________________________________________ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) [_] (b) [x] ________________________________________________________________________________ 3 SEC USE ONLY ________________________________________________________________________________ 4 SOURCE OF FUNDS (SEE INSTRUCTIONS) N/A ________________________________________________________________________________ 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [_] ________________________________________________________________________________ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware ________________________________________________________________________________ 7 SOLE VOTING POWER 28,896,750 NUMBER OF SHARES _________________________________________________________________ BENEFICIALLY 8 SHARED VOTING POWER N/A OWNED BY EACH _________________________________________________________________ REPORTING 9 SOLE DISPOSITIVE POWER N/A PERSON WITH _________________________________________________________________ 10 SHARED DISPOSITIVE POWER 28,896,750 ________________________________________________________________________________ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 28,896,750 ________________________________________________________________________________ 12 CHECK IF AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) [_] ________________________________________________________________________________ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 79.34%* ________________________________________________________________________________ 14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) 00 ________________________________________________________________________________ * All the shares beneficially held by the Reporting Person are shares of Class A Common Stock, par value $0.01 per share, of the Issuer ("Class A Stock"). Each share of Class A Stock is convertible into one share of Common Stock, par value $0.01 per share, of the Issuer ("Common Stock") without consideration being paid therefor. Each share of Class A Stock has two votes per share and each share of Common Stock has one vote per share. The Class A Stock beneficially owned by the Reporting Person represents approximately 60.59% of the aggregate voting power of the Issuer. The calculations are based on a total of 58,963,113 shares outstanding, consisting of 22,541,613 shares of Common Stock and 36,421,500 shares of Class A Stock, as last reported by Net2Phone in its Form 10-Q for the three months ended April 30, 2001. ------------------ ------------------ CUSIP No. 64108N10 Page 4 of 22 Pages ------------------ ------------------ ________________________________________________________________________________ 1 NAME OF REPORTING PERSONS. IDT INVESTMENTS INC. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY). 88-0469107 ________________________________________________________________________________ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) [_] (b) [x] ________________________________________________________________________________ 3 SEC USE ONLY ________________________________________________________________________________ 4 SOURCE OF FUNDS (SEE INSTRUCTIONS) N/A ________________________________________________________________________________ 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [_] ________________________________________________________________________________ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Nevada ________________________________________________________________________________ 7 SOLE VOTING POWER 28,896,750 NUMBER OF SHARES _________________________________________________________________ BENEFICIALLY 8 SHARED VOTING POWER N/A OWNED BY EACH _________________________________________________________________ REPORTING 9 SOLE DISPOSITIVE POWER 28,896,750 PERSON WITH _________________________________________________________________ 10 SHARED DISPOSITIVE POWER N/A ________________________________________________________________________________ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 28,896,750 ________________________________________________________________________________ 12 CHECK IF AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) [_] ________________________________________________________________________________ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 79.34%* ________________________________________________________________________________ 14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) CO ________________________________________________________________________________ * All the shares beneficially held by the Reporting Person are shares of Class A Common Stock, par value $0.01 per share, of the Issuer ("Class A Stock"). Each share of Class A Stock is convertible into one share of Common Stock, par value $0.01 per share, of the Issuer ("Common Stock") without consideration being paid therefor. Each share of Class A Stock has two votes per share and each share of Common Stock has one vote per share. The Class A Stock beneficially owned by the Reporting Person represents approximately 60.59% of the aggregate voting power of the Issuer. The calculations are based on a total of 58,963,113 shares outstanding, consisting of 22,541,613 shares of Common Stock and 36,421,500 shares of Class A Stock, as last reported by Net2Phone in its Form 10-Q for the three months ended April 30, 2001. ------------------ ------------------ CUSIP No. 64108N10 Page 5 of 22 Pages ------------------ ------------------ ________________________________________________________________________________ 1 NAME OF REPORTING PERSONS. IDT NEVADA HOLDINGS, INC. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY). 06-1613439 ________________________________________________________________________________ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) [_] (b) [x] ________________________________________________________________________________ 3 SEC USE ONLY ________________________________________________________________________________ 4 SOURCE OF FUNDS (SEE INSTRUCTIONS) N/A ________________________________________________________________________________ 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [_] ________________________________________________________________________________ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Nevada ________________________________________________________________________________ 7 SOLE VOTING POWER 28,896,750 NUMBER OF SHARES _________________________________________________________________ BENEFICIALLY 8 SHARED VOTING POWER N/A OWNED BY EACH _________________________________________________________________ REPORTING 9 SOLE DISPOSITIVE POWER N/A PERSON WITH _________________________________________________________________ 10 SHARED DISPOSITIVE POWER 28,896,750 ________________________________________________________________________________ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 28,896,750 ________________________________________________________________________________ 12 CHECK IF AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) [_] ________________________________________________________________________________ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 79.34%* ________________________________________________________________________________ 14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) CO ________________________________________________________________________________ * All the shares beneficially held by the Reporting Person are shares of Class A Common Stock, par value $0.01 per share, of the Issuer ("Class A Stock"). Each share of Class A Stock is convertible into one share of Common Stock, par value $0.01 per share, of the Issuer ("Common Stock") without consideration being paid therefor. Each share of Class A Stock has two votes per share and each share of Common Stock has one vote per share. The Class A Stock beneficially owned by the Reporting Person represents approximately 60.59% of the aggregate voting power of the Issuer. The calculations are based on a total of 58,963,113 shares outstanding, consisting of 22,541,613 shares of Common Stock and 36,421,500 shares of Class A Stock, as last reported by Net2Phone in its Form 10-Q for the three months ended April 30, 2001. ------------------ ------------------ CUSIP No. 64108N10 Page 6 of 22 Pages ------------------ ------------------ ________________________________________________________________________________ 1 NAME OF REPORTING PERSONS. IDT DOMESTIC TELECOM, INC. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY). 52-2310760 ________________________________________________________________________________ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) [_] (b) [x] ________________________________________________________________________________ 3 SEC USE ONLY ________________________________________________________________________________ 4 SOURCE OF FUNDS (SEE INSTRUCTIONS) N/A ________________________________________________________________________________ 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [_] ________________________________________________________________________________ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware ________________________________________________________________________________ 7 SOLE VOTING POWER 28,896,750 NUMBER OF SHARES _________________________________________________________________ BENEFICIALLY 8 SHARED VOTING POWER N/A OWNED BY EACH _________________________________________________________________ REPORTING 9 SOLE DISPOSITIVE POWER N/A PERSON WITH _________________________________________________________________ 10 SHARED DISPOSITIVE POWER 28,896,750 ________________________________________________________________________________ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 28,896,750 ________________________________________________________________________________ 12 CHECK IF AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) [_] ________________________________________________________________________________ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 79.34%* ________________________________________________________________________________ 14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) CO ________________________________________________________________________________ * All the shares beneficially held by the Reporting Person are shares of Class A Common Stock, par value $0.01 per share, of the Issuer ("Class A Stock"). Each share of Class A Stock is convertible into one share of Common Stock, par value $0.01 per share, of the Issuer ("Common Stock") without consideration being paid therefor. Each share of Class A Stock has two votes per share and each share of Common Stock has one vote per share. The Class A Stock beneficially owned by the Reporting Person represents approximately 60.59% of the aggregate voting power of the Issuer. The calculations are based on a total of 58,963,113 shares outstanding, consisting of 22,541,613 shares of Common Stock and 36,421,500 shares of Class A Stock, as last reported by Net2Phone in its Form 10-Q for the three months ended April 30, 2001. ------------------ ------------------ CUSIP No. 64108N10 Page 7 of 22 Pages ------------------ ------------------ ________________________________________________________________________________ 1 NAME OF REPORTING PERSONS. IDT TELECOM, INC. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY). 22-3696918 ________________________________________________________________________________ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) [_] (b) [x] ________________________________________________________________________________ 3 SEC USE ONLY ________________________________________________________________________________ 4 SOURCE OF FUNDS (SEE INSTRUCTIONS) N/A ________________________________________________________________________________ 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [_] ________________________________________________________________________________ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware ________________________________________________________________________________ 7 SOLE VOTING POWER 28,896,750 NUMBER OF SHARES _________________________________________________________________ BENEFICIALLY 8 SHARED VOTING POWER N/A OWNED BY EACH _________________________________________________________________ REPORTING 9 SOLE DISPOSITIVE POWER N/A PERSON WITH _________________________________________________________________ 10 SHARED DISPOSITIVE POWER 28,896,750 ________________________________________________________________________________ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 28,896,750 ________________________________________________________________________________ 12 CHECK IF AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) [_] ________________________________________________________________________________ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 79.34%* ________________________________________________________________________________ 14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) CO ________________________________________________________________________________ * All the shares beneficially held by the Reporting Person are shares of Class A Common Stock, par value $0.01 per share, of the Issuer ("Class A Stock"). Each share of Class A Stock is convertible into one share of Common Stock, par value $0.01 per share, of the Issuer ("Common Stock") without consideration being paid therefor. Each share of Class A Stock has two votes per share and each share of Common Stock has one vote per share. The Class A Stock beneficially owned by the Reporting Person represents approximately 60.59% of the aggregate voting power of the Issuer. The calculations are based on a total of 58,963,113 shares outstanding, consisting of 22,541,613 shares of Common Stock and 36,421,500 shares of Class A Stock, as last reported by Net2Phone in its Form 10-Q for the three months ended April 30, 2001. ------------------ ------------------ CUSIP No. 64108N10 Page 8 of 22 Pages ------------------ ------------------ ________________________________________________________________________________ 1 NAME OF REPORTING PERSONS. IDT CORPORATION I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY). 22-3415036 ________________________________________________________________________________ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) [_] (b) [x] ________________________________________________________________________________ 3 SEC USE ONLY ________________________________________________________________________________ 4 SOURCE OF FUNDS (SEE INSTRUCTIONS) N/A ________________________________________________________________________________ 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [_] ________________________________________________________________________________ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware ________________________________________________________________________________ 7 SOLE VOTING POWER 28,896,750 NUMBER OF SHARES _________________________________________________________________ BENEFICIALLY 8 SHARED VOTING POWER N/A OWNED BY EACH _________________________________________________________________ REPORTING 9 SOLE DISPOSITIVE POWER N/A PERSON WITH _________________________________________________________________ 10 SHARED DISPOSITIVE POWER 28,896,750 ________________________________________________________________________________ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 28,896,750 ________________________________________________________________________________ 12 CHECK IF AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) [_] ________________________________________________________________________________ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 79.34%* ________________________________________________________________________________ 14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) CO ________________________________________________________________________________ * All the shares beneficially held by the Reporting Person are shares of Class A Common Stock, par value $0.01 per share, of the Issuer ("Class A Stock"). Each share of Class A Stock is convertible into one share of Common Stock, par value $0.01 per share, of the Issuer ("Common Stock") without consideration being paid therefor. Each share of Class A Stock has two votes per share and each share of Common Stock has one vote per share. The Class A Stock beneficially owned by the Reporting Person represents approximately 60.59% of the aggregate voting power of the Issuer. The calculations are based on a total of 58,963,113 shares outstanding, consisting of 22,541,613 shares of Common Stock and 36,421,500 shares of Class A Stock, as last reported by Net2Phone in its Form 10-Q for the three months ended April 30, 2001. ------------------ ------------------ CUSIP No. 64108N10 Page 9 of 22 Pages ------------------ ------------------ ________________________________________________________________________________ 1 NAME OF REPORTING PERSONS. HOWARD S. JONAS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY). ________________________________________________________________________________ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) [_] (b) [x] ________________________________________________________________________________ 3 SEC USE ONLY ________________________________________________________________________________ 4 SOURCE OF FUNDS (SEE INSTRUCTIONS) N/A ________________________________________________________________________________ 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [_] ________________________________________________________________________________ 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States ________________________________________________________________________________ 7 SOLE VOTING POWER 28,896,750 NUMBER OF SHARES _________________________________________________________________ BENEFICIALLY 8 SHARED VOTING POWER N/A OWNED BY EACH _________________________________________________________________ REPORTING 9 SOLE DISPOSITIVE POWER N/A PERSON WITH _________________________________________________________________ 10 SHARED DISPOSITIVE POWER 28,896,750 ________________________________________________________________________________ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 28,896,750 ________________________________________________________________________________ 12 CHECK IF AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) [_] ________________________________________________________________________________ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 79.34%* ________________________________________________________________________________ 14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) IN ________________________________________________________________________________ * All the shares beneficially held by the Reporting Person are shares of Class A Common Stock, par value $0.01 per share, of the Issuer ("Class A Stock"). Each share of Class A Stock is convertible into one share of Common Stock, par value $0.01 per share, of the Issuer ("Common Stock") without consideration being paid therefor. Each share of Class A Stock has two votes per share and each share of Common Stock has one vote per share. The Class A Stock beneficially owned by the Reporting Person represents approximately 60.59% of the aggregate voting power of the Issuer. The calculations are based on a total of 58,963,113 shares outstanding, consisting of 22,541,613 shares of Common Stock and 36,421,500 shares of Class A Stock, as last reported by Net2Phone in its Form 10-Q for the three months ended April 30, 2001. ------------------ ------------------ CUSIP No. 64108N10 Page 10 of 22 Pages ------------------ ------------------ ________________________________________________________________________________ 1 NAME OF REPORTING PERSONS. ITELTECH, LLC I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY). 22-3747756 ________________________________________________________________________________ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) [_] (b) [x] ________________________________________________________________________________ 3 SEC USE ONLY ________________________________________________________________________________ 4 SOURCE OF FUNDS (SEE INSTRUCTIONS) N/A ________________________________________________________________________________ 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [_] ________________________________________________________________________________ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware ________________________________________________________________________________ 7 SOLE VOTING POWER N/A NUMBER OF SHARES _________________________________________________________________ BENEFICIALLY 8 SHARED VOTING POWER N/A OWNED BY EACH _________________________________________________________________ REPORTING 9 SOLE DISPOSITIVE POWER N/A PERSON WITH _________________________________________________________________ 10 SHARED DISPOSITIVE POWER 28,896,750 ________________________________________________________________________________ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 28,896,750 ________________________________________________________________________________ 12 CHECK IF AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) [_] ________________________________________________________________________________ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 79.34%* ________________________________________________________________________________ 14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) 00 ________________________________________________________________________________ * All the shares beneficially held by the Reporting Person are shares of Class A Common Stock, par value $0.01 per share, of the Issuer ("Class A Stock"). Each share of Class A Stock is convertible into one share of Common Stock, par value $0.01 per share, of the Issuer ("Common Stock") without consideration being paid therefor. Each share of Class A Stock has two votes per share and each share of Common Stock has one vote per share. The Class A Stock beneficially owned by the Reporting Person represents approximately 60.59% of the aggregate voting power of the Issuer. The calculations are based on a total of 58,963,113 shares outstanding, consisting of 22,541,613 shares of Common Stock and 36,421,500 shares of Class A Stock, as last reported by Net2Phone in its Form 10-Q for the three months ended April 30, 2001. ------------------ ------------------ CUSIP No. 64108N10 Page 11 of 22 Pages ------------------ ------------------ ________________________________________________________________________________ 1 NAME OF REPORTING PERSONS. AT&T CORP. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY). 13-4924710 ________________________________________________________________________________ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) [_] (b) [x] ________________________________________________________________________________ 3 SEC USE ONLY ________________________________________________________________________________ 4 SOURCE OF FUNDS (SEE INSTRUCTIONS) N/A ________________________________________________________________________________ 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [_] ________________________________________________________________________________ 6 CITIZENSHIP OR PLACE OF ORGANIZATION New York ________________________________________________________________________________ 7 SOLE VOTING POWER N/A NUMBER OF SHARES _________________________________________________________________ BENEFICIALLY 8 SHARED VOTING POWER N/A OWNED BY EACH _________________________________________________________________ REPORTING 9 SOLE DISPOSITIVE POWER N/A PERSON WITH _________________________________________________________________ 10 SHARED DISPOSITIVE POWER 28,896,750 ________________________________________________________________________________ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 28,896,750 ________________________________________________________________________________ 12 CHECK IF AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) [_] ________________________________________________________________________________ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 79.34%* ________________________________________________________________________________ 14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) CO ________________________________________________________________________________ * All the shares beneficially held by the Reporting Person are shares of Class A Common Stock, par value $0.01 per share, of the Issuer ("Class A Stock"). Each share of Class A Stock is convertible into one share of Common Stock, par value $0.01 per share, of the Issuer ("Common Stock") without consideration being paid therefor. Each share of Class A Stock has two votes per share and each share of Common Stock has one vote per share. The Class A Stock beneficially owned by the Reporting Person represents approximately 60.59% of the aggregate voting power of the Issuer. The calculations are based on a total of 58,963,113 shares outstanding, consisting of 22,541,613 shares of Common Stock and 36,421,500 shares of Class A Stock, as last reported by Net2Phone in its Form 10-Q for the three months ended April 30, 2001. The undersigned hereby file this Amendment No. 1 (this "Amendment") to the Schedule 13D filed by IDT Investments Inc., IDT Corporation and Howard S. Jonas with the Securities and Exchange Commission (the "SEC") on August 21, 2000 (the "IDT Schedule 13D") and the Schedule 13D filed by ITelTech, LLC and AT&T Corp. with the SEC on August 22, 2000 (the "AT&T Schedule 13D"), each relating to the Common Stock, par value $0.01 per share, of Net2Phone, Inc. This Amendment amends and restates each of the IDT Schedule 13D and AT&T Schedule 13D in its entirety. ITEM 1. SECURITY AND ISSUER This statement relates to shares of Common Stock, par value $0.01 per share ("Common Stock"), of Net2Phone, Inc., a Delaware corporation ("Net2Phone"). The principal executive offices of Net2Phone are located at 520 Broad Street, Newark, New Jersey 07102. ITEM 2. IDENTITY AND BACKGROUND (a)-(b) Net2Phone Holdings, L.L.C. is a Delaware limited liability company ("Net2Phone Holdings"). Net2Phone Holdings is a holding company, which will actively manage the Class A Common Stock, par value $0.01 per share ("Class A Stock"), of Net2Phone contributed to it by its members. The members of Net2Phone Holdings consist of IDT Domestic-Union, LLC ("IDT D-U"), ITelTech, LLC ("ITelTech"), LMC Animal Planet, Inc. ("LMC") and IDT Investments Inc. ("IDT Investments"). The address of its principal office and principal place of business is 400 North Stephanie Street, Eastgate Plaza, Suite 235, Henderson, Nevada 89014. IDT D-U is a Delaware limited liability company. IDT D-U is a holding company, which holds membership interests of Net2Phone Holdings, L.L.C. and Union Telecard Alliance, LLC. The members of IDT D-U consist of IDT Investments and IDT Domestic Telecom, Inc. ("IDT D-T"). The address of its principal office and principal place of business is 520 Broad Street, Newark, New Jersey 07102. IDT Investments is a Nevada corporation. IDT Investments is a holding company, which holds IDT Corporation's ("IDT") equity investments in telecommunications and Internet-related companies. IDT Investments is a majority owned subsidiary of IDT Nevada Holdings, Inc. ("IDT Nevada"). The address of its principal office and principal place of business is 400 North Stephanie Street, Eastgate Plaza, Suite 235, Henderson, Nevada 89014. IDT Nevada is a Nevada corporation. IDT Nevada is a holding company, which is wholly-owned by IDT. The address of its principal office and principal place of business is 400 North Stephanie Street, Eastgate Plaza, Suite 235, Henderson, Nevada 89014. IDT D-T is a Delaware corporation. IDT D-T is a facilities-based, domestic carrier that provides a broad range of telecommunications services to wholesale and retail customers. IDT D-T is wholly-owned by IDT Telecom, Inc. ("IDT Telecom"). IDT D-T is the managing member of IDT D-U. The address of its principal office and principal place of business is 520 Broad Street, Newark, New Jersey 07102. IDT Telecom is a Delaware corporation. IDT Telecom is a facilities-based, multinational carrier that provides a broad range of telecommunications services to wholesale and retail customers. IDT Telecom is majority-owned by IDT. The address of its principal office and principal place of business is 520 Broad Street, Newark, New Jersey 07102. IDT is a Delaware corporation. IDT is a holding company, which owns a majority of the shares of IDT Telecom and IDT Investments (through IDT Nevada), and all of the shares of IDT Ventures, Inc., which develops innovative telecom and Internet-related businesses. The address of its principal office and principal place of business is 520 Broad Street, Newark, New Jersey 07102. Page 12 of 22 Howard S. Jonas is the Chairman of the Board of Directors and Treasurer of IDT, Chairman of IDT Telecom, director of IDT D-T, and the interim Chief Executive Officer and director of Net2Phone and owns approximately 52.99% of the voting power of IDT. The address of his principal office and principal place of business is 520 Broad Street, Newark, New Jersey 07102. ITelTech is a Delaware limited liability company, which is wholly-owned by AT&T Corp. ("AT&T"). The address of its principal office and principal place of business is 32 Avenue of the Americas, New York, New York 10013-2412. AT&T, a New York corporation, is among the world's communications leaders, providing voice, data, video and broadband telecommunications services to large and small businesses, consumers and government agencies. AT&T provides domestic and international long distance, regional and local communications services, cable television and Internet communication services. AT&T also provides billing, directory and calling-card services to support our communications businesses. The address of its principal office and principal place of business is 32 Avenue of the Americas, New York, New York 10013-2412. (c) The name, business address, and principal occupation of each executive officer, director and manager of Net2Phone Holdings, IDT D-U, IDT Investments, IDT Nevada, IDT D-T, IDT Telecom, IDT, ITelTech and AT&T is set forth in Exhibits 1, 2, 3, 4, 5, 6, 7, 8 and 9 hereto and is incorporated herein by reference. (d) During the last five years, none of the Reporting Persons, nor to the best of Net2Phone Holdings' knowledge, any of Net2Phone Holdings' managers, nor to the best of IDT D-U's knowledge, any of IDT D-U's managers, nor to the best of IDT Investments' knowledge, any of IDT Investments' directors or executive officers, nor to the best of IDT Nevada's knowledge, any of IDT Nevada's directors or executive officers, nor to the best of IDT D-T's knowledge, any of IDT D-T's directors or executive officers, nor to the best of IDT Telecom's knowledge, any of IDT Telecom's directors or executive officers, nor to the best of IDT's knowledge, any of IDT's directors or executive officers, nor to the best of ITelTech's knowledge, any of ITelTech's directors or executive officers, nor to the best of AT&T's knowledge, any of AT&T's directors or executive officers, has been convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors). (e) During the last five years, none of the Reporting Persons, nor to the best of Net2Phone Holdings' knowledge, any of Net2Phone Holdings' managers, nor to the best of IDT D-U's knowledge, any of IDT D-U's managers, nor to the best of IDT Investments' knowledge, any of IDT Investments' directors or executive officers, nor to the best of IDT Nevada's knowledge, any of IDT Nevada's directors or executive officers, nor to the best of IDT D-T's knowledge, any of IDT D-T's directors or executive officers, nor to the best of IDT Telecom's knowledge, any of IDT Telecom's directors or executive officers, nor to the best of IDT's knowledge, any of IDT's directors or executive officers, nor to the best of ITelTech's knowledge, any of ITelTech's directors or executive officers, nor to the best of AT&T's knowledge, any of AT&T's directors or executive officers, has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction resulting in a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws, or finding any violation with respect to such laws, and which judgment, decree or final order was not subsequently vacated. (f) To the best of Net2Phone Holdings' knowledge, each of the managers of Net2Phone Holdings named in Exhibit 1 is a United States citizen. IDT D-U's managing member, IDT D-T, is a Delaware corporation. To the best of IDT Investments' knowledge, each of the executive officers and directors of IDT Investments named in Exhibit 3 is a United States citizen, except as indicated in Exhibit 3. To the best of IDT Nevada's knowledge, each of the executive officers and directors of IDT Nevada named in Exhibit 4 is a United States citizen, except as indicated in Exhibit 4. Page 13 of 22 To the best of IDT D-T's knowledge, each of the executive officers and directors of IDT D-T named in Exhibit 5 is a United States citizen. To the best of IDT Telecom's knowledge, each of the executive officers and directors of IDT Telecom named in Exhibit 6 is a United States citizen. To the best of IDT's knowledge, each of the executive officers and directors of IDT named in Exhibit 7 is a United States citizen, except as indicated in Exhibit 7. Howard S. Jonas is a United States citizen. To the best of ITelTech's knowledge, each of the executive officers and directors named in Exhibit 8 is a United States citizen. To the best of AT&T's knowledge, each of the executive officers and directors of AT&T named in Exhibit 9 is a United States citizen. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION The information set forth in Item 4 of this Amendment is hereby incorporated by reference. ITEM 4. PURPOSE OF TRANSACTION Each of IDT D-U and ITelTech contributed its interest in Net2Phone to Net2Phone Holdings to consolidate their interest under one management for the purpose of increasing the value of the Class A Stock. STOCK PURCHASE AGREEMENT AND SUBSCRIPTION AGREEMENT. On August 11, 2000, AT&T, through ITelTech, purchased (i) from Net2Phone four million newly issued shares of Class A Stock at a price of $75 per share and (ii) from IDT Investments 14.9 million shares of Class A Stock at a price of $75 per share. Pursuant to the Stock Purchase Agreement (the "Stock Purchase Agreement"), dated August 11, 2000, by and among AT&T, IDT and IDT Investments and the Subscription Agreement (the "Subscription Agreement"), dated August 11, 2000, by and between AT&T and Net2Phone, (i) Howard S. Jonas resigned from Net2Phone's board of Directors and was appointed as an observer to Net2Phone's board of directors and (ii) two designees of AT&T, John Petrillo and Richard Roscitt, were elected to serve on Net2Phone's board of directors. AT&T had the right to designate one more member to serve on Net2Phone's board of directors. The Stock Purchase Agreement also provided ITelTech with additional rights with respect to the shares of Class A Stock then held by IDT Investments, all of which have been waived by ITelTech on October 19, 2001 in connection with the contributions of Class A Stock to Net2Phone Holdings (as described below). VOTING AGREEMENT. On August 11, 2000, in connection with the sale of shares of Class A Stock to ITelTech, IDT Investments and ITelTech entered into a Voting Agreement (the "Voting Agreement") pursuant to which IDT Investments and ITelTech agreed that until August 1, 2003 or such earlier time as IDT Investments ceases to own two million or more shares of Class A Stock or Common Stock, they will vote or cause to be voted all of their shares in favor of nominees to the board of directors of Net2Phone who are mutually acceptable to IDT Investments and ITelTech. The parties further agreed to vote or cause to be voted all of their shares consistent with the result of having two designees from IDT Investments reasonably acceptable to ITelTech on the board of directors of Net2Phone and three designees from ITelTech reasonably acceptable to IDT Investments on the board of directors of Net2Phone. In the event that they are unable to agree on acceptable nominees, they agreed to abstain from voting on such nominees as to which they are unable to agree. The parties also agreed to use their reasonable best efforts to assure that at least five members of the board of directors of Net2Phone will be members not employed by, providing material services for compensation to or otherwise affiliated with IDT, IDT Investments, ITelTech or AT&T or any of their respective affiliates. This obligation terminates at such time as IDT Investments Page 14 of 22 or ITelTech, as the case may be, becomes the beneficial owner of more than 85% or less than 15% of the voting power of Net2Phone. On October 19, 2001, in connection with the contributions of Class A Stock to Net2Phone Holdings (as described below), each of IDT Investments and ITelTech assigned all of its rights, obligations and interests under the Voting Agreement to Net2Phone Holdings. LIMITED LIABILITY COMPANY AGREEMENT. Pursuant to the Limited Liability Company Agreement, dated as of October 19, 2001 (the "LLC Agreement"), of Net2Phone Holdings, entered into by IDT D-U, IDT D-U contributed to Net2Phone Holdings 9,996,750 shares of Class A Stock in exchange for 87 Class A-1 and 13 Class B membership interests of Net2Phone Holdings and was admitted as the initial member of Net2Phone Holdings. AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT. Pursuant to the Amended and Restated Limited Liability Company Agreement, dated as of October 19, 2001 (the "Amended and Restated LLC Agreement"), of Net2Phone Holdings, by and among AT&T, ITelTech, IDT and IDT D-U, ITelTech contributed to Net2Phone Holdings 18,900,000 shares of Class A Stock in exchange for 62 Class A and 127 Class B membership interests of Net2Phone Holdings and was admitted as a new member of Net2Phone Holdings. SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT. Pursuant to the Second Amended and Restated Limited Liability Company Agreement, dated as of October 19, 2001 (the "Second Amended and Restated LLC Agreement"), of Net2Phone Holdings, by and among AT&T, ITelTech, IDT, IDT D-U, IDT Investments, Liberty Media Corporation ("Liberty Media") and LMC, IDT Investments and LMC were admitted as new members of Net2Phone Holdings. Simultaneously with the execution and delivery of the Second Amended and Restated LLC Agreement, ITelTech transferred (i) to IDT Investments 30 Class B membership interests of Net2Phone Holdings in exchange for $13,531,363 and 3,419 newly issued shares of Class C preferred stock of IDT Investments, and (ii) to LMC 33 Class A and 97 Class B membership interests of Net2Phone Holdings in exchange for $64,700,000, 69 newly issued shares of LMC's common stock, par value $0.01 per share, and 650 newly issued shares of LMC's Series A Voting Preferred Stock, par value $0.01 per share. The Second Amended and Restated LLC Agreement provides the following rights and obligations with respect to the Class A Stock owned by Net2Phone Holdings: Limitation on Transfer. Net2Phone Holdings is not permitted to sell, transfer (other than a transfer to a wholly-owned subsidiary of Net2Phone Holdings), pledge or hypothecate any of its Class A Stock without the consent of all its members. Voting. The board of managers of Net2Phone Holdings shall make all decisions relating to the casting of votes in respect of the Class A Stock on all matters submitted to a vote of, or seeking the written consent of, the stockholders of Net2Phone, including the election and removal of directors to the board of directors of Net2Phone. The holders of a majority of the Class A-1 membership interests of Net2Phone Holdings have the right to appoint all five managers of Net2Phone Holdings' board of managers. However, for so long as LMC owns a majority of the membership interests owned by it on October 19, 2001, the Class A-1 member or members agree to cause one nominee selected by LMC to be appointed as a manager of Net2Phone Holdings. Net2Phone Board of Directors. Each of ITelTech and IDT Investments agreed to (i) assign its rights under the Voting Agreement to Net2Phone Holdings and (ii) use its reasonable best efforts to fully cooperate with each other and with Net2Phone in removing and replacing the directors of Net2Phone currently designated by ITelTech and in ensuring that the directors of Net2Phone designated by IDT Investments are elected to Net2Phone's board of directors. Distribution upon Liquidation. Upon dissolution of Net2Phone Holdings and following payment to all creditors, any member of Net2Phone Holdings may elect to receive distributions in kind of Class A Stock held directly or indirectly by Net2Phone to be distributed prior to any sale of shares of Class A Stock or any other assets of Net2Phone. The number of shares of Class A Stock to be distributed will be determined after the shares are marked-to-market based on the average (rounded to the nearest 1/10,000) of the closing prices of the Class A Stock Page 15 of 22 during regular trading hours on the principal market on which shares of Class A Stock are then listed or quoted (whether the NASDAQ National Market, The New York Stock Exchange or another national securities exchange or association) for the twenty (20) trading days up to and including such date. Redemption With Class A Stock. On or after January 1, 2004, the Class A-1 members and the Class B members of Net2Phone Holdings may cause Net2Phone Holdings to redeem the Class A membership interests held by ITelTech with Class A Stock at the fair market value of the Class A membership interests as determined in accordance with such agreement. The number of shares of Class A Stock to be delivered will be determined after the shares are marked-to-market based on the average (rounded to the nearest 1/10,000) of the closing prices of the Class A Stock during regular trading hours on the principal market on which shares of Class A Stock are then listed or quoted (whether the NASDAQ National Market, The New York Stock Exchange or another national securities exchange or association) for the twenty (20) trading days up to and including such date. Acquisition of Class A Membership Interests. On or after January 1, 2004, the Class A-1 members and the Class B members of Net2Phone Holdings may acquire the Class A membership interests held by ITelTech at the fair market value of the Class A membership interests, as fully described in the Second Amended and Restated LLC Agreement. Put Rights and Call Rights. The members of Net2Phone Holdings have certain put rights and call rights with respect to the membership interests and control of Net2Phone Holdings, as fully described in the Second Amended and Restated LLC Agreement. STOCKHOLDERS AGREEMENT. Pursuant to a stockholders agreement, dated May 13, 1999 (the "Stockholders Agreement"), IDT agreed to vote all of its shares of capital stock in Net2Phone in favor of the election of, and take all other actions necessary to cause the election of, a director nominated by SOFTBANK Technology Ventures IV, L.P. and a director nominated by GE Capital Equity Investments, Inc., in each case for as long as either entity holds a majority of the shares of Series A convertible preferred stock of Net2Phone originally purchased by them or the Class A Stock into which they were converted in August 1999. The descriptions of the Subscription Agreement, the Stock Purchase Agreement, the Voting Agreement, the LLC Agreement, the Amended and Restated LLC Agreement, the Second Amended and Restated LLC Agreement and the Stockholders Agreement throughout this Amendment are qualified by reference to such Subscription Agreement, Stock Purchase Agreement, Voting Agreement, LLC Agreement, Amended and Restated LLC Agreement, Second Amended and Restated LLC Agreement and Stockholders Agreement, copies of which are filed as Exhibits 10, 11, 12, 13, 14, 15 and 16 hereto and are incorporated herein by reference. On October 23, 2001, Howard S. Jonas, Stephen R. Brown, Joyce J. Mason and Jesse P. King were elected as directors of Net2Phone to fill in vacancies resulting from (i) the resignations of David Negal, John C. Petrillo and Howard S. Balter from the board of directors and (ii) an increase in the size of the board of directors of Net2Phone from twelve (12) to thirteen (13). Howard S. Jonas is the Chairman of the Board of Directors and Treasurer of IDT, Chairman of IDT Telecom, director of IDT D-T and the owner of approximately 52.99% of the voting power of IDT. Stephen R. Brown is the Chief Financial Officer and director of IDT. Joyce J. Mason is the General Counsel, Senior Vice President, Secretary and Director of IDT and Assistant Secretary of IDT Telecom. Ms. Mason is also Mr. Jonas' sister. John C. Petrillo is the Executive Vice President - Corporate Strategy and Business Development of AT&T. Each of the Reporting Persons intends to continuously review their investment in Net2Phone, and may in the future determine, either alone or as part of a group (i) to acquire additional securities of Net2Phone, through open market purchases, private agreements or otherwise, (ii) to dispose of all or a portion of the securities of Net2Phone owned by it or (iii) to take any other available course of action, which could involve one or more of the types of transactions or have one or more of the results described in paragraphs (a) - (j) of Item 4 of Schedule 13D. Notwithstanding anything contained herein, each of the Reporting Persons specifically reserves the right to change its intention with respect to any or all of such matters. In reaching any decision as to its course of action (as well as to the specific elements thereof), each of the Reporting Persons currently expects that it would take into consideration a variety of factors, including, but not limited to, Net2Phone's business and prospects, other developments concerning Net2Phone and its businesses generally, other business opportunities available to the Reporting Persons, developments with respect to the business of the Reporting Persons, changes in law and government regulations, general economic conditions and money and stock market conditions, including the market price of the securities of Net2Phone. Page 16 of 22 Other than the transactions and events described above, the Reporting Persons have no plans or proposals with respect to Net2Phone or its securities that relate to, or would result in, any of the transactions described in paragraphs (a) - (j) of Item 4 of Schedule 13D. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (a) Net2Phone Holdings directly beneficially owns 28,896,750 shares of Class A Stock, representing (i) approximately 79.34% of the outstanding shares of Class A Stock, (ii) approximately 49.01% of the combined outstanding shares of Common Stock and Class A Stock of Net2Phone, and (iii) approximately 60.59% of the combined voting power of all outstanding shares of Common Stock and Class A Stock of Net2Phone. Each share of Class A Stock is convertible into one share of Common Stock without consideration being paid therefor. The calculations included herein are based on Net2Phone having a total of 58,963,113 shares outstanding, consisting of 22,541,613 shares of Common Stock and 36,421,500 shares of Class A Stock, as last reported by Net2Phone in its Form 10-Q for the three months ended April 30, 2001. IDT D-U does not directly beneficially own any shares of Net2Phone. IDT D-U is a member of Net2Phone Holdings and owns 87 Class A-1 and 13 Class B membership interests of Net2Phone Holdings, representing approximately 34.60% of the membership interests of Net2Phone Holdings. IDT D-U may be deemed to be the indirect beneficial owner of 28,896,750 shares of Class A Stock owned by Net2Phone Holdings. IDT Investments does not directly beneficially own any shares of Net2Phone. IDT Investments is a member of Net2Phone Holdings and owns 30 Class B membership interests of Net2Phone Holdings, representing approximately 10.38% of the membership interests of Net2Phone Holdings. IDT Investments is also a member of IDT D-U, owning approximately 1% of the ownership interests and approximately 40% of the voting power of IDT D-U. IDT Investments may be deemed to be the indirect beneficial owner of 28,896,750 shares of Class A Stock owned by Net2Phone Holdings and IDT D-U. IDT Nevada does not directly beneficially own any shares of Net2Phone. IDT Nevada owns (i) approximately 57.2% of the outstanding shares of IDT Investments assuming immediate conversion of all outstanding shares of preferred stock of IDT Investments and (ii) approximately 64.7% of the voting power of IDT Investments assuming immediate conversion of all outstanding shares of preferred stock of IDT Investments. IDT Nevada may be deemed to be the indirect beneficial owner of 28,896,750 shares of Class A Stock owned by Net2Phone Holdings, IDT D-U and IDT Investments. IDT D-T does not directly beneficially own any shares of Net2Phone. IDT D-T is the managing member of IDT D-U, owning approximately 99% of the ownership interests and approximately 60% of the voting power of IDT D-U. IDT D-T also owns (i) approximately 9.3% of the outstanding shares of IDT Investments assuming immediate conversion of all outstanding shares of preferred stock of IDT Investments and (ii) approximately 10.5% of the voting power of IDT Investments assuming immediate conversion of all outstanding shares of preferred stock of IDT Investments. IDT D-T may be deemed to be the indirect beneficial owner of 28,896,750 shares of Class A Stock owned by Net2Phone Holdings and IDT D-U. IDT Telecom does not directly beneficially own any shares of Net2Phone. IDT D-T is a wholly-owned subsidiary of IDT Telecom. IDT Telecom may be deemed to be the indirect beneficial owner of 28,896,750 shares of Class A Stock owned by Net2Phone Holdings, IDT D-U and IDT D-T. IDT does not directly beneficially own any shares of Net2Phone. IDT Telecom is a majority-owned subsidiary of IDT. IDT owns all of the outstanding shares of common stock of IDT Telecom. IDT may be deemed to be the indirect beneficial owner of 28,896,750 shares of Class A Stock owned by Net2Phone Holdings, IDT D-U, IDT Investments, IDT Nevada, IDT D-T and IDT Telecom. Howard S. Jonas does not directly beneficially own any shares of Net2Phone. As of October 22, 2001, Mr. Jonas beneficially owned 9,816,988 shares of Class A Common Stock, par value $0.01 per share, of IDT and 9,616,988 shares of Class B Common Stock, par value $0.01 per share, of IDT, Page 17 of 22 representing approximately 24.20% of the outstanding shares of IDT and approximately 52.99% of the combined voting power of IDT. Mr. Jonas may be deemed to be the indirect beneficial owner of 28,896,750 shares of Class A Stock owned by Net2Phone Holdings, IDT D-U, IDT Investments, IDT Nevada, IDT D-T, IDT Telecom and IDT. ITelTech does not directly beneficially own any shares of Net2Phone. ITelTech may be deemed to be the indirect beneficial owner of 28,896,750 shares of Class A Stock owned by Net2Phone Holdings. AT&T does not directly beneficially own any shares of Net2Phone. ITelTech is a wholly-owned subsidiary of AT&T. AT&T may be deemed to be the indirect beneficial owner of 28,896,750 shares of Class A Stock owned by Net2Phone Holdings and ITelTech. The filing of this Amendment shall not be construed as an admission by the Reporting Persons that they are, for purposes of Section 13(d) of the Exchange Act, the beneficial owner of shares of Net2Phone owned by other parties. Each of Net2Phone Holdings, IDT D-U, IDT Investments, IDT Nevada, IDT D-T, IDT Telecom, IDT and Howard S. Jonas disclaims membership in a group with ITelTech and AT&T of the 28,896,750 shares of Class A Stock owned by Net2Phone Holdings. Each of ITelTech and AT&T disclaims membership in a group with Net2Phone Holdings, IDT D-U, IDT Investments, IDT Nevada, IDT D-T, IDT Telecom, IDT and Howard S. Jonas of the 28,896,750 shares of Class A Stock owned by Net2Phone Holdings. (b) By virtue of his ownership of shares of IDT, representing approximately 52.99% of the combined voting power of IDT, Mr. Jonas (i) has the power to control the election of directors to IDT's board of directors, which may be deemed as the power to direct the vote of the 28,896,750 shares of Class A Stock owned by Net2Phone Holdings and (ii) may be deemed to share with ITelTech and LMC the power to dispose of the 28,896,750 shares of Class A Stock owned by Net2Phone Holdings. By virtue of its ownership of all the outstanding shares of ITelTech, AT&T may be deemed to share with IDT Investments, IDT D-U and LMC the power to dispose of the 28,896,750 shares of Class A Stock owned by Net2Phone Holdings. (c) Except as described below and as previously described in Item 4 above, no transactions in the shares of Common Stock or Class A Stock have been effected by the Reporting Persons or, to the best of Net2Phone Holdings' knowledge, by any of the executive officers and directors of Net2Phone Holdings named in Exhibit 1, to the best of IDT D-U's knowledge, by any of the executive officers and directors of IDT D-U named in Exhibit 2, to the best of IDT Investments' knowledge, by any of the executive officers and directors of IDT Investments named in Exhibit 3, to the best of IDT Nevada's knowledge, by any of the executive officers and directors of IDT Nevada named in Exhibit 4, to the best of IDT D-T's knowledge, by any of the executive officers and directors of IDT D-T named in Exhibit 5, to the best of IDT Telecom's knowledge, by any of the executive officers and directors of IDT Telecom named in Exhibit 6, to the best of IDT's knowledge, by any of the executive officers and directors of IDT named in Exhibit 7, to the best of ITelTech's knowledge, by any of the directors or executive officers of ITelTech named in Exhibit 8, or to the best of AT&T's knowledge, by any of the executive officers and directors of AT&T named in Exhibit 9, during the past 60 days. On October 16, 2001, IDT Investments contributed to IDT D-U, 9,996,750 shares of Class A Stock in exchange for an increase in IDT Investments' capital account and unreturned capital in IDT D-U of $55,280,000, reflecting a new capital account balance of $105,280,000. (d) None. (e) Not Applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER Except as described in this Item and in Item 4 above, none of the Reporting Persons has any contracts, arrangements, understandings, or relationship (legal or otherwise) with respect to any securities of Net2Phone. Page 18 of 22 As described in Item 4, (i) Net2Phone and AT&T entered into the Subscription Agreement, (ii) AT&T, IDT and IDT Investments entered into the Stock Purchase Agreement, (iii) ITelTech and IDT Investments entered into the Voting Agreement, (iv) IDT D-U entered into the LLC Agreement, (v) AT&T, ITelTech, IDT and IDT D-U entered into the Amended and Restated LLC Agreement, (vi) AT&T, ITelTech, IDT, IDT D-U, IDT Investments, Liberty Media and LMC entered into the Second Amended and Restated LLC Agreement and (vii) IDT and Net2Phone entered into the Stockholders Agreement with certain investors, each with respect to the Class A Stock currently owned by the Reporting Persons. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS Exhibit 1 Name, business address and principal occupation of each manager of Net2Phone Holdings Exhibit 2 Name, business address and principal occupation of each manager of IDT D-U Exhibit 3 Name, business address and principal occupation of each executive officer and director of IDT Investments Exhibit 4 Name, business address and principal occupation of each executive officer and director of IDT Nevada Exhibit 5 Name, business address and principal occupation of each executive officer and director of IDT D-T Exhibit 6 Name, business address and principal occupation of each executive officer and director of IDT Telecom Exhibit 7 Name, business address and principal occupation of each executive officer and director of IDT Exhibit 8 Name, business address and principal occupation of each manager of ITelTech Exhibit 9 Name, business address and principal occupation of each executive officer and director of AT&T Exhibit 10 Subscription Agreement, dated as of August 11, 2000, by and between Net2Phone and AT&T (incorporated by reference to Schedule 13D of IDT Investments, IDT and Howard S. Jonas filed August 21, 2000) Exhibit 11 Stock Purchase Agreement, dated as of August 11, 2000, by and between AT&T, IDT and IDT Investments (incorporated by reference to Schedule 13D of IDT Investments, IDT and Howard S. Jonas filed August 21, 2000) Exhibit 12 Voting Agreement, dated as of August 11, 2000, by and between ITelTech and IDT Investments (incorporated by reference to Schedule 13D of IDT Investments, IDT and Howard S. Jonas filed August 21, 2000) Exhibit 13 Limited Liability Company Agreement, dated as of October 19, 2001, of Net2Phone Holdings, by IDT D-U Exhibit 14 Amended and Restated Limited Liability Company Agreement, dated as of October 19, 2001, of Net2Phone Holdings, by and among AT&T, ITelTech, IDT and IDT D-U Exhibit 15 Second Amended and Restated Limited Liability Company Agreement, dated as of October 19, 2001, of Net2Phone Holdings, by and among AT&T, ITelTech, IDT, IDT D-U, IDT Investments, Liberty Media and LMC Page 19 of 22 Exhibit 16 Stockholders Agreement, dated as of May 13, 1999, by and among IDT, Clifford M. Sobel, Net2Phone and the additional investors listed on Schedule A thereto (incorporated by reference to Form S-1/A of Net2Phone filed June 20, 1999) Exhibit 17 Joint Filing Agreement, dated as of October 24, 2001, by and between Net2Phone Holdings, IDT D-U, IDT Investments, IDT Nevada, IDT D-T, IDT Telecom, IDT, Howard S. Jonas, ITelTech and AT&T Page 20 of 22 SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: October 24, 2001 NET2PHONE HOLDINGS, L.L.C. By: /s/ JOYCE J. MASON ---------------------------------------- Name: Joyce J. Mason Title: Manager IDT DOMESTIC-UNION, LLC By: IDT Domestic Telecom, Inc., its managing member By: /s/ MOTTI LICHTENSTEIN ------------------------------------ Name: Motti Lichtenstein Title: Chief Executive Officer IDT INVESTMENTS INC. By: /s/ ANTHONY S. DAVIDSON ------------------------------------------ Name: Anthony S. Davidson Title: Vice President & Chief Financial Officer IDT NEVADA HOLDINGS, INC. By: /s/ ANTHONY S. DAVIDSON ------------------------------------------ Name: Anthony S. Davidson Title: Vice President & Chief Financial Officer IDT DOMESTIC TELECOM, INC. By: /s/ MOTTI LICHTENSTEIN ----------------------------------------- Name: Motti Lichtenstein Title: Chief Executive Officer Page 21 of 22 IDT TELECOM, INC. By: /s/ MOTTI LICHTENSTEIN ----------------------------------------- Name: Motti Lichtenstein Title: Chief Executive Officer IDT CORPORATION By: /s/ JAMES COURTER ------------------------------------------ Name: James A. Courter Title: Chief Executive Officer and Vice Chairman /s/ HOWARD S. JONAS ---------------------------------------------- Howard S. Jonas ITELTECH, LLC By: /s/ ROBERT FEIT ------------------------------------------ Name: Robert Feit Title: President AT&T CORP. By: /s/ ROBERT FEIT ------------------------------------------ Name: Robert Feit Title: General Attorney and Assistant Secretary Page 22 of 22 EXHIBIT INDEX Exhibit No. Description Exhibit 1 Name, business address and principal occupation of each manager of Net2Phone Holdings Exhibit 2 Name, business address and principal occupation of each manager of IDT D-U Exhibit 3 Name, business address and principal occupation of each executive officer and director of IDT Investments Exhibit 4 Name, business address and principal occupation of each executive officer and director of IDT Nevada Exhibit 5 Name, business address and principal occupation of each executive officer and director of IDT D-T Exhibit 6 Name, business address and principal occupation of each executive officer and director of IDT Telecom Exhibit 7 Name, business address and principal occupation of each executive officer and director of IDT Exhibit 8 Name, business address and principal occupation of each manager of ITelTech Exhibit 9 Name, business address and principal occupation of each executive officer and director of AT&T Exhibit 10 Subscription Agreement, dated as of August 11, 2000, by and between Net2Phone and AT&T (incorporated by reference to Schedule 13D of IDT Investments, IDT and Howard S. Jonas filed August 21, 2000) Exhibit 11 Stock Purchase Agreement, dated as of August 11, 2000, by and between AT&T, IDT and IDT Investments (incorporated by reference to Schedule 13D of IDT Investments, IDT and Howard S. Jonas filed August 21, 2000) Exhibit 12 Voting Agreement, dated as of August 11, 2000, by and between ITelTech and IDT Investments (incorporated by reference to Schedule 13D of IDT Investments, IDT and Howard S. Jonas filed August 21, 2000) Exhibit 13 Limited Liability Company Agreement, dated as of October 19, 2001, of Net2Phone Holdings, by IDT D-U Exhibit 14 Amended and Restated Limited Liability Company Agreement, dated as of October 19, 2001, of Net2Phone Holdings, by and among AT&T, ITelTech, IDT and IDT D-U Exhibit 15 Second Amended and Restated Limited Liability Company Agreement, dated as of October 19, 2001, of Net2Phone Holdings, by and among AT&T, ITelTech, IDT, IDT D-U, IDT Investments, Liberty Media and LMC Exhibit 16 Stockholders Agreement, dated as of May 13, 1999, by and among IDT, Clifford M. Sobel, Net2Phone and the additional investors listed on Schedule A thereto (incorporated by reference to Form S-1/A of Net2Phone filed June 20, 1999) Exhibit 17 Joint Filing Agreement, dated as of October 24, 2001, by and between Net2Phone Holdings, IDT D-U, IDT Investments, IDT Nevada, IDT D-T, IDT Telecom, IDT, Howard S. Jonas, ITelTech and AT&T EX-99.1 3 exh1.txt EACH MANAGER OF NET2PHONE HOLDINGS EXHIBIT 1 MANAGERS OF NET2PHONE HOLDINGS, L.L.C. AS OF OCTOBER 23, 2001 The name, position, principal occupation and business address of each manager of Net2Phone Holdings, L.L.C. is set forth below.

Name Position Principal Occupation Business Address ---- -------- -------------------- ---------------- Howard S. Jonas Manager Chairman of the Board and c/o Net2Phone Holdings, Treasurer of IDT Corporation L.L.C. 400 North Stephanie Street, Suite 235, Henderson, Nevada 89014 Joyce J. Mason Manager General Counsel, Senior Vice c/o Net2Phone Holdings, President, Secretary and L.L.C. Director of IDT Corporation 400 North Stephanie Street, Suite 235, Henderson, Nevada 89014 Michael Fischberger Manager Chief Operating Officer of c/o Net2Phone Holdings, IDT Corporation L.L.C. 400 North Stephanie Street, Suite 235, Henderson, Nevada 89014 Anthony S. Davidson Manager Chief Financial Officer, Vice c/o Net2Phone Holdings, President, Secretary and L.L.C. Director of IDT Investments 400 North Stephanie Inc. Street, Suite 235, Henderson, Nevada 89014 Anthony Werner Manager Chief Technology Officer c/o Liberty Media Corporation of Liberty Media Corporation 1300 Liberty Boulevard Englewood, CO 80112

EX-99.2 4 exh2.txt EACH MANAGER OF IDT D-U EXHIBIT 2 MANAGER OF IDT DOMESTIC-UNION, LLC AS OF OCTOBER 23, 2001 The name, position and business address of the manager of IDT Domestic-Union, LLC is set forth below.

Name Position Principal Occupation Business Address ---- -------- -------------------- ---------------- IDT Domestic Telecom, Managing Member N/A c/o IDT Domestic-Union, LLC Inc. 520 Broad Street Newark, NJ 07102

EX-99.3 5 exh3.txt EXECUTIVE OFFICER AND DIRECTOR OF IDT INVESTMENTS EXHIBIT 3 DIRECTORS AND EXECUTIVE OFFICERS OF IDT INVESTMENTS INC. AS OF OCTOBER 23, 2001 The name, position, principal occupation and business address of each executive officer and director of IDT Investments is set forth below. Unless otherwise indicated, each occupation set forth opposite an executive officer's name refers to employment with IDT Investments, Inc. Each person listed below is a citizen of the United States, other than Gil Boosidan, who is a citizen of Israel.

Name Position Principal Occupation Business Address ---- -------- -------------------- ---------------- James A. Courter Director Chief Executive Officer and c/o IDT Investments Inc. Vice Chairman of the Board of 400 North Stephanie IDT Corporation Street, Suite 235, Henderson, Nevada 89014 Anthony S. Davidson Chief Financial Officer, Chief Financial Officer, Vice c/o IDT Investments Inc. Vice President, Secretary President, Secretary and 400 North Stephanie and Director Director Street, Suite 235, Henderson, Nevada 89014 Gil Boosidan Treasurer Treasurer c/o IDT Investments Inc. 400 North Stephanie Street, Suite 235, Henderson, Nevada 89014

EX-99.4 6 exh4.txt EXECUTIVE OFFICER AND DIRECTOR OF IDT NEVADA EXHIBIT 4 DIRECTORS AND EXECUTIVE OFFICERS OF IDT NEVADA HOLDINGS, INC. AS OF OCTOBER 23, 2001 The name, position, principal occupation and business address of each executive officer and director of IDT Nevada Holdings, Inc. is set forth below. Unless otherwise indicated, each occupation set forth opposite an executive officer's name refers to employment with IDT Nevada Holdings, Inc. Each person listed below is a citizen of the United States, other than Gil Boosidan, who is a citizen of Israel.

Name Position Principal Occupation Business Address ---- -------- -------------------- ---------------- James A. Courter Director Chief Executive Officer and c/o IDT Nevada Holdings, Vice Chairman of the Board of Inc. IDT Corporation 400 North Stephanie Street, Suite 235, Henderson, Nevada 89014 Anthony S. Davidson Chief Financial Officer, Chief Financial Officer, Vice c/o IDT Nevada Holdings, Vice President, Secretary President, Secretary and Inc. and Director Director 400 North Stephanie Street, Suite 235, Henderson, Nevada 89014 Gil Boosidan Treasurer Treasurer c/o IDT Nevada Holdings, Inc. 400 North Stephanie Street, Suite 235, Henderson, Nevada 89014

EX-99.5 7 exh5.txt EXECUTIVE OFFICER AND DIRECTOR OF IDT-DT EXHIBIT 5 DIRECTORS AND EXECUTIVE OFFICERS OF IDT DOMESTIC TELECOM, INC. AS OF OCTOBER 23, 2001 The name, position, principal occupation and business address of each executive officer and director of IDT Domestic Telecom, Inc. is set forth below. Unless otherwise indicated, each occupation set forth opposite an executive officer's name refers to employment with IDT Domestic Telecom, Inc.

Name Position Principal Occupation Business Address ---- -------- -------------------- ---------------- Howard S. Jonas Director Chairman of the Board and c/o IDT Domestic Telecom, Treasurer of IDT Corporation Inc. 520 Broad Street Newark, NJ 07102 Morris Lichtenstein Chief Executive Officer and Executive Vice President of c/o IDT Domestic Telecom, Director Business Development of IDT Inc. Corporation 520 Broad Street Newark, NJ 07102 Geoffrey Rochwarger Director Executive Vice President of c/o IDT Domestic Telecom, Telecommunications and Inc. Director of IDT Corporation 520 Broad Street Newark, NJ 07102 Joyce J. Mason Secretary General Counsel, Senior Vice c/o IDT Domestic Telecom, President, Secretary and Inc. Director of IDT Corporation 520 Broad Street Newark, NJ 07102 Norman Rosenberg Treasurer Chief Financial Officer of c/o IDT Domestic Telecom, IDT Telecom, Inc. Inc. 520 Broad Street Newark, NJ 07102

EX-99.6 8 exh6.txt EXECUTIVE OFFICER AND DIRECTOR OF IDT TELECOM EXHIBIT 6 DIRECTORS AND EXECUTIVE OFFICERS OF IDT TELECOM, INC. AS OF OCTOBER 23, 2001 The name, position, principal occupation and business address of each executive officer and director of IDT Telecom, Inc. is set forth below. Unless otherwise indicated, each occupation set forth opposite an executive officer's name refers to employment with IDT Telecom, Inc.

Name Position Principal Occupation Business Address ---- -------- -------------------- ---------------- Howard S. Jonas Chairman of the Board Chairman of the Board c/o IDT Telecom, Inc. 520 Broad Street Newark, NJ 07102 Morris Lichtenstein Chief Executive Officer, Chief Executive Officer, c/o IDT Telecom, Inc. Treasurer and Vice Chairman of Treasurer and Vice Chairman 520 Broad Street the Board of the Board Newark, NJ 07102 Geoffrey Rochwarger Chief Operating Officer and Chief Operating Officer and c/o IDT Telecom, Inc. Director Director 520 Broad Street Newark, NJ 07102 Jonathan Levy President, Carrier Services President, Carrier Services c/o IDT Telecom, Inc. and Director and Director 520 Broad Street Newark, NJ 07102 Joshua Winkler President, Debit Division President, Debit Division c/o IDT Telecom, Inc. 520 Broad Street Newark, NJ 07102 Norman Rosenberg Chief Financial Officer Chief Financial Officer c/o IDT Telecom, Inc. 520 Broad Street Newark, NJ 07102 Michael Fischberger Executive Vice President, Executive Vice President, c/o IDT Telecom, Inc. Operations Operations 520 Broad Street Newark, NJ 07102 Moshe Kaganoff Executive Vice President, Executive Vice President, c/o IDT Telecom, Inc. Strategic Planning Strategic Planning 520 Broad Street Newark, NJ 07102 Kathy Timko Executive Vice President, Executive Vice President, c/o IDT Telecom, Inc. Engineering and Operations and Engineering and Operations 520 Broad Street Director and Director Newark, NJ 07102

Hon. William S. Cohen Director Chairman and CEO of c/o The Cohen Group The Cohen Group 600 13th Street, Suite 301 Washington, DC 20005 James A. Courter Director Chief Executive Officer and c/o IDT Telecom, Inc. Vice Chairman of the Board of 520 Broad Street Directors of IDT Corporation Newark, NJ 07102 Muni Figueres Director Writer c/o IDT Telecom, Inc. 520 Broad Street Newark, NJ 07102 Jack Kemp Director Co-Director Empower America c/o Empower America 1701 Pennsylvania Avenue, N.W., Suite 900 Washington, DC 20006 Frank R. Lautenberg Director Retired U.S. Senator 201 West Passaic, Suite 301 Rochelle Park, NJ 07662 EX-99.7 9 exh7.txt EXECUTIVE OFFICER AND DIRECTOR OF IDT EXHIBIT 7 DIRECTORS AND EXECUTIVE OFFICERS OF IDT CORPORATION AS OF OCTOBER 23, 2001 The name, position, principal occupation and business address of each executive officer and director of IDT Corporation is set forth below. Unless otherwise indicated, each occupation set forth opposite an executive officer's name refers to employment with IDT Corporation. Each person listed below is a citizen of the United States, other than Paul Reichmann, who is a citizen of Canada.

Name Position Principal Occupation Business Address ---- -------- -------------------- ---------------- Howard S. Jonas Chairman of the Board and Chairman of the Board and c/o IDT Corporation Treasurer Treasurer 520 Broad Street Newark, NJ 07102 James A. Courter Chief Executive Officer and Chief Executive Officer and c/o IDT Corporation Vice Chairman of the Board Vice Chairman of the Board 520 Broad Street Newark, NJ 07102 Ira A. Greenstein President President c/o IDT Corporation 520 Broad Street Newark, NJ 07102 Michael Fischberger Chief Operating Officer and Chief Operating Officer and c/o IDT Corporation Director Director 520 Broad Street Newark, NJ 07102 Stephen R. Brown Chief Financial Officer and Chief Financial Officer and c/o IDT Corporation Director Director 520 Broad Street Newark, NJ 07102 Joyce J. Mason General Counsel, Senior General Counsel, Senior Vice c/o IDT Corporation Vice President, Secretary President, Secretary and 520 Broad Street and Director Director Newark, NJ 07102 Marc E. Knoller Senior Vice President and Senior Vice President and c/o IDT Corporation Director Director 520 Broad Street Newark, NJ 07102 Moshe Kaganoff Executive Vice President of Executive Vice President of c/o IDT Corporation Strategic Planning and Strategic Planning and 520 Broad Street Director Director Newark, NJ 07102 Geoffrey Rochwarger Executive Vice President of Executive Vice President of c/o IDT Corporation Telecommunications and Telecommunications and 520 Broad Street Director Director Newark, NJ 07102 Morris Lichtenstein Executive Vice President of Executive Vice President of c/o IDT Corporation Business Development Business Development 520 Broad Street Newark, NJ 07102

Name Position Principal Occupation Business Address ---- -------- -------------------- ---------------- Charles H.F. Garner Executive Vice President of Executive Vice President of c/o IDT Corporation New Ventures New Ventures 520 Broad Street Newark, NJ 07102 Jonathan Levy Executive Vice President of Executive Vice President of c/o IDT Corporation Corporate Development Corporate Development 520 Broad Street Newark, NJ 07102 Meyer A. Berman Director Sole Proprietor M.A. Berman Company 433 Plaza Real Suite 355 Boca Raton, FL 33432 J. Warren Blaker Director Professor of Physics Fairleigh Dickinson University Teaneck-Hackensack Campus 1000 River Road Teaneck, NJ 07666 Denis A. Bovin Director Vice Chairman - Bear Stearns Investment Banking 245 Park Avenue 28th Floor New York, NY 10017 Saul K. Fenster Director President of New Jersey New Jersey Institute of Institute of Technology Technology University Heights 323 Martin Luther King Blvd. Newark, NJ 07102 William A. Owens Director Vice Chairman and CEO Teledesic LLC 1445 120th NE Bellevue, WA 98005 William F. Weld Director General Partner Leeds, Weld & Company 660 Madison Avenue New York, NY 10021 Paul Reichmann Director Executive Chairman, c/o International Property International Property Management Management 175 Bloor Street East South Tower, 7th Floor Toronto, Ontario M4W 3R8 Michael J. Levitt Director Chairman of Ilios Capital c/o Ilios Capital LLC LLC 235 Lincoln Street Englewood, NJ 07631

EX-99.8 10 exh8.txt NAME OF EACH MANAGER OF ITELTECH EXHIBIT 8 MANAGERS OF ITELTECH, LLC AS OF OCTOBER 24, 2001 The name, position, principal occupation and business address of each executive officer and director of ITelTech, LLC is set forth below. Each person listed below is a citizen of the United States.

Name Position Principal Occupation Business Address ---- -------- -------------------- ---------------- Robert S. Feit Director, President and General Attorney of AT&T Corp. c/o AT&T Corp. Secretary 295 North Maple Avenue Basking Ridge, NJ 07920 Steven Garfinkel Vice President General Attorney of AT&T Corp. c/o AT&T Corp. 295 North Maple Avenue Basking Ridge, NJ 07920 James H. Hodge Director and Treasurer Assistant Treasurer of AT&T c/o AT&T Corp. Corp. 295 North Maple Avenue Basking Ridge, NJ 07920 Lawrence R. Kurland Director General Attorney of AT&T Corp c/o AT&T Corp. 295 North Maple Avenue Basking Ridge, NJ 07920

EX-99 11 exh9.txt EX-99.9, EXECUTIVE OFFICER AND DIRECTOR OF AT&T EXHIBIT 9 DIRECTORS AND EXECUTIVE OFFICERS OF AT&T CORP. AS OF OCTOBER 24, 2001 The name, position, principal occupation and business address of each executive officer and director of AT&T Corp. is set forth below. Unless otherwise indicated, each occupation set forth opposite an executive officer's name refers to employment with AT&T Corp. Each person listed below is a citizen of the United States.

Name Position Principal Occupation Business Address ---- -------- -------------------- ---------------- C. Michael Armstrong Chairman and Chief Executive Chairman and Chief Executive c/o AT&T Corp. Officer and Director Officer and Director 295 North Maple Avenue Basking Ridge, NJ 07920 J. Michael Cook Director Retired Chairman and CEO, c/o AT&T Corp. Deloitte & Touche LLP 295 North Maple Avenue Basking Ridge, NJ 07920 Kenneth T. Derr Director Chairman of the Board, c/o AT&T Corp. Retired - Chevron Corporation 295 North Maple Avenue Basking Ridge, NJ 07920 M. Kathryn Eickhoff Director President, Eickhoff Economics c/o AT&T Corp. Incorporated 295 North Maple Avenue Basking Ridge, NJ 07920 George M.C. Fisher Director Retired Chairman and CEO, c/o AT&T Corp. Eastman Kodak Company 295 North Maple Avenue Basking Ridge, NJ 07920 Amos B. Hostetter, Jr. Director Chairman - Pilot House c/o AT&T Corp. Associates 295 North Maple Avenue Basking Ridge, NJ 07920 Shirley A. Jackson Director President, Rensselaer c/o AT&T Corp. Polytechnic Institute 295 North Maple Avenue Basking Ridge, NJ 07920 Donald F. McHenry Director President, The IRC Group, LLC c/o AT&T Corp. 295 North Maple Avenue Basking Ridge, NJ 07920 Louis A. Simpson Director President and CEO - Capital c/o AT&T Corp. Operations of GEICO 295 North Maple Avenue Corporation Basking Ridge, NJ 07920 Michael I. Sovern Director President Emeritus and c/o AT&T Corp. Chancellor Kent Professor of 295 North Maple Avenue Law, Columbia University Basking Ridge, NJ 07920 Sanford I. Weill Director Chairman and Chief Executive c/o AT&T Corp. Officer - Citigroup Inc. 295 North Maple Avenue Basking Ridge, NJ 07920 Betsy J. Bernard Executive Vice President and Executive Vice President and c/o AT&T Corp. President and CEO - AT&T President and CEO - AT&T 295 North Maple Avenue Consumer Consumer Basking Ridge, NJ 07920 James W. Cicconi General Counsel and Executive General Counsel and Executive c/o AT&T Corp. Vice President - Law & Vice President - Law & 295 North Maple Avenue Government Affairs Government Affairs Basking Ridge, NJ 07920 Nicholas S. Cyprus Vice President and Controller Vice President and Controller c/o AT&T Corp. 295 North Maple Avenue Basking Ridge, NJ 07920 David W. Dorman President President c/o AT&T Corp. 295 North Maple Avenue Basking Ridge, NJ 07920 Mirian M. Graddick-Weir Executive Vice President - Executive Vice President - c/o AT&T Corp. Human Resources Human Resources 295 North Maple Avenue Basking Ridge, NJ 07920 Frank Ianna Executive Vice President and Executive Vice President and c/o AT&T Corp. President AT&T Network Services President AT&T Network 295 North Maple Avenue Services Basking Ridge, NJ 07920 Richard J. Martin Executive Vice President - Executive Vice President - c/o AT&T Corp. Public Relations and Employee Public Relations and Employee 295 North Maple Avenue Communications Communications Basking Ridge, NJ 07920 Charles H. Noski Senior Executive Vice Senior Executive Vice c/o AT&T Corp. President and Chief Financial President and Chief Financial 295 North Maple Avenue Officer Officer Basking Ridge, NJ 07920 John C. Petrillo Executive Vice President - Executive Vice President - c/o AT&T Corp. Corporate Strategy & Business Corporate Strategy & Business 295 North Maple Avenue Development Development Basking Ridge, NJ 07920 William T. Schleyer President and CEO - AT&T President and CEO - AT&T c/o AT&T Corp. Broadband Broadband 295 North Maple Avenue Basking Ridge, NJ 07920

EX-99.13 12 sc286949.txt LLC AGREEMENT EXECUTION COPY LIMITED LIABILITY COMPANY AGREEMENT OF NET2PHONE HOLDINGS, L.L.C. This Limited Liability Company Agreement (the "Agreement") of Net2Phone Holdings, L.L.C. is entered into and effective as of this 19th day of October, 2001, by IDT Domestic-Union, LLC, a Delaware limited liability company, as member (the "Member"). WHEREAS, the Member, by execution of this Agreement and causing a Certificate of Formation of the Company (as defined herein), dated as of October 17, 2001, to be filed in the Office of the Secretary of State of the State of Delaware (the "Certificate of Formation"), hereby forms the Company as a limited liability company pursuant to and in accordance with the statutes and laws of the State of Delaware relating to limited liability companies, including without limitation, the Delaware Limited Liability Company Act (6 Del. C.ss.18-101 et seq.), as amended from time to time (the "Act"); NOW THEREFORE, the Member, by execution of this Agreement, does hereby form the Company as a limited liability company pursuant to the Act, upon the following terms and conditions: 1. Name. The name of the limited liability company formed hereby is Net2Phone Holdings, L.L.C. (the "Company"). 2. Purpose. The Company is formed for the object and purpose of, and the nature of the business to be conducted and promoted by the Company is, engaging in any lawful act or activity for which limited liability companies may be formed under the Act and engaging in any and all activities necessary or incidental to the foregoing. 3. Powers. In furtherance of its purposes, the Company shall have the power and is hereby authorized to do any and all acts necessary or convenient to carry out any and all of the objects and purposes of the Company and to perform all acts in furtherance thereof, and shall have and may exercise all of the powers and rights conferred upon a limited liability company formed pursuant to the Act. 4. Certificates. The Member and Managers hereby ratify and approve the execution, delivery and filing of the original Certificate of Formation with the Secretary of State of the State of Delaware by Nikola Uzelac, as an authorized person within the meaning of the Act. Upon the execution and delivery of this Agreement, Nikola Uzelac's powers as an authorized person shall cease, and any person authorized by any Manager as an authorized person within the meaning of the Act shall execute, deliver, file, or cause the execution, delivery and filing of, all certificates required or permitted by the Act to be filed with the Secretary of State of the State of Delaware. 5. Registered Office. The address of the registered office of the Company in the State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. 6. Registered Agent. The name and address of the registered agent of the Company for service of process on the Company in the State of Delaware is The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. 7. Fiscal Year. The fiscal year of the Company (the "fiscal year") shall end on the fiscal year end required for U.S. federal income tax purposes. The Member is authorized to make all elections for tax or other purposes as it may deem necessary or appropriate in such connection, including the establishment and implementation of transition periods. 8. Member. The name of the Member is as set forth above in the preamble to this Agreement. 9. Management and Control. The Company shall be managed by one or more managers appointed by the Member ("Managers"), each of which shall have the right, power and authority acting alone to conduct the business and affairs of the Company and do all things necessary or convenient to carry on the business and purposes of the Company, including, without limitation, any and all other actions such Manager deems necessary, desirable, convenient or incidental for the furtherance of the objects and purposes of the Company, and shall have and may exercise all of the powers and rights conferred upon a manager of a limited liability company formed pursuant to the Act. Notwithstanding any other provision of this Agreement or any provision of the Act or other applicable law, rule or regulation, if there is more than one Manager appointed, then each Manager shall have the right, power and authority to act alone in carrying out activities and conducting business in the name, or on behalf, of the Company without any further act, vote or approval of any person or entity. As provided in Section 18-402 of the Act, each Manager shall have the authority to bind the Company. 10. Definition of Affiliate. The term "Affiliate", as used in this Agreement shall mean, as to any person, any other person that, directly or indirectly, is in -2- control of, is controlled by or is under common control with such person. As used in this Agreement, the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person or entity, whether through ownership of voting securities, by contract or otherwise. 11. Managers. (a) Appointment and Removal of Managers. The Member shall have the power to set from time-to-time the number of Managers, to remove any Manager (with or without cause and for any reason or no reason) and/or to appoint a Manager by delivering notice to the Company, which removal or appointment shall become effective immediately upon receipt by the Company of such notice. The Managers shall not have the authority to appoint additional or successor Managers. A Manager may resign at any time by providing prior written notice of such resignation to the Company and the Member. (b) Managers as Agents. The Managers, to the extent of their powers set forth in this Agreement and subject to Section 11(a), are agents of the Company for the purpose of conducting the business and affairs of the Company, and the actions of any Manager taken in accordance with such powers shall bind the Company and any third party dealing with such Manager shall be entitled to rely conclusively (without making inquiry of any kind) on any actions so taken as being properly authorized by the Company. 12. Officers. (a) Any Manager, acting alone or with the other Managers, may appoint one or more officers of the Company (each, an "Officer"), including, without limitation, a President, a Chief Executive Officer, a Chief Operating Officer, a Secretary, a Treasurer, one or more Vice Presidents and one or more Assistant Secretaries, and Assistant Vice Presidents. Any two or more offices may be held by the same person. Each such Officer shall have delegated to him or her the authority and power to execute and deliver on behalf of the Company (and to cause the Company to perform) any and all such contracts, certificates, agreements, instruments and other documents, and to take any such action, as any one or more Managers deems necessary or appropriate, all as may be set forth in a written delegation of authority executed by any one or more Managers. In addition, unless a Manager decides otherwise, if the title given to such Officer is one commonly used for officers of a business corporation formed under the Delaware General Corporation Law, the assignment of such title shall constitute the delegation to such person of the authorities and duties that are normally associated with that office. The Officers shall serve at the pleasure of the Managers, and any Manager may remove any person as an Officer and/or appoint additional persons as Officers, as any such Manager deems necessary or desirable. Any Officer may resign at any time by giving written notice of such resignation to a Manager. Unless otherwise specified in such written -3- notice, such resignation shall take effect upon receipt thereof by a Manager and the acceptance of such resignation shall not be necessary to make it effective. Any person or entity dealing with the Company may conclusively presume that an Officer specified in such a written delegation of authority who executes a contract, certificate, agreement, instrument or other document on behalf of the Company has the full power and authority to do so and each such document shall, for all purposes, be duly authorized, executed and delivered by the Company upon execution and delivery by such Officer. (b) The Officers, to the extent of their powers set forth in this Agreement or otherwise vested in them by action of a Manager(s) not inconsistent with this Agreement, are agents of the Company for the purpose of conducting the business and affairs of the Company, and the actions of any Officer taken in accordance with such powers shall bind the Company and any third party dealing with such Officer shall be entitled to rely conclusively (without making inquiry of any kind) on any actions so taken as being properly authorized by the Company. 13. Exculpation and Indemnification. No Manager or Member or other authorized agent of the Company shall be liable to the Company, or any other person or entity who has an interest in the Company, for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such person by this Agreement, except that such person shall be liable for any such loss, damage or claim incurred by reason of such person's willful misfeasance or bad faith. In the event that any Member, or any of its direct or indirect partners, directors, managing directors, officers, stockholders, employees, agents or Affiliates, or any Manager or Officer of the Company (collectively, the "Indemnified Persons"; and each an "Indemnified Person"), becomes involved, in any capacity, in any threatened, pending or completed, action, suit, proceeding or investigation, in connection with any matter arising out of or relating to the Company's business or affairs, to the fullest extent permitted by applicable law, any legal and other expenses (including the cost of any investigation and preparation) incurred by such Indemnified Person in connection therewith shall, from time to time, be advanced by the Company prior to the final disposition of such action, suit, proceeding or investigation upon receipt by the Company of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall ultimately be determined that such Indemnified Person is not entitled to be indemnified by the Company in connection with such action, suit, proceeding or investigation as provided in the exception contained in the next succeeding sentence. To the fullest extent permitted by law, the Company also will indemnify and hold harmless an Indemnified Person against any losses, claims, damages, liabilities, obligations, penalties, actions, judgments, suits, proceedings , costs, expenses and disbursements of any kind or nature whatsoever (collectively, "Costs"), to which such an Indemnified Person may become subject in connection with any matter arising out of or in connection with the Company's business or affairs, except to the extent that any such Costs result solely from the willful misfeasance or bad faith of such Indemnified Person. If for any -4- reason (other than the willful misfeasance or bad faith of such Indemnified Person) the foregoing indemnification is unavailable to such Indemnified Person, or insufficient to hold it harmless, then the Company shall contribute to the amount paid or payable by such Indemnified Person as a result of such Costs in such proportion as is appropriate to reflect not only the relative benefits received by the Company on the one hand and such Indemnified Person on the other hand but also the relative fault of the Company and such Indemnified Person, as well as any relevant equitable considerations. The reimbursement, indemnity and contribution obligations of the Company under this Section 13 shall be in addition to any liability which the Company may otherwise have to any Indemnified Person and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Company and any Indemnified Person. The reimbursement, indemnity and contribution obligations of the Company under this Section 13 shall be limited to the Company's assets, and no Member shall have any personal liability on account thereof. The foregoing provisions shall survive any termination of this Agreement. 14. Member Shall Not Have Power to Bind Company. Except as provided herein, the Member shall not transact business for the Company nor shall the Member have the power or authority to sign, act for or bind the Company, all of such powers being vested solely and exclusively in each of the Managers and their delegates, as described herein. The Member shall not hold itself out to be responsible for the decisions or actions respecting the daily business and affairs of the Company. 15. Dissolution. The Company shall dissolve, and its affairs shall be wound up upon the first to occur of the following: (a) the written consent of the Member, (b) the entry of a decree of judicial dissolution under Section 18-802 of the Act and (c) at any time there are no members, unless the business of the Company is continued in a manner permitted by the Act. The bankruptcy (as defined in Section 18-101(1) of the Act) of the Member shall not cause the Member to cease to be a member of the Company and upon the occurrence of such an event, the business of the Company shall continue without dissolution. In the event of dissolution, the Company shall conduct only such activities as are necessary to wind up its affairs (including the sale of the assets of the Company in an orderly manner), and the assets of the Company shall be applied in such manner, and in such order of priority, as determined by any Manager, subject to any requirements of the Act. 16. Capital Contributions; Capital Accounts. The Member has contributed to the Company (i) 1,300,000 shares of Class A Common Stock, par value $0.01 per share ("Class A Common Stock"), of Net2Phone, Inc., a Delaware corporation ("Net2Phone"), in exchange for 13 units of Class B Membership Interests of the -5- Company and (ii) 8,696,750 shares of Class A Common Stock of Net2Phone in exchange for 87 units of Class A-1 Membership Interests of the Company, as set forth on Annex I hereto. Each member shall have a capital account determined and maintained in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv). 17. Treatment for Tax Purposes. For so long as the Company has only one member, it is the intention of the Member that the Company be disregarded as a separate entity for federal, state and local tax purposes. If at any time the Company has more than one member, it shall be treated as a partnership for federal, state and local tax purposes. 18. Additional Contributions. The Member is not required to make any additional capital contribution to the Company but may in its sole discretion elect to do so. 19. Allocation of Profit and Losses. All of the Company's profits and losses shall be allocated to the Member. 20. Distributions. Distributions shall be made to the Member at the times and in the aggregate amounts determined by one or more of the Managers. Notwithstanding anything to the contrary contained in this Agreement, the Company shall not make a distribution to any Member on account of its interest in the Company if such distribution would violate the Act or other applicable law. 21. Assignments. The Member may transfer or assign in whole or in part its limited liability company interest. 22. Admission of Additional Members. One or more additional Members of the Company may be admitted to the Company with the consent of the Member and upon the execution of a counterpart of this Agreement. 23. Amendments. This Agreement may not be modified, altered, supplemented or amended except pursuant to a written agreement executed and delivered by the Member. 24. Limited Liability. Except as otherwise provided by the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and the Member, the Officers and the Managers shall not be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member, an Officer or a Manager of the Company. 25. No Third Party Beneficiaries. The right or obligation of the Member to call for any capital contribution or to make a capital contribution or otherwise -6- to do, perform, satisfy or discharge any liability or obligation of the Member hereunder, or to pursue any other right or remedy hereunder or at law or in equity, shall not confer any right or claim upon or otherwise inure to the benefit of any creditor or other third party having dealings with the Company; it being understood and agreed that the provisions of this Agreement shall be solely for the benefit of, and may be enforced solely by, the parties hereto and their respective successors and assigns except as may be otherwise agreed to by the Company in writing with the prior written approval of the Member. 26. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED UNDER, THE LAWS OF THE STATE OF DELAWARE, ALL RIGHTS AND REMEDIES BEING GOVERNED BY SAID LAWS, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. -7- IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, has duly executed this Limited Liability Company Agreement as of the date first above written. Pursuant to Section 18-201(d) of the Act, this Agreement shall be effective as of the date hereof. MEMBER: IDT DOMESTIC-UNION, LLC By: IDT Domestic Telecom, Inc., its Managing Member By: /s/ MOTTI LICHTENSTEIN ------------------------------ Name: Motti Lichtenstein Title: CEO ANNEX I Capital Contributions of the Member IDT DOMESTIC-UNION, LLC Capital Contributions: --------------------- A. 1,300,000 shares of Class A Common Stock, par value $0.01 per share, of Net2Phone, Inc. in exchange for 13 units of Class B Membership Interests of the Company. B. 8,696,750 shares of Class A Common Stock, par value $0.01 per share, of Net2Phone, Inc. in exchange for 87 units of Class A-1 Membership Interests of the Company. EX-99.14 13 sc288152.txt AMENDED LLC AGREEMENT EXECUTION COPY AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF NET2PHONE HOLDINGS, L.L.C. Dated as of October 19, 2001 TABLE OF CONTENTS Page No. -------- ARTICLE I. DEFINITIONS 1.1. Definitions..........................................................2 1.2. Terms Generally......................................................9 ARTICLE II. THE COMPANY AND ITS BUSINESS 2.1. Formation of the Company; Effectiveness..............................9 2.2. Company Name........................................................10 2.3. Term................................................................10 2.4. Business; Scope of Members' Authority...............................10 2.5. Principal Office; Registered Agent..................................10 2.6. Names and Addresses of Members......................................10 2.7. Certain Representations by Members..................................11 2.8. Withholding Tax.....................................................12 ARTICLE III. MANAGEMENT OF COMPANY BUSINESS 3.1. Management and Control..............................................12 3.2. Appointment of Managers; Removal of Managers; Meetings of Managers and Members..............................................12 3.3. Significant Decisions...............................................14 3.4. Compensation of Managers............................................16 3.5. Actions by the Members..............................................16 ARTICLE IV. RIGHTS AND DUTIES OF MEMBERS 4.1. Other Activities of the Members.....................................16 4.2. Liability of Members, Managers and Officers.........................17 4.3. Investment Representations..........................................18 4.4. Legend..............................................................18 4.5. Limited Liability of Members........................................19 4.6. Dealing with Members................................................19 4.7. Designation of Tax Matters Member...................................20 4.8. Tax Matters.........................................................20 ARTICLE V. BOOKS, RECORDS, BUDGETS AND REPORTS 5.1. Books of Account....................................................22 5.2. Availability of Books of Account....................................23 5.3. Annual and Periodic Reports and Statements..........................23 5.4. Accounting Expenses.................................................24 ARTICLE VI. CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS, PROFITS AND LOSSES AND ALLOCATIONS 6.1. Capital Contributions of the Members................................24 6.2. Capital of the Company..............................................24 6.3. Return of Capital Contribution......................................25 6.4. Capital Accounts....................................................25 6.5. Profits and Losses..................................................25 6.6. Special Allocations.................................................26 6.7. Other Allocation Rules..............................................27 6.8. Tax Allocations: Code Section 704(c)...............................27 ARTICLE VII. DISTRIBUTIONS 7.1. Distribution Policy.................................................28 7.2. Liquidation.........................................................29 ARTICLE VIII. RESERVED 8.1. Reserved............................................................30 -ii- ARTICLE IX. TERMINATION OF A MEMBER; TRANSFER OF MEMBERSHIP INTERESTS 9.1. Termination of a Member.............................................30 9.2. Transfer of Membership Interests....................................30 ARTICLE X. TERMINATION OF THE COMPANY; LIQUIDATION AND DISTRIBUTION OF ASSETS 10.1. Dissolution and Termination.........................................31 10.2. Distribution Upon Liquidation.......................................32 10.3. Sale of Company Assets..............................................32 10.4. Deficit Capital Accounts............................................33 ARTICLE XI. RESERVED 11.1. Reserved............................................................33 ARTICLE XII. AMENDMENTS 12.1. Amendments. (a) Amendments may be made to this Agreement from time to time by the unanimous consent of the Members...........33 ARTICLE XIII. MISCELLANEOUS 13.1. Further Assurances..................................................34 13.2. Notices.............................................................34 13.3. Headings and Captions...............................................34 13.4. Variance of Pronouns................................................35 13.5. Counterparts........................................................35 13.6. Governing Law.......................................................35 13.7. Partition...........................................................35 13.8. Invalidity..........................................................35 13.9. Assignment; Successors and Assigns..................................35 13.10. Entire Agreement....................................................36 -iii- 13.11. No Brokers..........................................................36 13.12. Maintenance as a Separate Entity....................................36 13.13. Expenses............................................................37 13.14. Publicity...........................................................37 -iv- AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF NET2PHONE HOLDINGS, L.L.C. This Amended and Restated Limited Liability Company Agreement of Net2Phone Holdings, L.L.C. (the "Company") is made, entered into and effective as of October 19, 2001, by and among AT&T Corp., a New York corporation ("AT&T"), ITelTech, LLC, a Delaware limited liability company ("AT&T Sub"), IDT Corporation, a Delaware corporation ("IDT Corporation") and IDT Domestic-Union, LLC, a Delaware limited liability company ("IDT Sub"), and each other Person who, in accordance with the terms hereof, shall become a party to or be bound by the terms of this Agreement after the date hereof. R E C I T A L S WHEREAS, the Company was formed under the Act pursuant to the Certificate of Formation filed with the Secretary of State of the State of Delaware on October 17, 2001; WHEREAS, IDT Sub entered into a Limited Liability Company Agreement, dated as of October 19, 2001 (the "Limited Liability Company Agreement"), in respect of the Company; WHEREAS, IDT Sub hereby agrees to admit AT&T Sub as a member to the Company, on the terms and conditions contained in this Agreement; WHEREAS, AT&T, AT&T Sub, IDT Corporation and IDT Sub are entering into this Agreement to jointly own 28,896,750 shares of Class A Common Stock, par value $.01 per share (together with any shares of such common stock or other property distributed in respect thereof, the "Common Stock"), of Net2Phone, Inc., a Delaware corporation ("Net2Phone"), and to actively manage the Common Stock through the Company to increase the value of the Common Stock for the benefit of the parties; WHEREAS, IDT Sub contributed to the Company the 9,996,750 shares of Common Stock owned by IDT Sub immediately prior to the execution and delivery of the Limited Liability Company Agreement (the "IDT Sub Shares") in exchange for Class A-1 and Class B Membership Interests of the Company, on the terms and conditions contained in the Limited Liability Company Agreement and this Agreement; and WHEREAS, AT&T Sub wishes to contribute to the Company the 18,900,000 shares of Common Stock beneficially owned by AT&T Sub immediately prior to the execution and delivery of this Agreement (the "AT&T Sub Shares") in exchange for Class A and Class B Membership Interests of the Company, on the terms and conditions contained in this Agreement. NOW, THEREFORE, in order to carry out their intent as expressed above and in consideration of the mutual agreements contained herein, the parties hereby agree to amend and restate the Limited Liability Company Agreement in its entirety as follows: ARTICLE I. DEFINITIONS 1.1. Definitions. As used in this Agreement, the following terms shall have the meanings set forth below: "Act" shall mean the Delaware Limited Liability Company Act, Sections 18-101 et seq. of Title 6 of the Delaware Code, as amended from time to time. "Additional Member" shall mean any Person admitted to the Company as a Member pursuant to the terms of this Agreement. "Adjusted Capital Account Deficit" shall mean, with respect to any Member, the deficit balance, if any, in such Member's Capital Account as of the end of the relevant period, after giving effect to the following adjustments: (i) credit to such Capital Account of any amounts which such Member is obligated to restore pursuant to any provision of this Agreement or is deemed to be obligated to restore pursuant to the penultimate sentence of Treasury Regulations Section 1.704-2(g)(1) or pursuant to the penultimate sentence of Treasury Regulations Section 1.704-2(i)(5); and (ii) debit to such Capital Account the items described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6). This definition of Adjusted Capital Account Deficit and the limitations and allocations set forth in Section 6.6(a), (b) and (c) hereof are together intended to comply with Treasury Regulations Section 1.704-1(b)(2)(ii)(d), and shall be so interpreted. "Affiliate" shall mean with respect to any Person, any other Person that directly or indirectly through one or more intermediaries Controls, is Controlled by or is under common Control with such Person. -2- "Affiliate Transaction" shall have the meaning set forth in Section 4.6. "Agreement" shall mean this Amended and Restated Limited Liability Company Agreement of Net2Phone Holdings, L.L.C., including any Schedules hereto, as it may hereafter be amended, modified or supplemented from time to time. "AT&T" has the meaning given in the Preamble. "AT&T Restructuring Entity" has the meaning given in Section 13.9. "AT&T Sub Shares" has the meaning given in the Recitals. "AT&T Sub" has the meaning given in the Preamble. "Bankruptcy" shall mean, with respect to the affected party, (i) the entry of an Order for Relief under Title 11 of the United States Code, (ii) the admission by such party of its inability to pay its debts as they mature, (iii) the making by it of an assignment for the benefit of creditors, (iv) the filing by it of a petition in bankruptcy or a petition for relief under Title 11 of the United States Code or any other applicable federal or state bankruptcy or insolvency law, (v) the expiration of sixty (60) days after the filing of an involuntary petition under Title 11 of the United States Code, an application for the appointment of a receiver for the assets of such party, or an involuntary petition seeking liquidation, reorganization, arrangement or readjustment of its debts under any other federal or state insolvency law, provided that the same shall not have been vacated, set aside or stayed within such sixty (60)-day period or (vi) the imposition of a judicial or statutory lien on all or a substantial part of its assets unless such lien is discharged or vacated or the enforcement thereof stayed within sixty (60) days after its effective date. With respect to a Member, the foregoing definition of "Bankruptcy" is intended to replace and shall supersede and replace the definition of "bankruptcy" set forth in Sections 18-101(1) and 18-304 of the Act. "Board of Managers" shall mean the governing board of the Company, constituted in accordance with the provisions of Article III hereof. Each member of the Board of Managers shall constitute a "manager" within the meaning of the Act. "Book Value" with respect to any Company Asset shall mean its adjusted basis for federal income tax purposes, except that the initial Book Value of any asset contributed by a Member to the Company shall be an amount equal to the fair market value of such asset as determined by the Board of Managers, and such Book Value shall thereafter be adjusted in a manner consistent with Treasury Regulations Section 1.704-l(b)(2)(iv)(g), including as a result of any revaluations pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(f) in the sole discretion of the Board of Managers. "Breaching Member" shall have the meaning set forth in Section 2.7. -3- "Capital Account" when used in respect of any Member shall mean the Capital Account maintained for such Member in accordance with Section 6.4, as said Capital Account may be increased or decreased from time to time pursuant to the terms of Section 6.4. "Capital Contribution" when used with respect to (x) any Member shall mean the amount of capital, if any, contributed by such Member in accordance with Section 6.1(a) and (y) each of the Class A Membership Interests, Class A-1 Membership Interests and Class B Membership Interests held by a Member, the amount of capital contributed by the Member with respect to each such class of Membership Interests. "Certificate of Formation" shall mean the certificate of formation of the Company filed with the Secretary of State of the State of Delaware on October 17, 2001, as the same may be amended and/or restated from time to time. "Class A Capital Account" shall have the meaning set forth in Section 6.4(a). "Class A Fair Market Value" shall mean, at any time with respect to a Class A Membership Interest, the value of the distributions that the holder of such Class A Membership Interest would receive pursuant to Section 10.2(iii) upon the hypothetical liquidation of the Company at such time. For purposes of determining the Class A Fair Market Value, the Common Stock shall be valued as set forth in Section 10.2 hereof. "Class A Member" shall mean (i) AT&T Sub for so long as it holds any Class A Membership Interests, (ii) any transferee of any Class A Membership Interest who has been admitted to the Company as an Additional Member in accordance with the terms of this Agreement or (iii) any other Person who has been admitted to the Company as a Class A Member in accordance with the terms of this Agreement. "Class A Membership Interest" shall mean one unit of the authorized Class A Membership Interests of the Company issued and outstanding in accordance with this Agreement. "Class A Percentage Interest" shall equal, with respect to any Class A Member, the number of Class A Membership Interests then held by such Class A Member divided by the aggregate number of Class A Membership Interests then issued and outstanding, expressed as a percentage. "Class A-1 Capital Account" shall have the meaning set forth in Section 6.4(a). "Class A-1 Member" shall mean (i) IDT Sub for so long as it holds any Class A-1 Membership Interests, (ii) any transferee of any Class A-1 Membership Interest who has been -4- admitted to the Company as an Additional Member in accordance with the terms of this Agreement or (iii) any other Person who has been admitted to the Company as a Class A-1 Member in accordance with the terms of this Agreement. "Class A-1 Membership Interest" shall mean one unit of the authorized Class A-1 Membership Interests of the Company issued and outstanding in accordance with this Agreement. "Class A-1 Percentage Interest" shall equal, with respect to any Class A-1 Member, the number of Class A-1 Membership Interests then held by such Class A-1 Member divided by the aggregate number of Class A-1 Membership Interests then issued and outstanding, expressed as a percentage. "Class B Capital Account" shall have the meaning set forth in Section 6.4(a). "Class B Member" shall mean (i) each of IDT Sub and AT&T Sub for so long as each holds any Class B Membership Interests, (ii) any transferee of any Class B Membership Interest who has been admitted to the Company as an Additional Member in accordance with the terms of this Agreement or (iii) any other Person who has been admitted to the Company as a Class B Member in accordance with the terms of this Agreement. "Class B Membership Interest" shall mean one unit of the authorized Class B Membership Interests of the Company issued and outstanding in accordance with this Agreement. "Class B Percentage Interest" shall equal, with respect to any Class B Member, the number of the Class B Membership Interests then held by such Class B Member divided by the aggregate number of Class B Membership Interests then issued and outstanding, expressed as a percentage. "Code" shall mean the Internal Revenue Code of 1986, as amended, or any corresponding provision(s) of succeeding law. "Company Assets" shall mean all right, title and interest of the Company in and to all or any portion of the assets of the Company, including, without limitation, securities of, and ownership interests in, Subsidiaries of the Company, and any property (real, personal, tangible or intangible) acquired in exchange therefor or in connection therewith. "Common Stock" shall have the meaning set forth in the recitals. -5- "Control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of another Person, whether through the ownership of voting securities or other ownership interests by contract or otherwise. "Damages" shall have the meaning set forth in Section 2.7. "Distributable Funds" shall mean all cash receipts of the Company (or released from reserves) during any period, as reduced by the setting aside during such period of such reserves as the Board of Managers may deem reasonably necessary for the discharge of liabilities or obligations of the Company and as increased by the release of any such reserves as determined by the Board of Managers. "electronic transmission" has the meaning given in Section 3.2(i). "Fiscal Year" shall mean the fiscal year of the Company, which shall be each twelve-month period ending December 31 of each year; provided, however, that upon termination of the Company, "Fiscal Year" shall mean the period from the end of the last preceding Fiscal Year to the date of such termination. "IDT Corporation" has the meaning given in the Preamble. "IDT Sub" has the meaning given in the Preamble. "IDT Sub Shares" has the meaning given in the Recitals. "Indebtedness" shall mean (i) all indebtedness for borrowed money or for the deferred purchase price of property, goods and services, including reimbursement, and all other obligations, absolute or contingent, with respect to surety bonds, letters of credit and bankers' acceptances whether or not matured, and hedges, swaps and other derivative contracts and financial instruments, (ii) all obligations evidenced by notes, bonds, debentures, or similar instruments, (iii) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to acquired property (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (iv) all capital lease obligations, (v) all indebtedness referred to in clause (i), (ii), (iii) or (iv) above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any lien upon or on property owned by the Company or any wholly-owned Subsidiary of the Company (including accounts or contract rights), even though the Company or such wholly-owned Subsidiary of the Company has not assumed or become liable for such indebtedness, and (vi) all guaranteed indebtedness of others. "Independent Accountants" has the meaning given in Section 4.8(a). -6- "Initial Class B Return" has the meaning given in Section 7.1(a)(iii). "IRR" shall mean the internal rate of return since the date hereof earned by the Class B Members on the Capital Contributions made with respect to the Class B Membership Interests taking into account the timing and amounts of any distributions made with respect to the Class B Membership Interests pursuant to Sections 7.1(a) and 10.2. "IRS" shall mean the Internal Revenue Service and any successor agency or entity thereto. "Limited Liability Company Agreement" has the meaning given in the Recitals. "Managers" has the meaning given in Section 3.2(a). "Member" shall mean a Class A Member, a Class A-1 Member or a Class B Member, as the context may require, in its capacity as a member of the Company. For purposes of the Act, there are no separate classes or groups of members other than the Class A Members, the Class A-1 Members and the Class B Members. "Membership Interests" means the Class A Membership Interests, the Class A-1 Membership Interests and the Class B Membership Interests. "Net2Phone" has the meaning given in the Recitals. "Organizational Documents" shall mean (if applicable) (i) with respect to a corporation, such Person's certificate or articles of incorporation and by-laws (including any constitution or rules constituting such by-laws), and any shareholder agreement, voting agreement, voting trust or similar arrangement applicable to any of such Person's authorized shares of capital stock, (ii) with respect to a partnership, such Person's certificate of limited partnership, if any, partnership agreement, voting trusts, voting agreements or similar arrangements applicable to any of its partnership interests or (iii) with respect to a limited liability company, such Person's certificate of formation, limited liability company or operating agreement, voting trusts, voting agreements or similar arrangements applicable to any of its limited liability company interests. "Parent" shall mean (i) AT&T (or if the Agreement is assigned by AT&T to an AT&T Restructuring Entity, the AT&T Restructuring Entity) with respect to AT&T Sub or any Permitted Transferee of AT&T Sub, (ii) IDT Corporation with respect to IDT Sub or any Permitted Transferee of IDT Sub, and (iv) with respect to each of the foregoing, any assignee pursuant to Section 13.9(a)(ii). "Permitted Transferee" has the meaning given in Section 9.2. -7- "Person" shall mean an individual, corporation (including any non-profit corporation), association, general or limited partnership, organization, business, firm, limited liability company, joint venture, trust, estate or other entity, association or organization, whether constituting a separate legal entity or not. "Profits" and "Losses" for any period shall mean the taxable income or loss, as the case may be, of the Company for such period determined in accordance with Code Section 703(a) and Treasury Regulation Section 1.703-1 computed with the following adjustments: (i) Items of gain, loss, and deduction shall be computed based upon the Book Values of the Company's assets (in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(g) and/or 1.704-3(d)) rather than upon the assets' adjusted bases for federal income tax purposes; (ii) Any tax exempt income received by the Company shall be included as an item of gross income; (iii) The amount of any adjustments to the Book Values of any assets of the Company pursuant to Code Section 743 shall not be taken into account; and (iv) Any expenditure of the Company described in Code Section 705(a)(2)(B) (including any expenditure treated as being described in Code Section 705(a)(2)(B) pursuant to Treasury Regulation under Code Section 704(b)) shall be treated as a deductible expense. "Regulatory Allocations" has the meaning given in Section 6.6(d). "Significant Decision" has the meaning given in Section 3.3. "Sub-Capital Account" when used in respect of the Membership Interests held by any Member shall mean the Sub-Capital Account maintained for such Member in accordance with Section 6.4 with respect to each class of Membership Interests held by such Member, as said Sub-Capital Accounts may be increased or decreased from time to time pursuant to the terms of Section 6.4. "Subsidiary" shall mean, with respect to any Person, (x) any other Person which such Person Controls and (y) in which such Person owns a majority of the outstanding capital stock or other ownership interests. "Tax Matters Member" shall initially be IDT Sub who shall serve as Tax Matters Member until such time as a successor Tax Matters Member is appointed by the Board of Managers. -8- "Terminating Event" has the meaning given in Section 9.1. "Total Class B Return" has the meaning given in Section 7.1(a)(iv). "Transfer" shall have the meaning set forth in Section 9.2. "Treasury Regulations" shall mean the regulations promulgated under the Code, as amended. 1.2. Terms Generally. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined herein have the meanings assigned to them herein and include both the plural and the singular, as the context may require; (b) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; and (c) the words "including" and "include" and other words of similar import shall be deemed to be followed by the phrase "without limitation." ARTICLE II. THE COMPANY AND ITS BUSINESS 2.1. Formation of the Company; Effectiveness. Prior to the date hereof, the Certificate of Formation was filed with the Secretary of State of the State of Delaware. The Members hereby agree to execute and file any required amendments to the Certificate of Formation and shall do all other acts required for the constitution of the Company as a limited liability company under the laws of the State of Delaware. The Members and the Board of Managers hereby ratify and approve the execution, delivery and filing of the original Certificate of Formation with the Secretary of State of the State of Delaware by Nikola Uzelac, and all other certificates executed, delivered and filed as of the date hereof with the Secretary of State of the State of Delaware by any officer of the Company, as an authorized person within the meaning of the Act. Thereafter, Nikola Uzelac's powers as an authorized person ceased, and any Person authorized by the Board of Managers as an authorized person within the meaning of the Act shall execute, deliver and file, or cause the execution, delivery and filing of, all certificates (and any amendments and/or restatements thereof) required or permitted by the Act to be filed with the Secretary of State of the State of Delaware. -9- 2.2. Company Name. The business of the Company shall be conducted under the name of "Net2Phone Holdings, L.L.C." in the State of Delaware and under such name or such assumed or trade names as the Board of Managers deem necessary or appropriate to comply with the requirements of any other jurisdiction in which the Company may be required to qualify. 2.3. Term. The term of the Company commenced on the date the Secretary of State of the State of Delaware accepted for filing the Certificate of Formation for the Company and shall continue until the Company is dissolved pursuant to Article X of this Agreement. 2.4. Business; Scope of Members' Authority. (a) The Company is organized for the object and purpose of, and the nature of the business to be conducted and promoted by the Company is, engaging in any lawful act or activity for which limited liability companies may be formed under the Act and engaging in any and all activities necessary, convenient, desirable or incidental to the foregoing, including, without limitation, acquiring, holding, managing, operating and disposing of real and personal property. (b) Except as otherwise expressly and specifically provided in this Agreement, no Member shall have any authority to bind or act for, or assume any obligations or responsibility on behalf of, any other Member or the Company. Neither the Company nor any Member shall, by virtue of executing this Agreement, be responsible or liable for any Indebtedness or obligation of the other Members incurred or arising either before or after the execution of this Agreement, except that the Company shall be responsible for the responsibilities, liabilities, Indebtedness and obligations of the Company incurred after the date hereof pursuant to and as limited by the terms of this Agreement. 2.5. Principal Office; Registered Agent. The principal office of the Company shall be at 400 North Stephanie Street, Suite 235, Henderson, Nevada 89014. The Company may change its place of business to such location or locations as may at any time or from time to time be determined by the Board of Managers. The mailing address of the Company shall be at 400 North Stephanie Street, Suite 235, Henderson, Nevada 89014, or such other address as may be selected from time to time by the Board of Managers. The registered office and registered agent in the State of Delaware of the Company shall be c/o The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801. 2.6. Names and Addresses of Members. The names and addresses of the Members are set forth on Schedule I hereto, as such schedule shall be amended from time to time to reflect changes in the Members or their addresses. Upon execution and -15- delivery of this Agreement AT&T Sub shall be admitted to the Company as a Member and IDT Sub shall continue as a Member. 2.7. Certain Representations by Members. Each Member represents, warrants, agrees and acknowledges that, as of the date hereof, (i) it has been duly authorized to purchase and hold its Membership Interests and to execute and deliver this Agreement and all other instruments executed and delivered on behalf of it in connection with the acquisition of its Membership Interests, (ii) the execution and delivery of this Agreement and the performance of its obligations hereunder will not result in a breach or violation of, a default under, or conflict with (A) its Organizational Documents or (B) any existing agreement to which it or any of its properties or assets is subject, other than in the case of clause (ii) (B) above, such breaches, violations, defaults and conflicts that will not materially adversely affect the ability of the Company and the Members to consummate the transactions and acts contemplated by this Agreement and, to the best of its knowledge, will not subject the Company, any wholly-owned subsidiary of the Company or the Members to any material liability or materially and adversely affect the ability of the Company or any wholly-owned Subsidiary of the Company to conduct its business as currently conducted or as proposed to be conducted, (iii) this Agreement has been duly authorized, executed and delivered by, and is a binding agreement on the part of, such Member enforceable against such Member in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles, and (iv) all authorizations, consents, approvals, orders, notices, filings, registrations, qualifications and exemptions of, with or from any court, administrative agency or commission or other federal, state or local governmental authority and agencies, departments or subdivisions thereof or any self-regulatory authority required to be obtained or made by or on behalf of such Member in connection with the execution of this Agreement or the performance of its obligations hereunder, to its knowledge, have been duly obtained or made by such Member and are in full force and effect, other than authorizations, consents, approvals, orders, notices, filings, registrations, qualifications and exemptions the absence of which would not have individually or in the aggregate a material adverse effect on the transactions contemplated by this Agreement. Each Member agrees to indemnify the Company, any wholly-owned Subsidiaries of the Company and each other Member against any and all claims, demands, losses, damages, liabilities, lawsuits and other proceedings, judgments and awards, and costs and expenses (including, but not limited to, reasonable attorneys' fees) (collectively, "Damages") incurred by the Company or any such other Member or any Affiliate of any Member arising from any breach by such Member of any of the foregoing representations and warranties or the representations and warranties contained in Section 6.1(b) of this Agreement (the "Breaching Member"); provided, however, that (A) if the Breaching Member is AT&T Sub, AT&T shall also covenant and agree to indemnify the Company, any wholly-owned Subsidiary of the Company and each other Member against any and all Damages arising from AT&T Sub's breach of any of the foregoing representations -11- and warranties, and (B) if the Breaching Member is IDT Sub, IDT Corporation shall also covenant and agree to indemnify the Company, any wholly-owned Subsidiary of the Company and each other Member against any and all Damages arising from IDT Sub's breach of any of the foregoing representations and warranties. 2.8. Withholding Tax. Each Member represents and warrants that it is not a foreign partner under Section 1446(e) of the Code. ARTICLE III. MANAGEMENT OF COMPANY BUSINESS 3.1. Management and Control. (a) Except as otherwise specifically set forth in this Agreement, the Board of Managers of the Company, acting in accordance with the terms of this Agreement, including, but not limited to, Section 3.2, shall have the right, power and authority to oversee the business and affairs of the Company and to do all things necessary to manage the business of the Company, and the Board of Managers is hereby authorized to take any action of any kind and to do anything and everything the Board of Managers deems necessary or appropriate in accordance with the provisions of this Agreement and applicable law. Any action taken by the Board of Managers in accordance with the terms of this Agreement that is not otherwise in violation of applicable law shall constitute the act of, and shall serve to bind, the Company. (b) No Member shall take any action on behalf of or in the name of the Company, or enter into any commitment or obligation binding upon the Company, except for actions authorized by the Board of Managers in the manner set forth herein. 3.2. Appointment of Managers; Removal of Managers; Meetings of Managers and Members. (a) The Board of Managers shall be comprised of five (5) Managers of the Company (the "Managers"), who shall be appointed by Members owning a majority of the Class A-1 Membership Interests, subject to the consent of the other Members, which shall not be unreasonably withheld. A Manager need not be a Member. The initial Managers shall be those individuals designated on Schedule II hereto. (b) Each Manager shall hold office until his death, resignation or removal as set forth in this Section 3.2(b). Any Manager may resign at any time upon written notice to the Board of Managers. Such resignation shall take effect at the time specified therein, and unless specified therein, no acceptance of such resignation shall be necessary to make it effective. Any Manager may be removed with or without cause by -12- Members owning a majority of the Class A-1 Membership Interests, and any Person designated to replace such Manager shall be appointed in accordance with Section 3.2(a). (c) Reserved. (d) The Board of Managers shall make all decisions relating to the casting of votes in respect of the Common Stock on all matters submitted to a vote of the stockholders of Net2Phone, including the election and removal of directors to the board of directors of Net2Phone. (e) The Board of Managers may hold meetings, both regular and special, either within or without the State of Delaware. (f) Regular meetings of the Board of Managers may be called by any Manager on one (1) day's prior notice to each member of the Board of Managers, either personally or by mail or by facsimile, at such time and such place as from time to time shall be determined by the Board of Managers, but in any event shall be held at least once every quarter. (g) Special meetings of the Board of Managers may be called by any Manager on one (1) day's prior notice to each member of the Board of Managers, either personally or by mail or by facsimile. Such notice shall state the purpose or purposes for which the special meeting is called. (h) At all meetings of the Board of Managers, three (3) Managers, present in person or represented by proxy, shall constitute a quorum for the transaction of business and, provided proper notice has been given to the Managers, the act of a majority of the Managers, present in person or represented by proxy, at any meeting at which there is a quorum shall be the act of the Board of Managers and, subject to Section 3.3, shall conduct, oversee and manage the business and affairs of the Company. (i) Any action required or permitted to be taken at any meeting of the Board of Managers may be taken without a meeting if the Managers having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all Managers were present, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of the Company. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form. As used in this Agreement, "electronic transmission" means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process. (j) Managers may participate in a meeting of the Board of Managers -13- 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. (k) Each Manager shall have the right to receive all printed information distributed to any member of the Board of Managers in his or her capacity as a Manager. (l) Each Manager may authorize another person or persons to act for such Manager by proxy at any meeting of the Board of Managers. 3.3. Significant Decisions. The Company shall not, and no Manager of the Company shall have the power or authority to cause the Company to, without the prior unanimous consent of all of the Members, take any action in respect of a Significant Decision; provided, however, that if a Member receives notice from the Company, either personally or by mail or by facsimile, describing in reasonable detail an action with respect to a Significant Decision that the Company intends to adopt, and such Member does not notify the Company in writing within seven (7) days or such longer period as may be stated in the notice that it does not consent to the taking of such action, such Member shall be deemed to have consented to the taking of such action with respect to the Significant Decision. For purposes of this Agreement, each of the following matters shall constitute a "Significant Decision": (a) the adoption, amendment, alteration or repeal of any provision or term of any Organizational Document of the Company; (b) any merger or consolidation involving, or any reorganization, dissolution (other than as expressly provided in Article X or Article XI hereof), liquidation or the issuance of equity securities or securities convertible into or exchangeable for equity securities (other than in any of the foregoing instances any merger or consolidation of a wholly owned Subsidiary of the Company, if any, with or into the Company or another wholly owned Subsidiary of the Company which would not have a material adverse tax effect on any Member) or other winding-up or termination of, the Company (or the adoption of a plan to do any of the foregoing); (c) the purchase or other acquisition (by merger, consolidation or otherwise) by the Company of any stock or equity interests in or of any other Person, or any assets of any other Person, or any business (or a substantial part of a business), other than the purchase or other acquisition of (i) securities issued by governmental agencies backed by the full faith and credit of the United States government, (ii) deposits with, certificates of deposit issued by and securities repurchase contracts with commercial banks or primary financial institutions, (iii) commercial paper, or (iv) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (i), (ii) or (iii) hereof; -14- (d) except as otherwise provided in this Agreement, the redemption, purchase, repurchase or other acquisition for value of any Membership Interests (other than as expressly provided in Article VIII and Article XI hereof) or any debt securities of the Company or any wholly-owned Subsidiary of the Company (except to the extent such debt security is required to be so redeemed, purchased, repurchased or otherwise acquired in accordance with the terms of this Agreement); (e) the sale, transfer, pledge or hypothecation of any shares of Common Stock other than to a wholly-owned Subsidiary of the Company; (f) subject to subsection (i) below, the entering into of any contract or transaction with or for the direct or indirect benefit of, or payment or provision of any money or other form of consideration, directly or indirectly, to or for the benefit of, or assumption, guarantee or becoming otherwise liable for any indebtedness or other obligation of, or sale, lease (as lessor or lessee), transfer, giving or other assignment or acquisition of any properties or assets, tangible or intangible, or services to or from, any Member or any of their respective Affiliates; (g) taking any action or failing to take any action that could reasonably be expected to result in (i) the Company failing to be treated as a partnership for U.S. federal income tax purposes or (ii) the termination of the Company under Section 708(b) of the Code; (h) accepting contributions of capital from any Member after the date hereof; (i) enter into any contract or arrangement which requires payment to or by the Company or any of its Subsidiaries in an amount, whether payable at one time or in a series of payments, in excess of U.S. $500,000 over the life of the contract or arrangement, except for any contract or arrangement which require payment of reasonable fees relating to administrative or professional services provided to the Company or any of its Subsidiaries; (j) cause any settlement of any litigation or other governmental proceeding or which provides for the release of a Manager from any liability for damages to the Company caused by fraud or willful misconduct of such Manager; provided, however, that the consent of the Members to take action with respect to this Section 3.3(j) shall not be unreasonably withheld; (k) entering into, assuming or becoming bound by any contract to do any of the foregoing, or otherwise attempting to do any of the foregoing, either directly or indirectly. -10- Notwithstanding anything to the contrary contained herein, any action required to be taken by the Company pursuant to Article VII shall not be deemed a Significant Decision. 3.4. Compensation of Managers. The Managers shall not be entitled to any compensation in connection with management services rendered to the Company. All expenses incurred by the Managers in connection with travel to and from meetings of the Board of Managers shall be borne by the Class A-1 Member. 3.5. Actions by the Members. All actions required or permitted to be taken by the Members may be taken without a meeting. The Members having not less than the minimum number of votes that would be necessary to authorize or take an action may consent in writing or by electronic transmission to the authorization or taking of an action and the written consent or electronic transmission or transmissions shall be filed with the minutes of the Company. The filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form. ARTICLE IV. RIGHTS AND DUTIES OF MEMBERS 4.1. Other Activities of the Members. (a) Subject to Sections 4.1(b) and 4.1(c), this Agreement shall not be construed to create any duty or obligation on the part of any of the Members, the Company or any other person employed by, related to or in any way affiliated with any Member or the Company to disclose or offer to the Company or the Members, or obtain for the benefit of the Company or the Members, any other activity or venture or interest therein, or to create on the part of the Company, any of the Members, any creditors of the Company or any other Person having any interest in the Company (i) any claim, right or cause of action against any of the Members or any other Person employed by, related to or in any way affiliated with, any of the Members by reason of any direct or indirect investment or other participation, whether active or passive, in any other activity or venture or interest therein or (ii) any right to any such activity or venture or interest therein or the income or profits derived therefrom. (b) AT&T hereby undertakes to use its reasonable best efforts to make valuable and meaningful introductions for the Company to appropriate executives at AT&T (or its Broadband division or Business division if separate entities) and certain PTTs and equipment manufacturers where AT&T would face no conflict of interest. AT&T further will endeavor to provide, when appropriate, intangible value to the Company through its contacts and relationships and, as appropriate and in its sole discretion, to purchase products and services from Net2Phone for its own use. (c) IDT Corporation hereby undertakes that, to the extent that as -16- owner, directly or indirectly, of (i) the IDT Sub Shares, (ii) any Membership Interests or (iii) any shares of Common Stock, it is entitled to the proceeds of any judgment or award resulting from any lawsuit or other legal proceeding brought by Net2Phone or the stockholders of Net2Phone against AT&T Sub or its Affiliates relating to any matter pertaining to AT&T Sub's ownership of Common Stock prior to the date hereof or its obligations under the agreements relating to the AT&T Sub Shares, IDT Corporation shall, and cause it Affiliates to, as soon as practicable after the receipt by IDT Corporation or any of its Affiliates of such proceeds, transfer such proceeds (net of any taxes payable with respect to such proceeds) to AT&T Sub for its sole benefit; provided, however, that for purposes of this Section 4.1(c), Net2Phone shall not be deemed an Affiliate of IDT Corporation. (d) The provisions of Sections 4.1(b) and (c) hereof were negotiated in good faith by the parties hereto, and the parties hereto agree that such provisions are reasonable and are not more restrictive than necessary to protect the legitimate interests of the parties hereto. If any provision of Section 4.1(b) or (c) hereof shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of such Section 4.1(b) or (c). It is the intention of the parties hereto that if any of the covenants contained in Section 4.1(b) or (c) is in any way construed to be too broad or to any extent invalid, such provision shall not be construed to be null, void and of no effect, but to the extent such provision would be valid or enforceable under applicable law, such Section 4.1(b) or (c) shall be construed, interpreted or reformed to provide for a covenant having the maximum enforceable provisions as shall be valid and enforceable under applicable law. 4.2. Liability of Members, Managers and Officers. (a) Except as otherwise expressly provided herein, no Member (including any Member acting in its capacity as the Tax Matters Member), Manager or officer of the Company shall be liable, responsible or accountable in damages or otherwise, with respect to matters or actions relating to the Company, under this Agreement to the Company or to any other Member or Manager for (i) any act performed or omission made in good faith except for fraud or the willful misconduct of such Member, Manager or officer, (ii) such Member's, Manager's or officer's performance of, or failure to perform, any act on the reasonable reliance on advice of legal counsel to the Company or (iii) the negligence, malfeasance or bad faith of any agent, consultant or broker of the Company selected, engaged or retained in good faith. In any threatened, pending or completed action, suit or proceeding, each Member (including any Member acting in its capacity as the Tax Matters Member), Manager and officer shall be fully protected and indemnified and held harmless by the Company to the fullest extent permitted by applicable law against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, proceedings, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, reasonable attorneys' fees, costs of -17- investigation, fines, judgments and amounts paid in settlement, actually incurred by such Member, Manager or officer in connection with such action, suit or proceeding) by virtue of its status as a Member (including by virtue of any Member's status as the Tax Matters Member), Manager or officer, as the case may be, or with respect to any action or omission taken or suffered in good faith, other than liabilities and losses resulting from fraud or the willful misconduct of such Member, Manager or officer. The indemnification provided by this Section 4.2(a) shall be recoverable only out of the assets of the Company, and no Member or Manager shall have any personal liability on account thereof. (b) To the extent that, at law or in equity, a Member, Manager or officer of the Company has duties (including fiduciary duties) and liabilities relating thereto to the Company or to another Member or Manager, such Member, Manager or officer of the Company acting in connection with the Company's business or affairs, shall not be liable to the Company or to any Member or Manager for its good faith reliance on the provisions of this Agreement. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of a Member, Manager or officer of the Company otherwise existing at law or in equity, are agreed by the Members to replace such other duties and liabilities of such Member, Manager or officer of the Company in the context of this Agreement. 4.3. Investment Representations. Each Member agrees that it will not Transfer all or any portion of, or offer to Transfer all or any portion of, such Membership Interests, or solicit offers to buy from or otherwise approach or negotiate in respect thereof with any Person or Persons whomsoever, all or any portion of such Membership Interests (i) in any manner which would violate or cause the Company or any Member to violate applicable federal or state securities laws and (ii) other than in accordance with the provisions of this Agreement. 4.4. Legend. The Company may issue certificates representing Membership Interests and in the event that the Company issues such certificates, such certificates shall bear substantially the following legend: "THE MEMBERSHIP INTERESTS REPRESENTED HEREBY WERE ORIGINALLY ISSUED AS OF OCTOBER 19, 2001, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER OR IN VIOLATION -18- OF ANY SUCH STATE SECURITIES LAWS. THE SECURITIES REPRESENTED HEREBY ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AND CERTAIN OTHER AGREEMENTS SET FORTH IN THE AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF THE COMPANY AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF THE SHARES REPRESENTED HEREBY UNTIL THE CONDITIONS THEREIN HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. UPON WRITTEN REQUEST, A COPY OF THE AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT SHALL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF WITHOUT CHARGE." 4.5. Limited Liability of Members. (a) Except as otherwise expressly provided herein or in the Act, no Member (and no director, officer, employee or controlling Person (if any) of such Member) shall be bound by, or be personally liable for, any expense, liability, indebtedness or obligations of the Company or any Subsidiary of the Company or of any other Member. Moreover, except as otherwise expressly provided herein or in the Act or for breach of this Agreement, no Member (and no director, officer, employee or controlling Person (if any) of such Member) shall have any liability under this Agreement to the Company or any other Member other than, with respect to such Member only, its Capital Contributions. The Members shall not be required to contribute any amounts in excess of the amounts set forth in Section 6.1 hereof. (b) To the fullest extent permitted by applicable law, recourse for any monetary liability or obligation of a Member to the Company or any other Member under this Agreement shall be had only against the Membership Interests held by such Member or the value thereof, and not against other assets of such Member. (c) Notwithstanding Sections 4.5(a) and (b) hereof, each Member shall be fully liable to contribute its Capital Contribution in accordance with Section 6.1 hereof. 4.6. Dealing with Members. The fact that a Member, an Affiliate of a Member or any officer, director, employee, partner, consultant or agent of a Member, is directly or indirectly interested in or connected with any person, firm or corporation employed by the Company to render or perform a service, or from or to whom the Company may buy or sell any property or have other business dealings, shall not prohibit -19- the Company from employing such person, firm or corporation or from dealing with him or it (each, an "Affiliate Transaction") on arm's-length terms, and neither the Company nor any of the Members shall have any rights in or to any income or profits derived therefrom by the party to any such Affiliate Transaction. 4.7. Designation of Tax Matters Member. (a) The Tax Matters Member shall act as the "tax matters partner" of the Company, as provided in the regulations pursuant to Section 6231 of the Code. The Tax Matters Member shall initially be IDT Sub, which shall serve as Tax Matters Member until such time as a successor Tax Matters Member is appointed by the Board of Managers. Any Person serving as the Tax Matters Member may be removed and a new Tax Matters Member may be appointed by the Board of Managers. Any Tax Matters Member who is to be replaced by a successor Tax Matters Member in accordance with this Section 4.7(a) shall certify that another Member has been selected as the Tax Matters Member of the Company by filing a statement to that effect with the IRS in the form and manner prescribed by Section 301.6231(a)(7)-1(d) of the Treasury Regulation. Each Member hereby approves of such designation and agrees to execute, certify, acknowledge, deliver, swear to, file and record at the appropriate public offices such documents as may be deemed necessary or appropriate to evidence such approval. To the extent and in the manner provided by applicable Code sections and Treasury Regulations thereunder, the Tax Matters Member (a) shall furnish the name, address, profits interest and taxpayer identification number of each Member to the IRS and (b) shall inform each Member of administrative or judicial proceedings for the adjustment of Company items required to be taken into account by a Member for income tax purposes. The Tax Matters Member shall act reasonably at all times and keep the other Members reasonably informed about its actions. (b) All reasonable out-of-pocket expenses and costs incurred by any Tax Matters Member in its capacity as Tax Matters Member shall be paid by the Company as an ordinary expense of its business. 4.8. Tax Matters. (a) The Board of Managers shall prepare all tax returns of the Company; provided, however, that the Board of Managers shall not file any such tax return without the approval of all Members, which approval shall not be unreasonably withheld. The Board of Managers shall cause the Company to circulate to each Member for its review and approval a draft of any income tax return no later than ninety (90) days after the end of the Company's Fiscal Year. If any Member shall object to any items on the return within thirty (30) days, then the Members and the Board of Managers shall attempt to agree on a mutually acceptable resolution of any disputed tax items. If the Member and the Board of Managers cannot resolve their disagreement within 10 days, either the Member or the Board of Managers may request, in writing with a copy sent to -20- the other party, that the disagreement be resolved by a mutually agreed upon "big five" independent accounting firm (Arthur Andersen LLP, Ernst & Young LLP, PricewaterhouseCoopers LLP, KPMG LLP or Deloitte & Touche LLP) (the "Independent Accountants") and the Independent Accountants shall be instructed to resolve the dispute by, first determining if both positions have merit, and if not, shall adopt the position that has merit. If the Independent Accountants determines that both positions have merit, the Independent Accountants shall adopt the position that will maximize, in the aggregate, the U.S. Federal, state and local income tax advantages and will minimize, in the aggregate, the U.S. Federal, state, and local income tax detriments, available to the Company's Members. The Independent Accountants shall provide their written resolution of the disagreement to both the Member and the Board of Managers within 15 days from the date that the Independent Accountants were requested to resolve such disagreement. If the Independent Accountants are incapable of resolving such disagreement based on the above-stated criteria, the position of the Board of Managers shall prevail. (b) The Board of Managers shall furnish a copy of all filed tax returns of the Company to each of the Members. In addition, upon reasonable written notice provided to the Company by a Member (and as otherwise required by law), the Company shall furnish such Members, on a timely basis, with all information relating to the Company required to be reported in any U.S. Federal, state and local tax returns of such Members, including a report indicating such Member's allocable share for U.S. Federal income tax purposes of the Company's income, gain, credits, losses and deductions. (c) The Members shall report their tax items with respect to, and arising from, their Membership Interests in a manner that is consistent with the Company's tax returns. (d) The Board of Managers shall provide prompt notice to the Members of advice that the IRS or any applicable state or local taxing authority intends to examine any tax returns or records or books of the Company and of any notice from the IRS in any administrative or judicial proceeding at the Company level relating to the determination of any item of income, gain, loss, deduction or credit of the Company, in each case together with a copy of such IRS or state or local taxing authority notice and any written materials submitted by the Board of Managers in response to such notice. In the event of any tax audit or any contest, dispute or litigation with respect to the treatment of, or liability of the Company for, any U.S. Federal, state or local income tax for any taxable period (or portion of a taxable period) of the Company beginning after the date hereof, the Board of Managers shall control, defend and otherwise represent the Company in such audit, contest, dispute or litigation; provided, however, that any Member that constitutes a "notice partner" (as defined in Code Section 6231(a)(8)) of the Company shall have the right, directly or through its designated representatives, to review in advance and timely comment upon all significant written submissions made in the -21- course of such audit, contest, dispute or litigation and to participate in, directly or through its designated representatives, all conferences, meetings or proceedings with any taxing authority, and all appearances before any court or judicial body, the subject matter of which is or includes an item for which such Member's U.S. Federal income tax liability or U.S. Federal income tax benefits could be increased or decreased, respectively, by more than $1,000,000 with respect to the Fiscal Year at issue. The Board of Managers shall advise any Member that constitutes a "notice partner" of the Company (as described above) of any written proposed adjustment by the IRS that would increase (directly or through such Member's interest in any intermediate entities) such Member's U.S. Federal income tax liability (or decrease (directly or through such Member's interest in any intermediate entities) such Member's U.S. Federal tax benefits) by more than $1,000,000 with respect to the Fiscal Year at issue. If the Board of Managers proposes that such adjustment be approved, the Company shall not concede such adjustment without such "notice partner" Member's prior written approval, which approval shall not be unreasonably withheld. In the event of a disagreement between the Board of Managers and a "notice partner" Member with respect to such adjustment, the procedures for resolving disagreements set forth in Section 4.8(a) hereof shall apply. (e) The Board of Managers shall take any steps necessary pursuant to Code Section 6223(a) to designate any Member who so requests, as a "notice partner" (as defined in Code Section 6231(a)(8)) if such Member so requests. In addition, nothing in this Agreement is intended to waive any rights, including rights to participate in administrative and judicial proceedings, that a Member may have under Code Sections 6221 through 6233, inclusive. (f) Notwithstanding any other provisions of this Agreement, the provisions of this Section 4.8 shall survive the dissolution of the Company or the termination of any Member's interest in the Company and shall remain binding on all Members for a period of time necessary to resolve with the IRS or any applicable state or local taxing authority all matters (including litigation) regarding the U.S. Federal, state and local income taxation, as the case may be, of the Company or any Member with respect to the Company. ARTICLE V. BOOKS, RECORDS, BUDGETS AND REPORTS 5.1. Books of Account. At all times during the continuance of the Company, the Board of Managers shall keep or cause to be kept true and complete books of account in accordance with United States generally accepted accounting principles (except as noted in the last sentence of Section 5.3) and in which shall be entered fully and accurately the transactions of the Company. Such books of account shall be kept on -22- the basis of the Fiscal Year in accordance with the accrual method of accounting, and shall reflect all transactions of the Company in accordance with United States generally accepted accounting principles (except as noted in the last sentence of Section 5.3). 5.2. Availability of Books of Account. All of the books of account referred to in Section 5.1, together with an executed copy of this Agreement, the Certificate of Formation and any amendments thereto shall at all times be maintained at the principal office of the Company or such other place in the State of Nevada or in such other state as the Board of Managers may designate in writing to the Members, and upon reasonable notice to the Board of Managers, shall be open to the inspection and examination of the Members or their representatives during reasonable business hours for purposes reasonably related to their Membership Interests. 5.3. Annual and Periodic Reports and Statements. For each Fiscal Year, the Board of Managers shall send or shall cause to be sent to each Person who was a Member at any time during such Fiscal Year, within one hundred and twenty (120) days after the end of such Fiscal Year, the consolidated annual financial statements of the Company including an annual balance sheet, profit and loss statement and a statement of changes in financial position, and a statement showing distributions to the Members, all as prepared in accordance with United States generally accepted accounting principles consistently applied (except as noted in the last sentence of this Section 5.3) and audited by the Company's independent public accountants, which shall be a firm of Independent Accountants and, within one hundred and twenty (120) days after the end of the Fiscal Year, a statement showing allocations to the Members of taxable income, gains, losses, deductions and credits, as prepared by such accountants. In addition, the Board of Managers shall send or cause to be sent to each Member (i) within forty-five (45) days after the end of the first three fiscal quarters of each year, a quarterly report, as applicable, setting forth such financial and operating information as the Board of Managers shall reasonably determine but which shall include a consolidated balance sheet and income statement (except as noted in the last sentence of this Section 5.3), (ii) such monthly and quarterly financial reporting information as the Board of Managers shall reasonably determine and (iii) such financial and other information concerning the Company as is reasonably requested by any Member that is necessary for the preparation of (A) such Member's federal, state and local income or other tax returns or (B) any filing, notice or application made by or on behalf of such Member to or with any regulatory body having jurisdiction over such Member, subject to the right of the Company to withhold any confidential information that it reasonably determines will not remain confidential and that the public disclosure of which could adversely affect the Company. In addition to the rights under this Agreement and under the Act, the Company may provide such information to such Members and such other Persons as it deems appropriate. Notwithstanding the foregoing, in no event shall the results of Net2Phone be consolidated within such financial statements. -23- 5.4. Accounting Expenses. All out-of-pocket expenses payable to Persons in connection with the keeping of the books and records of the Company and the preparation of audited or unaudited financial statements and federal and local tax and information returns required to implement the provisions of this Agreement or required by any governmental authority with jurisdiction over the Company shall be borne by the Company as an ordinary expense of its business. ARTICLE VI. CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS, PROFITS AND LOSSES AND ALLOCATIONS 6.1. Capital Contributions of the Members. (a) IDT Sub has made a Capital Contribution to the Company in the form of the IDT Sub Shares, as of the date of the Limited Liability Company Agreement, with 1,300,000 shares of Common Stock exchanged for Class B Membership Interests and 8,696,750 shares of Common Stock exchanged for Class A-1 Membership Interests. AT&T Sub is making a Capital Contribution to the Company in the form of the AT&T Sub Shares, with 6,200,000 shares of Common Stock exchanged for Class A Membership Interests and 12,700,000 shares of Common Stock exchanged for Class B Membership Interests. AT&T Sub is hereby delivering to the Company two certificates representing 18,900,000 shares of Common Stock, accompanied by stock powers duly executed in blank, in proper form for transfer. No other Member is making a Capital Contribution. (b) Each of AT&T Sub and IDT Sub represents, warrants and acknowledges that immediately prior to its Capital Contribution, it owned the AT&T Sub Shares or the IDT Sub Shares, as applicable, beneficially and of record, free and clear of any mortgage, pledge, lien, security interest, claim, restriction, charge or encumbrance of any kind. Each of AT&T Sub and IDT Sub represents, warrants and acknowledges that it owns its Membership Interests, subject, in the case of AT&T Sub, to the Exchange Agreements, beneficially and of record, free and clear of any mortgage, pledge, lien, security interest, claim, restriction, charge or encumbrance of any kind, other than as provided in this Agreement. (c) The Membership Interests held by each Member and the Capital Contributions attributable to each class of Membership Interests held by each Member, are set forth on Schedule III hereto, as such schedule may be hereafter amended from time to time. 6.2. Capital of the Company. The capital of the Company shall be the aggregate capital in all of the Members' Capital Accounts. Except as otherwise provided herein, no Member shall be entitled to (i) withdraw or receive any interest or other return on its Capital Contribution or (ii) voluntarily contribute capital to the Company. -24- 6.3. Return of Capital Contribution. Except as otherwise provided in this Agreement, no Member shall have the right to demand the return of all or any part of its Capital Contribution until the Company has been dissolved, or, in the event it has such right, to demand or receive any property other than cash in return for its Capital Contribution. 6.4. Capital Accounts. (a) The Company shall maintain separate Capital Accounts for each Member in accordance with Section 704(b) of the Code and the Treasury Regulations thereunder. In addition, the Company shall maintain separate Sub-Capital Accounts for each Member (i) with respect to the Class A Membership Interests held by such Member (the "Class A Capital Account"), (ii) with respect to the Class A-1 Membership Interests held by such Member (the "Class A-1 Capital Account") and (iii) with respect to the Class B Membership Interests held by such Member (the "Class B Capital Account"), each in the same manner as the Capital Accounts except that only items allocable or attributable to each individual class of Membership Interests shall be taken into account. The Capital Accounts and the Sub-Capital Accounts of each Member as of the date hereof are deemed to equal the dollar amounts set forth opposite such Member's name on Schedule IV hereto as of the date hereof. (b) The Capital Account of each Member shall be increased by the amount of any Profits allocated to such Member. The Capital Account of each Member shall be decreased by (i) the amount of any Losses allocated to such Member and (ii) the amount of distributions to such Member. In all respects, the Members' Capital Accounts shall be determined in accordance with the detailed capital accounting rules set forth in Treasury Regulations Section 1.704-1(b)(2)(iv) as currently in effect and may be adjusted in the sole discretion of the Board of Managers as provided in Treasury Regulations Section 1.704-1(b)(2)(iv)(f) as currently in effect. (c) A transferee of all (or a portion) of the Membership Interests held by a Member shall succeed to the Capital Account, Sub-Capital Account and Capital Contributions attributable to the transferred Membership Interests. 6.5. Profits and Losses. Except as otherwise set forth in Section 6.6 hereof, Profits, Losses and items of income, gain, deduction and loss of the Company for each Fiscal Year shall be allocated among all Persons who were Members during such Fiscal Year at the direction of the Board of Managers in a manner that will, as nearly as possible, cause the Capital Account balance of each Member (as computed for purposes of section 704(b) of the Code), as of the date the Board of Managers determine the allocations, to be equal to the sum of the amounts of cash or the Book Value of other property that would be distributable to such Member pursuant to Article X hereof at such time upon a hypothetical liquidation of the Company assuming that all the remaining assets of the Company were sold for their Book Values, all debts of the Company were -25- paid according to their terms (with any nonrecourse debt for U.S. Federal income tax purposes deemed paid in amounts not in excess of the Book Value of the property securing such nonrecourse debt) and the cash or other property received therefrom was distributed to the Members in accordance with the priorities set forth in Article X hereof. 6.6. Special Allocations. The following special allocations shall be made in the following order: (a) Qualified Income Offset. In the event any Member unexpectedly receives any adjustments, allocations, or distributions described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6) of the Treasury Regulations, items of Company income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the Adjusted Capital Account Deficit of the Member as quickly as possible; provided that an allocation pursuant to this Section 6.6(a) shall be made only if and to the extent that the Member would have an Adjusted Capital Account Deficit after all other allocations provided for in this Article VI have been tentatively made as if this Section 6.6(a) were not in the Agreement. (b) Gross Income Allocations. In the event any Member has an Adjusted Capital Account Deficit at the end of any Fiscal Year, each such Member shall be specially allocated items of Company income and gain in the amount of such excess as quickly as possible; provided that an allocation pursuant to this Section 6.6(b) shall be made only if and to the extent that such Member would have an Adjusted Capital Account Deficit in excess of such sum after all other allocations provided for in this Article VI have been made as if Section 6.6(a) and this Section 6.6(b) were not in the Agreement. (c) Loss Limitation. Losses allocated pursuant to Section 6.5 hereof shall, to the extent possible, not exceed the maximum amount of Losses that can be allocated without causing any Member to have an Adjusted Capital Account Deficit at the end of any Fiscal Year. In the event some but not all of the Members would have Adjusted Capital Account Deficits as a consequence of an allocation of Losses pursuant to Section 6.5 hereof, the limitation set forth in this Section 6.6(c) shall be applied on a Member by Member basis and Losses not allocable to any Member as a result of such limitation shall be allocated to the other Members in accordance with the positive balances in such Member's Capital Accounts so as to allocate the maximum permissible Losses to each Member under Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations. Any remaining Losses shall be allocated to the Members in the proportion and to the extent to which such Members bear the economic risk with respect to such Losses. (d) Curative Allocations. The allocations set forth in Section 6.6 hereof (the "Regulatory Allocations") are intended to comply with certain requirements -26- of the Treasury Regulations. It is the intent of the Members that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Company income, gain, loss or deduction pursuant to this Section 6.6(d). Therefore, notwithstanding any other provision of this Article VI (other than the Regulatory Allocations), to the extent permitted under the Treasury Regulations, the Board of Managers shall make such offsetting special allocations of Company income, gain, loss or deduction in whatever manner it determines appropriate so that, after such offsetting allocations are made, each Member's Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if the Regulatory Allocations were not part of the Agreement and all Company items were allocated pursuant to Section 6.5. 6.7. Other Allocation Rules. (a) For purposes of determining the Profits, Losses, or any other items allocable to any period, Profits, Losses, and any such other items shall be determined on a daily, monthly, or other basis, as determined by the Board of Managers using any permissible method under Code Section 706 and the Treasury Regulations thereunder. (b) The Members are aware of the income tax consequences of the allocations made by this Article VI and hereby agree to be bound by the provisions of this Article VI in reporting their shares of Company income and loss for income tax purposes. (c) Notwithstanding anything to the contrary in this Article VI, the Board of Managers shall be permitted to allocate Profits and Losses and gross items of income, gain, loss and deduction and to adjust the Members' Capital Accounts in the manner the Board of Managers, in its reasonable discretion, deems required to cause the Capital Account balances of the Members to be consistent with the distribution provisions of Article VII. 6.8. Tax Allocations: Code Section 704(c). (a) For tax purposes, all items of income, gain, loss, deduction, expense and credit, shall be allocated in the same manner as are Profits and Losses and items of income, gain, loss and deduction pursuant to Sections 6.5, 6.6 and 6.7; provided, however, that in accordance with Code Section 704(c) and the Treasury Regulations thereunder, income, gain, loss and deductions with respect to any property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its initial Book Value (computed in accordance with the definition of Book Value) using any permissible method as provided in the Treasury Regulations. (b) In the event the Book Value of any Company asset is adjusted -27- pursuant to subparagraph (ii) of the definition of Book Value, subsequent allocations of income, gain, loss and deductions with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Book Value in the same manner as under Code Section 704(c) and the Treasury Regulations thereunder using any permissible method as provided in the Treasury Regulations. (c) Any elections or other decisions relating to such allocations shall be made by the Board of Managers in its sole discretion. Allocations pursuant to this Section 6.8 are solely for purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing any Member's Capital Account or share of Profits, Losses, other items or distributions pursuant to any provisions of this Agreement. (d) No election shall be made under Section 754 of the Code for the Company unless otherwise determined by the Board of Managers in its sole discretion. ARTICLE VII. DISTRIBUTIONS 7.1. Distribution Policy. (a) Subject to Paragraph (b) below, the Company shall distribute Distributable Funds only when, as and if determined by the Board of Managers. Distributable Funds on any distribution date shall be distributed to the Members in the following order of priority: (i) First, 100% to the Class B Membership Interests in accordance with the Class B Percentage Interests until the cumulative amounts distributed pursuant to this Section 7.1(a)(i) equal the Capital Contributions made with respect to the Class B Membership Interests; (ii) Second, 58.4% to the Class A-1 Membership Interests in accordance with the Class A-1 Percentage Interests and 41.6% to the Class A Membership Interests in accordance with the Class A Percentage Interests until the cumulative amounts distributed pursuant to this Section 7.1(a)(ii) equal the aggregate of the Capital Contributions made with respect to the Class A-1 Membership Interests and the Class A Membership Interests; (iii) Third, 100% to the Class B Membership Interests in accordance with the Class B Percentage Interests until the sum of the cumulative distributions to the Class B Membership Interests pursuant to -28- Section 7.1(a)(i) and this Section 7.1(a)(iii) represents an annual IRR of 8.5% compounded quarterly with respect to the Class B Membership Interests (the "Initial Class B Return") as of such distribution date; (iv) Fourth, 58.4% to the Class B Membership Interests in accordance with the Class B Percentage Interests and 41.6% to the Class A Membership Interest in accordance with the Class A Percentage Interests until the sum of the cumulative distributions to the Class B Membership Interests pursuant to Section 7.1(a)(i), Section 7.1(a)(iii) and this Section 7.1(a)(iv) represents an annual IRR of 13% compounded quarterly with respect to the Class B Membership Interests (the "Total Class B Return") as of such distribution date; and (v) Fifth, 58.4% to the Class A-1 Membership Interests in accordance with the Class A-1 Percentage Interests and 41.6% to the Class A Membership Interests in accordance with the Class A Percentage Interests. (b) All amounts withheld pursuant to any provision of any U.S. federal, state, local or foreign tax law with respect to any payment, distribution or allocation to the Company or the Members shall be treated as amounts distributed to the Members pursuant to Section 7.1(a) for all purposes of this Agreement. The Board of Managers is authorized to withhold from distributions, or with respect to allocations, to the Members and to pay over to any U.S. federal, state, local or foreign government any amounts required to be so withheld pursuant to the Code or any provision of any other U.S. federal, state or local law and shall allocate such amounts to those Members with respect to which such amounts were withheld. To the extent that withholding taxes and other related expenses paid to any U.S. federal, state, local or foreign government on behalf of a Member exceed the amount of any distribution the Member would otherwise receive from the Company, the Board of Managers may, in its discretion, require such Member to contribute cash to the Company up to the amount paid on such Member's behalf. 7.2. Liquidation. In the event of any sale or other disposition of all or substantially all of the assets of the Company in accordance with the terms of this Agreement, the Company shall be dissolved and the proceeds of such sale or other disposition shall be distributed to the Members in liquidation as provided in Article X. -29- ARTICLE VIII. RESERVED 8.1. Reserved. ARTICLE IX. TERMINATION OF A MEMBER; TRANSFER OF MEMBERSHIP INTERESTS 9.1. Termination of a Member. The expulsion, dissolution or Bankruptcy of a Member or any other event that terminates the continued membership of any Member (each a "Terminating Event") shall not in and of itself cause the Company to be dissolved, wound up or terminated unless, no later than ninety (90) days following a Terminating Event with respect to a Member, Members owning all of the remaining Membership Interests unanimously determine not to continue the business of the Company, in which case the Company shall dissolve and liquidate pursuant to Article X hereof and the remaining Members shall select the liquidator pursuant to such Article. No Member shall have the right to withdraw or resign as a Member or, except as provided in Section 10.1(a)(i), dissolve the Company voluntarily. 9.2. Transfer of Membership Interests. No Member may transfer, sell, pledge, hypothecate, encumber, assign or otherwise dispose of (whether voluntarily, involuntarily, by operation of law or otherwise) (each, a "Transfer") any Membership Interest, or agree or contract to Transfer any Membership Interests held by such Member, without the unanimous consent of the other Members to (x) such Transfer and (y) the admission of the proposed transferee as a Member of the Company. Notwithstanding the foregoing, a Member may Transfer any or all of its Membership Interests to (i) the Parent of such Member and/or (ii) one or more Subsidiaries of the Parent of such Member; provided that any such transferee agrees to be bound by the terms of this Agreement applicable to the Membership Interests so transferred and either (1) the other Members are reasonably satisfied that such transferee has the ability to meet the obligations it would have hereunder or (2) the transferring Member or the Parent of such Member guarantees the performance of such obligations (each, a "Permitted Transferee"). Any attempted or purported Transfer in violation of this Section 9.2 shall be void and of no force or effect. For purposes of this Agreement, any Transfer by a Parent or any Subsidiary of a Parent of any direct or indirect interest in a Member which results in such Member ceasing to be a Subsidiary of such Parent shall be deemed a Transfer by such Member of all of its Membership Interests. -30- ARTICLE X. TERMINATION OF THE COMPANY; LIQUIDATION AND DISTRIBUTION OF ASSETS 10.1. Dissolution and Termination. (a) The Company shall be dissolved only upon the occurrence of any of the following: (i) the delivery of a written notice by any Member on or after January 1, 2004 to the other Members electing to unwind and dissolve the Company; (ii) the sale or other disposition of all or substantially all of the Common Stock held directly or indirectly by the Company and receipt of the final payment of any installment obligation received as a result of any such sale or disposition; (iii) the unanimous written consent of all Members; (iv) any event which makes it unlawful for the Company's business to be continued unless, no later than thirty (30) days following such event, the Members unanimously determine not to dissolve the Company; (v) the issuance of a decree by any court of competent jurisdiction that the Company be dissolved and liquidated; or (vi) at any time that there are no Members of the Company, unless the Company is continued in accordance with the Act. Upon dissolution, the Company shall wind-up its affairs and shall be liquidated and a certificate of cancellation of the Company's Certificate of Formation, as required by law, shall be filed. (b) In the event of the dissolution of the Company, its business activities shall be wound up, any amounts due from the Members shall be collected, its debts and liabilities shall be satisfied and its remaining assets, if any, shall be distributed as set forth in Section 10.2 below. Dissolution shall be effective on the date of the occurrence of an event set forth in Section 10.1(a) but the Company shall not terminate until all of the Company Assets have been liquidated and the proceeds distributed in accordance with the provisions of this Article X. Notwithstanding the dissolution of the Company, prior to the termination of the Company as aforesaid, the business of the -31- Company and the affairs of the Members as such, shall continue to be governed by this Agreement. 10.2. Distribution Upon Liquidation. Upon dissolution of the Company, the Board of Managers, as provided in this Agreement, or if there shall be none, a trustee or liquidator appointed by unanimous consent of the Members shall proceed to the liquidation of the Company and the proceeds of such liquidation shall, notwithstanding any other provision of this Agreement to the contrary, be applied and distributed in the following order of priority: (i) to creditors other than Members (whether by payment or the making of reasonable provision for payment thereof, including the setting up of any reserves that the Managers or trustee or liquidator, as the case may be, shall determine are reasonably necessary for any liabilities or obligations of the Company) in satisfaction of all Indebtedness and liabilities of the Company (including the expenses of the liquidation); (ii) to Members who are creditors (whether by payment or the making of reasonable provision for payment thereof, including the setting up of any reserves that the Managers or trustee or liquidator, as the case may be, shall determine are reasonably necessary for any liabilities or obligations of the Company) in satisfaction of other debts and liabilities of the Company owed to Members; and (iii) to the Members in accordance with Section 7.1(a) hereof. Any Member may elect to receive distributions in kind of Common Stock held directly or indirectly by the Company to be distributed prior to any sale of shares of Common Stock or any Company Assets. In such case, the Company shall mark-to-market the shares of Common Stock based on the average (rounded to the nearest 1/10,000) of the closing prices of the Common Stock of Net2Phone during regular trading hours on the principal market on which shares of Common Stock of Net2Phone are then listed or quoted (whether the NASDAQ National Market, The New York Stock Exchange or another national securities exchange or association) for the twenty (20) trading days up to and including such date and distribute Common Stock to such electing Member in lieu of cash in the amount that such Member would have received pursuant to clause (iii) above if all shares of Common Stock were distributed to all the Members in a final liquidation of the Company after all obligations under clauses (i) and (ii) above are satisfied and the number of shares of Common Stock to be distributed to such electing Member are adjusted accordingly to satisfy such electing Member's pro rata share of such obligations. 10.3. Sale of Company Assets. (a) As expeditiously as possible after dissolution, the Board of -32- Managers, or any trustee or liquidator, shall satisfy all Company Indebtedness and liabilities, and make the distributions provided for in Section 10.2. Except as agreed by the Board of Managers and subject to paragraph (b) below, the priorities set forth in Section 10.2 and each Member's right to elect to receive distributions in kind of Common Stock held directly or indirectly by the Company as set forth in Section 10.2, no Member shall have the right to demand or receive property other than cash upon liquidation, and the Board of Managers, or any such trustee or liquidator, shall, in any event, have the power to sell Company Assets for cash. (b) In connection with the sale by the Company and reduction to cash of its assets, although the Company has no obligation to offer to sell any property to the Members, any Member or any Affiliate of any Member may bid on and purchase any Company Assets. If the Board of Managers, or any such trustee or liquidator, determines that an immediate sale of part or all of the Company's assets would cause undue loss to the Members, the Members, or any trustee or liquidator, may, with the approval of the Board of Managers, defer liquidation of and withhold from distribution for a reasonable time any Company Assets (except those necessary to satisfy the Company's current obligations). 10.4. Deficit Capital Accounts. Notwithstanding anything to the contrary contained in this Agreement, and notwithstanding any custom or law to the contrary, upon dissolution of the Company, any deficit in a Member's Capital Account shall not be an asset of the Company and such Member shall not be obligated to contribute such amount to the Company to bring the balance of such Member's Capital Account to zero. ARTICLE XI. RESERVED 11.1. Reserved. ARTICLE XII. AMENDMENTS 12.1. Amendments. (a) Amendments may be made to this Agreement from time to time by the unanimous consent of the Members. In making any amendments, there shall be prepared and filed by the Board of Managers such documents and certificates as shall be required to be prepared and filed. All amendments to this Agreement shall be in writing. -33- (b) Notwithstanding anything to the contrary contained in this Agreement, the Board of Managers shall amend Schedules I through IV hereof to reflect the admission of Additional Members, the Transfer of Membership Interests, changes in the Capital Accounts of Members and any other changes in the information set forth therein accomplished in accordance with this Agreement, and the amendment of such Schedules shall not constitute an amendment of this Agreement and shall not require the consent of any Member or other Person. ARTICLE XIII. MISCELLANEOUS 13.1. Further Assurances. Each party to this Agreement agrees to execute, acknowledge, deliver, file and record such further certificates, amendments, instruments and documents, and to do all such other acts and things, as may be required by law or as, in the reasonable judgment of both the Board of Managers and such party, are necessary to carry out the intent and purpose of this Agreement. 13.2. Notices. Unless otherwise specified in this Agreement, all notices, demands, elections, requests or other communications that any party to this Agreement may desire or be required to give hereunder shall be in writing and shall be given by hand, by facsimile, or by a recognized overnight courier service providing confirmation of delivery, addressed as follows: (a) to the Company, at the address set forth in Section 2.5; and (b) to the Members at their respective addresses set forth in Schedule I hereto. Each Member shall have the right to designate another address or change an address by written notice to the Company and the other Members in the manner prescribed herein. All notices given pursuant to this Section 13.2 shall be deemed to have been given (i) if delivered by hand on the date of delivery or on the date delivery was refused by the addressee, (ii) if delivered by facsimile transmission, when transmitted to the applicable number so specified in (or pursuant to) this Section 13.2 and an appropriate answer back is received or (iii) if delivered by overnight courier, on the date of delivery as established by the return receipt or courier service confirmation (or the date on which the courier service confirms that acceptance of delivery was refused by the addressee). 13.3. Headings and Captions. All headings and captions contained in this Agreement and the table of contents hereto are inserted for convenience only and shall not be deemed a part of this Agreement. -34- 13.4. Variance of Pronouns. All pronouns and all variations thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or entity may require. 13.5. Counterparts. This Agreement may be executed in two or more separate counterparts, each of which shall constitute an original and all of which, when taken together, shall constitute one Agreement. 13.6. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF. 13.7. Partition. The Members hereby agree that no Member nor any successor-in-interest to any Member shall have the right, while this Agreement remains in effect, to have the property of the Company partitioned, or to file a complaint or institute any proceeding at law or in equity to have the property of the Company partitioned, and each Member, on behalf of himself, his successors, representatives, heirs and assigns, hereby waives any such right. 13.8. Invalidity. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. If a provision of this Agreement is held to be invalid and the rest of this Agreement is not invalidated, each party shall use all reasonable efforts to effect as far as practicable and valid under applicable law a new provision to achieve the purpose of such invalidated provision. 13.9. Assignment; Successors and Assigns. (a) This Agreement may be assigned, in whole or part, (i) by any Member, to any Permitted Transferee as it pertains to the Membership Interests transferred to such Permitted Transferee, (ii) by any Parent, to any successor to or assignee of all or substantially all of the assets or business of such Parent, (iii) by AT&T, to any entity that controls and operates substantially all of the businesses operated by AT&T's Broadband division, AT&T's Business division or AT&T's Consumer division (each an "AT&T Restructuring Entity") and to which all Membership Interests held directly or indirectly by AT&T are assigned following completion of the restructuring plan announced by AT&T in October 2000, or any successor to or assignee of all or substantially all of the assets or business of any AT&T Restructuring Entity; provided that (x) in any such case, the assignee agrees to be bound by the applicable terms of this Agreement and either (1) the other Members are reasonably satisfied that such transferee has the ability to meet the obligations it would have hereunder or (2) the assigning party or the Parent of such assigning party guarantees the performance of such obligations has the ability to meet the obligations it would have hereunder and (y) in the case of AT&T, the right to assign the Agreement to an AT&T -35- Restructuring Entity shall not be utilized more than once. Any other assignment of this Agreement requires the unanimous written consent of the other parties hereto. Any attempted or purported assignment in violation of this Section 13.9 shall be void and of no force or effect. (b) This Agreement shall be binding upon the parties hereto and their respective successors, executors, administrators, legal representatives, heirs and legal assigns and shall inure to the benefit of the parties hereto and, except as otherwise provided herein, their respective successors, executors, administrators, legal representatives, heirs and legal assigns. No Person other than the parties hereto and their respective successors, executors, administrators, legal representatives, heirs and legal assigns, shall have any rights or claims under this Agreement. (c) AT&T agrees, and in the event it assigns its rights under this Agreement pursuant to Section 13.9(a) hereof, its assignee shall agree, to retain beneficial ownership, either directly or indirectly, of 50% or more of the outstanding voting securities of, or other ownership interests in, AT&T Sub, or any Permitted Transferee of AT&T Sub to which any of AT&T Sub's Membership Interests are transferred. (d) IDT Corporation agrees, and in the event it assigns its rights under this Agreement pursuant to Section 13.9(a) hereof, its assignee shall agree, to retain beneficial ownership, either directly or indirectly, of 50% or more of the outstanding voting securities of, or other ownership interests in, IDT Sub, or any Permitted Transferee of IDT Sub to which any of IDT Sub's Membership Interests are transferred.. 13.10. Entire Agreement. This Agreement supersede all prior agreements among the parties with respect to the subject matter hereof and thereof and contain the entire agreement among the parties with respect to such subject matter. No waiver of any provision hereof by any party hereto shall be deemed a waiver by any other party nor shall any such waiver by any party be deemed a continuing waiver of any matter by such party. No amendment, modification, supplement, discharge or waiver hereof or hereunder shall require the consent of any Person not a party to this Agreement. 13.11. No Brokers. Each of the parties hereto warrants to each other that there are no brokerage commissions or finders' fees (or any basis therefor) resulting from any action taken by such party or any Person acting or purporting to act on its behalf upon entering into this Agreement. Each Member agrees to indemnify and hold harmless each other Member for all costs, damages or other expenses arising out of any misrepresentation made in this Section 13.11. 13.12. Maintenance as a Separate Entity. The Company shall maintain books and records and bank accounts separate from those of its Affiliates; shall at all times hold itself out to the public as a legal entity separate and distinct from any of its Affiliates (including in its leasing activities, in entering into any contract, in preparing its -36- financial statements, and in its stationery and on any signs it posts), and shall cause its controlled Affiliates to do the same and to conduct business with it on an arm's-length basis; shall not commingle its assets with assets of any of its Affiliates; shall not guarantee any obligation of any of its Affiliates; shall cause its business to be carried on by the Board of Managers and shall keep minutes of all meetings of, or written consent executed by, the Members. 13.13. Expenses. Without prejudice to its ability to recover for any losses, damages or liabilities relating to any dispute, controversy or claim arising out of or relating to this Agreement, each of the parties to this Agreement shall pay its own expenses in connection with this Agreement and any amendments, consents or waivers (whether or not the same become effective) under or in respect of this Agreement. 13.14. Publicity. None of the parties hereto shall, or permit any of their Affiliates to, issue any press release or make any other public statements, filings or disclosure with respect to the matters contemplated by this Agreement, or any other matter related hereto or thereto, except (a) as may be required by applicable law, court process or obligations pursuant to the requirement of any applicable self-regulatory authority or (b) with the consent of the other parties to this Agreement. -37- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. AT&T CORP. By:/s/ RAYMOND E. LIGUORI ------------------------------ Name: Raymond E. Liguori Title: Mergers & Acquisitions Vice President, Assistant Treasurer ITELTECH, LLC By:/s/ RAYMOND E. LIGUORI ------------------------------ Name: Raymond E. Liguori Title: Mergers & Acquisitions Vice President, Assistant Treasurer IDT DOMESTIC-UNION, LLC By: IDT Domestic Telecom, Inc., its Managing Member By:/s/ MOTTI LICHTENSTEIN ------------------------------ Name: Motti Lichtenstein Title: CEO IDT CORPORATION By:/s/ MOTTI LICHTENSTEIN ------------------------------ Name: Motti Lichtenstein Title: EVP -38- SCHEDULE I NAMES AND ADDRESSES OF MEMBERS IDT DOMESTIC-UNION, LLC 520 Broad Street Newark, New Jersey 07102 ITELTECH, LLC 295 North Maple Avenue Basking Ridge, New Jersey 07920 SCHEDULE II INITIAL MANAGERS Howard S. Jonas Joyce J. Mason Motti Lichtenstein Michael Fischberger Anthony Davidson SCHEDULE III MEMBERS' MEMBERSHIP INTERESTS CLASS A CLASS A-1 CLASS B IDT Domestic-Union, LLC 87 13 ITelTech, LLC 62 127 SCHEDULE IV CAPITAL ACCOUNTS AND SUB-CAPITAL ACCOUNTS CAPITAL ACCOUNT IDT Domestic-Union, LLC $55,300,000 ITelTech, LLC $104,517,000 CLASS A CLASS A-1 CLASS B IDT Domestic-Union, LLC $48,111,000 $7,189,000 ITelTech, LLC $34,286,000 $70,231,000 EX-99.15 14 sc287396.txt SECOND AMENDED LLC AGMT EXECUTION COPY SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF NET2PHONE HOLDINGS, L.L.C. Dated as of October 19, 2001 TABLE OF CONTENTS Page No. -------- ARTICLE I. DEFINITIONS 1.1. Definitions..........................................................2 1.2. Terms Generally.....................................................10 ARTICLE II. THE COMPANY AND ITS BUSINESS 2.1. Formation of the Company; Effectiveness.............................11 2.2. Company Name........................................................11 2.3. Term................................................................11 2.4. Business; Scope of Members' Authority...............................11 2.5. Principal Office; Registered Agent..................................12 2.6. Names and Addresses of Members......................................12 2.7. Certain Representations by Members..................................12 2.8. Withholding Tax.....................................................13 ARTICLE III. MANAGEMENT OF COMPANY BUSINESS 3.1. Management and Control..............................................13 3.2. Appointment of Managers; Removal of Managers; Meetings of Managers and Members..............................................14 3.3. Significant Decisions...............................................16 3.4. Compensation of Managers............................................18 3.5. Actions by the Members..............................................18 ARTICLE IV. RIGHTS AND DUTIES OF MEMBERS 4.1. Other Activities of the Members.....................................18 4.2. Liability of Members, Managers and Officers.........................19 4.3. Investment Representations..........................................20 4.4. Legend..............................................................20 -i- 4.5. Limited Liability of Members........................................21 4.6. Dealing with Members................................................22 4.7. Designation of Tax Matters Member...................................22 4.8. Tax Matters.........................................................22 ARTICLE V. BOOKS, RECORDS, BUDGETS AND REPORTS 5.1. Books of Account....................................................25 5.2. Availability of Books of Account....................................25 5.3. Annual and Periodic Reports and Statements..........................25 5.4. Accounting Expenses.................................................26 ARTICLE VI. CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS, PROFITS AND LOSSES AND ALLOCATIONS 6.1. Capital Contributions of the Members................................26 6.2. Capital of the Company..............................................27 6.3. Return of Capital Contribution......................................27 6.4. Capital Accounts....................................................27 6.5. Profits and Losses..................................................28 6.6. Special Allocations.................................................28 6.7. Other Allocation Rules..............................................29 6.8. Tax Allocations: Code Section 704(c)...............................30 ARTICLE VII. DISTRIBUTIONS 7.1. Distribution Policy.................................................30 7.2. Liquidation.........................................................32 ARTICLE VIII. RECIPROCAL PUT/CALL RIGHTS 8.1. Put Rights..........................................................32 8.2. Call Rights.........................................................34 -ii- ARTICLE IX. TERMINATION OF A MEMBER; TRANSFER OF MEMBERSHIP INTERESTS 9.1. Termination of a Member.............................................35 9.2. Transfer of Membership Interests....................................35 ARTICLE X. TERMINATION OF THE COMPANY; LIQUIDATION AND DISTRIBUTION OF ASSETS 10.1. Dissolution and Termination.........................................36 10.2. Distribution Upon Liquidation.......................................37 10.3. Sale of Company Assets..............................................38 10.4. Deficit Capital Accounts............................................38 ARTICLE XI. REDEMPTION OF CLASS A MEMBERSHIP INTERESTS 11.1. Redemption of the Class A Membership Interests held by AT&T Sub....................................................39 ARTICLE XII. AMENDMENTS 12.1. Amendments..........................................................40 ARTICLE XIII. MISCELLANEOUS 13.1. Further Assurances..................................................40 13.2. Notices.............................................................40 13.3. Headings and Captions...............................................41 13.4. Variance of Pronouns................................................41 13.5. Counterparts........................................................41 13.6. Governing Law.......................................................41 13.7. Partition...........................................................41 13.8. Invalidity..........................................................41 13.9. Assignment; Successors and Assigns..................................41 13.10. Entire Agreement....................................................43 -iii- 13.11. No Brokers..........................................................43 13.12. Maintenance as a Separate Entity....................................43 13.13. Expenses............................................................43 13.14. Publicity...........................................................43 -iv- SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF NET2PHONE HOLDINGS, L.L.C. This Second Amended and Restated Limited Liability Company Agreement of Net2Phone Holdings, L.L.C. (the "Company") is made, entered into and effective as of October 19, 2001, by and among AT&T Corp., a New York corporation ("AT&T"), ITelTech, LLC, a Delaware limited liability company ("AT&T Sub"), IDT Corporation, a Delaware corporation ("IDT Corporation"), IDT Domestic-Union, LLC, a Delaware limited liability company ("IDT Sub"), IDT Investments Inc., a Nevada corporation ("IDT Investments"), Liberty Media Corporation, a Delaware corporation ("LMC"), and LMC Animal Planet, Inc., a Colorado corporation ("Liberty Sub"), and each other Person who, in accordance with the terms hereof, shall become a party to or be bound by the terms of this Agreement after the date hereof. R E C I T A L S WHEREAS, the Company was formed under the Act pursuant to the Certificate of Formation filed with the Secretary of State of the State of Delaware on October 17, 2001; WHEREAS, IDT Sub entered into a Limited Liability Company Agreement, dated as of October 19, 2001 (the "Limited Liability Company Agreement"), in respect of the Company, which was amended and restated on October 19, 2001, by the Amended and Restated Limited Liability Company Agreement, dated as of October 19, 2001 (the "Amended and Restated Limited Liability Company Agreement"), entered into by IDT Sub, AT&T Sub and AT&T; WHEREAS, IDT Sub and AT&T Sub hereby agree to admit IDT Investments and Liberty Sub as members to the Company, on the terms and conditions contained in this Agreement; WHEREAS, AT&T, AT&T Sub, IDT Corporation, IDT Sub, IDT Investments, LMC and Liberty Sub are entering into this Agreement to jointly own 28,896,750 shares of Class A Common Stock, par value $.01 per share (together with any shares of such common stock or other property distributed in respect thereof, the "Common Stock"), of Net2Phone, Inc., a Delaware corporation ("Net2Phone"), and to actively manage the Common Stock through the Company to increase the value of the Common Stock for the benefit of the parties; WHEREAS, IDT Sub contributed to the Company the 9,996,750 shares of Common Stock owned by IDT Sub immediately prior to the execution and delivery of the Limited Liability Company Agreement (the "IDT Sub Shares") in exchange for Class A-1 and Class B Membership Interests of the Company, on the terms and conditions contained in the Limited Liability Company Agreement, the Amended and Restated Limited Liability Company Agreement and this Agreement; WHEREAS, AT&T Sub contributed to the Company the 18,900,000 shares of Common Stock beneficially owned by AT&T Sub immediately prior to the execution and delivery of the Amended and Restated Limited Liability Company Agreement (the "AT&T Sub Shares") in exchange for Class A and Class B Membership Interests of the Company, on the terms and conditions contained in the Amended and Restated Limited Liability Company Agreement and this Agreement; and WHEREAS, AT&T Sub wishes to transfer certain of its Class A Membership Interests and Class B Membership Interests in exchange for cash and stock of Liberty Sub and IDT Investments in accordance with the Exchange Agreements (as defined herein). NOW, THEREFORE, in order to carry out their intent as expressed above and in consideration of the mutual agreements contained herein, the parties hereby agree to amend and restate the Amended and Restated Limited Liability Company Agreement in its entirety as follows: ARTICLE I. DEFINITIONS 1.1. Definitions. As used in this Agreement, the following terms shall have the meanings set forth below: "Act" shall mean the Delaware Limited Liability Company Act, Sections 18-101 et seq. of Title 6 of the Delaware Code, as amended from time to time. "Additional Member" shall mean any Person admitted to the Company as a Member pursuant to the terms of this Agreement. "Adjusted Capital Account Deficit" shall mean, with respect to any Member, the deficit balance, if any, in such Member's Capital Account as of the end of the relevant period, after giving effect to the following adjustments: (i) credit to such Capital Account of any amounts which such Member is obligated to restore pursuant to any provision of this Agreement or is deemed to be obligated to restore pursuant to the penultimate sentence of Treasury -2- Regulations Section 1.704-2(g)(1) or pursuant to the penultimate sentence of Treasury Regulations Section 1.704-2(i)(5); and (ii) debit to such Capital Account the items described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6). This definition of Adjusted Capital Account Deficit and the limitations and allocations set forth in Section 6.6(a), (b) and (c) hereof are together intended to comply with Treasury Regulations Section 1.704-1(b)(2)(ii)(d), and shall be so interpreted. "Affiliate" shall mean with respect to any Person, any other Person that directly or indirectly through one or more intermediaries Controls, is Controlled by or is under common Control with such Person. "Affiliate Transaction" shall have the meaning set forth in Section 4.6. "Agreement" shall mean this Second Amended and Restated Limited Liability Company Agreement of Net2Phone Holdings, L.L.C., including any Schedules hereto, as it may hereafter be amended, modified or supplemented from time to time. "Amended and Restated Limited Liability Company Agreement" has the meaning given in the Recitals. "AT&T" has the meaning given in the Preamble. "AT&T Restructuring Entity" has the meaning given in Section 13.9. "AT&T Sub Shares" has the meaning given in the Recitals. "AT&T Sub" has the meaning given in the Preamble. "Bankruptcy" shall mean, with respect to the affected party, (i) the entry of an Order for Relief under Title 11 of the United States Code, (ii) the admission by such party of its inability to pay its debts as they mature, (iii) the making by it of an assignment for the benefit of creditors, (iv) the filing by it of a petition in bankruptcy or a petition for relief under Title 11 of the United States Code or any other applicable federal or state bankruptcy or insolvency law, (v) the expiration of sixty (60) days after the filing of an involuntary petition under Title 11 of the United States Code, an application for the appointment of a receiver for the assets of such party, or an involuntary petition seeking liquidation, reorganization, arrangement or readjustment of its debts under any other federal or state insolvency law, provided that the same shall not have been vacated, set aside or stayed within such sixty (60)-day period or (vi) the imposition of a judicial or statutory lien on all or a substantial part of its assets unless such lien is discharged or vacated or the enforcement thereof stayed within sixty (60) days after its effective date. -3- With respect to a Member, the foregoing definition of "Bankruptcy" is intended to replace and shall supersede and replace the definition of "bankruptcy" set forth in Sections 18-101(1) and 18-304 of the Act. "Board of Managers" shall mean the governing board of the Company, constituted in accordance with the provisions of Article III hereof. Each member of the Board of Managers shall constitute a "manager" within the meaning of the Act. "Book Value" with respect to any Company Asset shall mean its adjusted basis for federal income tax purposes, except that the initial Book Value of any asset contributed by a Member to the Company shall be an amount equal to the fair market value of such asset as determined by the Board of Managers, and such Book Value shall thereafter be adjusted in a manner consistent with Treasury Regulations Section 1.704-l(b)(2)(iv)(g), including as a result of any revaluations pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(f) in the sole discretion of the Board of Managers. "Breaching Member" shall have the meaning set forth in Section 2.7. "Capital Account" when used in respect of any Member shall mean the Capital Account maintained for such Member in accordance with Section 6.4, as said Capital Account may be increased or decreased from time to time pursuant to the terms of Section 6.4. "Capital Contribution" when used with respect to (x) any Member shall mean the amount of capital, if any, contributed by such Member in accordance with Section 6.1(a) and (y) each of the Class A Membership Interests, Class A-1 Membership Interests and Class B Membership Interests held by a Member, the amount of capital contributed by the Member with respect to each such class of Membership Interests. "Certificate of Formation" shall mean the certificate of formation of the Company filed with the Secretary of State of the State of Delaware on October 17, 2001, as the same may be amended and/or restated from time to time. "Class A Capital Account" shall have the meaning set forth in Section 6.4(a). "Class A Fair Market Value" shall mean, at any time with respect to a Class A Membership Interest, the value of the distributions that the holder of such Class A Membership Interest would receive pursuant to Section 10.2(iii) upon the hypothetical liquidation of the Company at such time. For purposes of determining the Class A Fair Market Value, the Common Stock shall be valued as set forth in Section 10.2 hereof. "Class A Member" shall mean (i) each of AT&T Sub and Liberty Sub for so long as each holds any Class A Membership Interests, (ii) any transferee of any Class -4- A Membership Interest who has been admitted to the Company as an Additional Member in accordance with the terms of this Agreement or (iii) any other Person who has been admitted to the Company as a Class A Member in accordance with the terms of this Agreement. "Class A Membership Interest" shall mean one unit of the authorized Class A Membership Interests of the Company issued and outstanding in accordance with this Agreement. "Class A Percentage Interest" shall equal, with respect to any Class A Member, the number of Class A Membership Interests then held by such Class A Member divided by the aggregate number of Class A Membership Interests then issued and outstanding, expressed as a percentage. "Class A-1 Capital Account" shall have the meaning set forth in Section 6.4(a). "Class A-1 Member" shall mean (i) IDT Sub for so long as it holds any Class A-1 Membership Interests, (ii) any transferee of any Class A-1 Membership Interest who has been admitted to the Company as an Additional Member in accordance with the terms of this Agreement or (iii) any other Person who has been admitted to the Company as a Class A-1 Member in accordance with the terms of this Agreement. "Class A-1 Membership Interest" shall mean one unit of the authorized Class A-1 Membership Interests of the Company issued and outstanding in accordance with this Agreement. "Class A-1 Percentage Interest" shall equal, with respect to any Class A-1 Member, the number of Class A-1 Membership Interests then held by such Class A-1 Member divided by the aggregate number of Class A-1 Membership Interests then issued and outstanding, expressed as a percentage. "Class B Capital Account" shall have the meaning set forth in Section 6.4(a). "Class B Member" shall mean (i) each of IDT Sub, IDT Investments and Liberty Sub for so long as each holds any Class B Membership Interests, (ii) any transferee of any Class B Membership Interest who has been admitted to the Company as an Additional Member in accordance with the terms of this Agreement or (iii) any other Person who has been admitted to the Company as a Class B Member in accordance with the terms of this Agreement. -5- "Class B Membership Interest" shall mean one unit of the authorized Class B Membership Interests of the Company issued and outstanding in accordance with this Agreement. "Class B Percentage Interest" shall equal, with respect to any Class B Member, the number of the Class B Membership Interests then held by such Class B Member divided by the aggregate number of Class B Membership Interests then issued and outstanding, expressed as a percentage. "Code" shall mean the Internal Revenue Code of 1986, as amended, or any corresponding provision(s) of succeeding law. "Company Assets" shall mean all right, title and interest of the Company in and to all or any portion of the assets of the Company, including, without limitation, securities of, and ownership interests in, Subsidiaries of the Company, and any property (real, personal, tangible or intangible) acquired in exchange therefor or in connection therewith. "Common Stock" shall have the meaning set forth in the recitals. "Control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of another Person, whether through the ownership of voting securities or other ownership interests by contract or otherwise. "Damages" shall have the meaning set forth in Section 2.7. "Distributable Funds" shall mean all cash receipts of the Company (or released from reserves) during any period, as reduced by the setting aside during such period of such reserves as the Board of Managers may deem reasonably necessary for the discharge of liabilities or obligations of the Company and as increased by the release of any such reserves as determined by the Board of Managers. "electronic transmission" has the meaning given in Section 3.2(i). "Exchange Agreements" shall mean, (i) the exchange agreement, dated as of the date hereof, among AT&T, AT&T Sub, IDT Corporation, IDT Domestic Telecom, Inc., IDT Nevada Holdings, Inc. and IDT Investments, and (ii) the exchange agreement, dated as of the date hereof, among AT&T, AT&T Sub, LMC and Liberty Sub, pursuant to which the Exchange Transactions will occur. "Exchange Transactions" shall mean the separate transactions, entered into as of the date hereof, pursuant to which AT&T Sub (x) is transferring certain Class A Membership Interests, Class B Membership Interests and shares of IDTC Class B -6- Common Stock to Liberty Sub in exchange for cash and shares of preferred stock and common stock of Liberty Sub and (y) is transferring certain Class B Membership Interests to IDT Investments in exchange for cash and shares of IDT Investments Preferred Stock. "Fiscal Year" shall mean the fiscal year of the Company, which shall be each twelve-month period ending December 31 of each year; provided, however, that upon termination of the Company, "Fiscal Year" shall mean the period from the end of the last preceding Fiscal Year to the date of such termination. "IDT Corporation" has the meaning given in the Preamble. "IDT Investments" has the meaning given in the Preamble. "IDT Investments Call" has the meaning given in Section 8.2(a). "IDT Investments Preferred Stock" has the meaning given in Section 8.1(b). "IDT Investments Put" has the meaning given in Section 8.1(a). "IDT Sub" has the meaning given in the Preamble. "IDT Sub Shares" has the meaning given in the Recitals. "IDTC Class B Common Stock" has the meaning given in Section 8.1(b). "Indebtedness" shall mean (i) all indebtedness for borrowed money or for the deferred purchase price of property, goods and services, including reimbursement, and all other obligations, absolute or contingent, with respect to surety bonds, letters of credit and bankers' acceptances whether or not matured, and hedges, swaps and other derivative contracts and financial instruments, (ii) all obligations evidenced by notes, bonds, debentures, or similar instruments, (iii) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to acquired property (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (iv) all capital lease obligations, (v) all indebtedness referred to in clause (i), (ii), (iii) or (iv) above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any lien upon or on property owned by the Company or any wholly-owned Subsidiary (including accounts or contract rights), even though the Company or such wholly-owned Subsidiary has not assumed or become liable for such indebtedness, and (vi) all guaranteed indebtedness of others. "Independent Accountants" has the meaning given in Section 4.8(a). -7- "Initial Class B Return" has the meaning given in Section 7.1(a)(iii). "IRR" shall mean the internal rate of return since the date hereof earned by the Class B Members on the Capital Contributions made with respect to the Class B Membership Interests taking into account the timing and amounts of any distributions made with respect to the Class B Membership Interests pursuant to Sections 7.1(a) and 10.2. "IRS" shall mean the Internal Revenue Service and any successor agency or entity thereto. "Liberty Sub" has the meaning given in the Preamble. "Liberty Sub Call" has the meaning given in Section 8.2(a). "Liberty Sub Preferred Stock" has the meaning given in Section 8.1(c). "Liberty Sub Put" has the meaning given in Section 8.1(a). "Limited Liability Company Agreement" has the meaning given in the Recitals. "LMC" has the meaning given in the Preamble. "LMC Manager" has the meaning given in Section 3.2(b). "Managers" has the meaning given in Section 3.2(a). "Member" shall mean a Class A Member, a Class A-1 Member or a Class B Member, as the context may require, in its capacity as a member of the Company. For purposes of the Act, there are no separate classes or groups of members other than the Class A Members, the Class A-1 Members and the Class B Members. "Membership Interests" means the Class A Membership Interests, the Class A-1 Membership Interests and the Class B Membership Interests. "Net2Phone" has the meaning given in the Recitals. "Organizational Documents" shall mean (if applicable) (i) with respect to a corporation, such Person's certificate or articles of incorporation and by-laws (including any constitution or rules constituting such by-laws), and any shareholder agreement, voting agreement, voting trust or similar arrangement applicable to any of such Person's authorized shares of capital stock, (ii) with respect to a partnership, such Person's certificate of limited partnership, if any, partnership agreement, voting trusts, voting agreements or similar arrangements applicable to any of its partnership interests or -8- (iii) with respect to a limited liability company, such Person's certificate of formation, limited liability company or operating agreement, voting trusts, voting agreements or similar arrangements applicable to any of its limited liability company interests. "Parent" shall mean (i) LMC with respect to Liberty Sub or any Permitted Transferee of Liberty Sub, (ii) AT&T (or if the Agreement is assigned by AT&T to an AT&T Restructuring Entity, the AT&T Restructuring Entity) with respect to AT&T Sub or any Permitted Transferee of AT&T Sub, (iii) IDT Corporation with respect to IDT Sub or any Permitted Transferee of IDT Sub and IDT Investments or any Permitted Transferee of IDT Investments, and (iv) with respect to each of the foregoing, any assignee pursuant to Section 13.9(a)(ii). "Permitted Transferee" has the meaning given in Section 9.2. "Person" shall mean an individual, corporation (including any non-profit corporation), association, general or limited partnership, organization, business, firm, limited liability company, joint venture, trust, estate or other entity, association or organization, whether constituting a separate legal entity or not. "Profits" and "Losses" for any period shall mean the taxable income or loss, as the case may be, of the Company for such period determined in accordance with Code Section 703(a) and Treasury Regulation Section 1.703-1 computed with the following adjustments: (i) Items of gain, loss, and deduction shall be computed based upon the Book Values of the Company's assets (in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(g) and/or 1.704-3(d)) rather than upon the assets' adjusted bases for federal income tax purposes; (ii) Any tax exempt income received by the Company shall be included as an item of gross income; (iii) The amount of any adjustments to the Book Values of any assets of the Company pursuant to Code Section 743 shall not be taken into account; and (iv) Any expenditure of the Company described in Code Section 705(a)(2)(B) (including any expenditure treated as being described in Code Section 705(a)(2)(B) pursuant to Treasury Regulation under Code Section 704(b)) shall be treated as a deductible expense. "Regulatory Allocations" has the meaning given in Section 6.6(d). "Significant Decision" has the meaning given in Section 3.3. -9- "Sub-Capital Account" when used in respect of the Membership Interests held by any Member shall mean the Sub-Capital Account maintained for such Member in accordance with Section 6.4 with respect to each class of Membership Interests held by such Member, as said Sub-Capital Accounts may be increased or decreased from time to time pursuant to the terms of Section 6.4. "Subsidiary" shall mean, with respect to any Person, (x) any other Person which such Person Controls and (y) in which such Person owns a majority of the outstanding capital stock or other ownership interests. "Tax Matters Member" shall initially be IDT Sub who shall serve as Tax Matters Member until such time as a successor Tax Matters Member is appointed by the Board of Managers. "Terminating Event" has the meaning given in Section 9.1. "Total Class B Return" has the meaning given in Section 7.1(a)(iv). "Transaction Documents" shall mean the Exchange Agreements and this Agreement. "Transfer" shall have the meaning set forth in Section 9.2. "Treasury Regulations" shall mean the regulations promulgated under the Code, as amended. "Voting Agreement" shall mean the Voting Agreement, dated as of August 11, 2000, by and between AT&T Sub and IDT Investments. 1.2. Terms Generally. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined herein have the meanings assigned to them herein and include both the plural and the singular, as the context may require; (b) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; and (c) the words "including" and "include" and other words of similar import shall be deemed to be followed by the phrase "without limitation." -10- ARTICLE II. THE COMPANY AND ITS BUSINESS 2.1. Formation of the Company; Effectiveness. Prior to the date hereof, the Certificate of Formation was filed with the Secretary of State of the State of Delaware. The Members hereby agree to execute and file any required amendments to the Certificate of Formation and shall do all other acts required for the constitution of the Company as a limited liability company under the laws of the State of Delaware. The Members and the Board of Managers hereby ratify and approve the execution, delivery and filing of the original Certificate of Formation with the Secretary of State of the State of Delaware by Nikola Uzelac, and all other certificates executed, delivered and filed as of the date hereof with the Secretary of State of the State of Delaware by any officer of the Company, as an authorized person within the meaning of the Act. Thereafter, Nikola Uzelac's powers as an authorized person ceased, and any Person authorized by the Board of Managers as an authorized person within the meaning of the Act shall execute, deliver and file, or cause the execution, delivery and filing of, all certificates (and any amendments and/or restatements thereof) required or permitted by the Act to be filed with the Secretary of State of the State of Delaware. 2.2. Company Name. The business of the Company shall be conducted under the name of "Net2Phone Holdings, L.L.C." in the State of Delaware and under such name or such assumed or trade names as the Board of Managers deem necessary or appropriate to comply with the requirements of any other jurisdiction in which the Company may be required to qualify. 2.3. Term. The term of the Company commenced on the date the Secretary of State of the State of Delaware accepted for filing the Certificate of Formation for the Company and shall continue until the Company is dissolved pursuant to Article X of this Agreement. 2.4. Business; Scope of Members' Authority. (a) The Company is organized for the object and purpose of, and the nature of the business to be conducted and promoted by the Company is, engaging in any lawful act or activity for which limited liability companies may be formed under the Act and engaging in any and all activities necessary, convenient, desirable or incidental to the foregoing, including, without limitation, acquiring, holding, managing, operating and disposing of real and personal property. (b) Except as otherwise expressly and specifically provided in this Agreement, no Member shall have any authority to bind or act for, or assume any obligations or responsibility on behalf of, any other Member or the Company. Neither the Company nor any Member shall, by virtue of executing this Agreement, be -11- responsible or liable for any Indebtedness or obligation of the other Members incurred or arising either before or after the execution of this Agreement, except that the Company shall be responsible for the responsibilities, liabilities, Indebtedness and obligations of the Company incurred after the date hereof pursuant to and as limited by the terms of this Agreement. 2.5. Principal Office; Registered Agent. The principal office of the Company shall be at 400 North Stephanie Street, Suite 235, Henderson, Nevada 89014. The Company may change its place of business to such location or locations as may at any time or from time to time be determined by the Board of Managers. The mailing address of the Company shall be at 400 North Stephanie Street, Suite 235, Henderson, Nevada 89014, or such other address as may be selected from time to time by the Board of Managers. The registered office and registered agent in the State of Delaware of the Company shall be c/o The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801. 2.6. Names and Addresses of Members. The names and addresses of the Members are set forth on Schedule I hereto, as such schedule shall be amended from time to time to reflect changes in the Members or their addresses. Upon execution and delivery of this Agreement IDT Investments and Liberty Sub shall be admitted to the Company as Members and IDT Sub and AT&T Sub shall continue as Members. 2.7. Certain Representations by Members. Each Member represents, warrants, agrees and acknowledges that, as of the date hereof, (i) it has been duly authorized to purchase and hold its Membership Interests and to execute and deliver this Agreement and all other instruments executed and delivered on behalf of it in connection with the acquisition of its Membership Interests, (ii) the execution and delivery of this Agreement and the performance of its obligations hereunder will not result in a breach or violation of, a default under, or conflict with (A) its Organizational Documents or (B) any existing agreement to which it or any of its properties or assets is subject, other than in the case of clause (ii) (B) above, such breaches, violations, defaults and conflicts that will not materially adversely affect the ability of the Company and the Members to consummate the transactions and acts contemplated by this Agreement and, to the best of its knowledge, will not subject the Company, any wholly-owned Subsidiary of the Company or the Members to any material liability or materially and adversely affect the ability of the Company or any wholly-owned Subsidiary of the Company to conduct its business as currently conducted or as proposed to be conducted, (iii) this Agreement has been duly authorized, executed and delivered by, and is a binding agreement on the part of, such Member enforceable against such Member in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles, and (iv) all authorizations, consents, approvals, orders, notices, filings, registrations, qualifications and exemptions of, with or from any court, administrative -12- agency or commission or other federal, state or local governmental authority and agencies, departments or subdivisions thereof or any self-regulatory authority required to be obtained or made by or on behalf of such Member in connection with the execution of this Agreement or the performance of its obligations hereunder, to its knowledge, have been duly obtained or made by such Member and are in full force and effect, other than authorizations, consents, approvals, orders, notices, filings, registrations, qualifications and exemptions the absence of which would not have individually or in the aggregate a material adverse effect on the transactions contemplated by this Agreement. Each Member agrees to indemnify the Company, any wholly-owned Subsidiary of the Company and each other Member against any and all claims, demands, losses, damages, liabilities, lawsuits and other proceedings, judgments and awards, and costs and expenses (including, but not limited to, reasonable attorneys' fees) (collectively, "Damages") incurred by the Company or any such other Member or any Affiliate of any Member arising from any breach by such Member of any of the foregoing representations and warranties or the representations and warranties contained in Section 6.1(b) of this Agreement (the "Breaching Member"); provided, however, that (A) if the Breaching Member is AT&T Sub, AT&T shall also covenant and agree to indemnify the Company, any wholly-owned Subsidiary of the Company and each other Member against any and all Damages arising from AT&T Sub's breach of any of the foregoing representations and warranties, (B) if the Breaching Member is IDT Sub or IDT Investments, IDT Corporation shall also covenant and agree to indemnify the Company, any wholly-owned Subsidiary of the Company and each other Member against any and all Damages arising from IDT Sub's or IDT Investments' breach of any of the foregoing representations and warranties, and (C) if the Breaching Member is Liberty Sub, LMC shall also covenant and agree to indemnify the Company, any wholly-owned Subsidiary of the Company and each other Member against any and all Damages arising from Liberty Sub's breach of any of the foregoing representations and warranties. 2.8. Withholding Tax. Each Member represents and warrants that it is not a foreign partner under Section 1446(e) of the Code. ARTICLE III. MANAGEMENT OF COMPANY BUSINESS 3.1. Management and Control. (a) Except as otherwise specifically set forth in this Agreement, the Board of Managers of the Company, acting in accordance with the terms of this Agreement, including, but not limited to, Section 3.2, shall have the right, power and authority to oversee the business and affairs of the Company and to do all things necessary to manage the business of the Company, and the Board of Managers is hereby -13- authorized to take any action of any kind and to do anything and everything the Board of Managers deems necessary or appropriate in accordance with the provisions of this Agreement and applicable law. Any action taken by the Board of Managers in accordance with the terms of this Agreement that is not otherwise in violation of applicable law shall constitute the act of, and shall serve to bind, the Company. (b) No Member shall take any action on behalf of or in the name of the Company, or enter into any commitment or obligation binding upon the Company, except for actions authorized by the Board of Managers in the manner set forth herein. 3.2. Appointment of Managers; Removal of Managers; Meetings of Managers and Members. (a) The Board of Managers shall be comprised of five (5) Managers of the Company (the "Managers"), who shall be appointed by Members owning a majority of the Class A-1 Membership Interests, subject to the consent of the other Members, which shall not be unreasonably withheld. For so long as Liberty Sub owns a majority of the Membership Interests owned by it on the date hereof, the Class A-1 Member or Members agree to cause one nominee selected by Liberty Sub to be appointed as a Manager of the Company (the "LMC Manager"). A Manager need not be a Member. The initial Managers shall be those individuals designated on Schedule II hereto. (b) Each Manager shall hold office until his death, resignation or removal as set forth in this Section 3.2(b). Any Manager may resign at any time upon written notice to the Board of Managers. Such resignation shall take effect at the time specified therein, and unless specified therein, no acceptance of such resignation shall be necessary to make it effective. Any Manager may be removed with or without cause by Members owning a majority of the Class A-1 Membership Interests, and any Person designated to replace such Manager shall be appointed in accordance with Section 3.2(a); provided, however, that so long as Liberty Sub owns a majority of the Membership Interests owned by it on the date hereof, the Class A-1 Member or Members, shall not, without Liberty Sub's consent, remove or cause the removal without cause of the LMC Manager. (c) As soon as practicable after the date hereof, each of AT&T Sub and IDT Investments shall (i) assign its rights under the Voting Agreement to the Company and (ii) use reasonable best efforts to fully cooperate with each other and with the Company in removing and replacing the directors of Net2Phone currently designated by AT&T Sub and in ensuring that the directors of Net2Phone designated by IDT Investments are elected to the Net2Phone board of directors. (d) The Board of Managers shall make all decisions relating to the casting of votes in respect of the Common Stock on all matters submitted to a vote of, or seeking the written consent of, the stockholders of Net2Phone, including the election and -14- removal of directors to the board of directors of Net2Phone. (e) The Board of Managers may hold meetings, both regular and special, either within or without the State of Delaware. (f) Regular meetings of the Board of Managers may be called by any Manager on one (1) day's prior notice to each member of the Board of Managers, either personally or by mail or by facsimile, at such time and such place as from time to time shall be determined by the Board of Managers, but in any event shall be held at least once every quarter. (g) Special meetings of the Board of Managers may be called by any Manager on one (1) day's prior notice to each member of the Board of Managers, either personally or by mail or by facsimile. Such notice shall state the purpose or purposes for which the special meeting is called. (h) At all meetings of the Board of Managers, three (3) Managers, present in person or represented by proxy, shall constitute a quorum for the transaction of business and, provided proper notice has been given to the Managers, the act of a majority of the Managers, present in person or represented by proxy, at any meeting at which there is a quorum shall be the act of the Board of Managers and, subject to Section 3.3, shall conduct, oversee and manage the business and affairs of the Company. (i) Any action required or permitted to be taken at any meeting of the Board of Managers may be taken without a meeting if the Managers having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all Managers were present, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of the Company. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form. As used in this Agreement, "electronic transmission" means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process. (j) Managers may participate in a meeting of the Board of Managers 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. (k) Each Manager shall have the right to receive all printed information distributed to any member of the Board of Managers in his or her capacity as a Manager. -15- (l) Each Manager may authorize another person or persons to act for such Manager by proxy at any meeting of the Board of Managers. 3.3. Significant Decisions. The Company shall not, and no Manager of the Company shall have the power or authority to cause the Company to, without the prior unanimous consent of all of the Members, take any action in respect of a Significant Decision; provided, however, that if a Member receives notice from the Company, either personally or by mail or by facsimile, describing in reasonable detail an action with respect to a Significant Decision that the Company intends to adopt, and such Member does not notify the Company in writing within seven (7) days or such longer period as may be stated in the notice that it does not consent to the taking of such action, such Member shall be deemed to have consented to the taking of such action with respect to the Significant Decision. For purposes of this Agreement, each of the following matters shall constitute a "Significant Decision": (a) the adoption, amendment, alteration or repeal of any provision or term of any Organizational Document of the Company; (b) any merger or consolidation involving, or any reorganization, dissolution (other than as expressly provided in Article X or Article XI hereof), liquidation or the issuance of equity securities or securities convertible into or exchangeable for equity securities (other than in any of the foregoing instances any merger or consolidation of a wholly owned Subsidiary of the Company, if any, with or into the Company or another wholly owned Subsidiary of the Company which would not have a material adverse tax effect on any Member) or other winding-up or termination of, the Company (or the adoption of a plan to do any of the foregoing); (c) the purchase or other acquisition (by merger, consolidation or otherwise) by the Company of any stock or equity interests in or of any other Person, or any assets of any other Person, or any business (or a substantial part of a business), other than the purchase or other acquisition of (i) securities issued by governmental agencies backed by the full faith and credit of the United States government, (ii) deposits with, certificates of deposit issued by and securities repurchase contracts with commercial banks or primary financial institutions, (iii) commercial paper, or (iv) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (i), (ii) or (iii) hereof; (d) except as otherwise provided in this Agreement, the redemption, purchase, repurchase or other acquisition for value of any Membership Interests (other than as expressly provided in Article VIII and Article XI hereof) or any debt securities of the Company or any wholly-owned Subsidiary of the Company (except to the extent such debt security is required to be so redeemed, purchased, repurchased or otherwise acquired in accordance with the terms of this Agreement); -16- (e) the sale, transfer, pledge or hypothecation of any shares of Common Stock other than to a wholly-owned Subsidiary of the Company; (f) subject to subsection (i) below, the entering into of any contract or transaction with or for the direct or indirect benefit of, or payment or provision of any money or other form of consideration, directly or indirectly, to or for the benefit of, or assumption, guarantee or becoming otherwise liable for any indebtedness or other obligation of, or sale, lease (as lessor or lessee), transfer, giving or other assignment or acquisition of any properties or assets, tangible or intangible, or services to or from, any Member or any of their respective Affiliates; provided, that subject to subsection (i) below, the unanimous consent of the Members shall not be required for the advancement of any working capital to the Company by IDT Corporation and LMC as contemplated in Section 4.1(e); (g) taking any action or failing to take any action that could reasonably be expected to result in (i) the Company failing to be treated as a partnership for U.S. federal income tax purposes or (ii) the termination of the Company under Section 708(b) of the Code; (h) accepting contributions of capital from any Member after the date hereof; (i) enter into any contract or arrangement which requires payment to or by the Company or any of its Subsidiaries in an amount, whether payable at one time or in a series of payments, in excess of U.S. $500,000 over the life of the contract or arrangement, except for any contract or arrangement which require payment of reasonable fees relating to administrative or professional services provided to the Company or any of its Subsidiaries; (j) cause any settlement of any litigation or other governmental proceeding or which provides for the release of a Manager from any liability for damages to the Company caused by fraud or willful misconduct of such Manager; provided, however, that the consent of the Members to take action with respect to this Section 3.3(j) shall not be unreasonably withheld; (k) entering into, assuming or becoming bound by any contract to do any of the foregoing, or otherwise attempting to do any of the foregoing, either directly or indirectly. Notwithstanding anything to the contrary contained herein, any action required to be taken by the Company pursuant to Article VII shall not be deemed a Significant Decision. -17- 3.4. Compensation of Managers. The Managers shall not be entitled to any compensation in connection with management services rendered to the Company. All expenses incurred by the Managers in connection with travel to and from meetings of the Board of Managers shall be borne by the Class A-1 Member, other than the expenses of the LMC Manager, which shall be borne by Liberty Sub. 3.5. Actions by the Members. All actions required or permitted to be taken by the Members may be taken without a meeting. The Members having not less than the minimum number of votes that would be necessary to authorize or take an action may consent in writing or by electronic transmission to the authorization or taking of an action and the written consent or electronic transmission or transmissions shall be filed with the minutes of the Company. The filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form. ARTICLE IV. RIGHTS AND DUTIES OF MEMBERS 4.1. Other Activities of the Members. (a) Subject to Sections 4.1(b) and 4.1(c), this Agreement shall not be construed to create any duty or obligation on the part of any of the Members, the Company or any other person employed by, related to or in any way affiliated with any Member or the Company to disclose or offer to the Company or the Members, or obtain for the benefit of the Company or the Members, any other activity or venture or interest therein, or to create on the part of the Company, any of the Members, any creditors of the Company or any other Person having any interest in the Company (i) any claim, right or cause of action against any of the Members or any other Person employed by, related to or in any way affiliated with, any of the Members by reason of any direct or indirect investment or other participation, whether active or passive, in any other activity or venture or interest therein or (ii) any right to any such activity or venture or interest therein or the income or profits derived therefrom. (b) AT&T hereby undertakes to use its reasonable best efforts to make valuable and meaningful introductions for the Company to appropriate executives at AT&T (or its Broadband division or Business division if separate entities) and certain PTTs and equipment manufacturers where AT&T would face no conflict of interest. AT&T further will endeavor to provide, when appropriate, intangible value to the Company through its contacts and relationships and, as appropriate and in its sole discretion, to purchase products and services from Net2Phone for its own use. (c) IDT Corporation hereby undertakes that, to the extent that as owner, directly or indirectly, of (i) the IDT Sub Shares, (ii) any Membership Interests or (iii) any shares of Common Stock, it is entitled to the proceeds of any judgment or award resulting from any lawsuit or other legal proceeding brought by Net2Phone or the -18- stockholders of Net2Phone against AT&T Sub or its Affiliates relating to any matter pertaining to AT&T Sub's ownership of Common Stock prior to the date hereof or its obligations under the agreements relating to the AT&T Sub Shares, IDT Corporation shall, and cause it Affiliates to, as soon as practicable after the receipt by IDT Corporation or any of its Affiliates of such proceeds, transfer such proceeds (net of any taxes payable with respect to such proceeds) to AT&T Sub for its sole benefit; provided, however, that for purposes of this Section 4.1(c), Net2Phone shall not be deemed an Affiliate of IDT Corporation. (d) The provisions of Sections 4.1(b) and (c) hereof were negotiated in good faith by the parties hereto, and the parties hereto agree that such provisions are reasonable and are not more restrictive than necessary to protect the legitimate interests of the parties hereto. If any provision of Section 4.1(b) or (c) hereof shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of such Section 4.1(b) or (c). It is the intention of the parties hereto that if any of the covenants contained in Section 4.1(b) or (c) is in any way construed to be too broad or to any extent invalid, such provision shall not be construed to be null, void and of no effect, but to the extent such provision would be valid or enforceable under applicable law, such Section 4.1(b) or (c) shall be construed, interpreted or reformed to provide for a covenant having the maximum enforceable provisions as shall be valid and enforceable under applicable law. (e) From time to time, IDT Corporation and/or LMC may advance or cause any of their Affiliates to advance working capital to the Company in the form of loans in such amounts as the Board of Managers deems appropriate in order to fund administrative and professional services required by the Company, subject to terms and conditions on arm's-length basis (including interest payments, sufficient collateral to secure the obligations and other commercial terms) satisfactory to IDT Corporation and LMC. 4.2. Liability of Members, Managers and Officers. (a) Except as otherwise expressly provided herein, no Member (including any Member acting in its capacity as the Tax Matters Member), Manager or officer of the Company shall be liable, responsible or accountable in damages or otherwise, with respect to matters or actions relating to the Company, under this Agreement to the Company or to any other Member or Manager for (i) any act performed or omission made in good faith except for fraud or the willful misconduct of such Member, Manager or officer, (ii) such Member's, Manager's or officer's performance of, or failure to perform, any act on the reasonable reliance on advice of legal counsel to the Company or (iii) the negligence, malfeasance or bad faith of any agent, consultant or broker of the Company selected, engaged or retained in good faith. In any threatened, pending or completed action, suit or proceeding, each Member (including any Member -19- acting in its capacity as the Tax Matters Member), Manager and officer shall be fully protected and indemnified and held harmless by the Company to the fullest extent permitted by applicable law against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, proceedings, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, reasonable attorneys' fees, costs of investigation, fines, judgments and amounts paid in settlement, actually incurred by such Member, Manager or officer in connection with such action, suit or proceeding) by virtue of its status as a Member (including by virtue of any Member's status as the Tax Matters Member), Manager or officer, as the case may be, or with respect to any action or omission taken or suffered in good faith, other than liabilities and losses resulting from fraud or the willful misconduct of such Member, Manager or officer. The indemnification provided by this Section 4.2(a) shall be recoverable only out of the assets of the Company, and no Member or Manager shall have any personal liability on account thereof. (b) To the extent that, at law or in equity, a Member, Manager or officer of the Company has duties (including fiduciary duties) and liabilities relating thereto to the Company or to another Member or Manager, such Member, Manager or officer of the Company acting in connection with the Company's business or affairs, shall not be liable to the Company or to any Member or Manager for its good faith reliance on the provisions of this Agreement. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of a Member, Manager or officer of the Company otherwise existing at law or in equity, are agreed by the Members to replace such other duties and liabilities of such Member, Manager or officer of the Company in the context of this Agreement. 4.3. Investment Representations. Each Member agrees that it will not Transfer all or any portion of, or offer to Transfer all or any portion of, such Membership Interests, or solicit offers to buy from or otherwise approach or negotiate in respect thereof with any Person or Persons whomsoever, all or any portion of such Membership Interests (i) in any manner which would violate or cause the Company or any Member to violate applicable federal or state securities laws and (ii) other than in accordance with the provisions of this Agreement. 4.4. Legend. The Company may issue certificates representing Membership Interests and in the event that the Company issues such certificates, such certificates shall bear substantially the following legend: "THE MEMBERSHIP INTERESTS REPRESENTED HEREBY WERE ORIGINALLY ISSUED AS OF OCTOBER 19, 2001, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE -20- STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER OR IN VIOLATION OF ANY SUCH STATE SECURITIES LAWS. THE SECURITIES REPRESENTED HEREBY ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AND CERTAIN OTHER AGREEMENTS SET FORTH IN THE SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF THE COMPANY AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF THE SHARES REPRESENTED HEREBY UNTIL THE CONDITIONS THEREIN HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. UPON WRITTEN REQUEST, A COPY OF THE SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT SHALL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF WITHOUT CHARGE." 4.5. Limited Liability of Members. (a) Except as otherwise expressly provided herein or in the Act, no Member (and no director, officer, employee or controlling Person (if any) of such Member) shall be bound by, or be personally liable for, any expense, liability, indebtedness or obligations of the Company or any Subsidiary of the Company or of any other Member. Moreover, except as otherwise expressly provided herein or in the Act or for breach of this Agreement, no Member (and no director, officer, employee or controlling Person (if any) of such Member) shall have any liability under this Agreement to the Company or any other Member other than, with respect to such Member only, its Capital Contributions. The Members shall not be required to contribute any amounts in excess of the amounts set forth in Section 6.1 hereof. (b) To the fullest extent permitted by applicable law, recourse for any monetary liability or obligation of a Member to the Company or any other Member under this Agreement shall be had only against the Membership Interests held by such Member or the value thereof, and not against other assets of such Member. (c) Notwithstanding Sections 4.5(a) and (b) hereof, each Member shall be fully liable to contribute its Capital Contribution in accordance with Section 6.1 hereof. -21- 4.6. Dealing with Members. The fact that a Member, an Affiliate of a Member or any officer, director, employee, partner, consultant or agent of a Member, is directly or indirectly interested in or connected with any person, firm or corporation employed by the Company to render or perform a service, or from or to whom the Company may buy or sell any property or have other business dealings, shall not prohibit the Company from employing such person, firm or corporation or from dealing with him or it (each, an "Affiliate Transaction") on arm's-length terms, and neither the Company nor any of the Members shall have any rights in or to any income or profits derived therefrom by the party to any such Affiliate Transaction. 4.7. Designation of Tax Matters Member. (a) The Tax Matters Member shall act as the "tax matters partner" of the Company, as provided in the regulations pursuant to Section 6231 of the Code. The Tax Matters Member shall initially be IDT Sub, which shall serve as Tax Matters Member until such time as a successor Tax Matters Member is appointed by the Board of Managers. Any Person serving as the Tax Matters Member may be removed and a new Tax Matters Member may be appointed by the Board of Managers. Any Tax Matters Member who is to be replaced by a successor Tax Matters Member in accordance with this Section 4.7(a) shall certify that another Member has been selected as the Tax Matters Member of the Company by filing a statement to that effect with the IRS in the form and manner prescribed by Section 301.6231(a)(7)-1(d) of the Treasury Regulation. Each Member hereby approves of such designation and agrees to execute, certify, acknowledge, deliver, swear to, file and record at the appropriate public offices such documents as may be deemed necessary or appropriate to evidence such approval. To the extent and in the manner provided by applicable Code sections and Treasury Regulations thereunder, the Tax Matters Member (a) shall furnish the name, address, profits interest and taxpayer identification number of each Member to the IRS and (b) shall inform each Member of administrative or judicial proceedings for the adjustment of Company items required to be taken into account by a Member for income tax purposes. The Tax Matters Member shall act reasonably at all times and keep the other Members reasonably informed about its actions. (b) All reasonable out-of-pocket expenses and costs incurred by any Tax Matters Member in its capacity as Tax Matters Member shall be paid by the Company as an ordinary expense of its business. 4.8. Tax Matters. (a) The Board of Managers shall prepare all tax returns of the Company; provided, however, that the Board of Managers shall not file any such tax return without the approval of all Members, which approval shall not be unreasonably withheld. The Board of Managers shall cause the Company to circulate to each Member for its review and approval a draft of any income tax return no later than ninety (90) days -22- after the end of the Company's Fiscal Year. If any Member shall object to any items on the return within thirty (30) days, then the Members and the Board of Managers shall attempt to agree on a mutually acceptable resolution of any disputed tax items. If the Member and the Board of Managers cannot resolve their disagreement within 10 days, either the Member or the Board of Managers may request, in writing with a copy sent to the other party, that the disagreement be resolved by a mutually agreed upon "big five" independent accounting firm (Arthur Andersen LLP, Ernst & Young LLP, PricewaterhouseCoopers LLP, KPMG LLP or Deloitte & Touche LLP) (the "Independent Accountants") and the Independent Accountants shall be instructed to resolve the dispute by, first determining if both positions have merit, and if not, shall adopt the position that has merit. If the Independent Accountants determines that both positions have merit, the Independent Accountants shall adopt the position that will maximize, in the aggregate, the U.S. Federal, state and local income tax advantages and will minimize, in the aggregate, the U.S. Federal, state, and local income tax detriments, available to the Company's Members. The Independent Accountants shall provide their written resolution of the disagreement to both the Member and the Board of Managers within 15 days from the date that the Independent Accountants were requested to resolve such disagreement. If the Independent Accountants are incapable of resolving such disagreement based on the above-stated criteria, the position of the Board of Managers shall prevail. (b) The Board of Managers shall furnish a copy of all filed tax returns of the Company to each of the Members. In addition, upon reasonable written notice provided to the Company by a Member (and as otherwise required by law), the Company shall furnish such Members, on a timely basis, with all information relating to the Company required to be reported in any U.S. Federal, state and local tax returns of such Members, including a report indicating such Member's allocable share for U.S. Federal income tax purposes of the Company's income, gain, credits, losses and deductions. (c) The Members shall report their tax items with respect to, and arising from, their Membership Interests in a manner that is consistent with the Company's tax returns. (d) The Board of Managers shall provide prompt notice to the Members of advice that the IRS or any applicable state or local taxing authority intends to examine any tax returns or records or books of the Company and of any notice from the IRS in any administrative or judicial proceeding at the Company level relating to the determination of any item of income, gain, loss, deduction or credit of the Company, in each case together with a copy of such IRS or state or local taxing authority notice and any written materials submitted by the Board of Managers in response to such notice. In the event of any tax audit or any contest, dispute or litigation with respect to the treatment of, or liability of the Company for, any U.S. Federal, state or local income tax for any taxable period (or portion of a taxable period) of the Company beginning after the date -23- hereof, the Board of Managers shall control, defend and otherwise represent the Company in such audit, contest, dispute or litigation; provided, however, that any Member that constitutes a "notice partner" (as defined in Code Section 6231(a)(8)) of the Company shall have the right, directly or through its designated representatives, to review in advance and timely comment upon all significant written submissions made in the course of such audit, contest, dispute or litigation and to participate in, directly or through its designated representatives, all conferences, meetings or proceedings with any taxing authority, and all appearances before any court or judicial body, the subject matter of which is or includes an item for which such Member's U.S. Federal income tax liability or U.S. Federal income tax benefits could be increased or decreased, respectively, by more than $1,000,000 with respect to the Fiscal Year at issue. The Board of Managers shall advise any Member that constitutes a "notice partner" of the Company (as described above) of any written proposed adjustment by the IRS that would increase (directly or through such Member's interest in any intermediate entities) such Member's U.S. Federal income tax liability (or decrease (directly or through such Member's interest in any intermediate entities) such Member's U.S. Federal tax benefits) by more than $1,000,000 with respect to the Fiscal Year at issue. If the Board of Managers proposes that such adjustment be approved, the Company shall not concede such adjustment without such "notice partner" Member's prior written approval, which approval shall not be unreasonably withheld. In the event of a disagreement between the Board of Managers and a "notice partner" Member with respect to such adjustment, the procedures for resolving disagreements set forth in Section 4.8(a) hereof shall apply. (e) The Board of Managers shall take any steps necessary pursuant to Code Section 6223(a) to designate any Member who so requests, as a "notice partner" (as defined in Code Section 6231(a)(8)) if such Member so requests. In addition, nothing in this Agreement is intended to waive any rights, including rights to participate in administrative and judicial proceedings, that a Member may have under Code Sections 6221 through 6233, inclusive. (f) Notwithstanding any other provisions of this Agreement, the provisions of this Section 4.8 shall survive the dissolution of the Company or the termination of any Member's interest in the Company and shall remain binding on all Members for a period of time necessary to resolve with the IRS or any applicable state or local taxing authority all matters (including litigation) regarding the U.S. Federal, state and local income taxation, as the case may be, of the Company or any Member with respect to the Company. (g) The parties hereby agree that the Company will file all of its tax returns in a manner that is consistent with the tax positions set forth in Sections 4.08 and 7.01 of the Exchange Agreement documenting the transfer by AT&T Sub of certain Class B Membership Interests to IDT Investments and on the basis that the contributions by the Members of the Common Stock to the Company are tax-free transactions under Code -24- Section 721. ARTICLE V. BOOKS, RECORDS, BUDGETS AND REPORTS 5.1. Books of Account. At all times during the continuance of the Company, the Board of Managers shall keep or cause to be kept true and complete books of account in accordance with United States generally accepted accounting principles (except as noted in the last sentence of Section 5.3) and in which shall be entered fully and accurately the transactions of the Company. Such books of account shall be kept on the basis of the Fiscal Year in accordance with the accrual method of accounting, and shall reflect all transactions of the Company in accordance with United States generally accepted accounting principles (except as noted in the last sentence of Section 5.3). 5.2. Availability of Books of Account. All of the books of account referred to in Section 5.1, together with an executed copy of this Agreement, the Certificate of Formation and any amendments thereto shall at all times be maintained at the principal office of the Company or such other place in the State of Nevada or in such other state as the Board of Managers may designate in writing to the Members, and upon reasonable notice to the Board of Managers, shall be open to the inspection and examination of the Members or their representatives during reasonable business hours for purposes reasonably related to their Membership Interests. 5.3. Annual and Periodic Reports and Statements. For each Fiscal Year, the Board of Managers shall send or shall cause to be sent to each Person who was a Member at any time during such Fiscal Year, within one hundred and twenty (120) days after the end of such Fiscal Year, the consolidated annual financial statements of the Company including an annual balance sheet, profit and loss statement and a statement of changes in financial position, and a statement showing distributions to the Members, all as prepared in accordance with United States generally accepted accounting principles consistently applied (except as noted in the last sentence of this Section 5.3) and audited by the Company's independent public accountants, which shall be a firm of Independent Accountants and, within one hundred and twenty (120) days after the end of the Fiscal Year, a statement showing allocations to the Members of taxable income, gains, losses, deductions and credits, as prepared by such accountants. In addition, the Board of Managers shall send or cause to be sent to each Member (i) within forty-five (45) days after the end of the first three fiscal quarters of each year, a quarterly report, as applicable, setting forth such financial and operating information as the Board of Managers shall reasonably determine but which shall include a consolidated balance sheet and income statement (except as noted in the last sentence of this Section 5.3), (ii) such monthly and quarterly financial reporting information as the Board of Managers -25- shall reasonably determine and (iii) such financial and other information concerning the Company as is reasonably requested by any Member that is necessary for the preparation of (A) such Member's federal, state and local income or other tax returns or (B) any filing, notice or application made by or on behalf of such Member to or with any regulatory body having jurisdiction over such Member, subject to the right of the Company to withhold any confidential information that it reasonably determines will not remain confidential and that the public disclosure of which could adversely affect the Company. In addition to the rights under this Agreement and under the Act, the Company may provide such information to such Members and such other Persons as it deems appropriate. Notwithstanding the foregoing, in no event shall the results of Net2Phone be consolidated within such financial statements. 5.4. Accounting Expenses. All out-of-pocket expenses payable to Persons in connection with the keeping of the books and records of the Company and the preparation of audited or unaudited financial statements and federal and local tax and information returns required to implement the provisions of this Agreement or required by any governmental authority with jurisdiction over the Company shall be borne by the Company as an ordinary expense of its business. ARTICLE VI. CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS, PROFITS AND LOSSES AND ALLOCATIONS 6.1. Capital Contributions of the Members. (a) IDT Sub has made a Capital Contribution to the Company in the form of the IDT Sub Shares, as of the date of the Limited Liability Company Agreement, with 1,300,000 shares of Common Stock exchanged for Class B Membership Interests and 8,696,750 shares of Common Stock exchanged for Class A-1 Membership Interests. AT&T Sub has made a Capital Contribution to the Company in the form of the AT&T Sub Shares, as of the date of the Amended and Restated Limited Liability Company Agreement, with 6,200,000 shares of Common Stock exchanged for Class A Membership Interests and 12,700,000 shares of Common Stock exchanged for Class B Membership Interests. No other Member is making a Capital Contribution. The Exchange Transactions are hereby approved in all respects. (b) Each of AT&T Sub and IDT Sub represents, warrants and acknowledges that immediately prior to its Capital Contribution, it owned the AT&T Sub Shares or the IDT Sub Shares, as applicable, beneficially and of record, free and clear of any mortgage, pledge, lien, security interest, claim, restriction, charge or encumbrance of any kind. Each of AT&T Sub and IDT Sub represents, warrants and acknowledges that it owns its Membership Interests, subject, in the case of AT&T Sub, to the Exchange Agreements, beneficially and of record, free and clear of any mortgage, pledge, lien, -26- security interest, claim, restriction, charge or encumbrance of any kind, other than as provided in the Transaction Agreements. (c) The Membership Interests held by each Member and the Capital Contributions attributable to each class of Membership Interests held by each Member, before and after giving effect to the Exchange Transactions, are set forth on Schedule III hereto, as such schedule may be hereafter amended from time to time. 6.2. Capital of the Company. The capital of the Company shall be the aggregate capital in all of the Members' Capital Accounts. Except as otherwise provided herein, no Member shall be entitled to (i) withdraw or receive any interest or other return on its Capital Contribution or (ii) voluntarily contribute capital to the Company. 6.3. Return of Capital Contribution. Except as otherwise provided in this Agreement, no Member shall have the right to demand the return of all or any part of its Capital Contribution until the Company has been dissolved, or, in the event it has such right, to demand or receive any property other than cash in return for its Capital Contribution. 6.4. Capital Accounts. (a) The Company shall maintain separate Capital Accounts for each Member in accordance with Section 704(b) of the Code and the Treasury Regulations thereunder. In addition, the Company shall maintain separate Sub-Capital Accounts for each Member (i) with respect to the Class A Membership Interests held by such Member (the "Class A Capital Account"), (ii) with respect to the Class A-1 Membership Interests held by such Member (the "Class A-1 Capital Account") and (iii) with respect to the Class B Membership Interests held by such Member (the "Class B Capital Account"), each in the same manner as the Capital Accounts except that only items allocable or attributable to each individual class of Membership Interests shall be taken into account. The Capital Accounts and the Sub-Capital Accounts of each Member as of the date hereof, after giving effect to the Exchange Transactions, are deemed to equal the dollar amounts set forth opposite such Member's name on Schedule IV hereto as of the date hereof. (b) The Capital Account of each Member shall be increased by the amount of any Profits allocated to such Member. The Capital Account of each Member shall be decreased by (i) the amount of any Losses allocated to such Member and (ii) the amount of distributions to such Member. In all respects, the Members' Capital Accounts shall be determined in accordance with the detailed capital accounting rules set forth in Treasury Regulations Section 1.704-1(b)(2)(iv) as currently in effect and may be adjusted in the sole discretion of the Board of Managers as provided in Treasury Regulations Section 1.704-1(b)(2)(iv)(f) as currently in effect. -27- (c) A transferee of all (or a portion) of the Membership Interests held by a Member shall succeed to the Capital Account, Sub-Capital Account and Capital Contributions attributable to the transferred Membership Interests. 6.5. Profits and Losses. Except as otherwise set forth in Section 6.6 hereof, Profits, Losses and items of income, gain, deduction and loss of the Company for each Fiscal Year shall be allocated among all Persons who were Members during such Fiscal Year at the direction of the Board of Managers in a manner that will, as nearly as possible, cause the Capital Account balance of each Member (as computed for purposes of section 704(b) of the Code), as of the date the Board of Managers determine the allocations, to be equal to the sum of the amounts of cash or the Book Value of other property that would be distributable to such Member pursuant to Article X hereof at such time upon a hypothetical liquidation of the Company assuming that all the remaining assets of the Company were sold for their Book Values, all debts of the Company were paid according to their terms (with any nonrecourse debt for U.S. Federal income tax purposes deemed paid in amounts not in excess of the Book Value of the property securing such nonrecourse debt) and the cash or other property received therefrom was distributed to the Members in accordance with the priorities set forth in Article X hereof. 6.6. Special Allocations. The following special allocations shall be made in the following order: (a) Qualified Income Offset. In the event any Member unexpectedly receives any adjustments, allocations, or distributions described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6) of the Treasury Regulations, items of Company income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the Adjusted Capital Account Deficit of the Member as quickly as possible; provided that an allocation pursuant to this Section 6.6(a) shall be made only if and to the extent that the Member would have an Adjusted Capital Account Deficit after all other allocations provided for in this Article VI have been tentatively made as if this Section 6.6(a) were not in the Agreement. (b) Gross Income Allocations. In the event any Member has an Adjusted Capital Account Deficit at the end of any Fiscal Year, each such Member shall be specially allocated items of Company income and gain in the amount of such excess as quickly as possible; provided that an allocation pursuant to this Section 6.6(b) shall be made only if and to the extent that such Member would have an Adjusted Capital Account Deficit in excess of such sum after all other allocations provided for in this Article VI have been made as if Section 6.6(a) and this Section 6.6(b) were not in the Agreement. (c) Loss Limitation. Losses allocated pursuant to Section 6.5 hereof -28- shall, to the extent possible, not exceed the maximum amount of Losses that can be allocated without causing any Member to have an Adjusted Capital Account Deficit at the end of any Fiscal Year. In the event some but not all of the Members would have Adjusted Capital Account Deficits as a consequence of an allocation of Losses pursuant to Section 6.5 hereof, the limitation set forth in this Section 6.6(c) shall be applied on a Member by Member basis and Losses not allocable to any Member as a result of such limitation shall be allocated to the other Members in accordance with the positive balances in such Member's Capital Accounts so as to allocate the maximum permissible Losses to each Member under Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations. Any remaining Losses shall be allocated to the Members in the proportion and to the extent to which such Members bear the economic risk with respect to such Losses. (d) Curative Allocations. The allocations set forth in Section 6.6 hereof (the "Regulatory Allocations") are intended to comply with certain requirements of the Treasury Regulations. It is the intent of the Members that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Company income, gain, loss or deduction pursuant to this Section 6.6(d). Therefore, notwithstanding any other provision of this Article VI (other than the Regulatory Allocations), to the extent permitted under the Treasury Regulations, the Board of Managers shall make such offsetting special allocations of Company income, gain, loss or deduction in whatever manner it determines appropriate so that, after such offsetting allocations are made, each Member's Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if the Regulatory Allocations were not part of the Agreement and all Company items were allocated pursuant to Section 6.5. 6.7. Other Allocation Rules. (a) For purposes of determining the Profits, Losses, or any other items allocable to any period, Profits, Losses, and any such other items shall be determined on a daily, monthly, or other basis, as determined by the Board of Managers using any permissible method under Code Section 706 and the Treasury Regulations thereunder. (b) The Members are aware of the income tax consequences of the allocations made by this Article VI and hereby agree to be bound by the provisions of this Article VI in reporting their shares of Company income and loss for income tax purposes. (c) Notwithstanding anything to the contrary in this Article VI, the Board of Managers shall be permitted to allocate Profits and Losses and gross items of income, gain, loss and deduction and to adjust the Members' Capital Accounts in the manner the Board of Managers, in its reasonable discretion, deems required to cause the Capital Account balances of the Members to be consistent with the distribution provisions of Article VII. -29- 6.8. Tax Allocations: Code Section 704(c). (a) For tax purposes, all items of income, gain, loss, deduction, expense and credit, shall be allocated in the same manner as are Profits and Losses and items of income, gain, loss and deduction pursuant to Sections 6.5, 6.6 and 6.7; provided, however, that in accordance with Code Section 704(c) and the Treasury Regulations thereunder, income, gain, loss and deductions with respect to any property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its initial Book Value (computed in accordance with the definition of Book Value) using any permissible method as provided in the Treasury Regulations. (b) In the event the Book Value of any Company asset is adjusted pursuant to subparagraph (ii) of the definition of Book Value, subsequent allocations of income, gain, loss and deductions with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Book Value in the same manner as under Code Section 704(c) and the Treasury Regulations thereunder using any permissible method as provided in the Treasury Regulations. (c) Any elections or other decisions relating to such allocations shall be made by the Board of Managers in its sole discretion. Allocations pursuant to this Section 6.8 are solely for purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing any Member's Capital Account or share of Profits, Losses, other items or distributions pursuant to any provisions of this Agreement. (d) No election shall be made under Section 754 of the Code for the Company unless otherwise determined by the Board of Managers in its sole discretion. ARTICLE VII. DISTRIBUTIONS 7.1. Distribution Policy. (a) Subject to Paragraph (b) below, the Company shall distribute Distributable Funds only when, as and if determined by the Board of Managers. Distributable Funds on any distribution date shall be distributed to the Members in the following order of priority: (i) First, 100% to the Class B Membership Interests in accordance with the Class B Percentage Interests until the cumulative -30- amounts distributed pursuant to this Section 7.1(a)(i) equal the Capital Contributions made with respect to the Class B Membership Interests; (ii) Second, 58.4% to the Class A-1 Membership Interests in accordance with the Class A-1 Percentage Interests and 41.6% to the Class A Membership Interests in accordance with the Class A Percentage Interests until the cumulative amounts distributed pursuant to this Section 7.1(a)(ii) equal the aggregate of the Capital Contributions made with respect to the Class A-1 Membership Interests and the Class A Membership Interests; (iii) Third, 100% to the Class B Membership Interests in accordance with the Class B Percentage Interests until the sum of the cumulative distributions to the Class B Membership Interests pursuant to Section 7.1(a)(i) and this Section 7.1(a)(iii) represents an annual IRR of 8.5% compounded quarterly with respect to the Class B Membership Interests (the "Initial Class B Return") as of such distribution date; (iv) Fourth, 58.4% to the Class B Membership Interests in accordance with the Class B Percentage Interests and 41.6% to the Class A Membership Interest in accordance with the Class A Percentage Interests until the sum of the cumulative distributions to the Class B Membership Interests pursuant to Section 7.1(a)(i), Section 7.1(a)(iii) and this Section 7.1(a)(iv) represents an annual IRR of 13% compounded quarterly with respect to the Class B Membership Interests (the "Total Class B Return") as of such distribution date; and (v) Fifth, 58.4% to the Class A-1 Membership Interests in accordance with the Class A-1 Percentage Interests and 41.6% to the Class A Membership Interests in accordance with the Class A Percentage Interests. (b) All amounts withheld pursuant to any provision of any U.S. federal, state, local or foreign tax law with respect to any payment, distribution or allocation to the Company or the Members shall be treated as amounts distributed to the Members pursuant to Section 7.1(a) for all purposes of this Agreement. The Board of Managers is authorized to withhold from distributions, or with respect to allocations, to the Members and to pay over to any U.S. federal, state, local or foreign government any amounts required to be so withheld pursuant to the Code or any provision of any other U.S. federal, state or local law and shall allocate such amounts to those Members with respect to which such amounts were withheld. To the extent that withholding taxes and other related expenses paid to any U.S. federal, state, local or foreign government on behalf of a Member exceed the amount of any distribution the Member would otherwise receive from the Company, the Board of Managers may, in its discretion, require such -31- Member to contribute cash to the Company up to the amount paid on such Member's behalf. 7.2. Liquidation. In the event of any sale or other disposition of all or substantially all of the assets of the Company in accordance with the terms of this Agreement, the Company shall be dissolved and the proceeds of such sale or other disposition shall be distributed to the Members in liquidation as provided in Article X. ARTICLE VIII. RECIPROCAL PUT/CALL RIGHTS 8.1. Put Rights. (a) AT&T Sub may, at its sole option, by written notice to the relevant party (or parties) delivered not more than fifteen (15) days prior to, or within fifteen (15) after, the first anniversary of the date hereof, transfer, within 30 days of providing such written notice, (x) six (6) of its Class A Membership Interests in exchange for cash and stock of IDT Investments (the "IDT Investments Put") and/or (y) twenty-three (23) of its Class A Membership Interests in exchange for cash and stock of Liberty Sub (the "Liberty Sub Put"), in either case valued at the Class A Fair Market Value of such Membership Interests, calculated as of such first anniversary. (b) If the Class A Fair Market Value required to be paid with respect to the IDT Investments Put is $7.4 million or less at the time the IDT Investments Put is exercised, then at least 90% of such Class A Fair Market Value shall be paid by IDT Investments to AT&T Sub in cash and the remaining portion (with the exact combination to be determined in the sole discretion of IDT Investments) of such Class A Fair Market Value shall be paid by IDT Investments to AT&T Sub in the form of preferred stock of IDT Investments having terms and conditions substantially similar to the terms and conditions contained on Schedule V-A hereto ("IDT Investments Preferred Stock"). If the Class A Fair Market Value required to be paid with respect to the IDT Investments Put is greater than $7.4 million at the time the IDT Investments Put is exercised, then IDT Investments may elect, at its sole option, to pay the portion of such Class A Fair Market Value that exceeds $7.4 million in the form of a combination of cash and shares of Class B Common Stock, par value $0.01 per share, of IDT Corporation ("IDTC Class B Common Stock") up to 90% of such excess (with the exact combination to be determined in the sole discretion of IDT Investments) and 10% to be paid in the form of IDT Investments Preferred Stock. For purposes of this Section 8.1(b), the value of a share of Class B Common Stock shall be determined to be the average (rounded to the nearest 1/10,000) of the closing prices of the IDTC Class B Common Stock during regular trading hours on the principal market on which shares of IDTC Class B Common Stock are then listed or quoted (whether the NASDAQ National Market, The New York Stock -32- Exchange or another national securities exchange or association) for the twenty (20) consecutive trading day period ending on the first anniversary of the date hereof. Such satisfaction of the IDT Investments Put shall, at the option of IDT Investments, be structured in the most tax efficient manner as determined by IDT Investments; provided, that such structuring shall not change the payment terms of the IDT Investments Put described above. (c) The Class A Fair Market Value required to be paid with respect to the Liberty Sub Put shall be paid at the time the Liberty Sub Put is exercised, with at least 90% to be paid by Liberty Sub to AT&T Sub in the form of cash and the remaining portion (with the exact combination to be determined in the sole discretion of Liberty Sub) to be paid by Liberty Sub to AT&T Sub in the form of preferred stock of Liberty Sub having terms and conditions substantially similar to the terms and conditions contained on Schedule V-B hereto ("Liberty Sub Preferred Stock"). Such satisfaction of the Liberty Sub Put shall, at the option of Liberty Sub, be structured in the most tax efficient manner as determined by Liberty Sub; provided, that such structuring shall not change the payment terms of the Liberty Sub Put described above. (d) Subject to the immediately succeeding sentence, IDT Investments or Liberty Sub, as the case may be, shall pay to AT&T Sub the Class A Fair Market Value as provided in Section 8.1(b) or 8.1(c), as the case may be, within thirty (30) days of the date the IDT Investments Put or the Liberty Sub Put, as the case may be, is exercised. In the event that the payment of any portion of the Class A Fair Market Value required to be paid with respect to the IDT Investments Put or the Class A Fair Market Value required to be paid with respect to the Liberty Sub Put requires any statutory or regulatory approval, the making of any statutory or regulatory filing or notification or the passage of any waiting period required under applicable statute or regulation, the payment of any such portion requiring such approval, filing, notification or passage of such waiting period shall be postponed until after all such approvals have been obtained, all such filings and notifications have been made and all such waiting periods have passed; provided, however, that in no event shall the payment date be extended beyond 180 days of the date the IDT Investments Put or the Liberty Sub Put, as the case may be, was exercised. The parties agree to cooperate in good faith and use all commercially reasonable efforts to obtain any such approvals, make any such filings and notifications and secure the termination of any such waiting periods. (e) The IDT Investments Put may be assigned by IDT Investments to Liberty Sub or any of its Affiliates at any time without the consent of AT&T or AT&T Sub; provided, however, that if the IDT Investments Put is assigned to Liberty Sub or any of its Affiliates, Liberty Sub or its Affiliate, as the case may be, shall be permitted to satisfy the IDT Investments Put in part by delivering to AT&T Sub shares of Liberty Sub Preferred Stock to the extent IDT Investments would have been permitted to satisfy the IDT Investments Put in part by delivering to AT&T Sub shares of IDT Investments -33- Preferred Stock; (f) The Liberty Sub Put may be assigned by Liberty Sub to IDT Investments or any of its Affiliates at any time without the consent of AT&T or AT&T Sub; provided, however, that if the Liberty Sub Put is assigned to IDT Investments or any of its Affiliates, IDT Investments or its Affiliate, as the case may be, shall be permitted to satisfy the Liberty Sub Put in part by delivering to AT&T Sub shares of IDT Investments Preferred Stock to the extent Liberty Sub would have been permitted to satisfy the Liberty Sub Put in part by delivering to AT&T Sub shares of Liberty Sub Preferred Stock. 8.2. Call Rights. (a) IDT Investments may, at its sole option, by written notice to the relevant party (or parties) delivered not more than thirty (30) days prior to, or within thirty (30) days after, the second anniversary of the date hereof, require AT&T Sub to transfer, within ten (10) days of providing such written notice (but in no event prior to the second anniversary of the date hereof), six (6) of the Class A Membership Interests held by AT&T Sub in exchange for cash and stock of IDT Investments (the "IDT Investments Call"), and Liberty Sub may, at its sole option, require AT&T Sub to transfer on such second anniversary twenty three (23) of the Class A Membership Interests held by AT&T Sub in exchange for cash and stock of Liberty Sub (the "Liberty Sub Call"), in either case valued at the Class A Fair Market Value of such Membership Interests, calculated as of such second anniversary. (b) The Class A Fair Market Value required to be paid with respect to the IDT Investments Call shall be paid within ten (10) days after the IDT Investments Call is exercised (but in no event prior to the second anniversary of the date hereof), with at least 90% to be paid in cash and the remaining portion to be paid in IDT Investments Preferred Stock, with the exact combination to be determined in the sole discretion of IDT Investments. Such satisfaction of the IDT Investments Call shall, at the option of IDT Investments, be structured in the most tax efficient manner as determined by IDT Investments; provided, that such structuring shall not change the payment terms of the IDT Investments Call described above (c) The Class A Fair Market Value required to be paid with respect to the Liberty Sub Call shall be paid within ten (10) days after the Liberty Sub Call is exercised (but in no event prior to the second anniversary of the date hereof), with at least 90% to be paid in cash and the remaining portion to be paid in Liberty Sub Preferred Stock, with the exact combination to be determined in the sole discretion of Liberty Sub. Such satisfaction of the Liberty Sub Call shall, at the option of Liberty Sub, be structured in the most tax efficient manner as determined by Liberty Sub; provided, that such structuring shall not change the payment terms of the Liberty Sub Call described above. -34- (d) The IDT Investments Call may be assigned by IDT Investments or any of its Affiliates to Liberty Sub at any time without the consent of AT&T or AT&T Sub; provided, however, that if the IDT Investments Call is assigned to Liberty Sub or any of its Affiliates, Liberty Sub or its Affiliate, as the case may be, shall be permitted to satisfy the IDT Investments Call in part by delivering to AT&T Sub shares of Liberty Sub Preferred Stock to the extent IDT Investments would have been permitted to satisfy the IDT Investments Put in part by delivering to AT&T Sub shares of IDT Investments Preferred Stock. (e) The Liberty Sub Call may be assigned by Liberty Sub to IDT Investments or any of its Affiliates at any time without the consent of AT&T or AT&T Sub; provided, however, that if the Liberty Sub Call is assigned to IDT Investments or any of its Affiliates, IDT Investments or its Affiliate, as the case may be, shall be permitted to satisfy the Liberty Sub Put in part by delivering to AT&T Sub shares of IDT Investments Preferred Stock to the extent Liberty Sub would have been permitted to satisfy the Liberty Sub Put in part by delivering to AT&T Sub shares of Liberty Sub Preferred Stock. ARTICLE IX. TERMINATION OF A MEMBER; TRANSFER OF MEMBERSHIP INTERESTS 9.1. Termination of a Member. The expulsion, dissolution or Bankruptcy of a Member or any other event that terminates the continued membership of any Member (each a "Terminating Event") shall not in and of itself cause the Company to be dissolved, wound up or terminated unless, no later than ninety (90) days following a Terminating Event with respect to a Member, Members owning all of the remaining Membership Interests unanimously determine not to continue the business of the Company, in which case the Company shall dissolve and liquidate pursuant to Article X hereof and the remaining Members shall select the liquidator pursuant to such Article. No Member shall have the right to withdraw or resign as a Member or, except as provided in Section 10.1(a)(i), dissolve the Company voluntarily. 9.2. Transfer of Membership Interests. No Member may transfer, sell, pledge, hypothecate, encumber, assign or otherwise dispose of (whether voluntarily, involuntarily, by operation of law or otherwise) (each, a "Transfer") any Membership Interest, or agree or contract to Transfer any Membership Interests held by such Member, without the unanimous consent of the other Members to (x) such Transfer and (y) the admission of the proposed transferee as a Member of the Company. Notwithstanding the foregoing, a Member may Transfer any or all of its Membership Interests to (i) the Parent of such Member and/or (ii) one or more Subsidiaries of the Parent of such Member; provided that any such transferee agrees to be bound by the terms of this Agreement -35- applicable to the Membership Interests so transferred and either (1) the other Members are reasonably satisfied that such transferee has the ability to meet the obligations it would have hereunder or (2) the transferring Member or the Parent of such Member guarantees the performance of such obligations (each, a "Permitted Transferee"). Any attempted or purported Transfer in violation of this Section 9.2 shall be void and of no force or effect. For purposes of this Agreement, any Transfer by a Parent or any Subsidiary of a Parent of any direct or indirect interest in a Member which results in such Member ceasing to be a Subsidiary of such Parent shall be deemed a Transfer by such Member of all of its Membership Interests. ARTICLE X. TERMINATION OF THE COMPANY; LIQUIDATION AND DISTRIBUTION OF ASSETS 10.1. Dissolution and Termination. (a) The Company shall be dissolved only upon the occurrence of any of the following: (i) the delivery of a written notice by any Member on or after January 1, 2004 to the other Members electing to unwind and dissolve the Company; provided, however, that such election to unwind the Company shall not be effective if at any time prior to or within 30 days after the date of any such notice, the Class A-1 Members and Class B Members have elected to acquire or cause the Company to redeem the Class A Membership Interests held by AT&T Sub pursuant to Section 11.1; (ii) the sale or other disposition of all or substantially all of the Common Stock held directly or indirectly by the Company and receipt of the final payment of any installment obligation received as a result of any such sale or disposition; (iii) the unanimous written consent of all Members; (iv) any event which makes it unlawful for the Company's business to be continued unless, no later than thirty (30) days following such event, the Members unanimously determine not to dissolve the Company; (v) the issuance of a decree by any court of competent jurisdiction that the Company be dissolved and liquidated; or -36- (vi) at any time that there are no Members of the Company, unless the Company is continued in accordance with the Act. Upon dissolution, the Company shall wind-up its affairs and shall be liquidated and a certificate of cancellation of the Company's Certificate of Formation, as required by law, shall be filed. (b) In the event of the dissolution of the Company, its business activities shall be wound up, any amounts due from the Members shall be collected, its debts and liabilities shall be satisfied and its remaining assets, if any, shall be distributed as set forth in Section 10.2 below. Dissolution shall be effective on the date of the occurrence of an event set forth in Section 10.1(a) but the Company shall not terminate until all of the Company Assets have been liquidated and the proceeds distributed in accordance with the provisions of this Article X. Notwithstanding the dissolution of the Company, prior to the termination of the Company as aforesaid, the business of the Company and the affairs of the Members as such, shall continue to be governed by this Agreement. 10.2. Distribution Upon Liquidation. Upon dissolution of the Company, the Board of Managers, as provided in this Agreement, or if there shall be none, a trustee or liquidator appointed by unanimous consent of the Members shall proceed to the liquidation of the Company and the proceeds of such liquidation shall, notwithstanding any other provision of this Agreement to the contrary, be applied and distributed in the following order of priority: (i) to creditors other than Members (whether by payment or the making of reasonable provision for payment thereof, including the setting up of any reserves that the Managers or trustee or liquidator, as the case may be, shall determine are reasonably necessary for any liabilities or obligations of the Company) in satisfaction of all Indebtedness and liabilities of the Company (including the expenses of the liquidation); (ii) to Members who are creditors (whether by payment or the making of reasonable provision for payment thereof, including the setting up of any reserves that the Managers or trustee or liquidator, as the case may be, shall determine are reasonably necessary for any liabilities or obligations of the Company) in satisfaction of other debts and liabilities of the Company owed to Members; and (iii) to the Members in accordance with Section 7.1(a) hereof. Any Member may elect to receive distributions in kind of Common Stock held directly or indirectly by the Company to be distributed prior to any sale of shares of Common Stock or any Company Assets. In such case, the Company shall mark-to-market the shares of -37- Common Stock based on the average (rounded to the nearest 1/10,000) of the closing prices of the Common Stock of Net2Phone during regular trading hours on the principal market on which shares of Common Stock of Net2Phone are then listed or quoted (whether the NASDAQ National Market, The New York Stock Exchange or another national securities exchange or association) for the twenty (20) trading days up to and including such date and distribute Common Stock to such electing Member in lieu of cash in the amount that such Member would have received pursuant to clause (iii) above if all shares of Common Stock were distributed to all the Members in a final liquidation of the Company after all obligations under clauses (i) and (ii) above are satisfied and the number of shares of Common Stock to be distributed to such electing Member are adjusted accordingly to satisfy such electing Member's pro rata share of such obligations. 10.3. Sale of Company Assets. (a) As expeditiously as possible after dissolution, the Board of Managers, or any trustee or liquidator, shall satisfy all Company Indebtedness and liabilities, and make the distributions provided for in Section 10.2. Except as agreed by the Board of Managers and subject to paragraph (b) below, the priorities set forth in Section 10.2 and each Member's right to elect to receive distributions in kind of Common Stock held directly or indirectly by the Company as set forth in Section 10.2, no Member shall have the right to demand or receive property other than cash upon liquidation, and the Board of Managers, or any such trustee or liquidator, shall, in any event, have the power to sell Company Assets for cash. (b) In connection with the sale by the Company and reduction to cash of its assets, although the Company has no obligation to offer to sell any property to the Members, any Member or any Affiliate of any Member may bid on and purchase any Company Assets. If the Board of Managers, or any such trustee or liquidator, determines that an immediate sale of part or all of the Company's assets would cause undue loss to the Members, the Members, or any trustee or liquidator, may, with the approval of the Board of Managers, defer liquidation of and withhold from distribution for a reasonable time any Company Assets (except those necessary to satisfy the Company's current obligations). 10.4. Deficit Capital Accounts. Notwithstanding anything to the contrary contained in this Agreement, and notwithstanding any custom or law to the contrary, upon dissolution of the Company, any deficit in a Member's Capital Account shall not be an asset of the Company and such Member shall not be obligated to contribute such amount to the Company to bring the balance of such Member's Capital Account to zero. -38- ARTICLE XI. REDEMPTION OF CLASS A MEMBERSHIP INTERESTS 11.1. Redemption of the Class A Membership Interests held by AT&T Sub. On or after January 1, 2004, the Class A-1 Members and the Class B Members may agree to elect to either (i) acquire or (ii) cause the Company to redeem the Class A Membership Interests held by AT&T Sub. If such Members so elect, with notice of such election to be delivered to the Class A Members in accordance with Section 13.2, then (x) such Members may cause the Company to redeem the Class A Membership Interests held by AT&T Sub with Common Stock at the Class A Fair Market Value (with shares of Common Stock to be marked-to-market in accordance with Section 10.2) or (y) either or both of IDT Investments and Liberty Sub may acquire the Class A Membership Interests held by AT&T Sub at the Class A Fair Market Value (with shares of Common Stock to be marked-to-market in accordance with Section 10.2), for at least 90% cash and up to 10% IDT Investments Preferred Stock or Liberty Sub Preferred Stock, as the case may be. Such transaction shall, at the option of IDT Investments or Liberty Sub, as the case may be, be structured in the most tax efficient manner as determined by IDT Investments or Liberty Sub, as the case may be; provided, that such structuring shall not change the payment terms described above. Subject to the immediately succeeding sentence, IDT Investments, Liberty Sub or the Company, as the case may be, shall pay to AT&T Sub the Class A Fair Market Value as provided in this Section 11.1 within thirty (30) days of the date such Member or Members or the Company elected to acquire the Class A Membership Interests held by AT&T Sub. In the event that the payment of any portion of the Class A Fair Market Value required to be paid with respect to such redemption requires any statutory or regulatory approval, the making of any statutory or regulatory filing or notification or the passage of any waiting period required under applicable statute or regulation, the payment of any such portion requiring such approval, filing, notification or passage of such waiting period shall be postponed until after all such approvals have been obtained, all such filings and notifications have been made and all such waiting periods have passed; provided, however, that in no event shall the payment date be extended beyond 180 days of such election date. The parties agree to cooperate in good faith and use all commercially reasonable efforts to obtain any such approvals, make any such filings and notifications and secure the termination of any such waiting periods. -39- ARTICLE XII. AMENDMENTS 12.1. Amendments. (a) Amendments may be made to this Agreement from time to time by the unanimous consent of the Members. In making any amendments, there shall be prepared and filed by the Board of Managers such documents and certificates as shall be required to be prepared and filed. All amendments to this Agreement shall be in writing. (b) Notwithstanding anything to the contrary contained in this Agreement, the Board of Managers shall amend Schedules I through IV hereof to reflect the admission of Additional Members, the Transfer of Membership Interests, changes in the Capital Accounts of Members and any other changes in the information set forth therein accomplished in accordance with this Agreement, and the amendment of such Schedules shall not constitute an amendment of this Agreement and shall not require the consent of any Member or other Person. ARTICLE XIII. MISCELLANEOUS 13.1. Further Assurances. Each party to this Agreement agrees to execute, acknowledge, deliver, file and record such further certificates, amendments, instruments and documents, and to do all such other acts and things, as may be required by law or as, in the reasonable judgment of both the Board of Managers and such party, are necessary to carry out the intent and purpose of this Agreement. 13.2. Notices. Unless otherwise specified in this Agreement, all notices, demands, elections, requests or other communications that any party to this Agreement may desire or be required to give hereunder shall be in writing and shall be given by hand, by facsimile, or by a recognized overnight courier service providing confirmation of delivery, addressed as follows: (a) to the Company, at the address set forth in Section 2.5; and (b) to the Members at their respective addresses set forth in Schedule I hereto. Each Member shall have the right to designate another address or change an address by written notice to the Company and the other Members in the manner prescribed herein. All notices given pursuant to this Section 13.2 shall be deemed to have been given (i) if delivered by hand on the date of delivery or on the date delivery was refused by the -40- addressee, (ii) if delivered by facsimile transmission, when transmitted to the applicable number so specified in (or pursuant to) this Section 13.2 and an appropriate answer back is received or (iii) if delivered by overnight courier, on the date of delivery as established by the return receipt or courier service confirmation (or the date on which the courier service confirms that acceptance of delivery was refused by the addressee). 13.3. Headings and Captions. All headings and captions contained in this Agreement and the table of contents hereto are inserted for convenience only and shall not be deemed a part of this Agreement. 13.4. Variance of Pronouns. All pronouns and all variations thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or entity may require. 13.5. Counterparts. This Agreement may be executed in two or more separate counterparts, each of which shall constitute an original and all of which, when taken together, shall constitute one Agreement. 13.6. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF. 13.7. Partition. The Members hereby agree that no Member nor any successor-in-interest to any Member shall have the right, while this Agreement remains in effect, to have the property of the Company partitioned, or to file a complaint or institute any proceeding at law or in equity to have the property of the Company partitioned, and each Member, on behalf of himself, his successors, representatives, heirs and assigns, hereby waives any such right. 13.8. Invalidity. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. If a provision of this Agreement is held to be invalid and the rest of this Agreement is not invalidated, each party shall use all reasonable efforts to effect as far as practicable and valid under applicable law a new provision to achieve the purpose of such invalidated provision. 13.9. Assignment; Successors and Assigns. (a) This Agreement may be assigned, in whole or part, (i) by any Member, to any Permitted Transferee as it pertains to the Membership Interests transferred to such Permitted Transferee, (ii) by any Parent, to any successor to or assignee of all or substantially all of the assets or business of such Parent, (iii) by IDT Investments, as provided in Sections 8.1(d) and 8.2(d), (iv) by Liberty Sub, as provided in Sections 8.1(e) and 8.2(e), and (v) by AT&T, to any entity -41- that controls and operates substantially all of the businesses operated by AT&T's Broadband division, AT&T's Business division or AT&T's Consumer division (each an "AT&T Restructuring Entity") and to which all Membership Interests held directly or indirectly by AT&T are assigned following completion of the restructuring plan announced by AT&T in October 2000, or any successor to or assignee of all or substantially all of the assets or business of any AT&T Restructuring Entity; provided that (x) in any such case, the assignee agrees to be bound by the applicable terms of this Agreement and either (1) the other Members are reasonably satisfied that such transferee has the ability to meet the obligations it would have hereunder or (2) the assigning party or the Parent of such assigning party guarantees the performance of such obligations and (y) in the case of AT&T, the right to assign the Agreement to an AT&T Restructuring Entity shall not be utilized more than once. Any other assignment of this Agreement requires the unanimous written consent of the other parties hereto. Any attempted or purported assignment in violation of this Section 13.9 shall be void and of no force or effect. (b) This Agreement shall be binding upon the parties hereto and their respective successors, executors, administrators, legal representatives, heirs and legal assigns and shall inure to the benefit of the parties hereto and, except as otherwise provided herein, their respective successors, executors, administrators, legal representatives, heirs and legal assigns. No Person other than the parties hereto and their respective successors, executors, administrators, legal representatives, heirs and legal assigns, shall have any rights or claims under this Agreement. (c) AT&T agrees, and in the event it assigns its rights under this Agreement pursuant to Section 13.9(a) hereof, its assignee shall agree, to retain beneficial ownership, either directly or indirectly, of 50% or more of the outstanding voting securities of, or other ownership interests in, AT&T Sub, or any Permitted Transferee of AT&T Sub to which any of AT&T Sub's Membership Interests are transferred. (d) LMC agrees, and in the event it assigns its rights under this Agreement pursuant to Section 13.9(a) hereof, its assignee shall agree, to retain beneficial ownership, either directly or indirectly, of 50% or more of the outstanding voting securities of, or other ownership interests in, Liberty Sub, or any Permitted Transferee of Liberty Sub to which any of Liberty Sub's Membership Interests are transferred. (e) IDT Corporation agrees, and in the event it assigns its rights under this Agreement pursuant to Section 13.9(a) hereof, its assignee shall agree, to retain beneficial ownership, either directly or indirectly, of 50% or more of the outstanding voting securities of, or other ownership interests in, IDT Investments or IDT Sub, as the case may be, or any Permitted Transferee of IDT Investments or IDT Sub to which any of IDT Investments' or IDT Sub's Membership Interests are transferred. -42- 13.10. Entire Agreement. This Agreement and the Exchange Agreements supersede all prior agreements among the parties with respect to the subject matter hereof and thereof and contain the entire agreement among the parties with respect to such subject matter. No waiver of any provision hereof by any party hereto shall be deemed a waiver by any other party nor shall any such waiver by any party be deemed a continuing waiver of any matter by such party. No amendment, modification, supplement, discharge or waiver hereof or hereunder shall require the consent of any Person not a party to this Agreement. 13.11. No Brokers. Each of the parties hereto warrants to each other that there are no brokerage commissions or finders' fees (or any basis therefor) resulting from any action taken by such party or any Person acting or purporting to act on its behalf upon entering into this Agreement. Each Member agrees to indemnify and hold harmless each other Member for all costs, damages or other expenses arising out of any misrepresentation made in this Section 13.11. 13.12. Maintenance as a Separate Entity. The Company shall maintain books and records and bank accounts separate from those of its Affiliates; shall at all times hold itself out to the public as a legal entity separate and distinct from any of its Affiliates (including in its leasing activities, in entering into any contract, in preparing its financial statements, and in its stationery and on any signs it posts), and shall cause its controlled Affiliates to do the same and to conduct business with it on an arm's-length basis; shall not commingle its assets with assets of any of its Affiliates; shall not guarantee any obligation of any of its Affiliates; shall cause its business to be carried on by the Board of Managers and shall keep minutes of all meetings of, or written consent executed by, the Members. 13.13. Expenses. Without prejudice to its ability to recover for any losses, damages or liabilities relating to any dispute, controversy or claim arising out of or relating to this Agreement, each of the parties to this Agreement shall pay its own expenses in connection with this Agreement and any amendments, consents or waivers (whether or not the same become effective) under or in respect of this Agreement. 13.14. Publicity. None of the parties hereto shall, or permit any of their Affiliates to, issue any press release or make any other public statements, filings or disclosure with respect to the matters contemplated by this Agreement, the Exchange Agreements or any other matter related hereto or thereto, except (a) as may be required by applicable law, court process or obligations pursuant to the requirement of any applicable self-regulatory authority or (b) with the consent of the other parties to this Agreement. -43- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. AT&T CORP. By:/s/ RAYMOND E. LIGUORI ------------------------------ Name: Raymond E. Liguori Title: Mergers & Acquisitions Vice President, Assistant Treasurer ITELTECH, LLC By:/s/ RAYMOND E. LIGUORI ------------------------------ Name: Raymond E. Liguori Title: Mergers & Acquisitions Vice President, Assistant Treasurer IDT DOMESTIC-UNION, LLC By: IDT Domestic Telecom, Inc., its Managing Member By:/s/ MOTTI LICHTENSTEIN ------------------------------ Name: Motti Lichtenstein Title: CEO IDT CORPORATION By:/s/ MOTTI LICHTENSTEIN ------------------------------ Name: Motti Lichtenstein Title: EVP -44- IDT INVESTMENTS INC. By:/s/ ANTHONY S. DAVIDSON ------------------------------ Name: Anthony S. Davidson Title: Vice President and CFO LMC ANIMAL PLANET, INC. By:/s/ CHARLES Y. TANABE ------------------------------ Name: Charles Y. Tanabe Title: Senior Vice President LIBERTY MEDIA CORPORATION By:/s/ CHARLES Y. TANABE ------------------------------ Name: Charles Y. Tanabe Title: Senior Vice President -45- SCHEDULE I NAMES AND ADDRESSES OF MEMBERS IDT DOMESTIC-UNION, LLC 520 Broad Street Newark, New Jersey 07102 ITELTECH, LLC 295 North Maple Avenue Basking Ridge, New Jersey 07920 IDT INVESTMENTS INC. 400 North Stephanie Street, Suite 235 Henderson, Nevada 89014 LMC ANIMAL PLANET, INC. 12300 Liberty Boulevard Englewood, Colorado 80112 SCHEDULE II INITIAL MANAGERS Howard S. Jonas Joyce J. Mason Michael Fischberger Anthony Davidson Anthony Werner (LMC Manager) SCHEDULE III MEMBERS' MEMBERSHIP INTERESTS PRIOR TO THE EXCHANGE TRANSACTIONS CLASS A CLASS A-1 CLASS B IDT Domestic-Union, LLC 87 13 ITelTech, LLC 62 127 AFTER THE EXCHANGE TRANSACTIONS CLASS A CLASS A-1 CLASS B IDT Domestic-Union, LLC 87 13 ITelTech, LLC 29 IDT Investments Inc. 30 LMC Animal Planet, Inc. 33 97 SCHEDULE IV CAPITAL ACCOUNTS AND SUB-CAPITAL ACCOUNTS PRIOR TO THE EXCHANGE TRANSACTIONS CAPITAL ACCOUNT IDT Domestic-Union, LLC $55,300,000 ITelTech, LLC $104,517,000 CLASS A CLASS A-1 CLASS B IDT Domestic-Union, LLC $48,111,000 $7,189,000 ITelTech, LLC $34,286,000 $70,231,000 AFTER THE EXCHANGE TRANSACTIONS CAPITAL ACCOUNT IDT Domestic-Union, LLC $55,300,000 ITelTech, LLC $16,037,000 IDT Investments Inc. $16,590,000 LMC Animal Planet, Inc. $71,890,000 CLASS A CLASS A-1 CLASS B IDT Domestic-Union, LLC $48,111,000 $7,189,000 ITelTech, LLC $16,037,000 IDT Investments Inc. $16,590,000 LMC Animal Planet, Inc. $18,249,000 $53,641,000 SCHEDULE V-A TERMS AND CONDITIONS OF IDT INVESTMENTS PREFERRED STOCK CERTIFICATE OF DESIGNATION OF SERIES ___ PREFERRED STOCK BY RESOLUTION OF THE BOARD OF DIRECTORS OF IDT INVESTMENTS INC. Pursuant to Section 78.1955 of the Nevada Revised Statutes ------------------------ SERIES [ ] PREFERRED STOCK Anthony Davidson, being the Vice President and Chief Financial Officer of IDT Investments Inc. (the "Corporation"), a corporation organized and existing under and by virtue of the Revised Statutes of the State of Nevada, in accordance with the provisions of Section 78.1955 of the Nevada Revised Statutes, DOES CERTIFY that pursuant to authority conferred upon the Board of Directors by the Articles of Incorporation of the Corporation, as amended (the "Articles of Incorporation") adopted the following resolution. RESOLVED that, pursuant to Section 2.3 of Article II of the Articles of Incorporation, there be and hereby is authorized and created a series of Preferred Stock consisting of _____ shares having a par value of $0.01 per share, which series shall be titled "Series [ ] Preferred Stock." Capitalized terms not defined herein shall have the definitions ascribed to such terms in the Articles of Incorporation. The designations, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions of the Series [ ] Preferred Stock shall be as follows: 1. Designation and Amount. This series of Preferred Stock shall be designated and known as "Series [ ] Preferred Stock" (the "Series [ ] Preferred Stock") and shall consist of _____ shares. The Series [ ] Preferred Stock shall have a par value of $0.01 per share. (A) Rank. The Series [ ] Preferred Stock shall, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank prior to all classes of Common Stock of the Corporation and such other series of preferred stock as the Board of Directors of the Corporation may hereinafter expressly designate as junior to the Series [ ] Preferred Stock. All equity securities of the Corporation to which the Series [ ] Preferred Stock ranks prior (whether with respect to dividends or upon liquidation, dissolution, winding-up or otherwise), including the Common Stock, are collectively referred to herein, where relevant with respect to dividends, upon liquidation, dissolution, winding up or otherwise, as the "Junior Securities." All equity securities of the Corporation with which the Series [ ] Preferred Stock ranks on a parity (whether with respect to dividends or upon liquidation, dissolution, winding-up or otherwise) are collectively referred to herein, where relevant with respect to dividends, upon liquidation, dissolution, winding up or otherwise, as the "Parity Securities." All equity securities of the Corporation to which the Series [ ] Preferred Stock ranks junior (whether with respect to dividends or upon liquidation, dissolution, winding-up or otherwise) are collectively referred to herein, where relevant with respect to dividends, upon liquidation, dissolution, winding up or otherwise, as the "Senior Securities." The Series [ ] Preferred Stock shall, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank junior to such other series of preferred stock as the Board of Directors may hereinafter expressly designate as senior to the Series [ ] Preferred Stock. The Series [ ] Preferred Stock shall be subject to the creation of Junior Securities, Parity Securities and Senior Securities. The Corporation's Series A Preferred Stock, par value $0.01 per share, and Series B Preferred Stock, par value $0.01 per share, shall be deemed to be Parity Securities with the Series [ ] Preferred Stock. (B) Dividends. (i) Each holder of a share of Series [ ] Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors of the Corporation, out of funds legally available for the payment of dividends, cumulative dividends at a rate of _____% per annum compounded quarterly on the Liquidation Preference thereof. Such dividends shall be payable in annual payments commencing on [date], and then on each [date] thereafter while the Series [ ] Preferred Stock remains outstanding; provided, however, that if such date is not a business day, the payment date shall be the next business day (each of such dates being a "Dividend Payment Date"), in preference to dividends payable with respect to any Junior Securities and on a parity with any dividends payable with respect to Parity Securities. Such dividends shall be paid to the holders of record of Series [ ] Preferred Stock at the close of business 10 days prior to the respective Dividend Payment Date. The dividends shall be fully cumulative and shall accrue (whether or not declared), without interest beginning on [Date] (the "Original Issue Date"). In addition to the foregoing, each holder of a share of Series [ ] Preferred Stock shall be entitled to receive the amount by which the aggregate amount of dividends receivable in any fiscal year on [ ] shares of the Corporation's Class B Common Stock (assuming for these purposes that each share of Series [ ] Preferred Stock had been converted into one share of Class B Common Stock of the Corporation) exceeds the aggregate dividend amount otherwise accrued pursuant to this paragraph (B)(i) with respect to all [ ] shares of the Series [ ] Preferred Stock. All dividend payments made with respect to Series [ ] Preferred Stock shall be made in cash. (ii) Notwithstanding anything contained herein to the contrary, no dividends on shares of Series [ ] Preferred Stock shall be declared by the Board of Directors or paid or set apart for payment by the Corporation at such time as the terms and provisions of any financing, working capital or other agreement of the Corporation specifically prohibit such declaration, payment or setting apart for payment or if such declaration, payment or setting apart for payment would constitute a breach thereof or a default thereunder or if such declaration, payment or setting apart for payment would, upon the giving of notice or passage of time or both, constitute such a breach or default; provided that nothing herein contained shall in any way or under any circumstances be construed or deemed to require the Board of Directors to declare or the Corporation to 2 pay or set apart for payment any cash dividends on shares of the Series [ ] Preferred Stock at any time, whether permitted by any of such agreements or not. (iii) No full dividends shall be declared by the Board of Directors or paid or set apart for payment by the Corporation on any Parity Securities for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum set apart sufficient for such payment on the Series [ ] Preferred Stock for all dividend payment periods terminating on or prior to the date of payment of such full dividends on such Parity Securities. If any dividends are not paid in full, as aforesaid, upon the shares of the Series [ ] Preferred Stock and any other Parity Securities, all dividends declared upon shares of the Series [ ] Preferred Stock and any other Parity Securities shall be declared pro rata so that the amount of dividends declared per share of the Series [ ] Preferred Stock and such Parity Securities shall in all cases bear to each other the same ratio that accumulated accrued dividends per share on the Series [ ] Preferred Stock and such Parity Securities bear to each other. The Corporation may elect not to declare dividend payments on any Dividend Payment Date; provided, however, that dividends on shares of the Series [ ] Preferred Stock will accrue whether or not the Corporation has earnings or profits, whether or not there are funds legally available for the payment of such dividends and whether or not dividends are declared. Dividends, whether declared or undeclared, will accumulate to the extent they are not paid on the Dividend Payment Date for the period to which they relate. Arrearages of unpaid dividends, whether declared or undeclared, will not themselves bear interest but will be added to the Liquidation Preference (set forth in paragraph (C)(i) of this Certificate of Designation for the Series [ ] Preferred Stock) in accordance with the following sentence, and dividends will accrue thereafter on the full amount of the Liquidation Preference as so increased. If any dividend payable on any Dividend Payment Date is not declared and paid in full on such Dividend Payment Date, the amount so payable, to the extent not paid, shall be added to the then effective Liquidation Preference on such Dividend Payment Date. (iv) (a) Holders of shares of the Series [ ] Preferred Stock shall be entitled to receive the dividends provided for in paragraph (B)(i) in preference to and in priority over any dividends upon any Junior Securities. (b) Subject to the terms of paragraph (B)(iii), the Corporation shall not declare, pay or set apart for payment any dividend or other distribution on any Junior Securities or Parity Securities or make any payment on account of, or set apart for payment money for a sinking or other similar fund for, the purchase, redemption or other retirement of, any Junior Securities or Parity Securities or any warrants, rights, calls or options exercisable for or convertible into any Junior Securities or Parity Securities, or make any distribution in respect thereof, either directly or indirectly, and whether in cash, obligations or shares of the Corporation or other property (other than distributions or dividends in Junior Securities to the holders of Junior Securities), and shall not permit any corporation or other entity directly or indirectly controlled by the Corporation to purchase or redeem any Junior Securities or Parity Securities or any warrants, rights, calls 3 or options exercisable for or convertible into any Junior Securities or Parity Securities, so long as any shares of the Series [ ] Preferred Stock are outstanding, unless prior to or concurrently with such declaration, payment, setting apart for payment, purchase, redemption or distribution, as the case may be, all accrued and unpaid dividends on shares of the Series [ ] Preferred Stock not paid on the dates provided for in paragraph (B)(i) (including accrued dividends not paid by reason of the terms and conditions of paragraph (B)(ii) or paragraph (B)(iii) of this Certificate of Designation for the Series [ ] Preferred Stock) shall have been paid in full. (v) Subject to the foregoing provisions of this paragraph (B), the Board of Directors may declare and the Corporation may pay or set apart for payment dividends and other distributions on any Junior Securities or Parity Securities, and may purchase or otherwise redeem any Junior Securities or Parity Securities or any warrants, rights or options exercisable for or convertible into any Junior Securities or Parity Securities, and the holders of the shares of the Series [ ] Preferred Stock shall not be entitled to share therein. (C) Liquidation Preference; Participation Right. (i) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, each holder of a share of Series [ ] Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its Stockholders an amount in cash equal to the greater of (x) the Liquidation Preference of each such share, plus an amount in cash equal to all accrued but unpaid dividends thereon, to the extent not included within the Liquidation Preference of such share pursuant to paragraph (B)(iii), from the issuance date of such share, or if later, the most recent Dividend Payment Date to the date fixed for liquidation, dissolution or winding up before any payment shall be made or any assets distributed to the holders of any Junior Securities (the "Liquidation Preference" of a share of Series [ ] Preferred Stock shall be equal to the sum of $_____ plus any accrued but unpaid dividends added to the Liquidation Preference pursuant to (B)(iii)) and (y) the amount of liquidation proceeds (excluding any accrued but unpaid dividends or other amounts) payable to holders of the Corporation's Class B Common Stock, assuming for these purposes that each such share of Series [ ] Preferred Stock had been converted into one share of Class B Common Stock of the Corporation on the Original Issue Date (the "Class B Common Stock Participation Right"). The Liquidation Preference and Class B Common Stock Common Stock Participation Right shall be subject to appropriate adjustment to reflect the effect of any stock split, reverse stock split, stock dividend, reclassification or other similar event affecting the Series [ ] Preferred Stock after the Original Issue Date. If the assets of the Corporation are not sufficient to pay in full the amounts payable to the holders of outstanding shares of the Series [ ] Preferred Stock and any Parity Securities in the event of any such voluntary liquidation, dissolution or winding up of the affairs of the Corporation, then the holders of all such shares shall share ratably in such distribution of assets in accordance with the amount that would be payable on such distribution if the amounts to which the holders of outstanding shares of Series [ ] Preferred Stock and the holders of outstanding shares of such Parity Securities are entitled were paid in full. 4 (ii) For the purposes of this paragraph (C), neither the voluntary sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all the property or assets of the Corporation nor the consolidation or merger of the Corporation with or into one or more other corporations shall be deemed to be a liquidation, dissolution or winding up of the Corporation, voluntary or involuntary, provided, that the Series [ ] Preferred Stock remains outstanding following such voluntary sale conveyance, exchange or transfer, or the holders of the Series [ ] Preferred Stock outstanding receive from the surviving or succeeding corporation, as the case may be, of such voluntary sale, conveyance, exchange or transfer, a security with substantially similar voting powers, preference, and relative, participating optional and other special rights as the Series [ ] Preferred Stock. (D) Voting Rights. (i) In addition to any voting rights provided by these terms of the Series [ ] Preferred Stock or by law, the holders of the Series [ ] Preferred Stock shall be entitled to vote on any matter on which holders of the Class B Common Stock of the Corporation shall be entitled to vote. The holders of the Series [ ] Preferred Stock shall be entitled to notice of any stockholders' meeting in accordance with the bylaws of the corporation. Each share of the Series [ ] Preferred Stock shall have a number of votes equal to the vote held by one share of the Corporation's Class B Common Stock, assuming for these purposes that each such share of Series [ ] Preferred Stock had been converted into one share of Class B Common Stock of the Corporation on the Original Issue Date. (ii) So long as any shares of the Series [ ] Preferred Stock are outstanding, the Corporation will not, without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series [ ] Preferred Stock, voting separately as a class, (A) authorize any additional shares of Series [ ] Preferred Stock, or (B) change, by amendment to the Articles of Incorporation of the Corporation (including any such amendment effected by merger consolidation, statutory share exchange or otherwise) the terms and provisions of the Series [ ] Preferred Stock set out in this Certificate of Designation so as to affect adversely the rights and preferences of the holders of the Series [ ] Preferred Stock. For the avoidance of doubt, any merger, consolidation, or other transaction involving the Corporation shall not be considered to involve an amendment to the Articles of Incorporation, if the holders of the Series [ ] Preferred Stock shall be entitled to receive pursuant to such merger, consolidation or other transaction (x) an amount in cash no less than the amount that would be payable to such holders upon a liquidation, dissolution or winding up of the Corporation or (y) securities of the surviving or succeeding corporation of such merger consolidation or other transacting having substantially similar voting powers, preferences, and relative, participating optional and other special rights as the Series [ ] Preferred Stock . For the further avoidance of doubt neither the authorization nor the issuance by the Corporation of additional shares of any shares of its capital stock other than Series [ ] Preferred Stock shall be considered to involve an amendment to the Articles of Incorporation. 5 (E) Redemption. (i) The Corporation shall redeem (unless prohibited by law) all of the outstanding shares of Series [ ] Preferred Stock on [ ] for cash equal to greater of (x) the then applicable Liquidation Preference or (y) the then applicable Class B Common Stock Participation Right. (ii) The Corporation shall give written notice of any redemption of Series [ ] Preferred Stock pursuant to this paragraph (E) at least 60 days prior to the date of such redemption (a) by certified or registered mail, return receipt requested, postage prepaid, (b) by a nationally known overnight delivery service or (c) by hand delivery, addressed to each holder of any shares of Series [ ] Preferred Stock to be redeemed, at the address of such holder as shown on the books of the Corporation (the "Redemption Notice"). Each such notice shall specify the date fixed for the redemption and the place or places for surrender of shares of Series [ ] Preferred Stock. Any notice which is sent as herein provided shall be conclusively presumed to have been duly given by the Corporation on the date the notice is transmitted and receipt acknowledged or, if mailed, on the date deposited in the mail, whether or not the holder of the Series B Preferred Stock receives such notice. On or after the date fixed for redemption (the "Redemption Date") as stated in such notice, each holder of shares called to be redeemed shall surrender the certificate evidencing such shares to the Corporation at the place designated in such notice for redemption. After the Redemption Date, each holder of a certificate representing any shares of Series [ ] Preferred Stock shall cease to have any rights with respect thereto, except the right to receive, upon surrender of such certificate, cash equal to the amount contemplated by paragraph (E). After receipt by the holders of the Series [ ] Preferred Stock of cash issuable upon redemption thereof, all rights whatsoever with respect to the shares so called for redemption shall terminate. (F) Waiver. Any provision of this Certificate of Designation which, for the benefit of the holders of Series [ ] Preferred Stock, prohibits, limits or restricts actions by the Corporation, or imposes obligations on the Corporation, including but not limited to provisions relating to the obligation of the Corporation to redeem the Series [ ] Preferred Stock, may be waived in whole or in part, or the application of all or any part of such provision in any particular circumstance or generally may be waived, in each case by the affirmative vote or with the consent of the holders of record of at least two thirds of the number of Series [ ] Preferred Stock then outstanding (or such greater percentage thereof as may be required by applicable law or any applicable rules of any national securities exchange or national interdealer quotation system), either in writing or by vote at an annual meeting or a special meeting called for such purpose at which the holders of Series [ ] Preferred Stock shall vote as a separate class. (G) Preemptive Rights. The holders of the Series [ ] Preferred Stock will not have any preemptive right to subscribe for or purchase any shares of stock or any other securities which may be issued by this Corporation. (H) Exclusion of Other Rights. Except as may otherwise be required by law and for the equitable rights and remedies that may otherwise be available to 6 holders of Series [ ] Preferred Stock, the shares of Series [ ] Preferred Stock shall not have any designations, preferences, limitations or relative rights, other than those specifically set forth in these resolutions (as such resolutions may, subject to paragraph (D)(ii), be amended from time to time) and in the Articles of Incorporation of this Corporation. (I) Headings. The headings of the various paragraphs and subparagraphs hereof are for convenience of reference only and shall not affect the interpretation of any of the provisions hereof. 7 IN WITNESS WHEREOF, said IDT Investments Inc. has caused this certificate to be signed by its [Officer], this _____th day of _________, ____. By: --------------------------- Name: Title: 8 SCHEDULE V-B TERMS AND CONDITIONS OF LIBERTY SUB PREFERRED STOCK SERIES ___ VOTING PREFERRED STOCK ____ of the authorized shares of preferred stock are hereby designated "Series ___ Voting Preferred Stock." The designations, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions of the Series ___ Voting Preferred Stock are as follows: 1. Designation and Amount. This series of preferred stock shall be designated and known as "Series [A] Voting Preferred Stock" (the "Series [A] Preferred Stock") and shall consist of ______ shares. The Series [A] Preferred Stock shall have a par value of $0.01 per share. (A) Rank. The Series [A] Preferred Stock shall, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank prior to the common stock of the corporation and such other series of preferred stock as the Board of Directors of the corporation may hereinafter expressly designate as junior to the Series [A] Preferred Stock. All equity securities of the corporation to which the Series [A] Preferred Stock ranks prior (whether with respect to dividends or upon liquidation, dissolution, winding-up or otherwise), including the common stock, are collectively referred to herein, where relevant with respect to dividends, upon liquidation, dissolution, winding up or otherwise, as "Junior Securities." All equity securities of the corporation with which the Series [A] Preferred Stock ranks at parity (whether with respect to dividends or upon liquidation, dissolution, winding-up or otherwise) are collectively referred to herein, where relevant with respect to dividends, upon liquidation, dissolution, winding up or otherwise, as "Parity Securities." All equity securities of the corporation to which the Series [A] Preferred Stock ranks junior (whether with respect to dividends or upon liquidation, dissolution, winding-up or otherwise) are collectively referred to herein, where relevant with respect to dividends, upon liquidation, dissolution, winding up or otherwise, as "Senior Securities." The Series [A] Preferred Stock shall be subject to the creation of Junior Securities, Parity Securities and Senior Securities. (B) Dividends. (i) Subject to the rights and preferences of any outstanding Senior Securities, each holder of a share of Series [A] Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors of the corporation, out of funds legally available for the payment of dividends, for each share of Series [A] Preferred Stock outstanding, cash dividends at a rate of __% per annum on the Liquidation Preference (as defined in paragraph (C)(i) below). Such dividends, if declared, shall be payable in [semi-annual] payments commencing on [date], and then on each [June 30] and [December 31] thereafter while the Series [A] Preferred Stock remains outstanding; provided, however, that if such date is not a business day, the payment date shall be the next business day (each of such dates being a "Dividend Payment Date"). If declared, such dividends shall be paid to the persons who were holders of record of Series [A] Preferred Stock at the close of business 10 days prior to the respective Dividend Payment Date. The dividends shall be fully cumulative and shall accrue (whether or not declared) without interest beginning on [Date] (the "Original Issue Date"). (ii) Notwithstanding anything contained herein to the contrary, no dividends on shares of Series [A] Preferred Stock shall be declared by the Board of Directors or paid or set apart for payment by the corporation at such time as the terms and provisions of any financing, working capital or other agreement of the corporation specifically prohibit such declaration, payment or setting apart for payment or if such declaration, payment or setting apart for payment would constitute a breach thereof or a default thereunder or if such declaration, payment or setting apart for payment would, upon the giving of notice or passage of time or both, constitute such a breach or default; provided that nothing herein contained shall in any way or under any circumstances be construed or deemed to require the Board of Directors to declare or the corporation to pay or set apart for payment any cash dividends on shares of the Series [A] Preferred Stock at any time, whether permitted by any of such agreements or not. (iii) No dividends shall be declared by the Board of Directors or paid or set apart for payment by the corporation on any Parity Securities for any period unless all accrued dividends have been or contemporaneously are declared and paid or declared and a sum set apart sufficient for such payment on the Series [A] Preferred Stock for all Dividend Payment Dates on or prior to the date of payment of such dividends on such Parity Securities; provided that if all dividends accrued and payable upon the shares of the Series [A] Preferred Stock and any Parity Securities cannot be paid in full as aforesaid, then all dividends declared upon shares of the Series [A] Preferred Stock and any other Parity Securities shall be declared and paid pro rata so that the amount of dividends declared and paid per share of the Series [A] Preferred Stock and such Parity Securities shall in all cases bear to each other the same ratio that accumulated accrued dividends per share on the Series [A] Preferred Stock and such Parity Securities bear to each other. The corporation may elect not to declare dividend payments on any Dividend Payment Date; provided, however, that dividends on shares of the Series [A] Preferred Stock will accrue whether or not the corporation has earnings or profits, whether or not there are funds legally available for the payment of such dividends and whether or not dividends are declared. Dividends, whether declared or undeclared, will accumulate to the extent they are not paid on the Dividend Payment Date for the period to which they relate. Arrearages of unpaid dividends, whether declared or undeclared, will not themselves bear interest but will be added to the Liquidation Preference (set forth in paragraph (C)(i) below) in accordance with the following sentence, and dividends will accrue thereafter on the full amount of the Liquidation Preference as so increased. If the dividend provided for in paragraph (B)(i) is not declared and paid in full on any Dividend Payment Date, then the amount of the dividend accrued, to the extent not paid, shall be added to the then effective Liquidation Preference on such Dividend Payment Date. (iv) (a) Holders of shares of the Series [A] Preferred Stock shall be entitled to receive the dividends provided for in paragraph (B)(i) in preference to and in priority over any dividends upon any Junior Securities. (b) Subject to the first sentence of paragraph (B)(iii), the corporation shall not declare, pay or set apart for payment any dividend or other distribution on any Junior Securities or Parity Securities or make any payment on account of, or set apart for payment money for a sinking or other similar fund for, the purchase, redemption or other retirement of, any Junior Securities or Parity Securities or any warrants, rights, calls or options exercisable for or convertible into any Junior Securities or Parity Securities, or make any distribution in respect thereof, either directly or indirectly, and whether in cash, obligations or shares of the corporation or other property (other than distributions or dividends in Junior Securities to the holders of -2- Junior Securities), and shall not permit any corporation or other entity directly or indirectly controlled by the corporation to purchase or redeem any Junior Securities or Parity Securities or any warrants, rights, calls or options exercisable for or convertible into any Junior Securities or Parity Securities, so long as any shares of the Series [A] Preferred Stock are outstanding, unless prior to or concurrently with such declaration, payment, setting apart for payment, purchase, redemption or distribution, as the case may be, all accrued and unpaid dividends on shares of the Series [A] Preferred Stock not paid on the dates provided for in paragraph (B)(i) (including accrued dividends not paid by reason of the terms and conditions of paragraph (B)(ii) or paragraph (B)(iii) of this Section C of this Article V) shall have been paid in full. (v) Subject to the foregoing provisions of this paragraph (B), the Board of Directors may declare and the corporation may pay or set apart for payment dividends and other distributions on any Junior Securities or Parity Securities, and may purchase or otherwise redeem any Junior Securities or Parity Securities or any warrants, rights or options exercisable for or convertible into any Junior Securities or Parity Securities, and the holders of the shares of the Series [A] Preferred Stock shall not be entitled to share therein. (C) Liquidation Preference. (i) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the corporation, each holder of any shares of Series [A] Preferred Stock then outstanding shall be entitled to be paid out of the assets of the corporation available for distribution to its Stockholders an amount in cash equal to the Liquidation Preference of each such share, plus an amount in cash equal to all accrued but unpaid dividends thereon, to the extent not included within the Liquidation Preference of such share pursuant to the last sentence of paragraph (B)(iii), from the issuance date of such share, or if later, the most recent Dividend Payment Date to the date fixed for liquidation, dissolution or winding up before any payment shall be made or any assets distributed to the holders of any Junior Securities (the "Liquidation Preference" of a share of Series [A] Preferred Stock shall be equal to the sum of $_______ plus any accrued but unpaid dividends added to the Liquidation Preference pursuant to the last sentence of paragraph (B)(iii)). If the assets of the corporation are not sufficient to pay in full the amounts payable to the holders of outstanding shares of the Series [A] Preferred Stock and any Parity Securities in the event of any such voluntary liquidation, dissolution or winding up of the affairs of the corporation, then the holders of all such shares shall share ratably in such distribution of assets in accordance with the amount that would be payable on such distribution if the amounts to which the holders of outstanding shares of Series [A] Preferred Stock and the holders of outstanding shares of such Parity Securities are entitled were paid in full. (ii) For the purposes of this part (C), neither the voluntary sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all the property or assets of the corporation nor the consolidation or merger of the corporation with or into one or more other corporations shall be deemed to be a liquidation, dissolution or winding up of the corporation, voluntary or involuntary, provided, that the Series [A] Preferred Stock remains outstanding following such voluntary sale conveyance, exchange or transfer, or the holders of the Series [A] Preferred Stock outstanding receive from the surviving or succeeding corporation, as the case may be, of such voluntary sale, conveyance, exchange or transfer, a security with substantially similar voting powers, preference, and relative, participating optional and other special rights as the Series [A] Preferred Stock. -3- (D) Voting Rights. (i) In addition to any voting rights provided by these terms of the Series [A] Preferred Stock or by law, the holders of the Series [A] Preferred Stock shall be entitled to one vote per share on any matter on which holders of the common stock of the corporation shall be entitled to vote, and, except as provided by law, the holders of common stock and Series [A] Preferred Stock shall vote together as a single class on all such matters. The holders of the Series [A] Preferred Stock shall be entitled to notice of any stockholders' meeting in accordance with the bylaws of the corporation. (ii) So long as any shares of the Series [A] Preferred Stock are outstanding, the corporation will not, without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series [A] Preferred Stock, voting separately as a class, (A) authorize any additional shares of Series [A] Preferred Stock, or (B) change, by amendment to the articles of incorporation of the corporation (including any such amendment effected by merger consolidation, statutory share exchange or otherwise) the terms and provisions of the Series [A] Preferred Stock set out in this Section C of this Article V so as to affect adversely the rights and preferences of the holders of the Series [A] Preferred Stock. For the avoidance of doubt, any merger, consolidation, or other transaction involving the corporation pursuant to which the Series [A] Preferred Stock is to be converted into or exchanged solely for cash shall not be considered to involve an amendment to the articles of incorporation, provided that in any such event, the holders of the Series [A] Preferred Stock shall be entitled to receive in such merger, consolidation or other transaction an amount in cash no less than the amount that would be payable to such holders upon a liquidation, dissolution or winding up of the corporation. For the further avoidance of doubt, neither the authorization nor the issuance by the corporation of any shares of its capital stock other than Series [A] Preferred Stock shall be considered to involve an amendment to the articles of incorporation that requires the consent of the Series [A] Preferred Stock voting separately as a class. (E) Redemption. (i) The corporation shall redeem (unless prohibited by law) all of the outstanding shares of Series [A] Preferred Stock on [insert date that is the 21st anniversary of the Original Issue Date], for cash equal to the then applicable Liquidation Preference. (ii) The corporation shall give written notice of any redemption of Series [A] Preferred Stock pursuant to this part (E) at least 60 days prior to the date of such redemption (a) by certified or registered mail, return receipt requested, postage prepaid, (b) by a nationally known overnight delivery service or (c) by hand delivery, addressed to each record holder of any shares of Series [A] Preferred Stock to be redeemed, at the address of such holder as shown on the books of the corporation (the "Redemption Notice"). Each such notice shall specify the date fixed for the redemption and the place or places for surrender of shares of Series [A] Preferred Stock. Any notice which is sent as herein provided shall be conclusively presumed to have been duly given by the corporation on the date the notice is transmitted and receipt acknowledged or, if mailed, on the date deposited in the mail, whether or not the holder of the Series [A] Preferred Stock receives such notice. On or after the date fixed for redemption (the "Redemption Date") as stated in such notice, each holder of shares called to be redeemed shall surrender the certificate evidencing such shares to the corporation at the place designated in such notice for redemption. After the Redemption Date, each holder of a certificate representing any shares of Series [A] Preferred Stock shall cease to have any rights with respect thereto, except the right to receive, upon surrender of such certificate, cash equal to the amount contemplated by this part -4- (E). After receipt by the holders of the Series [A] Preferred Stock of cash issuable upon redemption thereof, all rights whatsoever with respect to the shares so called for redemption shall terminate. (F) Waiver. Any provision of this Section C of this Article V which, for the benefit of the holders of Series [A] Preferred Stock, prohibits, limits or restricts actions by the corporation, or imposes obligations on the corporation, including but not limited to provisions relating to the obligation of the corporation to redeem the Series [A] Preferred Stock, may be waived in whole or in part, or the application of all or any part of such provision in any particular circumstance or generally may be waived, in each case by the affirmative vote or with the consent of the holders of record of at least 66-2/3% of the number of Shares then outstanding (or such greater percentage thereof as may be required by applicable law or any applicable rules of any national securities exchange or national interdealer quotation system), either in writing or by vote at an annual meeting or a special meeting called for such purpose at which the holders of Series [A] Preferred Stock shall vote as a separate class. (G) Preemptive Rights. The holders of the Series [A] Preferred Stock will not have any preemptive right to subscribe for or purchase any shares of stock or any other securities which may be issued by this corporation. (H) Exclusion of Other Rights. Except as may otherwise be required by law and for the equitable rights and remedies that may otherwise be available to holders of Series [A] Preferred Stock, the shares of Series [A] Preferred Stock shall not have any designations, preferences, limitations or relative rights, other than those specifically set forth in this Section C of this Article V (as it may, subject to paragraph (D)(ii), be amended from time to time) or otherwise in the articles of incorporation of this corporation. (I) Headings. The headings of the various parts, paragraphs and subparagraphs hereof are for convenience of reference only and shall not affect the interpretation of any of the provisions hereof. -5- EX-99.17 15 exh17.txt JOINT FILING AGREEMENT Exhibit 17 JOINT FILING AGREEMENT, DATED AS OF OCTOBER 24, 2001 In accordance with Rule 13d-1(k)(1) under the Securities Exchange Act of 1934, as amended, the undersigned hereby agree to the joint filing of Net2Phone Holdings, L.L.C., IDT Domestic-Union, LLC, IDT Investments Inc., IDT Nevada Holdings, Inc., IDT Domestic Telecom, Inc., IDT Telecom, Inc., IDT Corporation, Howard S. Jonas, ITelTech, LLC and AT&T Corp. on behalf of each of them of a statement on Schedule 13D (including amendments thereto) with respect to shares of Common Stock, par value $0.01 per share, of Net2Phone, Inc., and that this Agreement be included as an Exhibit to such joint filing. This Agreement may be executed in any number of counterparts all of which taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned hereby execute this Agreement this 24th day of October 2001. NET2PHONE HOLDINGS, L.L.C. By: /s/ JOYCE J. MASON ---------------------------------------- Name: Joyce J. Mason Title: Manager IDT DOMESTIC-UNION, LLC By: IDT Domestic Telecom, Inc., its managing member By: /s/ MOTTI LICHTENSTEIN ------------------------------------ Name: Motti Lichtenstein Title: Chief Executive Officer IDT INVESTMENTS INC. By: /s/ ANTHONY S. DAVIDSON ------------------------------------------ Name: Anthony S. Davidson Title: Vice President & Chief Financial Officer IDT NEVADA HOLDINGS, INC. By: /s/ ANTHONY S. DAVIDSON ------------------------------------------ Name: Anthony S. Davidson Title: Vice President & Chief Financial Officer IDT DOMESTIC TELECOM, INC. By: /s/ MOTTI LICHTENSTEIN ----------------------------------------- Name: Motti Lichtenstein Title: Chief Executive Officer IDT TELECOM, INC. By: /s/ MOTTI LICHTENSTEIN ----------------------------------------- Name: Motti Lichtenstein Title: Chief Executive Officer IDT CORPORATION By: /s/ JAMES COURTER ------------------------------------------ Name: James A. Courter Title: Chief Executive Officer and Vice Chairman /s/ HOWARD S. JONAS ---------------------------------------------- Howard S. Jonas ITELTECH, LLC By: /s/ ROBERT FEIT ------------------------------------------ Name: Robert Feit Title: President AT&T CORP. By: /s/ ROBERT FEIT ------------------------------------------ Name: Robert Feit Title: General Attorney and Assistant Secretary