-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DFvz6xZcMXW8Njzq7MD7OY3zA29WE2scVJZxMLGw7eb8k+Gj6Gt8s0gZd3KSIFy2 xNfMTNPaUzPnMJX1yuGQMg== 0000950130-96-004538.txt : 19961122 0000950130-96-004538.hdr.sgml : 19961122 ACCESSION NUMBER: 0000950130-96-004538 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960731 FILED AS OF DATE: 19961121 SROS: NONE FILER: 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 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 000-27898 FILM NUMBER: 96670513 BUSINESS ADDRESS: STREET 1: 294 STATE ST CITY: HACKENSACK STATE: NJ ZIP: 07601 BUSINESS PHONE: 2019281000 MAIL ADDRESS: STREET 1: 294 STATE STREET CITY: HACKENSACK STATE: NJ ZIP: 07601 10-K405/A 1 AMENDED FORM 10-K405 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------ FORM 10-K/A FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JULY 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 0-27898 IDT CORPORATION (Exact name of registrant as specified in its charter) Delaware 22-3415036 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation and organization) 294 State Street Hackensack, New Jersey 07601 (Address of principal executive offices, including zip code) (201) 928-1000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value (Title of class) Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No __ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the Registrant, based on the closing price of the Common Stock on October 25, 1996 of $12.25, as reported on the Nasdaq National Market, was approximately $99.4 million. Shares of Common Stock held by each officer and director and by each person who owns 5% or more of the outstanding Common Stock have been excluded from this computation in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. As of October 25, 1996 the Registrant had outstanding 9,666,900 shares of Common Stock, $.01 par value, and 11,174,330 shares of Class A Common Stock, $.01 par value. Explanatory Note ---------------- The undersigned Registrant hereby amends Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K of Part IV of its Annual Report on Form 10-K for the fiscal year ended July 31, 1996 pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. 1 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) The following documents are filed as part of this Report: 1. Financial Statements. 2. Financial Statement Schedules. Schedule No. Description ------------ ----------- II Valuation and Qualifying Accounts 3. Exhibits. Exhibit No. Description --- ----------- 2.01## Merger Agreement relating to the reincorporation of the Registrant in Delaware. 3.01## Restated Certificate of Incorporation of the Registrant. 3.02## By-laws of the Registrant. 4.01### Specimen Certificates for shares of the Registrant's Common Stock and Class A Stock. 4.02## Description of Capital Stock (contained in the Certificate of Incorporation of the Registrant, filed as Exhibit 3.01). 10.01**@ Form of Employment Agreement between the Registrant and Howard S. Jonas. 10.02**@ Form of Employment Agreement between the Registrant and Howard S. Balter. 10.03**@ Form of Employment Agreement between the Registrant and Eric L. Raab. 10.04##@ Form of 1996 Stock Option and Incentive Plan. 10.05*+ Network Service Provider Agreement between Netscape Communications Corporation and the Registrant. 10.06** Marketing Services and Independent Contractor Services Agreement between Lermer Overseas Telecommunications, Inc. and the Registrant. 10.07# Rebiller Service Agreement between WorldCom, Inc. (formerly LDDS Communications, Inc.) and the Registrant. 10.08### Form of Registration Rights Agreement between the Company's stockholders and the Company 10.09## Lease of 294 State Street. 10.11o Form of Registration Rights Agreement between Howard S. Jonas and the Registrant. 10.14*+ Access Agreement between PSINet Inc. and the Registrant. 10.15*+ Restated Sales Agreement between International Computer Systems, Inc. and the Registrant. 21.01* Subsidiaries of the Registrant. 27.01* Financial Data Schedule. - ---------- * filed herewith + confidential treatment requested ** incorporated by reference to Form S-1 filed January 9, 1996, file No. 333-00204 # incorporated by reference to Form S-1 filed January 22, 1996, file No. 333-00204 ## incorporated by reference to Form S-1 filed February 21, 1996, file No. 333-00204 ### incorporated by reference to Form S-1 filed March 8, 1996, file No. 333-00204 o incorporated by reference to Form S-1 filed March 14, 1996, file No. 333-00204 @ compensation plans and arrangements for executives and others. 2 (b) Reports on Form 8-K. The Registrant did not file any reports on Form 8-K during the fiscal year ended July 31, 1996. 3 IDT Corporation Index to Consolidated Financial Statements Report of Independent Auditors............................................F-2 Consolidated Balance Sheets as of July 31, 1995 and 1996..................F-3 Consolidated Statements of Operations for the years ended July 31, 1994, 1995 and 1996............................................F-4 Consolidated Statements of Stockholders' Equity for the years ended July 31, 1994, 1995 and 1996............................................F-5 Consolidated Statements of Cash Flows for the years ended July 31, 1994, 1995 and 1996............................................F-6 Notes to Consolidated Financial Statements................................F-7 Financial Statement Schedule - Valuation and Qualifying Accounts..........F-20 F-1 Report of Independent Auditors The Board of Directors and Stockholders IDT Corporation We have audited the accompanying consolidated balance sheets of IDT Corporation as of July 31, 1995 and 1996, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended July 31, 1996. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These consolidated financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at July 31, 1995 and 1996 and the results of its operations and its cash flows for each of the three years in the period ended July 31, 1996, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. ERNST & YOUNG LLP New York, New York September 30, 1996 F-2 IDT Corporation Consolidated Balance Sheets
July 31 1995 1996 ------------------------- Assets Current assets: Cash and cash equivalents $ 231,592 $14,893,756 Trade accounts and commissions receivable, net of allowance for doubtful accounts of $250,000 at July 31, 1995 2,029,518 11,497,565 and $2,100,000 at July 31, 1996 Advances receivable -- 925,000 Due from Yovelle -- 1,200,000 Other current assets 141,034 1,985,090 ------------------------- Total current assets 2,402,144 30,501,411 Property and equipment, at cost, net 1,770,113 12,453,330 Advances receivable -- 325,000 Other assets 25,000 517,630 ------------------------- Total assets $ 4,197,257 $43,797,371 ========================= Liabilities and stockholders' equity Current liabilities: Trade accounts payable $ 798,587 $ 7,778,860 Accrued expenses 2,028,753 7,770,334 Deferred revenue 266,584 983,496 Notes payable to former stockholder 5,001 -- Other current liabilities 187,357 422,005 ------------------------- Total current liabilities 3,286,282 16,954,695 ------------------------- Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value; authorized shares-- 10,000,000; -- -- no shares issued Common stock, $.01 par value; authorized shares-- 100,000,000; 4,491,900 and 9,666,900 shares issued and 44,919 96,669 outstanding in 1995 and 1996, respectively Class A stock, $.01 par value; authorized shares-- 35,000,000; 11,174,330 shares issued and outstanding 111,743 111,743 Additional paid-in capital 3,223,598 44,746,841 Accumulated deficit (2,469,285) (18,112,577) ------------------------- Total stockholders' equity 910,975 26,842,676 ------------------------- Total liabilities and stockholders' equity $ 4,197,257 $43,797,371 =========================
F-3 See accompanying notes. F-4 IDT Corporation Consolidated Statements of Operations
Year ended July 31 1994 1995 1996 -------------------------------------------- Revenues $ 3,169,013 $ 11,664,434 $ 57,693,880 Costs and expenses: Direct cost of revenues 989,886 7,543,923 36,437,583 Selling, general and administrative 2,402,556 5,991,520 35,799,158 Depreciation and amortization 105,853 303,619 1,212,235 -------------------------------------------- Total costs and expenses 3,498,295 13,839,062 73,448,976 -------------------------------------------- Loss from operations (329,282) (2,174,628) (15,755,096) Interest expense (3,167) -- (113,160) Interest income 26,376 15,129 458,464 Other 7,684 14,950 -- -------------------------------------------- Loss before income taxes and extraordinary item (298,389) (2,144,549) (15,409,792) Income taxes -- -- -- -------------------------------------------- Loss before extraordinary item (298,389) (2,144,549) (15,409,792) Extraordinary loss on retirement of debt -- -- (233,500) -------------------------------------------- Net loss $ (298,389) $ (2,144,549) $(15,643,292) ============================================ Loss per share: Loss before extraordinary item $ (0.02) $ (0.13) $ (0.85) Extraordinary loss on retirement of debt -- -- (0.01) -------------------------------------------- Net loss $ (0.02) $ (0.13) $ (0.86) ============================================ Weighted average number of shares used in calculation of loss per share 16,569,292 16,569,292 18,180,023 ============================================
See accompanying notes. F-5 IDT Corporation Consolidated Statements of Stockholders' Equity
Common Stock Class A Stock Additional Stock --------------------- --------------------- Paid-In Subscription (Accumulated Shares Amount Shares Amount Capital Receivable Deficit) ----------------------------------------------------------------------------------------- Balance at July 31, 1993 4,491,900 $ 44,919 11,174,330 $ 111,743 $ 939,938 $ (25,000) $ (26,347) Contribution and sale of common stock -- -- -- -- 1,315,000 -- -- Net loss for the year ended July 31, 1994 -- -- -- -- -- -- (298,389) ----------------------------------------------------------------------------------------- Balance at July 31, 1994 4,491,900 44,919 11,174,330 111,743 2,254,938 (25,000) (324,736) Stock options -- -- -- -- 968,660 -- -- Services rendered in exchange for subscription receivable -- -- -- -- -- 25,000 -- Net loss for the year ended July 31, 1995 -- -- -- -- -- -- (2,144,549) ----------------------------------------------------------------------------------------- Balance at July 31, 1995 4,491,900 44,919 11,174,330 111,743 3,223,598 -- (2,469,285) Stock options -- -- -- -- 70,000 -- -- Sale of common stock 4,600,000 46,000 -- -- 41,458,993 -- -- Exercise of warrants 575,000 5,750 -- -- (5,750 -- -- Net loss for the year ended July 31, 1996 -- -- -- -- -- -- (15,643,292) ----------------------------------------------------------------------------------------- Balance at July 31, 1996 9,666,900 $ 96,669 11,174,330 $ 111,743 $ 44,746,841 $ -- $(18,112,577) =========================================================================================
See accompanying notes. F-6 IDT Corporation Consolidated Statements of Cash Flows
Year ended July 31 1994 1995 1996 ----------------------------------------------------------- Operating activities Net loss $ (298,389) $ (2,144,549) $(15,643,292) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Stock option expense -- 968,660 70,000 Depreciation and amortization 105,853 303,619 1,212,235 Write-off of abandoned equipment 82,000 -- -- Services rendered in exchange for subscription receivable -- 25,000 -- Gain on sale of short-term investments (7,284) -- -- Changes in assets and liabilities: Accounts receivable (648,928) (1,104,087) (9,468,047) Due from Yovelle -- -- (1,200,000) Other current assets (9,896) (97,357) (1,844,056) Other assets (25,000) -- (492,630) Advances receivable -- -- (1,250,000) Trade accounts payable 321,873 417,662 6,980,273 Accrued expenses 260,557 1,731,696 5,741,581 Deferred revenue -- 242,921 716,912 Other current liabilities (15,488) 177,810 234,648 ----------------------------------------------------------- Net cash provided by (used in) operating activities (234,702) 521,375 (14,942,376) Investing activities Purchase of equipment (716,623) (1,325,518) (11,895,452) Purchase of short-term investments (1,490,413) -- -- Proceeds from the sale of short-term investments 1,669,355 297,974 -- ----------------------------------------------------------- Net cash used in investing activities (537,681) (1,027,544) (11,895,452) Financing activities Payments on notes due to former shareholder (13,334) (16,669) (5,001) Proceeds from notes payable from shareholders, affiliates and outside investors -- -- 4,237,000 Repayments of notes payable from shareholders, affiliates and outside investors -- -- (4,237,000) Payments of stockholder loans (77,500) -- -- Proceeds from sale of common stock 1,315,000 -- 41,504,993 ----------------------------------------------------------- Net cash provided by (used in) financing activities 1,224,166 (16,669) 41,499,992 ----------------------------------------------------------- Net increase (decrease) in cash 451,783 (522,838) 14,662,164 Cash and cash equivalents at beginning of period 302,647 754,430 231,592 ---------------------------------------------------------- Cash and cash equivalents at end of period $ 754,430 $ 231,592 $ 14,893,756 ==========================================================
See accompanying notes. F-7 IDT Corporation Notes to Consolidated Financial Statements July 31, 1996 1. Summary of Significant Accounting Policies Organization IDT Corporation (the "Company") was incorporated in Delaware in December 1995 as a wholly-owned subsidiary of International Discount Telecommunications, Corp. ("IDT New York"). IDT New York was incorporated under the laws of the state of New York in August 1990. In March 1996, in order to effect IDT New York's Reincorporation in Delaware, IDT New York was merged into the Company ("the Reincorporation"). As part of the Reincorporation, the stockholders of IDT New York exchanged their shares of common stock of IDT New York for an aggregate of 4,491,900 shares of Common Stock and 11,174,330 shares of Class A Stock of the Company. The accompanying financial statements give retroactive effect to the Reincorporation. The Company provides Internet connectivity and certain telecommunication services to subscribers in the United States and abroad. In August 1996, the Company also began providing Internet telephony services with the introduction of Net2Phone. Principles of Consolidation The accompanying consolidated financial statements include accounts of the Company and its majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results inevitably will differ from those estimates. Revenue Recognition Monthly subscription service revenue is recognized over the period services are provided. Telecommunication revenues are recognized as they are incurred. Equipment sales are recognized when installation is completed. Deferred revenue consists primarily of semi-annual and annual Internet services billed in advance. F-8 IDT Corporation Notes to Consolidated Financial Statements (continued) 1. Summary of Significant Accounting Policies (continued) Direct Cost of Revenues Direct cost of revenues consists primarily of telecommunication costs, connectivity costs, and the cost of equipment sold to customers. Property and Equipment Equipment, software, and furniture and fixtures are depreciation using the straight-line method over the estimated useful lives of the assets, which range from five to seven years. Leasehold improvements are depreciated using the straight-line method over the term of the lease or estimated useful life of the assets, whichever is shorter. Subscriber Acquisition Costs and Advertising Subscriber acquisition costs including sales commissions, license fees and production and shipment of starter packages are expensed as incurred. The Company expenses the costs of advertising as incurred. For the years ended July 31, 1994, 1995 and 1996, advertising expense totaled $10,000, $581,000 and $8,520,000, respectively. Software Development Costs Costs for the internal development of new software products and substantial enhancements to existing software products are expensed as incurred until technological feasibility has been established, at which time any additional costs would be capitalized. To date, the Company has essentially completed its software development concurrently with the establishment of technological feasibility and, accordingly, no such costs have been capitalized to date. Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents are carried at cost which approximates market value. F-9 IDT Corporation Notes to Consolidated Financial Statements (continued) 1. Summary of Significant Accounting Policies (continued) Income Taxes The Company accounts for income taxes on the liability method as required by Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities. Net Income (Loss) Per Share Except as noted below, net income (loss) per common share is computed using the weighted average number of common and Class A shares outstanding and dilutive common stock equivalent shares from stock options. Stock options and warrants are included as share equivalents using the treasury stock method. For all periods prior to the Company's initial public offering the net income (loss) per share amounts were computed in accordance with rules and practices of the Securities and Exchange Commission that require common stock, common stock options and common stock warrants issued at a price substantially below the proposed public offering price and within a twelve-month period prior to an initial public offering of common stock to be treated as common stock equivalents outstanding for all periods prior to the initial public offering. Current Vulnerability Due to Certain Concentrations The Company is dependent upon certain suppliers for the provision of telecommunication and Internet services to its customers. The Company has not experienced and does not expect any disruption of such services. Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents and trade receivables. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Company's customer base. However, international customers account for a significant amount of the Company's total revenues. Therefore, the Company is subject to risks associated with international operations, including changes in exchange rates, difficulty in accounts receivable collection and longer payment cycles. Management regularly monitors the creditworthiness of its domestic and international customers and believes that it has adequately provided for any exposure to potential credit losses. F-10 IDT Corporation Notes to Consolidated Financial Statements (continued) 1. Summary of Significant Accounting Policies (continued) Impact of Recently Issued Accounting Standards In March 1995, the Financial Accounting Standards Board ("FASB") issued Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Statement 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The Company will adopt Statement 121 in the first quarter of fiscal 1997 and, based on current circumstances, does not believe the effect of adoption will be material. Stock Based Compensation The Company grants stock options for a fixed number of shares to employees with an exercise price equal to or less than the fair value of the shares at the date of grant. In October 1995, the FASB issued of Statement No. 123, Accounting for Stock Based Compensation, which is effective for fiscal years beginning after December 15, 1995. In accordance with the provisions of Statement 123, the Company has elected to continue to account for stock option grants in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees, and, accordingly, recognizes compensation expense for stock option grants only when the exercise price is less than the fair value of the shares at the date of grant. However, Statement 123 requires additional pro forma disclosures regardless of whether a company elects to continue to apply APB 25 for its stock option grants. The Company will include such disclosures in its fiscal 1997 annual financial statements. 2. Advances Receivable Prior to July 31, 1996, the Company advanced $1,250,000 to one of its carriers. The Company also had trade receivables of approximately $1,600,000 due from the carrier at July 31, 1996. Subsequent to July 31, 1996, the Company converted the advance and trade receivables, plus accrued interest thereon, into a promissory note bearing interest at a rate of 13% per annum and payable in 12 monthly installments commencing on November 15, 1996. The promissory note is secured by the carrier's equipment. F-11 IDT Corporation Notes to Consolidated Financial Statements (continued) 3. Property and Equipment Property and equipment consists of the following:
July 31 1995 1996 ---------------------------- Equipment $ 1,906,622 $ 10,661,941 Computer software 140,319 1,971,018 Leasehold improvements 48,249 296,718 Furniture and fixtures 115,902 1,176,867 ---------------------------- 2,211,092 14,106,544 Less accumulated depreciation and amortization (440,979) (1,653,214) ============================ Net property and equipment $ 1,770,113 $ 12,453,330 ============================
4. Note Payable to Former Stockholder In May 1991, the Company repurchased 1,035,000 shares of its Common for $80,000 payable $20,000 on execution of the agreement and 36 monthly principal payments of $1,667 beginning May 1, 1992. The note bore interest at 2% above the prime rate as defined. In connection with the aforementioned stock repurchase, the former stockholder received a warrant permitting him, in the event of certain sales of the Company's Common stock, as defined, to purchase shares of the Company's stock at a discount to the sale price. On January 1, 1996, in full satisfaction of the previous agreement, the former stockholder was granted a warrant to purchase 575,000 shares of the Company's Common stock for an aggregate purchase price of $1.00. This warrant was exercised in March 1996. 5. Related Party Transactions The Company currently leases office space from a corporation which is wholly-owned by an officer stockholder. Aggregate lease payments under such lease, which expires on June 30, 1997, were $24,000 for each of the years ended July 31, 1994, 1995 and 1996. The Company provided a portion of such space to corporations owned by an officer/stockholder without compensation. The Company has been provided professional services by directors and/or relatives of officers/directors. The Company incurred approximately $9,000, $37,000 and $197,000 for such services for the years ended July 31, 1994, 1995 and 1996, respectively. F-12 IDT Corporation Notes to Consolidated Financial Statements (continued) 5. Related Party Transactions (continued) During 1996, the Company received $760,000 in non-interest bearing advances from a company which is wholly-owned by an officer/shareholder of the Company. Such advances were repaid during 1996. The Company supplied telecommunications services to its customers under an agreement wherein Lermer Overseas Telecommunications, Inc. ("Lermer") was the carrier. Simon L. Lermer, who served as a director of the Company from December 1992 to December 1995, is the sole shareholder of Lermer. Mr. Lermer and Marc Knoller, a director of the Company, are the two directors of Lermer. Under an agreement between Lermer and the Company, the Company provides Lermer with marketing, technical support, billing and collection and rate procurement services. Payments made to Lermer in Fiscal 1994 (from the inception of Lermer in April 1994 until July 31, 1994), 1995 and 1996 equal $181,160, $2,416,534 and $2,142,718, respectively. The Company's revenues for such services amounted to approximately $298,000, $6,016,000 and $13,024,259 for the years ended July 31, 1994, 1995 and 1996, respectively. During fiscal 1996, the Company obtained a license to supply telecommunications services directly to its customers and the agreement with Mr. Lermer was terminated. 6. Income Taxes Significant components of the Company's deferred tax assets and liabilities are as follows:
July 31 1995 1996 ---------------------------- Deferred tax assets: Net operating loss carryforwards $ 570,000 $ 7,257,000 Bad debt reserve -- 844,000 Employee benefits 330,000 418,000 ---------------------------- Deferred tax assets 900,000 8,519,000 Deferred tax liability - depreciation 60,000 759,000 ---------------------------- Net deferred tax assets 840,000 7,760,000 Valuation allowance (840,000) (7,760,000) ---------------------------- Total deferred tax assets $ -- $ -- ===========================
F-13 IDT Corporation Notes to Consolidated Financial Statements (continued) 6. Income Taxes (continued) The Company has provided a full valuation allowance on net deferred tax assets since realization of these benefit cannot be reasonably assured. The valuation allowance increased by $6,920,000 during 1996. At July 31, 1996, based upon tax returns filed and to be filed, the Company had net operating loss carryforwards for federal income tax purposes of approximately $18,100,000 expiring in the years 2009 through 2011. These net operating loss carryforwards may be limited in their use in the event of significant changes in the Company's ownership. In addition, their use is limited to future taxable earnings of the Company. 7. Stockholders' Equity Common Stock and Class A Stock The rights of holders of Common stock and holders of Class A stock are identical except for voting and conversion rights and restrictions on transferability. The holders of Class A stock are entitled to three votes per share and the holders of Common stock are entitled to one vote per share. Class A stock is subject to certain limitations on transferability that do not apply to the Common stock. Each share of Class A stock may be converted into one share of Common stock, at any time at the option of the holder. Stock Options In August 1994, the Company granted options to purchase 1,783,530 shares of common stock at exercise prices ranging from $0.21 to $0.83 per share. In April 1995, the Company granted options to purchase 356,840 shares of common stock at exercise prices ranging from $0.41 to $1.66 per share. In November 1995, the Company granted options to purchase 18,400 shares of common stock at exercise prices ranging from $2.54 to $10.16 per share. The options granted include various vesting provisions and expire ten years from the date of grant. In connection with the granting of these options, the Company recorded compensation expense of approximately $969,000 and $70,000 during the years ended July 31, 1995 and 1996, respectively. At July 31, 1996, options to purchase 3,503,520 shares of the Company's Common Stock were outstanding of which 2,446,512 were then exercisable. F-14 IDT Corporation Notes to Consolidated Financial Statements (continued) 7. Stockholders' Equity (continued) Initial Public Offering On March 15, 1996, the Company completed an initial public offering of 4,600,000 shares of its common stock for $10 per share. The Company realized net proceeds of approximately $41.5 million from this offering. A portion of the proceeds from this offering was used to repay $3,477,000 of short-term notes previously issued during fiscal 1996. 8. Commitments and Contingencies Legal Proceedings On August 2, 1995, in a suit entitled Fisher, Herbst & Kimble, P.C. et al v. International Discount Telecommunications Corporation, pending in the U.S. District Court of Dallas County, Texas, two plaintiffs alleged violation of the Telephone Consumer Protection Act of 1991, 47 U.S.C. (beta)227(b)(1)(C) ("TCPA). In general, the TCPA prohibits certain kinds of, but not all, unauthorized advertising by way of facsimile. The named Plaintiffs filed suit individually and as a class action certification contending that the Company transmitted advertisements proscribed by the TCPA and should be liable for damages permitted by law. The statute provides a private right of action (if otherwise permitted by the laws or rules of a court of a state) and allows recovery of up to $500 or actual damages, if greater, for each individual violation. The Company has entered into a settlement agreement with such plaintiffs which has received final court approval. In October 1995, an investigation was instituted by the Attorneys General of Iowa, New Jersey, New York, Tennessee and Texas (collectively, the "A.G.") into certain business practices of the Company as a result of complaints by residents of those states. Michigan, thereafter entered the investigation on or about September 1996. The focus of the A.G.'s investigation concerns advertising practices that the Company voluntarily terminated prior to the notice of investigation from the A.G. The majority of the advertising in question concerns the sale of a product that the Company now sells only in limited circumstances. The A.G. has indicated its desire to settle the matter with a consent order, the content of which is being presently negotiated with the Company. The Company believes that the outcome will not have a material effect on the Company's results of operations or financial condition. F-15 IDT Corporation Notes to Consolidated Financial Statements (continued) 8. Commitments and Contingencies (continued) On December 29, 1995, DRTV, Inc. a/k/a Surfers ("Surfers") filed a breach of contract action in court. The suit names the Company as defendant and seeks damages for licensing the sale of a product in the retail market to a third party allegedly in violation of the agreement between the Company and Surfers. The Company has filed a counterclaim. The Company and Surfers have reached a settlement agreement and are in the process of finalizing it. The Company is subject to other legal proceedings and claims which have arisen in the ordinary course of its business and have not been finally adjudicated. In the opinion of management, settlement of these and the aforementioned actions when ultimately concluded will not have a material adverse effect on results of operations, cash flows or the financial condition of the Company. Employment Agreements The Company has entered into employment agreements with four senior executives and two other employees of the Company which extend through December 1999. The employment agreements provide, among other things, minimum annual compensation aggregating $835,000 and for the issuance of stock options and common stock. Operating Leases The Company has operating leases for its premises and certain equipment. Rental expense under such leases was approximately $25,000, $30,000 and $178,000 for the years ended July 31, 1994, 1995 and 1996, respectively. Future minimum lease payments under such leases for the years ending July 31 are as follows:
1997 $ 392,000 1998 351,000 1999 203,000 2000 4,000 ============ Total minimum lease payments $ 950,000 ============
F-16 IDT Corporation Notes to Consolidated Financial Statements (continued) 8. Commitments and Contingencies (continued) License Fees In connection with the provision of Internet access, the Company provides certain customers with Internet software licensed from a third party. In the prior year, the Company agreed to pay royalties based upon end users. In May 1996, such agreement was amended, except for monies due under the original agreement. Under the terms of the amended agreement, which expires in May 1998, the Company has agreed to pay minimum royalties based upon end users and annual service fees of approximately $1,850,000 and $300,000, respectively. For the years ended July 31, 1994, 1995 and 1996, total licensing fees amounted to $0, $30,000 and $1,098,000, respectively. Communications Services The Company has an agreement with a supplier of telecommunications services ("Vendor") which began in August 1994 and continues monthly unless terminated by one of the parties. Under such agreement, the Vendor bills and collects, on behalf of the Company, for long distance telephone services provided to the Company's customers. The Company is responsible for all uncollected receivables. For the year ended July 31, 1995 and 1996, the Company purchased approximately $1,723,000 and $3,900,000 respectively, of services from the Vendor. The Company has entered into agreements with certain carriers to buy and sell communications services. As of July 31, 1996, the Company has approximately $1,475,000 in minimum purchase commitments related to such agreements. Distribution Agreements The Company has entered into distribution agreements under which it has agreed to pay its agents commissions for obtaining new Internet and discount telecommunications customers. The agreements require commissions upon activation of the customers. 9. Customer, Geographical Area and Segment Information During the year ended July 31, 1996, one customer accounted for approximately 19% of revenues. No customer accounted for more than 10% of revenues during the years ended July 31, 1994 and 1995. F-17 IDT Corporation Notes to Consolidated Financial Statements (continued) 9. Customer, Geographical Area and Segment Information (continued) Revenues from customers outside the United States represented approximately 59%, 56% and 23% of total revenues during the years ended July 31, 1994, 1995 and 1996, respectively. No single geographic area accounted for more than 10% of total revenues. Operating results and other financial data are presented for the principal business segments of the Company for the years ended July 31, 1995 and 1996. Prior to August 1, 1994, the Company operated principally in one segment telecommunications.
Internet Tele- Access communications Net2Phone Total ------------------------------------------------------- ($ in thousands) Year ended July 31, 1995 Revenues $ 875 $ 10,789 $ - $ 11,664 Income (loss) from operations (3,005) 830 - (2,175) Depreciation and amortization 187 117 - 304 Total assets 869 3,328 - 4,197 Capital expenditures 893 433 - 1,326 Year ended July 31, 1996 Revenues 21,986 35,708 - 57,694 Income (loss) from operations (17,851) 2,756 (660) (15,755) Depreciation and amortization 930 258 24 1,212 Total assets 20,570 22,907 320 43,797 Capital expenditures 10,335 1,358 202 11,895
10. Notes and Advances Payable During fiscal 1996, the Company borrowed an aggregate of $3,477,000 from shareholders, affiliates and outside investors. The notes bore interest at 12% per annum. The notes were repaid with the proceeds of the Company's initial public offering. In connection with the repayment of such notes, the Company incurred a prepayment penalty of $233,500. Such prepayment penalty has been classified as an extraordinary loss on retirement of debt in the accompanying statement of operations. F-18 IDT Corporation Notes to Consolidated Financial Statements (continued) 11. Additional Financial Information Additional financial information with respect to cash flows is as follows:
Year ended July 31, ---------------------------------- 1994 1995 1996 ---------------------------------- Cash payments made for interest $ 4,574 $ - $ 113,000 Cash payments made for income taxes -- 56,000 --
Other current assets include advances from carriers of $1,498,502 at July 31, 1996. Accrued expenses includes $1,791,587 and $5,839,706 due to telecommunication carriers at July 31, 1995 and 1996, respectively. 12. Consulting and Licensing Agreement The Company possesses the exclusive right to make the services of Genie, including its multi-player games and information services, accessible over the Internet and the World Wide Web, pursuant to its agreement with Yovelle Renaissance Corporation ("Yovelle," and such agreement, the "Yovelle Agreement"). Yovelle, a recently formed entity, purchased the Genie service from GE Information Services, Inc. in January 1996. Pursuant to the Yovelle Agreement, the Company provided certain management consulting and other services to Yovelle and paid Yovelle certain online content product costs and licensing fees, in exchange for the right to make Genie's online offerings available over the Internet (including the World Wide Web) exclusively through the Company. The Yovelle Agreement was to expire in February 1998, and was renewable thereafter. The Company's Chief Executive Officer and Chairman of the Board of Directors, loaned $500,000 to Yovelle and received a promissory note in consideration therefor which bore interest at a rate of 12% per annum and was due in June 1996. During the year ended July 31, 1996, revenue under the Yovelle Agreement amounted to $1,200,000. In August 1996, the Company purchased all of the issued and outstanding stock of Yovelle for $200,000. The purchase price is comprised of $100,000 in cash and a non-interest bearing promissory note for $100,000, payable on or before December 31, 1996. F-19 IDT Corporation Notes to Consolidated Financial Statements (continued) 13. Joint Venture In May 1996, the Company entered into an agreement with Internet Consulting Group Limited to make the Company's Internet services available throughout Europe by providing marketing and customer support services. Under the terms of the agreement, the Company has agreed to an initial capital investment of $1,400,000 for 70% of the shares of the new joint venture, of which the Company has invested $90,000 as of July 31, 1996. Operations of the joint venture are expected to commence in 1997. 14. Subsequent Events Acquisition of PCIX, Inc. On August 16, 1996, the Company completed the acquisition of the assets of PCIX, Inc. ("PCIX"), a former alliance partner of the Company. The acquisition price included a $690,000 promissory note, cash payments totaling $260,000, forgiveness of $162,300 owed to the Company from PCIX, and the assumption of $95,400 of other PCIX liabilities. The acquisition price is subject to adjustment based on PCIX's operating activity during the period from May 1, 1996 to August 16, 1996. The promissory note bears interest at 8.25% per annum and matures on August 16, 1998. Capital Lease In August 1996, the Company entered into a $1,000,000 capital lease arrangement to acquire computer and communications related equipment. The lease which expires in July 1999, requires monthly payments of $31,270, including interest at 8.4% and is collateralized by the equipment. Note Payable On August 8, 1996, the Company borrowed $2,500,000 from a financing company under an interest bearing note. Such note will be repaid in 34 installments of $77,330 per month commencing in October 1996 and includes a balloon payment of $312,500 in September 1999. The note is collateralized by certain equipment owned by the Company. F-20
Additions Balance at Charged to Balance Beginning Costs and at End Description of Period Expenses Deductions(1) of Period - ---------------------------------------------------------------------------------------------------- 1994: Reserves deducted from accounts receivable: Allowance for doubtful accounts $ -- $ 5,000 $ -- $ 5,000 1995: Reserves deducted from accounts receivable: Allowance for doubtful accounts 5,000 439,891 (194,891) 250,000 1996: Reserves deducted from accounts receivable: Allowance for doubtful accounts 250,000 4,042,070 (2,192,070) 2,100,000
- ---------- (1) Uncollectible accounts written off, net of recoveries. F-21 SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Amendment on Form 10/K-A to the Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized. IDT Corporation November 7, 1996 By: /s/ Howard S. Jonas - ---------------- ------------------- Date Howard S. Jonas Chairman and Chief Executive Officer EX-10.05 2 NETWORK SERVICE PROVIDER AGREEMENT Exhibit 10.05: Network Service Provider Agreement between Netscape Communications Corporation and the Registrant Pages where confidential treatment has been requested are stamped 'Confidential Treatment Requested and Redacted Material has been separately filed with the Commission,' and the appropriate section has been marked in the margin with a star(*). NETSCAPE COMMUNICATIONS CORPORATION NETWORK SERVICE PROVIDER DISTRIBUTION AGREEMENT COVER SHEET IDT Internet Services INC. Full legal name of Network Service Provider (IDT) 294 State Street Address of Principal Place of Business Hackensack NJ 07601 City State Zip Telephone 201-928-1000 Fax 201-928-1057 IDT is incorporated in the state/county of Del. If IDT is not a corporation, please specify form of organization --------------------------------- Non Disclosure Agreement Signed [X] Yes If yes, date March 9, 1995 ---------------------- Name and Description of Internet Access and/or Intranet Access service/software (IDT's Product): IDT's Internet Access Services Check Applicable: [X] Netscape Navigator LAN [X] Netscape Dial-Up Kit IMPORTANT NOTICE: THIS NETSCAPE COMMUNICATIONS CORPORATION NETWORK SERVICE PROVIDER DISTRIBUTION AGREEMENT GIVES YOU THE RIGHT TO MAKE AND DISTRIBUTE COPIES OF THE NAVIGATOR SOFTWARE CHECKED ABOVE AT THE PRICING SET FORTH IN ATTACHMENT B HERETO. THE NAVIGATOR SOFTWARE MUST BE OFFERED TO END USERS AS A PACKAGED PRODUCT WITH IDT'S PRODUCT AND MAY NOT BE OFFERED AS A STAND-ALONE PRODUCT. THE NAVIGATOR SOFTWARE IS ONLY TO BE OFFERED TO END USERS IN THE TERRITORY NOTED BELOW. YOU MUST PROVIDE QUARTERLY POINT OF SALE REPORTS TO NETSCAPE. CAREFULLY REVIEW THE REST OF THIS AGREEMENT FOR OTHER IMPORTANT TERMS. FAILURE TO COMPLY WITH THIS AGREEMENT MAY RESULT IN TERMINATION AS SET FORTH IN THIS AGREEMENT. TERRITORY Worldwide, subject to compliance with all applicable US (Country): and foreign laws. NETWORK SERVICE PROVIDER By: /s/ Howard Balter ----------------- Name: Howard Balter Title: COO Date: 5/16/96 IDT Technical Contact Primary: Eric Raab Phone: 201-928-4487 Fax: 201-928-1057 e-mail: eraab@ios.com NETSCAPE COMMUNICATIONS CORPORATION By: /s/ Conway (Todd) Rulon-Miller ----------------------------- Name: Conway (Todd) Rulon-Miller Title: VP, Sales Date of Acceptance: 5/23/96 Alternate: Howard Balter Phone: 201-928-4480 Fax: same e-mail: hbalter@mail.idt.net REVIEWED BY NETSCAPE LEGAL Initial [illigible] IDT pa-69366.2 Rev 030496 CONFIDENTIAL AMENDMENT No. ONE TO THE NETSCAPE COMMUNICATIONS CORPORATION NETWORK SERVICE PROVIDER DISTRIBUTION AGREEMENT This Amendment No. One (the "1st Amendment") is entered into, as of June 25, 1996, by and between IDT Internet Services, Inc., a Delaware corporation with principal offices at 294 State Street, Hackensack, New Jersey 07601 ("IDT") and Netscape Communications Corporation, a Delaware corporation, with principal offices at 501 E. Middlefield Road, Mountain View, California 94043 ("Netscape"). WHEREAS, the parties have entered into a Network Service Provider Distribution Agreement executed by IDT on May 16, 1996 (the "Agreement"); and WHEREAS, the parties wish to modify and supplement the provisions of such Agreement; NOW, THEREFORE, the parties, in consideration of the terms and conditions herein, agree as follows: 1. 2. Attachments A and B are replaced with Attachments A and B to this 1st Amendment. 3. Capitalized terms defined in the Agreement shall have the same meaning in this 1st Amendment as in the Agreement. 4. Except as expicitly modified, all terms, conditions and provisions of the Agreement shall continue in full force and effect. 5. In the event of any inconsistency or conflict between the Agreement and this 1st Amendment, the terms, conditions, and provisions of this Amendment shall govern and control. 6. This 1st Amendment and the Agreement constitute the entire and exclusive agreement between the parties with respect to this subject matter. All previous discussions and agreements with respect to this subject matter are superseded by the Agreement and this 1st Amendment. IN WITNESS WHEREOF, the parties hereto have caused this 1st Amendment to be executed by their duly authorized representatives, effective as of the date of signature by Netscape ("Effective Date"). IDT INTERNET SERVICES INC. NETSCAPE COMMUNICATIONS CORPORATION By: /s/ Howard Balter By: /s/ Conway (Todd) Rulon-Miller - ----------------------------- ----------------------------------- Name: Howard Balter Name: Conway (Todd) Rulon-Miller - ----------------------------- ----------------------------------- Title: C.O.O. Title: V.P. Sales - ----------------------------- ----------------------------------- Date: 6/20/96 Date: 6/25/96 - ----------------------------- ----------------------------------- 6/20/95 FRT CONFIDENTIAL IDT NSP Amdmt 106-25-96 A11:06 OUT 06-25-96 A10:05 RCVD REVIEWED BY NETSCAPE LEGAL Initial: [ILLEGIBLE TEXT] ---------------- AMENDMENT No. TWO TO THE NETSCAPE COMMUNICATIONS CORPORATION NETWORK SERVICE PROVIDER DISTRIBUTION AGREEMENT This Amendment No. Two (the "2nd Amendment") is entered into, as of August 28, 1996, by and between IDT Internet Services, Inc., a Delaware corporation with principal offices at 294 State Street, Hackensack, New Jersey 07601 ("IDT") and Netscape Communications Corporation, a Delaware corporation, with principal offices at 501 E. Middlefield Road, Mountain View, California 94043 ("Netscape"). WHEREAS, the parties have entered into a Network Service Provider Distribution Agreement executed by IDT on May 16, 1996 (the "Agreement"); and WHEREAS, the parties wish to modify and supplement the provisions of such Agreement; NOW, THEREFORE, the parties, in consideration of the terms and conditions herein, agree as follows: 1. Added as a new language to the end of Section 2.1.1 is: "IDT may also distribute in the Territory by sublicense the initial copy of the Navigator to End Users, electronically, by on-line distribution from IDT's FTP site provided, however, that such electronic distribution is only permitted if such distribution meets all of the following conditions. Electronic on-line distribution must be directly from IDT and not through Distributors, and there shall be no electronic distribution to an End User unless: (a) and until after such End User subscribes to IDT's Product; (b) addressed specifically to such End User; (c) such distribution is password protected and subject to acceptance of an electronic version of the End User License Agreement; (d) such distribution is only made after successful completion of such protection by the End User and acceptance by the End User of the End User License Agreement; and (e) such distribution is solely from IDT's FTP site. 2. Notwithstanding anything to the contrary in Section 4.1 of the Agreement, per copy license fees for each copy of the Navigator that is distributed electronically by on-line distribution shall accrue immediately upon distribution/transmission of each copy from IDT's FTP site. 3. Capitalized terms defined in the Agreement shall have the same meaning in this 1st Amendment as the Agreement. 4. Except as explicitly modified, all terms, conditions, and provisions of the Agreement shall continue in full force and effect. 5. In the event of any inconsistency or conflict between the Agreement and this 2nd Amendment, the terms, conditions and provisions of this 2nd Amendment shall govern and control. 6. This 2nd Amendment, the 1st Amendment and the Agreement constitute the entire and exclusive agreement between the parties with respect to this subject matter. All previous discussions and agreements with respect to this subject matter are superseded by the Agreement, the 1st Amendment and this 2nd Amendment. CONFIDENTIAL 8/22/96 IDT NSP Amdmt 2 IN WITNESS WHEREOF, the parties hereto have caused this 2nd Amendment to be executed by their duly authorized representatives, effective as of the date of signature by Netscape ("Effective Date"). IDT INTERNET SERVICES INC. NETSCAPE COMMUNICATIONS CORPORATION By: /s/ Howard Balter By: /s/ Noreen G. Bergin -------------------------- ------------------------------ Name: HOWARD BALTER Name: Noreen G. Bergin -------------------------- ------------------------------ Title: COO Title: VP & Corp. Controller -------------------------- ------------------------------ Date: 9/24/96 Date: 9/30/96 -------------------------- ------------------------------ REVIEWED BY NETSCAPE LEGAL Initial /s/ [Illegible] --------------- CONFIDENTIAL IDT NST Amdmt 2 8/22/96 NETSCAPE COMMUNICATIONS CORPORATION NETWORK SERVICE PROVIDER DISTRIBUTION AGREEMENT This Network Service Provider Distribution Agreement ("Agreement") is entered into by and between Netscape Communications Corporation, a Delaware corporation ("Netscape"), with principal offices at 501 East Middlefield Road, Mountain View, CA 94043, U.S.A. and the Network Service Provider listed and identified on the cover sheet to this Agreement ("Cover Sheet") as of the date of acceptance by Netscape ("Effective Date") listed on the Cover Sheet. WHEREAS, IDT markets and provides Internet Access services and/or Intranet Access services. WHEREAS, IDT desires to obtain rights to use and distribute Netscape's Navigator selected on the Cover Sheet and other Netscape products in accordance with the terms and conditions of this Agreement. NOW, THEREFORE, the parties agree to the following terms and conditions: 1. DEFINITIONS For purposes of this Agreement, the following terms shall have the following meanings: 1.1 "Active User" means a Registered User for which Internet Access or Intranet Access through IDT's Product has not been terminated. 1.2 "Attachment(s) means the attachments to this Agreement which are attached hereto and incorporated herein: 1.2.1 Attachment A (Description of Netscape Products) which sets forth a description of each Netscape Product licensed hereunder. 1.2.2 Attachment B (Pricing, Payment Schedules, Deliverables and Territory) which sets forth pricing for IDT, payment schedules and specific items to be delivered to IDT. 1.2.3 Attachment C (Netscape's End User License Agreements) which sets forth Netscape's terms and conditions of licensing applicable to an end user customer. Attachment C-1 sets forth Netscape's End User License Agreement for the Navigator and Attachment C-2 set forth Netscape's End User License Agreement for the Server Products. 1.2.4 Attachment D (Quarterly Point of Sale Report) which sets forth the form and information IDT must provide to Netscape each quarter. 1.2.5 Attachment E (Maintenance and Technical Support) which sets forth Netscape's and IDT's maintenance and support obligations. 1.2.6 Attachment F (Navigator Custom Program Request Form) which sets forth the elements of the user interface of the Navigator that are available to be customized. 1.3 "Configuration Guide" means the configuration guide for the Netscape Dial-Up Kit to be provided by Netscape to IDT pursuant to this Agreement. 1.4 "Derivative Work(s)" means a revision, modification, translation, abridgment, condensation or expansion of the Navigator or Documentation or any form in which the Netscape Products or Documentation may be recast, transferred, or adapted, which, if prepared without the consent of Netscape, would be a copyright infringement. 1.5 "Distributor" means any third party appointed pursuant to this Agreement by IDT or any Distributor properly appointed hereunder to distribute the Netscape Products to End Users in accordance with the terms hereof. 1.6 "Documentation" means Netscape's standard user manuals, reference manuals and installation guides, or portions thereof, which are distributed as of the Effective Date generally by Netscape to its other licensees of the Navigator either in hard copy or electronic copy, as may be updated by Netscape from time to time and provided to IDT hereunder. 1.7 "End User" means any third party licensed by IDT or a Distributor pursuant to this Agreement to use, but not to further distribute, the Netscape Products except that if such third party is a corporation or other entity, then "End User" means each individual within such corporation or entity licensed by IDT or a Distributor pursuant to this Agreement to use, but not to further distribute, the Netscape Products. 1.8 "Enterprise Kit" means the executable version (but not the source code version) of Netscape's proprietary utility tool software program currently being developed by, and, when released by Netscape, The Enterprise Kit is intended to include functionality that would permit licensees thereof to customize the elements of the user interface of the Netscape Navigator LAN as set forth in Attachment F. 1.9 "Internet Access" means connecting, through any medium now known or hereafter developed or discovered, to the Internet in order to permit data flow between the Internet and the connected End User. 1.10 "Intranet Access" means connecting, through any medium now known or hereafter developed or discovered, to a private network operated by IDT in order to permit data flow between such network and the connected End User. 1.11 "Navigator" means the Netscape Dial-Up Kit and/or Netscape Navigator LAN as selected on the Cover Sheet. 1.12 "Netscape Dial-Up Kit" means, to the extent selected on the Cover Sheet, the executable version (but not the source code version) of the web client software Netscape markets under the name "Netscape Dial-Up Kit", and any Updates that Netscape may provide to IDT hereunder from time to time. 1.13 "Netscape Navigator LAN" means, to the extent selected on the Cover Sheet, the executable version (but not the source code version) of the web client software Netscape markets under the name "Netscape Dial-Up Kit", and any Update that Newscape may provide to IDT hereunder from time to time. 1.14 "Navigator Gold" means the executable version (but not the source code version) of the web client software Netscape markets under the name "Netscape Navigator Gold", and any Updates that Netscape may provide to IDT hereunder from time to time. 1.15 "Server Products" means the executable version (but not the source code version) of the products listed in Section 3 of Attachment A, and any Updates that Netscape may provide to IDT hereunder from time to time. 1.16 "Netscape Products" means the Navigator, Navigator Gold and Server Products. 1.17 "IDT's Product" means IDT's Internet Access and/or Intranet Access services/software, as described on the Cover Sheet, with which the Netscape Products are required to be bundled and distributed. 1.18 "Program Errors" means one or more reproducible deviations in the Netscape Products from the applicable functional specifications set forth in the Documentation. 1.19 "Registered User" means (a) an End User of the Navigator that is provided Intranet Access only or Internet Access and Intranet Access through IDT's Product as of the date such access is provided or (b) an End User of the Navigator that has been provided Internet Access and not Intranet Access through IDT's Product and who continues to use IDT's Product for Internet Access for at least thirty (30) days from the date that such End User is first provided Internet Access through IDT's Product. 1.20 "Territory" shall mean that geographic area set forth on the Cover Sheet. 1.21 "Updates" mean updates, if any, to the Netscape Products including any error correction, modification, enhancement, or improvement. Major Updates involve additions of substantial functionality while Minor Updates do not. Major Updates are designated by a change in the number to the left of the decimal point of the number appearing after the product name while Minor Updates are designated by a change in such number to the right of the decimal point. Netscape is the sole determiner of the availability and designation of an Update as a Major or Minor Update. Major Updates exclude software releases which are reasonably designated by Netscape as new products. Where used herein "Updates" shall mean Major Updates and Minor Updates. 2. GRANT OF LICENSES AND RIGHTS 2.1 Licenses 2.1.1 Navigator License. Subject to the terms and conditions of this Agreement, Netscape hereby grants to IDT and IDT hereby accepts, a nonexclusive and nontransferable right and license to (i) use in the Territory the Navigator for IDT's internal business purposes, (including, without limitation, for purposes of testing, development, establishment of accounts, provision of technical support to End Users, sales, marketing and promotional activity) (ii) reproduce, without change (except as expressly permitted or required herein), the Navigator (in executable form only) on any tangible media or as expressly permitted in this Section 2.1.1(iv), (iii) distribute in the Teritory by sublicense such Navigator copies to End Users, directly or indirectly through Distributors, solely for use in conjunction with IDT's Product and (iv) directly distribute from IDT's FTP (file transfer protocol) site to Active Users located in the Territory and Updates to the Navigator provided to IDT by Netscape pursuant to this Agreement; provided, that such FTP site shall not permit any person or entity, other than Active Users, to download or otherwise access any Update. In the event Netscape adopts a policy of making generally available to its network service providers distribution of the intial copy of the Navigator from the network service providers FTP site, then Netscape shall grant IDT such distribution rights. 2.1.2 Navigator Gold and Service Product License. Subject to the terms and conditions of this Agreement, Netscape hereby grants to IDT and IDT hereby accepts, a nonexclusive and nontransferable right and license to (i) use in the Territory the Navigator Gold and Server Products for IDT's internal business purposes, (including, without limitation, for purposes of testing, development, establishment of account, provision of technical support to End Users, sales, marketing and promotional activity) (ii) reproduce, without change (except as expressly permitted or required herein), the Navigator Gold and Server Products (in executable form only) on any tangible media, (iii) distribute in the Territory by sublicense such Navigator Gold and Server Products copies to End Users, directly or indirectly through Distributors, solely for use in conjunction with IDT's Product and (iv) distribute to End Users located in the Territory directly or indirectly through Distributors any Updates to the Navigator Gold and Server Products provided to IDT by Netscape pursuant to this Agreement. 2.1.3 Enterprise Kit License. Subject to the terms and conditions of this Agreement, Netscape hereby grants and IDT hereby accepts, a nonexclusive and nontransferable right and license to use the Enterprise Kit, when commercially released, to customize the Netscape Navigator LAN. 2.1.4 Distributors. Subject to the terms and conditions of this Agreement, IDT may (i) sublicense to Distributors and such Distributors may sublicense to other Distributors the right and IDT pa-69366.2 -5- Rev. 030496 CONFIDENTIAL license to reproduce, without change (except for changes IDT is permitted to make pursuant to this Agreement, which Distributor is allowed to reproduce), the Navigator (in executable form only) on any tangible media solely as an incorporated part of IDT's Product and to distribute in the Territory by sublicense such Navigator copies to End Users, directly or indirectly through other Distributors, solely for use in conjunction with IDT's Product; and (ii) appoint Distributors to distribute in the Territory directly to End Users the Navigator Gold and Server Products solely in conjunction with IDT's Product. IDT shall not be entitled to grant to any distributor the right to reproduce all or any portion of the Navigator Gold or Server Products or to indirectly sell, sublicense or otherwise distribute the Navigator Gold or Server Products, and no Distributor shall appoint any distributor, reseller or other third party or agent in connection therewith. 2.1.5 License Restrictions. IDT agrees not to copy (except as expressly permitted herein), modify (except as expressly permitted or required herein), translate, decompile, reverse engineer, disassemble, or otherwise determine or attempt to determine source code from the executable code of the Netscape Products or to create any Derivative Works based upon the Netscape Products or Documentation, and agrees not to permit or authorize anyone else, including, without limitation, any Distributor, to do so. IDT and each Distributor are expressly prohibited from any marketing and/or distribution of the Netscape Products (a) unless each copy of the Netscape Products is bundled with IDT's Product and (b) outside of the Territory. IDT shall not be entitled to grant to any Distributor and no Distributor shall be entitled to grant to any other Distributor the right or license to electronically distribute the Netscape Products, including, without limitation, any Update. 2.1.6 Limited Modification License. Subject to the terms and conditions of this Agreement, Netscape hereby grants and IDT hereby accepts a nonexclusive and nontransferable right and license to modify (i) the Navigator solely as necessary to bundle the Navigator with IDT's Product, and (ii) the Documentation for the Navigator, solely to reflect accurately the operation of the Navigator as combined with IDT's Product; provided, however, that all such modifications shall be subject to Netscape's reasonable approval, not to be unreasonably withheld or delayed. 2.1.7 Documentation License. Subject to the terms and conditions of this Agreement, Netscape hereby grants and IDT hereby accepts a nonexclusive and nontransferable right and license to use and reproduce, without change (except as expressly permitted or required herein), the Documentation, and to distribute in the Territory by sublicense the Documentation to End Users, directly or indirectly through Distributors, solely in conjunction with the Netscape Products. Subject to the terms and conditions contained in this Agreement, IDT may sublicense to Distributors and such Distributors may sublicense to other Distributors the right and license to use the Documentation for the Netscape Products, and reproduce, without change, the Documentation for the Navigator, and to distribute in the Territory by sublicense the Documentation to End Users, directly or indirectly through other Distributors, solely in conjunction with the Netscape Products. 2.1.8 Licenses Dependent on Bundling and Accounting. The licenses granted in this Section 2.1 are conditional upon (i) IDT bundling each copy of the Netscape Products with IDT's Product and IDT and each Distributor marketing and distributing each copy of the Netscape Products only as so bundled with IDT's Product and only in the Territory and (ii) IDT establishing and maintaining controls and procedures sufficient to timely and accurately determine the number of End Users that become Registered Users and the number of then- current Active Users. Without limiting the generality of the foregoing, IDT agrees to implement a user agent or other process that shall accurately deterime and record the version number of each Netscape Products used by an Active User such that IDT can distinguish a new Registered User from an Active User that first uses an Update. If (a) IDT fails to so bundle the Netscape Products, (b) IDT or any Distributor markets or distributes the Netscape Products without IDT's Product bundled therewith or outside of the Territory or (c) IDT fails to account for all Registered Users and all then- current Active Users in accordance with this IDT pa-69366.2 -6- Rev. 030496 CONFIDENTIAL Section 2.1.8, such default shall give rise to Netscape's right of termination pursuant to Section 14.1 hereof, provided that the period for cure shall be ten (10) working days and not sixty (60) days. 2.1.9 Configuration Guide. In the event that the Netscape Dial-Up Kit is selected on the Cover Sheet, Netscape hereby grants to IDT, and IDT hereby accepts, a nonexclusive and nontransferable right and license, in the Territory, to (a) use (with no right to sublicense) the Configuration Guide to preconfigure the dial-up parameters and Netscape preferences specified therein solely for IDT's Product and for no other network service and (b) modify the Getting Started pofrtion of the Documentation for the Netscape Dial-Up Kit solely to the extent necessary to reflect the preconfigured parameters and dial-up preferences made by IDT to the Netscape Dial-Up Kit in accordance with this Section 2.1.6. Prior to distribution of any Netscape Dial-Up Kit to a Distributor or End User, IDT shall use the Configuration Guide to preconfigure the dial-up parameters and Netscape preferences of each such Netscape Dial-Up Kit to: (i) provide Internet Access and/or Internet Access to End Users solely through IDT's Product and (ii) prevent access to any public network other than the Internet; and to any private network not operated by IDT. IDT is granted no right or license to (x) distribute or sublicense the Configuration Guide to any third party, including, without limitation, Distributors, (y) sublicense to any Distributor the right or license to modify or change all or any portion of the Navigator or Documentation, and (z) except as provided in this Section 2.1.9, modify or change all or any portion of the Navigator or Documentation. 2.1.10 Stack and Dialer. Prior to distribution of any Netscape Navigator LAN to a Distribuitor or End User, IDT shall bundle, in accordance with this Section 2.1.10, each copy of the Netscape Navigator LAN with IDT's or a third party's stack and dialer. IDT agrees to bundle each copy of the Netscape Navigator LAN with such stack and dialer so that such copy of the Netscape Navigator LAN: (i) provides Internet Access and/or Intranet Access to End Users solely through IDT's Product and (ii) prevents access to any public network, other than the Internet, and to any private network not operated by IDT. 2.1.11 IDT Program Guidelines. When if Netscape makes available the Netscape Navigator Flexible Program Outline, IDT and Netscape shall negotiate in good faith the inclusion of the provisions of such Outline into an amendment to this Agreement. 2.1.12 Promotion of Navigators. IDT agrees to treat all Navigators at least as favorably as it treats any other products distributed by IDT that are competitive with any Navigator. Specifically, IDT agrees that it will not market or promote any Navigator or any other product in a manner that states or could reasonably be interpreted to imply that the Navigator is inferior or secondary to the other product. For example, IDT will not market or promote any other product as preferred, premier, primary or the like as compared to any Navigator for the general Internet browser market. 2.2. Export. IDT shall comply fully with all then current applicable laws, rules and regulations relating to the export of technical data, including, but not limted to any regulations of the United States Office of Export Administration and other applicable governmental agencies and IDT acknowledges that by virtue to certain security technology embedded in the Netscape Products, that export of such software may not be legal. IDT shall conspicuously mark all packaging containing Netscape Products identified by Netscape in writing as not for export with a Not for Export notice. Netscape shall advise IDT of any changes to such laws, rules and regulations of which it has actual knowledge as they may apply to the Netscape Products. Netscape agrees to cooperate in providing information requested by IDT as necessary to obtain any required licenses and approvals. When distributing the Netscape Products and Documentation in countries where an enforceable copyright law covering the same does not exist, IDT shall obtain a written agreement signed by the End User prohibiting the End User from making unauthorized copies of the same. 2.3 Compliance and Laws IDT pa-69366.2 -7- Rev. 030496 CONFIDENTIAL 2.3.1 At is own expense, IDT shall make, obtain, and maintain in force at all times during the term of this Agreement, all applicable filings, registrations, reports, licenses, permits and authorizations (collectively Authorizations) in the portions of the Territory in which IDT is distributing the Netscape Products pursuant to this Agreement in order for IDT to perform its obligations under this Agreement. Netscape shall provide IDT with such assistance and cooperation as IDT may reasonably request in making or obtaining any such Authorizations, including without limitation, the execution of appropriate documents. In the event that the issuance of any Authorization is conditioned upon an amendment or modification to this Agreement which is unacceptable to Netscape, Netscape shall have the right to terminate this Agreement without liability or further obligation whatsoever to IDT with respect to the affected portion of the Territory. 2.3.2 IDT shall comply with all laws, regulations and other legal requirements that apply to this Agreement, including tax and foreign exchange legislation; advise Netscape of any legislation, rule, regulation or other law (including but not limited to any customs, tax, trade, intellectual property or tariff law) which is in effect or which may come into effect in the Territory after the Effective Date of this Agreement and which to IDT's knowledge affects the importation of the Netscape Products into, or the use and the protection of the Netscape Products and the intellectual property of rights within, the Territory, or which has a material effect on any provision of this Agreement, IDT will provide Netscape with the assurances and official documents that Netscape periodically may request to verify IDT's compliance with this subsection. 2.3.3 Neither IDT or Netscape shall, together with their respective employees and agents, in conformity with the United States Foreign Corrupt Practices Act and with Netscape's established corporate policies regarding foreign business practices which have been disclosed by Netscape to IDT in writing, directly or indirectly make and offer payment, promise to pay, or authorize payment, or offer a gift, promise to give, or authorize the giving of anything of value for the purpose of influencing an act or decision of an official of any government within the Territory or of the United States Government (including a decision not to act) or inducing such a person to use his influence to affect any such governmental act or decision in order to assist Netscape in obtaining, retaining or directing any such business. 2.4 Third Party Licenses. If all or any part of the Netscape Products delivered to IDT has been licensed to Netscape by a third party software supplier then, notwithstanding anything to the contrary contained in this Agreement, IDT is granted a sublicense to the third party softward subject to the same terms and conditions to those contained in the agreement between Netscape and such third party software supplier. In addition, Netscape reserves the right to substitute any third party software in the Netscape Products so long as the new third party software does not materially affect the functionality of the Netscape Products. If such substitution affects the operation or use of the Netscape Products in a manner: (a) that is obvious to the average End User; or (b) which Netscape knows would generally require its network service providers to make technical changes to their Internet access services to incorporate; then Netscape shall provide IDT with reasonable prior notice of such substitution. Netscape represents that current releases of the Netscape Products contain no third party software which would require IDT to agree to any terms and conditions in addtion to those set forth in this Agreement. 2.5 European Union. In the event that any provision of this Agreement prohibits any activity of Licensee or any Distributor in violation of Article 6 of the Council Directive of 14 May 1991 on the legal protection of computer programs, and implementing legislation thereunder (the Directive), then, such activity shall be permitted solely to the extent, if any, that such activity is (i) subject to the jurisdiction of a Member State of the European Union and (ii) expressly permitted by the Directive. 3. MARKETING AND DISTRIBUTION 3.1 Nonexclusivity. IDT understands that Netscape may enter into arrangements similar to this Agreement with third parties. Netscape understands that IDT may enter into arrangements for IDT pa-69366.2 -8- Rev. 030496 CONFIDENTIAL bundling and/or distribution of products similar to, or in competition with the Netscape Products, subject to the express provisions of Section 2.1.12 herein. 3.2 Terms Relating to Distribution. 3.2.1 Distribution to Government Agencies. IDT agrees to comply with all applicable laws, rules and regulations to preclude the acquistion of unlimited rights to technical data, softweare and documentation provided with the Netscape Products to a governmental agency, and ensure the inclusion of the appropriate Restricted Rights or Limited Rights notices required by the U.S. Government agencies or other applicable agencies. 3.2.2 Distributor Agreements. Prior to the distribution of any Netscape Products to a Distributor, IDT or a then-current Distributor shall enter into an enforceable written agreement with such Distributor (Distributor Agreement) that (i) is sufficient to ensure that such Distributor is required to comply with the relevant terms of this Agreement and (ii) in all Distributor Agreements entered into after the Effective Date, expressly names Netscape as an intended third party beneficiary with the right to rely on and directly enforce the terms thereof. Without limiting the generality of the foregoing, each Distributor Agreement shall include terms no less restrictive than those contained in Sections 2.1.1(iii), 2.1.5, 2.1.11, 2.2, 2.3, 3.2.1, 3.2.3, 3.3, 7, 8 and 9.1 of this Agreement. 3.2.3 End User License Agreements. Neither IDT nor any Distributor shall sublicense or otherwise distribute any copy of the Netscape Products or Documentation to End Users except pursuant to a written sublicense agreement ("End User License Agreement") that (i) contains terms and conditions not inconsistent with and no less restrictive than the terms and conditions set forth in Netscape's then-current standard end user license agreement for the Netscape Products and Documentation (with IDT or such Distributor as the Licensor thereunder) and (ii) provides, in 12 point, bold, upper-case type, at the top of each such agreement and prior to any other text (other than introductory text regarding acceptance of the agreement), a legend in substantially the following form: THE NETSCAPE PRODUCTS AND DOCUMENTATION ARE PROVIDED FOR USE ONLY (I) WITH THE INTERNET ACCESS OR INTRANET ACCESS SERVICE INITIALLY OFFERED BY [IDT/DISTRIBUTOR] IN CONJUNCTION WITH THE DISTRIBUTION OF THE NETSCAPE PRODUCTS AND DOCUMENTATION AND (II) IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT. NO RIGHT OR LICENSE IS GRANTED TO USE THE NETSCAPE PRODUCTS OR DOCUMENTATION WITH ANY OTHER INTERNET ACCESS OR INTRANET ACCESS SERVICE. Copies of Netscape's current standard end user license agreement for the Netscape Products are attached hereto as Attachment C. Upon delivery by Netscape to IDT of any revised end user license agreement, IDT and each Distributor shall, as soon as reasonably practicable, but in any event within ninety (90) days after receipt thereof from Netscape, use only such End User License Agreements that have been revised to conform to the terms of this Agreement and such revised end user license agreement provided by Netscape to IDT; provided, in the event that the revised end user license agreement is provided by Netscape to IDT is necessary to comply with or conform to a modification to or implementation of a governmental law, regulation or policy or other third party requirement, IDT and each Distributor will use only such revised End User License Agreement within thirty (30) days after receipt by IDT of Netscape's revised end user license agreement. 3.3 Enforcement of Ancillary Agreements. IDT shall use commercially reasonable efforts to enforce each Distributor Agreement and End User License Agreement and IDT shall require each Distributor to use commercially reasonable efforts to enforce each Distributor Agreement and each End User License Agreement to which such Distributor is a party, in each case, with at lease the same degree of diligence used by IDT in enforcing similar IDT pa-69366.2 -9- Rev. 030496 CONFIDENTIAL agreements governing others, which in any event shall be that sufficient to adequately enforce such agreements. IDT shall, and shall require each Distributor to, use commercially reasonable efforts to protect Netscape's copyright rights, and IDT shall notify Netscape, and shall require each Distributor to notify IDT, of any breach of a material obligation under a Distributor Agreement or an End User License Agreement affecting the Netscape Products or Documentation. In addition, IDT will cooperate, and will require each Distributor to cooperate, with any reasonable requests of Netscape in any legal action to prevent or stop unauthorized use, reporduction or distribution of the Netscape Products or Documentation. 3.4 Third Party Requirements. In the event that Netscape is required by a third party software supplier to cease and to cause its licensees to cease reproduction and distribution of a particular revision of the Netscape Products, IDT agrees to comply herewith provided Netscape provides IDT with thirty (30) days prior written notice and further provided Netscape replaces such affected Netscape Product with a functionally equivalent Netscape Product as soon as commercially practicable. If Netscape is unable to provide a functionally equivalent Netscape Product within thirty (30) days, IDT may continue to distribute the affected Netscape Product without the code from the third party supplier that required Netscape to cease reproduction and distribution of such code. 4. FEES AND PAYMENT 4.1 License, Subscription and Major Update Fees. IDT shall pay to Netscape within thirty (30) days of the Effective Date, the non-refundable prepaid license and subscription fee for the Navigator shown on Attachment B (Prepaid Navigator License and Subscription Fee). The Prepaid Navigator License and Subscription Fee shall be credited against the applicable per copy license and subscription fees for the Navigator accruing under this Agreement. Upon exhaustion of the Prepaid Navigator License and Subscription Fee, IDT shall pay to Netscape, within thirty (30) days of the date of Netscape's invoice, the applicable per copy license fee, subscription fee and Major Update fee for the Navigator set forth in Attachment B for each license granted by IDT to End Users in connection with the distribution of all or any portion of the Navigator and Major Updates thereto. IDT shall pay to Netscape, within thirty (30) days of the date of Netscape's invoice, the applicable per copy license fee, subscription fee and Major Update fee for the Navigator Gold and Server Products set forth in Attachment B for each license granted by IDT to End Users in connection with the distribution of all or any portion of the Navigator Gold and Server Products, and Major Updates therto. Netscape will invoice IDT on a quarterly basis (based upon IDT's fiscal quarters) for accrued but unpaid fees based on IDT's Quarterly Point of Sales Reports submitted in accordance with Section 4.5 below. Per copy license fees will accrue in the applicable corresponding quantity upon: (a) the initial date of IDT's internal use of a Netscape Products; (b) distribution of Navigator Gold or Server Product to a Distributor or End User; or (c) the date that an End User of the Navigator first becomes a Registered User, provided that such Registered User is an Active User on such date. Per copy subscription fees will accrue in the applicable corresponding quantity upon: (d) the initial date of IDT's internal use of a Netscape Product if IDT will provide subscription services for such Netscape Product; (e) distribution of a Navigator Gold or Server Product to a Distributor or End User if IDT will provide subscription services for such Navigator Gold or Server Product; and (f) the date that an End User of the Navigator first becomes a Registered User, provided that such Registered User is an Active User on such date if IDT will provide subscription services for such Navigator product. Per copy Major Update fees will accrue in the applicable corresponding quantity upon: (g) the initial date of IDT's internal use of a Major Update of a Netscape Product if IDT has not paid Netscape the subscription fee for such Netscape Product; (h) the initial date of IDT's use of a Major Update of a Netscape Product if more than twelve (12) months have elapsed since the subscription fee for such Netscape Product accrued hereunder; (i) distribution of a Major Update to a Distributor or End User if IDT has not paid Netscape the subscription fee for such Netscape Product; and (i) distribution of a Major Update to a Distributor or End User if more than twelve (12) months have elapsed since the subscription fee for such Netscape Product accrued hereunder. IDT pa-69366.2 -10- Rev. 030496 CONFIDENTIAL 4.2 Support Fees. IDT shall pay to Netscape the support fees set forth in Attachment B for the technical support described in Attachment E. 4.3 Enterprise Kit License or Customization Fee. IDT shall pay to Netscape the amount set forth in Attachment B for either a license to use the Enterprise Kit, or for Netscape to customize one (1) version of the Navigator LAN. 4.4 Payment and Taxes. All payments shall be made in United States dollars at Netscape's address as indicated in this Agreement or at such other address as Netscape may from time to time indicate by proper notice hereunder or by wire transfer to a bank and account number designated by Netscape. All fees are exclusive of all taxes, duties or levies, however designated or computed. IDT shall be responsible for and pay all taxes based upon the transfer, use or distribution of the Netscape Products, or the program storage media, or upon payments due under this Agreement including, but not limited to sales, use, or value-added taxes, duties, withholding taxes and other assessments now or hereafter imposed on or in connection with this Agreement or with any sublicense granted hereunder, exclusive of taxes based upon Netscape's net income. In lieu thereof, IDT shall provide to Netscape a tax or other levy exemption certificate acceptable to the taxing or other levying authority. If IDT is required by law to make any deduction or to withhold from any sum payable to Netscape by IDT hereunder, (i) IDT shall effect such deduction, or withholding, remit such amounts to the appropriate taxing authorities and promptly furnish Netscape with tax receipts evidencing the payments of such amounts, and (ii) the sum payable by IDT upon which the deduction or withholding is based shall be increased to the extent necessary to ensure that, after such deduction or withholding, Netscape receives and retains, free from liability for such deduction or withholding, a net amount equal to the amount Netscape would have received and retained in the absence of such required deduction or withholding. Any past due amount shall bear interest at the rate of one percent (1%) per month or the maximum rate allowed by applicable law, whichever is less, until paid in full. 4.5 Quarterly Point of Sale Reports. IDT shall maintain accurate records of End Users, Registered Users and Active Users, including the information (broken down by month, Netscape Products type, whether subscription services will be provided for such Netscape Product and Major Update distributed) required in the Quarterly Point of Sale Report attached hereto as Attachment B, and any further relevant information as Netscape may from time to time reasonably request. Irrespective of the Effective Date, IDT shall submit Quarterly Point of Sale Reports electronically in ASCII tab or comma delimited fields format to Netscape on February 10, May 10, August 10, and November 10 of each year for the quarters November through January, February through April, May through July, and August through October, respectively. 4.6 Audit of Records. IDT shall maintain, and shall require its Distributors to maintain, accurate records containing the information (broken down by month, Netscape Products type, whether subscription services will be provided for such Netscape Product and Major Updates distributed) required in the Quarterly Point of Sale Report attached hereto as Attachment B, all data reasonably required for verification of IDT's and each Distributor's compliance with the terms of this Agreement, amounts to be paid, the quantity of Netscape Products and Major Updates distributed by IDT and each Distributor and the number of End Users, Registered Users and Active Users, including, without limitation, the version number of each Netscape Product and Major Update being used by each Registered User and Active User as determined in accordance with Section 2.1.8, and any further information as Netscape may from time to time reasonably request. Netscape shall have the right, during normal business hours, at the location where IDT normally maintains such records, upon at least five (5) business days prior notice, to direct its independent auditors, who shall execute an appropriate nondisclosure agreement mutually acceptable to the parties, to audit and analyze the relevant records of IDT and its Distributors to verify compliance with the provisions of this Agreement, but such audit shall occur no more than twice in any IDT fiscal year. The audit shall be conducted at Netscape's expense unless there is inadequate record keeping or the results of such audit establish that inaccuracies in the Quarterly Point of Sale Reports have resulted in underpayment to Netscape of more than seven percent (7%) of the amount actually due in any quarter, in which case IDT shall pay any additional license fees resulting from the audit and bear the expenses of the audit. IDT pa-693662 -11- Rev. 030496 CONFIDENTIAL 5. DELIVERABLES 5.1 Navigator Deliverables. Upon receipt by Netscape of the Prepaid License and Subscription Fee, Netscape shall provide IDT with one (1) gold master of the release of the Navigator as of the Effective Date (as selected on the Cover Sheet) and the applicable Documentation as of the Effective Date. If IDT has selected the Netscape Dial-Up Kit on the Cover Sheet, IDT will also receive the Configuration Guide. All deliveries under this Agreement shall be F.C.A. Netscape, California, U.S.A. F.C.A. means Free Carrier Alongside and shall have the definition set forth in INCOTERMS 1990. 5.2 Navigator Gold, Server Product and Update Deliverables. Netscape shall provide one (1) gold master and applicable Documentation of the release of the Navigator Gold and/or Server Product(s) upon receipt of a purchase order from IDT for same. Netscape shall provide one (1) gold master of each Update and applicable Documentation to IDT no later than the earliest date such Update made generally available to other network service providers. 6. SUPPORT See Attachment D. 7. TRADEMARKS AND TRADE NAMES IDT shall use, and is hereby granted a non-transferable, non-exclusive and restricted license, during the term of this Agreement, to use in the Territory the trademark "Netscape Navigator Included" and those Netscape trademarks and tradenames relating to the Navigator, Navigator Gold and Server Products in any advertising, marketing, technical, packaging or other materials related to the Navigator, Navigator Gold and Server Products which are distributed by IDT in connection with this Agreement in accordance with Netscape's then current trademark usage guidelines to be provided and updated by Netscape from time to time (the "Guidelines"). IDT shall be entitled to sublicense to Distributors the right to use in the Territory, and shall require each Distributor to use in the Territory, "Netscape Navigator Included" and those Netscape trademarks and tradenames relating to the Navigator Gold and Server Products in any advertising, marketing, technical, packaging or other materials related to the Navigator, Navigator Gold and Server Products, respectively, which are distributed by such Distributor hereunder in accordance with the Guidelines. Other than the use of "Netscape Navigator Included," and those Netscape trademarks and tradenames relating to the Navigator Gold and Server Products neither IDT nor any Distributor shall use "Netscape or "Netscape Navigator" or "Personal Edition" and those Netscape trademarks and tradenames relating to the Navigator Gold and Server Products in any advertising, marketing collateral and/or packaging relating to IDT's Product. Neither IDT nor any Distributor shall use Netscape's trademarks and trade names in any context in which their connotation is offensive, indecent or inappropriate. IDT will consult with Netscape as to the placement, context and use of Netscape trademarks and trade names so that Netscape can help ensure uniformity with their use by Netscape or third parties. IDT and each Distributor shall clearly indicate Netscape's ownership of such trademarks or trade names. All such usage shall inure to Netscape's benefit. IDT agrees not to register and agrees not to permit any Distributor to register any Netscape trademarks or trade names without Netscape's express prior written consent. Upon Netscape's request from time to time IDT agrees to provide Netscape with copies of goods bearing Netscape's trademarks and trade names so that Netscape can verify that the use and quality of IDT's and each Distributor's use and quality of such trademarks are comparable to that of Netscape's use and quality thereof. IDT shall suspend and shall require each Distributor to suspend use of Netscape trademarks and trade names if such use or quality is reasonably deemed offensive, indecent, inappropriate of inferior by Netscape until IDT and any such Distributor has taken such steps as Netscape may reasonably require to solve to quality deficiencies. 8. PROPRIETARY RIGHTS IDT pa-693662 -12- Rev. 030496 CONFIDENTIAL 8.1 Proprietary Rights. Title to and ownership of all copies of the Netscape Products and Documentation whether in machine-readable or printed form, and including, without limitation, Derivative Works, compilations, or collective works thereof and all related technical know-how and all rights therein (including without limitation rights in patents, copyrights, and trade secrets applicable thereto), are and shall remain the exclusive property of Netscape and/or its suppliers. IDT shall not take any action to jeopardize, limit or interfere in any manner with Netscape's ownership of and rights with respect to the Netscape Products and Documentation. IDT shall have only those rights in or to the Netscape Products and Documentation granted to it pursuant to this Agreement. 8.2 Proprietary Notices 8.2.1 No Alteration of Notices. IDT and its employees and agents shall not, and IDT shall not allow any Distributor to, remove or alter any trademark, trade name, copyright, or other proprietary notices, legends, symbols, or labels appearing on or in copies of the Netscape Products and Documentation delivered to IDT by Netscape and IDT shall use and shall require each Distributor to use the same notices, legends, symbols, or labels, in and on copies of the Netscape Products and Documentation made pursuant to this Agreement as are contained in and on the master copy. Notwithstanding the inclusion of Netscape and its suppliers' trademarks, trade names, copyright or other proprietary rights notices, legends, symbols or labels appearing on or in the Netscape Products and/or Documentation, IDT and its Distributors shall have the right to have their notices, legends, symbols or logos appear in conjunction with Netscape's notices, legends, symbols or logos (provided the use and placement of same are not in conflict with Netscape's logo and trademark guidelines) when IDT and its distributors distribute the Netscape Products with IDT Products. 8.2.2 Notice. Each portion of the Netscape Products and Documentation reproduced by IDT or any Distributor shall include the intellectual property notice or notices appearing in or on the corresponding portion of such materials as delivered by Netscape hereunder. IDT shall ensure that all copies of the Netscape Products made by IDT or any Distributor pursuant to this Agreement conspicuously display a notice substantially in the following form: Copyright (c) 1994 (or other appropriate year) Netscape Communications Corporation. All Rights Reserved. If IDT is unsure of the appropriate year(s), it shall consult Netscape to obtain the correct designation. Such notice shall be on labels on all media containing the Netscape Products. If the copyright symbol "(c)" cannot technically be reproduced, IDT or any Distributor shall use the work "Copyright" followed by the notation "(c)" in its place. 9. CONFIDENTIAL INFORMATION AND DISCLOSURE 9.1 Confidential Information. The parties agree that all disclosure of confidential and/or proprietary information relating to this Agreement shall be governed by the Nondisclosure Agreement identified on the Cover Sheet. 9.2 Confidentiality of Agreement. Unless required by law, and except to assert its rights hereunder or for disclosure to its own employees and Distributors on a need to know basis, IDT agrees not to disclose the terms of this Agreement or matters relating hereto without the prior written consent of Netscape, which consent shall not be unreasonably withheld. 10. WARRANTIES 10.1 Limited Warranty. Subject to the limitations set forth in this Agreement, Netscape warrants only IDT that the Netscape Products when properly adapted, installed, and used will substantially IDT pa-693662 -13- Rev. 030496 CONFIDENTIAL conform to the functional specifications set forth in the Documentation in effect when the Netscape Products are shipped to IDT. Netscape's warranty and obligation shall extend for a period of ninety (90) days ("Warranty Period") from the date that Netscape first delivers the Netscape Products to IDT. All warranty claims not made in writing or not received by Netscape within the Warranty Period shall be deemed waived. Netscape's warranty and obligation is solely for the benefit of IDT, who has no authority to extend this warranty to any other person or entity. NETSCAPE MAKES NO WARRANTY THAT ALL ERRORS OR FAILURES WILL BE CORRECTED. 10.2 EXCLUSIVE WARRANTY. THE EXPRESS WARRANTY SET FORTH IN SECTION 10.1 CONSTITUTES THE ONLY WARRANTY MADE BY NETSCAPE. NETSCAPE MAKES NO OTHER REPRESENTATION OR WARRANTY, OF ANY KIND WHETHER EXPRESS OR IMPLIED (EITHER IN FACT OR BY OPERATION OF LAW) WITH RESPECT TO THE NETSCAPE PRODUCTS OR DOCUMENTATION. NETSCAPE EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY, NONINFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE. NETSCAPE DOES NOT WARRANT THAT THE NETSCAPE PRODUCTS OR DOCUMENTATION ARE ERROR-FREE OR THAT OPERATION OF THE NETSCAPE PRODUCTS WILL BE SECURE OR UNINTERRUPTED AND HEREBY DISCLAIMS ANY AND ALL LIABILITY ON ACCOUNT THEREOF. THE ABOVE LIMITATION SHALL APPLY TO THE EXTENT ALLOWED BY APPLICABLE LAW. 10.3 Defects Not Covered by Warranties. Netscape shall have no obligations under the warranty provisions set forth in Section 10.1 if any nonconformance is caused by: (a) the incorporation, attachment or otherwise engagement of any attachment, feature, program, or device, other than by Netscape, to the Netscape Products, or any part thereof; or (b) accident; transportation; neglect or misuse; alteration, modification, or enhancement of the Netscape Products other than by, or at the express written direction or with the prior written consent of, Netscape; failure to provide a suitable installation environment; use of supplies or materials not meeting specifications; use of the Netscape Products for other than the specific purpose for which the Netscape Products is designed; use of the Netscape Products on any systems other than the specified hardware platform for such Netscape Products; or IDT's use of defective media or defective duplication of the Netscape Products; or IDT's failure to incorporate any Update previously released by Netscape, and made available to IDT under the provisions of this Agreement which remedies such nonconformance. 10.4 Exclusive Remedy. If IDT finds what it believes to be errors in or a failure of the Netscape Products that prevents that Netscape Products from conforming in a material respects to the functional specifications set forth in the Documentation, and provides Netscape with a written report thereof during the Warranty Period, Netscape will use reasonable efforts to correct promptly, at no charge to IDT, any such errors or failures. This is IDT's sole and exclusive remedy, for breach of any express or implied warranties hereunder. 11. IMDEMNIFICATION 11.1 Netscape shall defend any action brought against IDT to the extent it is based on a claim that reproduction or distribution by IDT of the Netscape Products furnished hereunder within the scope of a license granted hereunder directly infringes[ ]* Netscape will pay resulting costs, damages and legal fees finally awarded against IDT in such action which are attributable to such claim provided that IDT (a) promptly (within twenty (20) days) notifies Netscape in writing of any such claim and Netscape has sole control of the defense and all related settlement negotiations, and (b) cooperates with Netscape, at Netscape's expense, in defending or settling such claim. 11.2 Should a Netscape Products become, or be likely to become in Netscape's opinion, the subject of infringement of such copyright, patent, trademark or trade secret, Netscape shall procure for IDT (i) the right to continue using the same or (ii) replace or modify it to make it non-infringing. In the event that Netscape shall determine that neither (i) nor (ii) above is commercially reasonable. IDT pa-69366.2 -14- Rev. 030496 CONFIDENTIAL Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission Netscape may terminate the licenses for the affected Netscape Product upon thirty (30) days prior written notice and credit IDT the license fees and any subscription and/or Major Update fees paid for such affected Netscape Product as depreciated on a three year straight line basis. Netscape shall have no liability for any claim based upon: (a) use of other than the then current, unaltered version of the Netscape Products, unless the infringing portion is also in the then current, unaltered release, other than alterations made at the express written direction of Netscape; (b) use, operation or combination of the Netscape Products with non-Netscape programs, data, equipment or documentation if such infringement would have been avoided but for such use, operation or combination; (c) IDT's or its agents activities after Netscape has notified IDT that Netscape believes such activities are likely to result in such infringement; (d) compliance with IDT's specific designs, specifications or instructions, if the Netscape Products without such designs, specifications or instructions would be noninfringing; (e) any modifications or marking of the Netscape Products not specifically authorized in writing by Netscape; (f) IDT's use of any trademarks other than the Netscape trademarks pursuant to Section 7; or (g) third party software. The foregoing states the entire liability of Netscape and the exclusive remedy of IDT with respect to infringement of any intellectual property rights whether under theory of warranty, indemnity or otherwise. 11.3 General Indemnification by IDT. IDT agrees to indemnify and hold harmless Netscape and its suppliers from and against any and all claims, damages, and costs relating to defective reproduction of or the use of defective media in the reproduction of Netscape Products. 12. LIMITATION OF LIABILITY 12.1 EXCEPT AS PROVIDED IN SECTION 11, OR FOR A BREACH OF SECTION 2.1.5 OR 8.1, IN NO EVENT SHALL IDT BE LIABLE FOR ANY LOSS OF PROFITS, LOSS OF BUSINESS, LOSS OF USE OR DATA, INTERRUPTION OF BUSINESS, OR FOR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, EVEN IF NETSCAPE HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. 12.2 EXCEPT AS PROVIDED IN SECTION 11, IN NO EVENT SHALL NETSCAPE OR ITS SUPPLIERS BE LIABLE FOR ANY LOSS OF PROFITS, LOSS OF BUSINESS, LOSS OF USE OR DATA, INTERRUPTION OF BUSINESS, OR FOR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, EVEN IF NETSCAPE HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. NEITHER NETSCAPE NOT ITS SUPPLIERS SHALL BE LIABLE FOR ANY CLAIM AGAINST IDT BY ANY END USER OR THIRD PARTY. IN NO EVENT WILL NETSCAPE OR ITS SUPPLIER BE LIABLE FOR (a) ANY REPRESENTATION OR WARRANTY MADE TO ANY END USER OR OTHER THIRD PARTY BY IDT, ANY DISTRIBUTOR OR ANY OF THEIR RESPECTIVE AGENTS; (b) FAILURE OF THE NETSCAPE PRODUCTS TO PERFORM EXCEPT AS, AND TO THE EXTENT, OTHERWISE EXPRESSLY PROVIDED HEREIN; (c) FAILURE OF THE NETSCAPE PRODUCTS TO PROVIDE SECURITY; (d) ANY USE OF THE NETSCAPE PRODUCTS OR THE DOCUMENTATION; OR (e) THE RESULTS OR INFORMATION OBTAINED OR DECISIONS MADE BY END USERS OF THE NETSCAPE PRODUCTS OR THE DOCUMENTATION. THE REMEDIES PROVIDED IN THIS AGREEMENT ARE IDT'S SOLE AND EXCLUSIVE REMEDIES. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY; NETSCAPE'S ENTIRE LIABILITY TO IDT FOR DAMAGES CONCERNING PERFORMANCE OR NONPERFORMANCE BY NETSCAPE OR IN ANY WAY RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT, AND REGARDLESS OF WHETHER THE CLAIM FOR SUCH DAMAGES IS BASED IN CONTRACT OR IN TORT, SHALL NOT EXCEED THE AMOUNT RECEIVED BY NETSCAPE FROM IDT DURING THE TWELVE (12) MONTHS PRIOR TO SUCH CLAIM. SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION OR LIMITATION OF INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THE ABOVE LIMITATION OR EXCLUSION MAY NOT APPLY TO IDT. IDT pa-69366.2 -15- Rev. 030496 CONFIDENTIAL 13. TERM OF AGREEMENT Unless sooner terminated under the provisions of Section 14, or otherwise rightfully terminated this Agreement shall remain in effect for a period of two (2) years from the Effective Date. 14. DEFAULT AND TERMINATION 14.1 Termination for Default. If either party defaults in any of its obligations under this Agreement, the non-defaulting party, at its option shall have the right to terminate this Agreement by written notice unless, within sixty (60) calendar days after written notice of such default, the defaulting party remedies the default, or, in the case of a default which cannot with due diligence be cured within a period of sixty (60) calendar days, the defaulting party institutes within the sixty (60) calendar days steps necessary to remedy the default and thereafter diligently prosecutes the same to completion. This Agreement may be terminated immediately by Netscape in the event of any breach of Sections 2.1.5 or 9 hereof. 14.2 Bankruptcy. Either party shall have the right to terminate this Agreement if the other party ceases to do business in the normal course, becomes or is declared insolvent or bankrupt, is the subject of any proceeding relating to its liquidation or insolvency which is not dismissed within ninety (90) calendar days, or makes an assignment for the benefit of its creditors. 14.3 Effect on Rights 14.3.1 Termination of this Agreement by either party shall not act as a waiver of any breach of this Agreement and shall not act as a release of either party from any liability for breach of such party's obligations under this Agreement. 14.3.2 Except as specified in Sections 14.4. and 14.5 below, upon termination or expiration of this Agreement, all licenses for the Netscape Products and Documentation granted under this Agreement shall terminate. 14.3.3 Except where otherwise specified, the rights and remedies granted to a party under this Agreement are cumulative and in addition to, and not in lieu of, any other rights or remedies which the party may possess at law or in equity, including without limitation rights or remedies under applicable patent, copyright, trade secrets, or proprietary rights laws, rules, or regulations. 14.4 Return or Destruction of Netscape Products. Within thirty (30) calendar days after termination of this Agreement, IDT shall either deliver to Netscape or destroy all copies of the Netscape Products and Documentation (except as provided in Section 14.5) and any other materials provided by Netscape to IDT hereunder in its possession or under its control, and shall furnish to Netscape an affidavit signed by an officer of IDT certifying that to the best of its knowledge, such delivery or destruction has been fully effected. For purposes of this Section 14.4, copies of the Netscape Productions, Documentation and other materials in the possession or under the control of a Distributor shall be deemed to be under the control of IDT. Notwithstanding the foregoing, in the event that this Agreement is terminated for any reason other than by Netscape pursuant to Section 14.1 and provided IDT fulfills its obligations specified in this Agreement with respect to such items, IDT may continue to use and retain copies of the Netscape Products and Documentation to the extent, but only to the extent, necessary to support Netscape Products rightfully distributed to End Users by IDT, directly or indirectly through Distributors, prior to termination of this Agreement. 14.5 Continuing Obligations 14.5.1 Payment of Accrued Fees. Within thirty (30) calendar days of termination of this Agreement, IDT shall pay to Netscape all sums then due and owing. Any other such sums shall subsequently be promptly paid as they become due and owing. -16- 14.5.2 Continuance of Sublicenses. Notwithstanding the termination of this Agreement, all End User sublicenses which have been properly granted by IDT or any Distributor pursuant to this Agreement prior to its termination shall survive. 14.5.3 Other Continuing Obligations. Any termination of this Agreement will be without prejudice to any other rights or remedies of the parties under this Agreement or at law or in equity and will not affect any accrued rights or liabilities of either party at the date of termination, and the following sections of this Agreement shall survive any expiration or termination of this Agreement: Sections 2.1.5, 3.3, 4, 8, 9, 10.2, 10.4, 11, 12, 14, and 15. 15. NOVATION 15.1 Prior Agreement. Netscape and IDT, as successor in interest to International Discount Telecommunications Corporation, a New York Corporation, are parties to that certain OEM Reseller Agreement dated as of March 30, 1995 (the "Prior Agreement"), pursuant to which IDT has distributed certain versions of the Navigator to end user customers. 15.2 Novation. Netscape and IDT each desires to be released and discharged from the obligations contained in the Prior Agreement, and each has agreed to release and discharge the other therefrom (except for monies due) on the condition that each promise the other that it will undertake to perform and be bound by the terms of this Agreement if the other agrees to release and discharge such party from the obligations (except for monies due) contained in the Prior Agreement. At the time of payment of the first invoice based on IDT's Quarterly Point of Sale Report submitted in accordance with Section 4.5, IDT covenants that it will have paid a license fee for each End User under the Prior Agreement. 15.3 End Users and Distributors. All validly licensed End Users and Distributors under the Prior Agreement shall be deemed End Users and Distributors under this Agreement, such that there is no interruption in the rights validly sublicensed by IDT pursuant to the Prior Agreement. Netscape hereby agrees not to make any claim against any such End User of Distributor resulting solely from this novation. 15.4 In the first Quarterly Point of Sale Report to be delivered by IDT pursuant to Section 4.5 hereof, IDT shall include all Registered Users not previously included in a quarterly royalty report under the Prior Agreement. 16. GENERAL PROVISIONS 16.1 Notices. Any notice, request, demand, or other communication required or permitted hereunder shall be in writing and shall be deemed to be properly given upon the earlier of (a) actual receipt by the addressee or (b) five (5) business days after deposit in the mail, postage prepaid, when mailed by registered or certified airmail, return receipt requested, or two (2) business days after being sent via private industry courier to the respective parties at the addresses set forth in the Cover Sheet or to such other person or address as the parties may from time to time designate in a writing delivered pursuant to this Section 16.1. Notices to Netscape shall be to the attention of: Legal Department. 16.2 Waiver and Amendment. The waiver by either party of a breach of or a default under any provision of this Agreement shall not be construed as a waiver of any subsequent breach of the same or any other provision of the Agreement, nor shall any delay or omission on the part of either party to exercise or avail itself of any right or remedy that it has or may have hereunder operate as a waiver of any right or remedy. No amendment or modification of any provision of this Agreement shall be effective unless in writing and signed by a duly authorized signatory of Netscape and IDT. -17- 16.3 Assignment. This Agreement and the licenses granted hereunder are to a specific legal entity or legal person, not including corporate subsidiaries or affiliates of IDT, and are not assignable by IDT, nor are the obligations imposed on IDT delegable without the prior written consent of Netscape, which shall not be unreasonably withheld. Any attempt to sublicense (except as expressly permitted herein) assign or transfer any of the rights, duties or obligations under this Agreement in derogation hereof shall be null and void. 16.4 Governing Law. This Agreement is entered into in the State of California U.S.A., and shall be governed by and construed in accordance with the laws of the State of California, U.S.A., without reference to its conflicts of law provisions. Any dispute regarding this Agreement shall be subject to the exclusive jurisdiction of the California state courts in and for Santa Clara County, California, U.S.A. (or, if there is exclusive federal jurisdiction, the United States District Court for the Northern District of California), and the parties agree to submit to the personal and exclusive jurisdiction and venue of these courts. This Agreement will not be governed by the United Nations Convention of Contracts for the International Sale of Goods, the application of which is hereby expressly excluded. 16.5 Relationship of the Parties. No agency, partnership, joint venture, or employment is created as a result of this Agreement and neither IDT nor its agents have any authority of any kind to bind Netscape in any respect whatsoever. 16.6 Captions and Section Heading. The captions and section and paragraph headings used in this Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement. 16.7 Severability. If the application of any provision or provisions of this Agreement to any particular facts of circumstances shall be held to be invalid or unenforceable by any court of competent jurisdiction, then (a) the validity and enforceability of such provision or provisions as applied to any other particular facts or circumstances and the validity of other provisions of this Agreement shall not in any way be affected or impaired thereby and (b) such provision or provisions shall be reformed without further action by the parties hereto and only to the extent necessary to make such provision or provisions valid and enforceable when applied to such particular facts and circumstances. 16.8 Force Majeure. Either party shall be excused from any delay or failure in performance hereunder, except the payment of monies by IDT to Netscape, caused by reason of any occurrence or contingency beyond its reasonable control, including but not limited to, acts of God, earthquake, labor disputes and strikes, riots, war, novelty of product manufacture or other unanticipated product development problems, and governmental requirements. The obligations and rights of the party so excused shall be extended on a day-to-day basis for the period of time equal to that of the underlying cause of the delay. 16.9 Entire Agreement. This Agreement, including the Attachments hereto and any Nondisclosure Agreement referenced on the Cover Sheet, constitutes the entire agreement between the parties concerning the subject matter hereof and supersedes all proposals or prior agreements whether oral or written, and all communications between the parties relating to the subject matter of this Agreement and all past courses of dealing or industry custom. The terms and conditions of this Agreement shall prevail, notwithstanding any variance with any purchase order or other written instrument submitted by IDT, whether formally rejected by Netscape. 16.10 English. This Agreement is in the English language only, which language shall be controlling in all respects, and all versions hereof in any other language shall not be binding on the parties hereto. All communications and notices to be made or given pursuant to this Agreement shall be in the English language. Les parties aux presentes confirment leur volonte que cette convention de meme que tous les documents y compris tout avis qui siy rattache, solent rediges en langue anglaise. 16.11 France. If the Territory includes France, IDT acknowledges that under French law as of the Effective Date, the importation, distribution and/or use in France of certain Netscape products may not be permitted, and IDT is not relying upon any such importation, distribution or use in entering into this Agreement or in fulfillment of its obligations herein. IDT pa-69366.2 -18- Rev. 030496 CONFIDENTIAL 16.12 Customer Reference. IDT agrees that Netscape shall have the right to use IDT's name as a customer reference provided that any Netscape press release concerning IDT other than as a customer reference shall be subject to IDT's prior review and approval. 16.13 High Risk Activities. The Netscape Products are not fault-tolerant and are not designed, manufactured or intended for use or resale as on-line control equipment in hazardous environments requiring fail-safe performance such as in the operation of nuclear facilities, aircraft navigation or communication systems, air traffic control, direct life support machines, or weapons systems, in which the failure of the Netscape Products could lead directly to death, personal injury, or severe physical or environmental damage ("High Risk Activities"). Netscape and its suppliers specifically disclaim any express or implied warranty of fitness for High Risk Activities. AUTHORIZED SIGNATURES. In order to bind the parties to this Agreement, their duly authorized representatives have executed the Cover Sheet to this Agreement. Ship To Address for Deliverables: Bill to Address: --------------------------------- ---------------- 294 State Street 294 State Street - ------------------------------------- ------------------------------- Hackensack, NJ 07601 Hackensack, NJ - ------------------------------------- ------------------------------- Attention: Eric Raab Attention: Howard Balter - ------------------------------------- ------------------------------- Telephone: 201-928-4487 Telephone: 201-928-4480 - ------------------------------------- ------------------------------- Fax: 201-928-1057 ------------------------------- Netscape Sales Rep: David Rudnitsky Office Telephone Number: 908-356-4885 or William C. Ackermann 212-836-4886 IDT pa-69366.2 -19- Rev. 030496 CONFIDENTIAL ATTACHMENT A NETSCAPE PRODUCT DESCRIPTIONS 1. Navigator Products Netscape Navigator Dial-Up Kit 2.0 for Windows, Win 95 - English and all available localized versions Netscape Navigator LAN 2.0 for Windows, Win 95 and Macintosh - English and all available localized versions. 2. Netscape Navigator Gold 2.0 for Windows, Win 95 3. Server Products FastTrack 2.0 for Windows NT and UNIX Enterprise 2.0 for Windows NT and UNIX Proxy 1.1 for Windows NT and UNIX News 1.1 for Windows NT and UNIX Mail 1.1 for Windows NT and UNIX Catalog 1.1 for Windows NT and UNIX SuiteSpot 2.0 for Windows NT and UNIX -20- IDT pa-69366.2 CONFIDENTIAL ATTACHMENT B PRICING, PAYMENT SCHEDULES AND DELIVERABLES 1. Prepayment for Netscape Products IDT agrees to pay to Netscape a nonrefundable prepayment against future-owed license fees and subscription fees for [ ]*due and payable as follows: [ ]* All Prepaid Navigator License and Subscription Fees are recoverable at a One Hundred percent (100%) rate, meaning that for each One dollar ($1.00) of license and subscription fees due for the Navigator, up to the total of [the One Million Eight Hundred Thousand dollar ($1,800,000) Prepaid Navigator, License and Subscription Fees, One dollar ($1.00) is credited to IDT's Prepaid Navigator License and Subscription Fees.]* After the Prepaid Navigator License and Subscription Fees are fully depleted, license and subscription fees for the Navigator will be paid net thirty (30) days in accordance with Section 2 of this Attachment B and Section 4 of this Agreement. 2. Pricing for Netscape Products. The per copy price is as follows:
OEM Total Per Volume Qty Per Copy Per Copy Per Copy Maint & Copy Minimum Minimum Splits License Fee Subscrptn Major Quantity LIC + Initial Order Initial Order Fee Update Subscrptn Subscrptn Quantity Fee Due Fee Fee Navigator [ ]* Netscape Gold 2.0 Server Prodcuts - -FastTrack - -Enterprise w/ LiveWire - -Proxy - -News - -Mail - -Catalog (SuiteSpot (Any 5 Server Prodcuts) ]*
3. Standard Maintenance and Technical Support. IDT agrees to pay to Netscape, in addition to any license, subscription and Major Update fees set forth above, the following fee for the standard maintenance - ---------- (1) The fee in Section 3 below includes support for the first 25 Server Products. After the 1st 25 Server Products the fee is TBD -21- IDT pa-69366.2 CONFIDENTIAL Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission or William C. Ackermann 212-836-4886 -23- IDT pa-69366.2 CONFIDENTIAL ATTACHMENT C END USER LICENSE AGREEMENTS ATTACHMENT C-1 NAVIGATOR END USER LICENSE AGREEMENT BY CLICKING ON THE "ACCEPT" BUTTON, USING THE INTERNET OR CORPORATE (INTRANET) ACCESS OFFERED BY LICENSOR, OR OPENING THE PACKAGE, YOU ARE CONSENTING TO BE BOUND BY THIS AGREEMENT. IF YOU DO NOT AGREE TO ALL OF THE TERMS OF THIS AGREEMENT, CLICK THE "DO NOT ACCEPT" BUTTON AND THE INSTALLATION PROCESS WILL NOT CONTINUE, DO NOT USE THE INTERNET OR INTRANET ACCESS OFFERED BY LICENSOR, OR RETURN THE PRODUCT TO THE PLACE OF PURCHASE FOR A FULL REFUND. THE SOFTWARE AND DOCUMENTATION ARE PROVIDED FOR USE ONLY (I) WITH THE INTERNET ACCESS OR INTRANET ACCESS SERVICE INITIALLY OFFERED BY LICENSOR IN CONJUNCTION WITH THE DISTRIBUTION OF THE SOFTWARE AND DOCUMENTATION AND (II) IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT. NO RIGHT OR LICENSE IS GRANTED TO USE THE SOFTWARE OR DOCUMENTATION WITH ANY OTHER INTERNET OR INTRANET ACCESS. END USER LICENSE AGREEMENT REDISTRIBUTION NOT PERMITTED GRANT._____________ ("Licensor") hereby grants to you a non-exclusive license to use its accompanying software product ("Software") and accompanying documentation ("Documentation") on the following terms: You may: o use the Software only with the Internet service initially offered by Licensor in conjunction with the distribution of the Software and Documentation ("Licensor's Internet Services") which it is bundled; o use the Software on any single computer; o use the Software on a second computer so long as the first and second computers are not used simultaneously; or o copy the Software for archival purposes, provided any copy must contain all of the original Software's proprietary notices. You may not: o use the Software or Documentation in conjunction with any Internet access or other network service, other than Licensor's Internet Services; o permit other individuals to use the Software except under the terms listed above; modify, translate, reverse engineer, decompile, disassemble (except to the extent applicable laws specifically prohibit such restriction), or create derivative works based on the Software or Documentation; o copy the Software or Documentation (except for back-up purposes); o rent, lease, transfer or otherwise transfer rights to the Software or Documentation; or o remove any proprietary notices or labels on the Software or Documentation. -24- IDT pa-69366.2 CONFIDENTIAL SOFTWARE. If you receive your first copy of the Software electronically, and a second copy on media, the second copy may be used for archival purposes only. This license does not grant you any right to any enhancement or update. TITLE. Title, ownership rights, and intellectual property rights in and to the Software and Documentation shall remain in Licensor and/or its suppliers. The Software is protected by the copyright laws of the United States and international copyright treaties. Title, ownership rights, and intellectual property rights in and to the content accessed through the Software is the property of the applicable content owner and may be protected by applicable copyright or other law. This License gives you no rights to such content. LIMITED WARRANTY. Licensor warrants that for a period of ninety (90) days from the date of acquisition, the Software, if operated as directed, will substantially achieve the functionality described in the Documentation. Licensor does not warrant, however, that your use of the Software will be uninterrupted or that the operation of the Software will be error free or secure and hereby disclaims any and all liability on account thereof. In addition, the security mechanism implemented by the Software has inherent limitations, and you must determine that the Software sufficiently meets your requirements. Licensor also warrants that the media containing the Software, if provided by Licensor, is free from defects in material and workmanship and will so remain for ninety (90) days from the date you acquired the Software. Licensor's sole liability for any breach of this warranty shall be, in Licensor's sole discretion: (i) to replace your defective media; or (ii) to advise you how to achieve substantially the same functionality with the Software as described in the Documentation through a procedure different from that set forth in the Documentation; or (iii) if the above remedies are impracticable, to refund the license fee you paid for the Software. Repaired, corrected or replaced Software and Documentation shall be covered by this limited warranty for the period remaining under the warranty that covered the original Software, or if longer, for thirty (30) days after the date (a) of shipment to you of the repaired or replaced Software, or (b) Licensor advised you how to operate the Software so as to achieve the functionality described in the Documentation. Only if you inform Licensor of your problem with the Software during the applicable warranty period and provide evidence of the date you acquired the Software will Licensor be obligated to honor this warranty. Licensor will use reasonable commercial efforts to repair, replace, advise or refund pursuant to the foregoing warranty within 30 days of being so notified. THIS IS A LIMITED WARRANTY AND IT IS THE ONLY WARRANTY OR CONDITION MADE BY LICENSOR. LICENSOR MAKES NO OTHER EXPRESS WARRANTY OR CONDITION AND THERE IS NO WARRANTY OR CONDITION OF NONINFRINGEMENT OF THIRD PARTIES' RIGHTS. THE DURATION OF IMPLIED WARRANTIES OR CONDITIONS, INCLUDING WITHOUT LIMITATION, WARRANTIES OR CONDITIONS OF MERCHANTABILITY AND OF FITNESS FOR A PARTICULAR PURPOSE IS LIMITED TO THE ABOVE LIMITED WARRANTY PERIOD; SOME STATES DO NOT ALLOW LIMITATIONS ON HOW LONG AN IMPLIED WARRANTY LASTS, SO LIMITATIONS MAY NOT APPLY TO YOU. NO DEALER, AGENT OR EMPLOYEE OF LICENSOR IS AUTHORIZED TO MAKE ANY MODIFICATIONS, EXTENSIONS, OR ADDITIONS TO THIS WARRANTY. NO WARRANTY IS MADE BY OR ON BEHALF OF ANY SUPPLIER OF LICENSOR. If any modifications are made to the Software by you during the warranty period; if the media is subjected to accident, abuse, or improper use; or if you violate the terms of this Agreement, then this warranty shall immediately be terminated. This warranty shall not apply if the Software is used on or in conjunction with hardware or Software other than the unmodified version of hardware and Software with which the Software was designed to be used as described in the Documentation. THIS WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS, AND YOU MAY HAVE OTHER LEGAL RIGHTS THAT VARY FROM STATE TO STATE OR BY JURISDICTION. LIMITATION OF LIABILITY. UNDER NO CIRCUMSTANCES AND UNDER NO LEGAL THEORY, TORT, CONTRACT OR OTHERWISE, SHALL LICENSOR OR ITS SUPPLIERS OR RESELLERS BE LIABLE TO YOU OR ANY OTHER PERSON FOR ANY INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY CHARACTER INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF GOODWILL, WORK STOPPAGE, COMPUTER FAILURE OR -25- IDT pa-69366.2 CONFIDENTIAL MALFUNCTION, OR ANY AND ALL OTHER COMMERCIAL DAMAGES OR LOSSES, OF FOR ANY DAMAGE IN EXCESS OF LICENSOR'S LIST PRICE FOR A LICENSE TO THE SOFTWARE AND DOCUMENTATION, EVEN IF LICENSOR SHALL HAVE BEEN INFORMED OF THE POSSIBILITY OF SUCH DAMAGES, OR FOR ANY CLAIM BY ANY OTHER PARTY. THIS LIMITATION OF LIABILITY SHALL NOT APPLY TO LIABILITY FOR DEATH OR PERSONAL INJURY TO THE EXTENT APPLICABLE LAW PROHIBITS SUCH LIMITATION. FURTHERMORE, SOME STATES DO NOT ALLOW THE EXCLUSION OR LIMITATION OF INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THIS LIMITATION AND EXCLUSION MAY NOT APPLY TO YOU. TERMINATION. This license will terminate automatically if you fail to comply with the limitations described above. On termination, you must destroy all copies of the Software and Documentation. EXPORT CONTROLS. None of the Software or underlying information or technology may be downloaded or otherwise exported or reexported (i) into (or to a national or resident of) Cuba, Iraq, Libya, North Korea, Yugoslavia, Iran, Syria or any other country to which the U.S. has embargoed goods; or (ii) to anyone on the U.S. Treasury Department's list of Specially Designated Nationals or the U.S. Commerce Department's Table of Denial Orders. By downloading or using the Software you are agreeing to the foregoing and you are representing and warranting that you are not located in, under the control of, or a national or resident of any such country or on any such list. In addition, if the licensed Software is identified as a not-for-export product (for example, on the box, media or in the installation process), then the following applies: EXCEPT FOR EXPORT TO CANADA FOR USE IN CANADA BY CANADIAN CITIZENS, THE SOFTWARE AND ANY UNDERLYING TECHNOLOGY MAY NOT BE EXPORTED OUTSIDE THE UNITED STATES OR TO ANY FOREIGN ENTITY OR "FOREIGN PERSON" AS DEFINED BY U.S. GOVERNMENT REGULATIONS, INCLUDING WITHOUT LIMITATION, ANYONE WHO IS NOT A CITIZEN, NATIONAL OR LAWFUL PERMANENT RESIDENT OF THE UNITED STATES. BY DOWNLOADING OR USING THE SOFTWARE, YOU ARE AGREEING TO THE FOREGOING AND YOU ARE WARRANTING THAT YOU ARE NOT A "FOREIGN PERSON" OR UNDER THE CONTROL OF A FOREIGN PERSON. HIGH RISK ACTIVITIES. The Software is not fault-tolerant and is not designed, manufactured or intended for use or resale as on-line control equipment in hazardous environments requiring fail-safe performance, such as in the operation of nuclear facilities, aircraft navigation or communication systems, air traffic control, direct life support machines, or weapons systems, in which the failure of the Software could lead directly to death, personal injury, or severe physical or environmental damage ("High Risk Activities"). Netscape and its suppliers specifically disclaim any express or implied warranty of fitness for High Risk Activities. MISCELLANEOUS. This Agreement represents the complete agreement concerning this license between the parties and supersedes all prior agreements and representations between them. It may be amended only by a writing executed by both parties. THE ACCEPTANCE OF ANY PURCHASE ORDER PLACED BY YOU IS EXPRESSLY MADE CONDITIONAL ON YOUR ASSENT TO THE TERMS SET FORTH HEREIN, AND NOT THOSE CONTAINED IN YOUR PURCHASE ORDER. If any provision of this Agreement is held to be unenforceable for any reason, such provision shall be reformed only to the extent necessary to make it enforceable. This Agreement shall be governed by and construed under California law as such law applies to agreements between California residents entered into and to be performed within California, except as governed by Federal law. The application of the United Nations Convention of Contracts for the International Sale of Goods is expressly excluded. Third Party Beneficiary. Licensor and you each agree that Netscape Communications Corporation shall, as an intended third party beneficiary of this Agreement, have the right to rely upon and directly enforce the terms set forth herein. -26- IDT pa-69366.2 CONFIDENTIAL U.S. GOVERNMENT RESTRICTED RIGHTS. Use, duplication or disclosure by the Government is subject to restrictions set forth in subparagraphs (a) through (d) of the Commercial Computer-Restricted Rights clause at FAR 52.227-19 when applicable, or in subparagraph (c)(1)(ii) of the Rights in Technical Data and Computer Software clause at DFARS 252.227-7013, or at 252.211-7015, and in similar clauses in the NASA FAR Supplement. Contractor/manufacturer is Netscape Communications Corporation, 501 East Middlefield Road, Mountain View, CA 94043. -27- IDT pa-69366.2 CONFIDENTIAL ATTACHMENT C-2 SERVER PRODUCT END USER LICENSE AGREEMENT SEE ATTACHED -28- IDT pa-69366.2 CONFIDENTIAL AMENDMENT No. ONE TO THE NETSCAPE COMMUNICATIONS CORPORATION NETWORK SERVICE PROVIDER DISTRIBUTION AGREEMENT This Amendment No. One (the "1st Amendment") is entered into, as of June 25, 1996, by and between IDT Internet Services, Inc., a Delaware corporation with principal offices at 294 State Street, Hackensack, New Jersey 07601 ("IDT") and Netscape Communications Corporation, a Delaware corporation, with principal offices at 501 E. Middlefield Road, Mountain View, California 94043 ("Netscape"). WHEREAS, the parties have entered into a Network Service Provider Distribution Agreement executed by IDT on May 16, 1996 (the "Agreement"); and WHEREAS, the parties wish to modify and supplement the provisions of such Agreement; NOW, THEREFORE, the parties in consideration of the terms and conditions herein, agree as follows: 1. 2. Attachments A and B are replaced with Attachments A and B to this 1st Amendment. 3. Capitalized terms defined in the Agreement shall have the same meaning in this 1st Amendment as in the Agreement. 4. Except as expicitly modified, all terms, conditions and provisions of the Agreement shall continue in full force and effect. 5. In the event of any inconsistency or conflict between the Agreement and this 1st Amendment, the terms, conditions, and provisions of this Amendment shall govern and control. 6. This 1st Amendment and the Agreement constitute the entire and exclusive agreement between the parties with respect to this subject matter. All previous discussions and agreements with respect to this subject matter are superseded by the Agreement and this 1st Amendment. IN WITNESS WHEREOF, the parties hereto have caused this 1st Amendment to be executed by their duly authorized representatives, effective as of the date of signature by Netscape ("Effective Date"). IDT INTERNET SERVICES INC. NETSCAPE COMMUNICATIONS CORPORATION By: /s/ Howard Balter By: /s/ Conway (Todd) Rulon-Miller - ----------------------------- ----------------------------- Name: Howard Balter Name: Conway (Todd) Rulon-Miller - ----------------------------- ----------------------------- Title: C.O.O. Title: V.P. Sales - ----------------------------- ----------------------------- Date: 6/20/96 Date: 6/25/96 - ----------------------------- ----------------------------- 6/20/96 CONFIDENTIAL REVIEWED BY NETSCAPE LEGAL [illegible] 06-25-96A10:11 RCVD Initial: [ILLEGIBLE TEXT] 1 ATTACHMENT A NETSCAPE PRODUCT DESCRIPTIONS 1. Navigator Products Netscape Navigator Dial-Up Kit 2.0 for Windows, Win 95, English and all currently available localized versions as of the Effective Date. Netscape Navigator LAN 2.0 for Windows, Win 95 and Macintosh - English and all currently available localized versions as of the Effective date. 2. Netscape Navigator Gold 2.0 for Windows, Win 95 3. Server Products FastTrack 2.0 for Windows NT and UNIX Enterprise 2.0 for Windows NT and UNIX Proxy 1.1 for Windows NT and UNIX News 1.1 for Windows NT and UNIX Mail 1.1 for Windows NT and UNIX Catalog 1.1 for Windows NT and UNIX SuiteSpot 1.1 for Windows NT and UNIX * End Users can switch to any localized versions available during the term of this Agreement at no additional charge. 2 ATTACHMENT B PRICING, PAYMENT SCHEDULES AND DELIVERABLES 1. Payment for Netscape Products IDT agrees to pay to Netscape a nonrefundable prepayment against future-owed license fees and subscription fees for [ ] due and payable as follows: [ ]* All Prepaid Navigator License and Subscription Fees are recoverable at a One Hundred percent (100%) rate, meaning that for each One dollar ($1.00) of license and subscription fees due for Navigator, up to the total of [ ]* after the Prepaid Navigator License and Subscription Fees are fully depleted, license and subscription fees for the Navigator will be paid net thrity (30) days in accordance with Section 2 of this Attachment B and Section 4 of this Agreement. 2. Pricing for Netscape Products. The per copy price is as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ Navigator Volume Qty. Per Copy Per Per OEM Total Minimum Minimum Splits License Fee Copy Copy Maint Per Copy Initial Order Initial Subscrp Major &Supt Lic + Quantity Order tn Fee Update Fee Subscrpt Fee Due Fee n Fee - ------------------------------ Nav. Gold 2.0 [ - ------------------------------ Server Products --------------- - FastTrack - Enterprise w/ LiveWire - Proxy - News - Mail - Catalog SuiteSpot (any 5 Server Products) ]*
3. Standard Maintenance and Technical Support. IDT agrees to pay to Netscape, in addition to any license, subscription and Major Update fees set forth above, the following fee for the standard - ---------- 1. The fee in Section 3 below includes support for the first 25 Server Products. After the 1st 25 Server Products the fee is TBD 3 Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission maintenance and technical support described in Attachment B for the [ ] This payment shall be due on the Effective Date and on the anniversary of the Effective Date. Annual maintenance fees after the first [ ]* 4. Subscription Fee. The Subscription fee entitles the End User the right to install any Update that Netscape releases for the applicable Netscape Product for which a subscription fee has been paid, for 12 months from the date the license fee for such Netscape Product accrues. Software subscription includes all Major Updates released by Netscape during the 12 month subscription period. It also allows End Users to switch operating system platforms and to switch to different localized versions available in production at no additional charge. The subscription fee must be purchased in conjunction with the license of the Netscape Product. IDT may license and bundles Netscape Products for use by End Users in conjunction with IDT's Internet service subscription fee program. 5. Deliverables. One (1) master reproduction copy of each of the Navigator and one (1) copy of the applicable Documentation, in any format generally available from Netscape. 6. Customization or Enterprise Kit License Fee. For the license to use the Enterprise Kit or the customization described in Attachment F to the Netscape Navigator LAN version 2.0, IDT shall pay Netscape a license fee of [ ]* due and payable on the Effective Date. 7. Ship To Address for Deliverables International Discount Telecommunications Corporation 294 State Street Hackensack, NJ 07652 Attention: Howard Balter, CFO Telephone: 201-928-4480 Bill To Address for Deliverables. International Discount Telecommunications Corporation 294 State Street Hackensack, NJ 07652 Attention: Howard Balter, CFO Telephone: 201-928-4480 8. Technical Contact. International Discount Telecommunications Corporation 294 State Street Hackensack, NJ 07652 Attention: Eric Raab, EVP Technology Telephone: 201-928-4487 4 Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission AMENDMENT No. TWO TO THE NETSCAPE COMMUNICATIONS CORPORATION NETWORK SERVICE PROVIDER DISTRIBUTION AGREEMENT This Amendment No. Two (the "2nd Amendment") is entered into, as of June _____, 1996, by and between IDT Internet Services, Inc., a Delaware corporation with principal offices at 294 State Street, Hackensack, New Jersey 07601 ("IDT") and Netscape Communications Corporation, a Delaware corporation, with principal offices at 501 E. Middlefield Road, Mountain View, California 94043 ("Netscape"). WHEREAS, the parties have entered into a Network Service provider Distribution Agreement executed by IDT on May 16, 1996 (the "Agreement"); and WHEREAS, the parties wish to modify and supplement the provisions of such Agreement; NOW, THEREFORE, the parties, in consideration of the terms and conditions herein, agree as follows: 1. Added as a new language to the end of Section 2.1.1 is: "IDT may also distribute in the Territory by sublicense the initial copy of the Navigator to End Users.[ ]* 2. Notwithstanding anything to the contrary in Section 4.1 of the Agreement, per copy license fees for each copy of the Navigator that is distributed electronically by on-line distribution shall accrue immediately upon distribution/transmission of each copy from IDT's FTP site. 3. Capitalized terms defined in the Agreement shall have the same meaning in this 1st Amendment as in the Agreement. 4. Except as explicitly modified, all terms, conditions and provisions of the Agreement shall continue in full force and effect. 5. In the event of any inconsistency or conflict between the Agreement and this 2nd Amendment, the terms, conditions and provisions of this 2nd Amendment shall govern and control. 6. This 2nd Amendment, the 1st Amendment and the Agreement constitute the entire and exclusive agreement between the parties with respect to this subject matter. All previous discussions and agreements with respect to this subject matter are superseded by the Agreement, the 1st Amendment and this 2nd Amendment. CONFIDENTIAL 1 6/26/96 IDT NSP Amdmt 2 FRT Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission IN WITNESS WHEREOF, the parties hereto have caused this 2nd Amendment to be executed by their duly authorized representatives, effective as of the date of signature by Netscape ("Effective Date"). IDT INTERNET SERVICES INC. NETSCAPE COMMUNICATIONS CORPORATION By: ___________________________ By: ___________________________ Name: _________________________ Name: _________________________ Title: ________________________ Title: ________________________ Date: _________________________ Date: _________________________ CONFIDENTIAL 6/26/96 IDT NSP Amdmt 2 FRT BY OPENING THE PACKAGE OR CLICKING ON THE "ACCEPT" BUTTON, YOU ARE CONSENTING TO BE BOUND BY AND ARE BECOMING A PARTY TO THIS AGREEMENT. IF YOU DO NOT AGREE TO ALL OF THE TERMS OF THIS AGREEMENT, CLICK THE "DO NOT ACCEPT" BUTTON OR RETURN THIS PRODUCT TO THE PLACE OF PURCHASE FOR A FULL REFUND. SERVER END USER LICENSE AGREEMENT GRANT. Subject to the provisions contained herein and payment of applicable license fees, Netscape Communications Corporation ("Netscape") hereby grants to you a non-exclusive license to use the version(s) of the accompanying proprietary software product ("Software") and related documentation ("Documentation") for which you have paid Netscape. You may run multiple instances of the Software on a single computer system. If the Software contains header files, then Netscape also grants you a license to copy and use the header files solely to create and distribute programs to interface with the Netscape Server Application Program Interface. You may not modify the header files. FEES. A license fee is required for each central processing unit ("CPU") contained in your computer system. If your computer system contains a multiprocessor configuration or, if after you have received a single CPU Software license, you decide to add CPUs to your computer system, you must upgrade your Software license to a multiple CPU Software license, and pay the applicable license fee(s) associated with such upgrade. If the Software is transferred from one computer system to another, additional fees may be due. ELECTRONIC DISTRIBUTION, ENCRYPTION. If the Software is the Netscape Commerce Server or the Netscape News Server, then you must obtain a signed digital certificate from a certification authority in order to utilize their cryptographic features. A certification authority may charge additional fees for certification services. Following successful installation of a digital certificate, your use of the Software's cryptographic features will be enabled. You are responsible for maintaining the security of the environment in which the Software is used and the integrity of the private key file used with the Software. RESTRICTED USE. The Software is protected by the copyright laws of the United States and international copyright treaties. You may not copy the Software, except for backup or archival purposes. Any such copy shall be subject to this Agreement and shall contain all of Netscape's notices regarding proprietary rights as contained in the Software Netscape originally provided to you. If you receive your first copy of the Software electronically and a second copy on media, the second copy may be used only for backup and archive purposes. This license does not grant you any right to any enhancement or update to the Software. Enhancements and updates, if available, may be obtained at Netscape's then current standard pricing, terms, and conditions. You may not lend, rent, lease or otherwise transfer the Software. TITLE. Title, ownership rights, and intellectual property rights in and to the Software and Documentation shall remain in Netscape and/or its suppliers. This Agreement does not include the right to sublicense the Software and may not by assigned (by operation of law of otherwise) or transferred without the prior written consent of Netscape. You agree not to attempt to decipher, decompile or disassemble the Software or develop derivative works of the Software or knowingly allow others to do so, except to the extent applicable laws specifically prohibit such restriction. You may not modify or create derivative works of the Software. CONTENT. Title, ownership rights, and intellectual property rights in and to the content accessed through the Software is the property of the applicable content owner and may be protected by applicable copyright or other law. This License gives you no rights to such content. LIMITED WARRANTY. Netscape warrants that for a period of ninety (90) days from the date of acquisition, the Software, if operated as directed, will substantially achieve the functionality Commerce/Communication/Proxy/News1.1 1 Rev. 100995 described in the Documentation. Netscape does not warrant, however, that your use of the Software will be uninterrupted or that the operation of the Software will be error-free or secure and hereby disclaims any and all liability on account thereof. In addition, the security mechanism implemented by the Software has inherent limitations and you must determine that the software sufficiently meets your needs. Netscape also warrants that the media containing the Software, if provided by Netscape, is free from defects in material and workmanship and will so remain for ninety (90) days from the date you acquire the Software. Netscape's sole liability for any breach of this warranty shall be, in Netscape's sole discretion: (i) to replace your defective media; or (ii) to advise you how to achieve substantially the same functionality with the Software as described in the Documentation through a procedure different from that set forth in the Documentation; or (iii) if the above remedies are impracticable, to refund the license fee you paid for the Software. Repaired, corrected, or replaced Software and Documentation shall be covered by this limited warranty for the period remaining under the warranty that covered the original Software, or if longer, for thirty (30) days after the date (a) of shipment to you of the repaired or replaced Software, or (b) Netscape advised you how to operate the Software so as to achieve the functionality described in the Documentation. Only if you inform Netscape of your problem with the Software during the applicable warranty period and provide evidence of the date you acquired the Software will Netscape be obligated to honor this warranty. THIS IS A LIMITED WARRANTY AND IT IS THE ONLY WARRANTY MADE BY NETSCAPE. NETSCAPE MAKES NO OTHER EXPRESS OR IMPLIED WARRANTY AND EXPRESSLY DISCLAIMS ALL WARRANTIES OR CONDITIONS OF NONINFRINGEMENT OF THIRD PARTIES' RIGHTS, OF MERCHANTABILITY AND OF FITNESS FOR A PARTICULAR PURPOSE. NO NETSCAPE DEALER, AGENT, OR EMPLOYEE IS AUTHORIZED TO MAKE ANY MODIFICATIONS, EXTENSIONS, OR ADDITIONS TO THIS WARRANTY. If any modifications are made to the Software by you during the warranty period; if the media is subjected to accident, abuse, or improper use; or if you violate the terms of this Agreement, then this warranty shall immediately be terminated. This warranty shall not apply if the Software is used on or in conjunction with hardware or programs other than the unmodified version of hardware and programs with which the Software was designed to be used as described in the Documentation. SOME STATES OR JURISDICTIONS DO NOT ALLOW THE EXCLUSION OF IMPLIED WARRANTIES, SO THE ABOVE EXCLUSION MAY NOT APPLY TO YOU. THIS WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS, AND YOU MAY HAVE OTHER LEGAL RIGHTS THAT VARY FROM STATE TO STATE OR BY JURISDICTION. LIMITATION OF LIABILITY. UNDER NO CIRCUMSTANCES AND UNDER NO LEGAL THEORY, TORT, CONTRACT, OR OTHERWISE, SHALL NETSCAPE OR ITS SUPPLIERS OR RESELLERS BE LIABLE TO YOU OR ANY OTHER PERSON FOR ANY INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY CHARACTER INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF GOODWILL, WORK STOPPAGE, COMPUTER FAILURE OR MALFUNCTION, OR ANY AND ALL OTHER COMMERCIAL DAMAGES OR LOSSES, OR FOR ANY DAMAGES IN EXCESS OF NETSCAPE'S LIST PRICE FOR A LICENSE TO THE SOFTWARE AND DOCUMENTATION, EVEN IF NETSCAPE SHALL HAVE BEEN INFORMED OF THE POSSIBILITY OF SUCH DAMAGES, OR FOR ANY CLAIM BY ANY OTHER PARTY. THIS LIMITATION OF LIABILITY SHALL NOT APPLY TO LIABILITY FOR DEATH OR PERSONAL INJURY TO THE EXTENT APPLICABLE LAW PROHIBITS SUCH LIMITATION. FURTHERMORE, SOME STATES AND JURISDICTIONS DO NOT ALLOW THE LIMITATION OF LIABILITY FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES SO THE ABOVE LIMITATIONS MAY NOT APPLY TO YOU. EXPORT. You may not download or otherwise export or reexport the Software or any underlying information or technology except in full compliance with all United States and other applicable laws and regulations as follows: None of the Software or underlying information or technology may be downloaded or otherwise exported or reexported (i) into (or to a national resident of) Cuba, Iraq, Libya, Yugoslavia, North Commerce/Communication/Proxy/News1.1 2 Rev. 100995 Korea, Iran, Syria or any other country to which the U.S. has embargoed goods; or (ii) to anyone on the U.S. Treasury Department's list of Specially Designated Nationals or the U.S. Commerce Department's Table of Denial Orders. By downloading or using the Software, you are agreeing to the foregoing and you are representing and warranting that you are not located in, under the control of, or a national or resident of any such country or on any such list. In addition, if the licensed Software is identified as a not-for-export product (for example, on the box, media or in the installation process), then the following applies: EXCEPT FOR EXPORT TO CANADA FOR USE IN CANADA BY CANADIAN CITIZENS, THE SOFTWARE AND ANY UNDERLYING TECHNOLOGY MAY NOT BE EXPORTED OUTSIDE THE UNITED STATES OR TO ANY FOREIGN ENTITY OR "FOREIGN PERSON," AS DEFINED BY U.S. GOVERNMENT REGULATIONS, INCLUDING WITHOUT LIMITATION, ANYONE WHO IS NOT A CITIZEN, NATIONAL OR LAWFUL PERMANENT RESIDENT OF THE UNITED STATES. BY DOWNLOADING OR USING THE SOFTWARE, YOU ARE AGREEING TO THE FOREGOING AND YOU ARE WARRANTING THAT YOU ARE NOT A "FOREIGN PERSON" OR UNDER THE CONTROL OF A FOREIGN PERSON. TERMINATION. Either party may terminate this Agreement immediately in the event of default by the other party. Upon any termination of this Agreement, you shall immediately discontinue the use of the Software and shall within ten (10) days return to Netscape all copies of the Software and Documentation. You may also terminate the Agreement at any time by destroying the Software and Documentation and all copies thereof. Your obligations to pay accrued charges and fees shall survive any termination of this Agreement. MISCELLANEOUS. This Agreement represents the complete and exclusive statement of the agreements concerning this license between the parties and supersedes all prior agreements and representations between them. It may be amended only by a writing executed by both parties. THE ACCEPTANCE OF ANY PURCHASE ORDER PLACED BY YOU FOR THE SOFTWARE AND/OR DOCUMENTATION IS EXPRESSLY MADE CONDITIONAL ON YOUR ASSENT TO THE TERMS AND CONDITIONS SET FORTH HEREIN, AND NOT THOSE CONTAINED IN YOUR PURCHASE ORDER. If any provision of this Agreement is held to be unenforceable for any reason, such provision shall be reformed only to the extent necessary to make it enforceable, and such decision shall not affect the enforceability (I) of such provision under other circumstances of (ii) of the remaining provisions hereof under all circumstances. Headings shall not be considered in interpreting this Agreement. This Agreement shall be governed by and construed under California law as such law applies to agreements between California residents entered into and to be performed entirely within California, except as governed by Federal law. This Agreement will not be governed by the United Nations Convention of Contracts for the International Sale of Goods, the application of which is hereby expressly excluded. U.S. GOVERNMENT RESTRICTED RIGHTS. Use, duplication or disclosure by the Government is subject to restrictions set forth in subparagraphs (a) through (d) of the Commercial Computer-Restricted Rights clause at FAR 52.227-19 when applicable, or in subparagraph (c)(1)(ii) of the Rights in Technical Data and Computer Software clause at DFARS 252.227-7013, and in similar clauses in the NASDA FAR Supplement. Contractor/manufacturer is Netscape Communications Corporation, 501 East Middlefield Road, Mountain View, CA 94043. Commerce/Communication/Proxy/News1.1 3 Rev. 100995 ATTACHMENT D QUARTERLY POINT OF SALE REPORT Network Service Provider Name and address: ---------------------------------------- ---------------------------------------- ---------------------------------------- ---------------------------------------- POS Report Contact Name: ---------------------------------------- POS Report Contact Phone: ---------------------------------------- POS Report Contact e:mail: ---------------------------------------- Report for (check one): November through January (due February 10) - ----- February through April (due May 10) - ----- May through July (due August 10) - ----- August through October (due November 10) - -----
Number of Number of New Registered Products Users Initially that have been used Number of Netscape Quantity/Mo Price/Uni Active Users for internally by Active Users Month/Year Product# nth t 30 days/Month IDT/Month End of Month - ---------- -------- ---- - ------------- --------- ------------ [First ------------ ------------ ------------ ------------ ------------ ------------ Month] ---- ---- ---- ---- ---- ---- [Second ------------ ------------ ------------ ------------ ------------ ------------ Month] ---- ---- ---- ---- ---- ---- [Third ------------ ------------ ------------ ------------ ------------ ------------ Month] ---- ---- ---- ---- ---- ----
Add columns for: Subscription and No Subscription (must equal total quantity of Netscape Products licensed) for each Netscape Product and Major Updates distributed for each Netscape Product -29- ATTACHMENT E MAINTENANCE AND SUPPORT 1. Maintenance/Minor Updates. In consideration of the maintenance and support fee set forth in Section 3 of Attachment B, Netscape will provide to IDT any Minor Updates made generally available during the one (1) year term for which maintenance and support fees have been paid. IDT and not Netscape will be responsible for providing Minor Updates to its Distributors and End Users. The expenses of any such distribution will be paid by IDT [ ]* to the extent consistent with policies of both companies. IDT and Netscape agree to discuss monthly support issues and processes. 2. Technical Support. In consideration of the maintenance and support fee set forth in Section 3 of Attachment B, Netscape will provide IDT for the one (1) year term for which maintenance and support fees have been paid with Netscape's backend technical support services, as further described herein. a. Back-end Support. Netscape will provide back-end support to IDT for Program Errors not resolved by IDT pursuant to IDT's support policies and in accordance with subsection (b) below. This support includes efforts to identify defective source code and to provide corrections, workarounds and/or patches to correct Program Errors. Netscape will provide IDT with a telephone number and an e-mail address which IDT may use to report Program Errors during Netscape's local California business hours (5am - 5pm Pacific Standard Time). Netscape will designate one (1) primary and one (1) alternate technical support representative for IDT. For priority 1 or 2 failures, IDT agrees to notify Netscape via both telephone and e-mail. IDT will identify two (2) members of its customer support staff and an alternate to act as the primary technical liaisons responsible for all communications with Netscape's technical support representatives. Such liaisons will have sufficient technical expertise, training and/or experience for IDT to perform its obligations hereunder. Within one (1) week after the Effective Date, IDT will designate its liaisons. Notification will be in writing and/or e-mail to Netscape. IDT may substitute contacts at any time by providing to Netscape one (1) week's prior written and/or electronic notice thereof. Netscape will make reasonable efforts to correct significant Program Errors that IDT identifies, classifies and reports to Netscape and that Netscape substantiates. Netscape may reclassify Program Errors if it reasonably believes that IDT's classification is incorrect. IDT will provide sufficient information to enable Netscape to duplicate the Program Error before Netscape's response obligations will commence. Netscape will not be required to correct any Program Error caused by (a) IDT's incorporation or attachment of a feature, program, or device to the Netscape Products, or any part thereof; (b) any nonconformance cause by accident, transportation, neglect, or misuse, or an alteration, modification, or enhancement (except as permitted by and in accordance with the Enterprise Kit), or the Netscape Products; (c) the failure to provide a suitable installation environment; (d) use of the Netscape Products for other than the specific purpose for which the Netscape Products are designed; (e) use of the Netscape Products on any systems other than the specified hardware platform for such Netscape Products; (f) IDT's use of defective media or defective duplication of the Netscape Products; or (g) IDT's failure to incorporate any Minor Update previously released by Netscape which corrects such Program Error. Provided Program Error reports are received by Netscape during Netscape's local California business hours (5am - 5pm Pacific Standard Time), Netscape will use its best commercial efforts to communicate with IDT about the Program Error via telephone or e-mail within the following targeted response times:
- ------------------------------------------------------------------------------------------------------------------------------------ Priority Failure Description Response Time 1 Fatal (no useful work can be done) 10 working hours - ------------------------------------------------------------------------------------------------------------------------------------
IDT pa-69666.2 -30- Rev. 030496 CONFIDENTIAL Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission - ------------------------------------------------------------------------------------------------------------------------------------ 2 Severe Impact (functionally disabled): errors 1 working day which result in a lack of application functionality or causes intermittent system failure - ------------------------------------------------------------------------------------------------------------------------------------ 3 Degraded Operations: errors causing malfunction 3 working days on non-critical functions - ------------------------------------------------------------------------------------------------------------------------------------ 4 Minimal Impact: attributes and/or options to utility Futures release, on programs do not operate as stated business justifiable basis - ------------------------------------------------------------------------------------------------------------------------------------ 5 Enhancement Request When applicable - ------------------------------------------------------------------------------------------------------------------------------------
Netscape will use reasonable commercial efforts to resolve each significant Program Error by providing either a reasonable workaround, and object code patch, or a specific action plan for how Netscape will address the problem and an estimate of how long it will take to rectify the defect. Netscape reserves the right to charge IDT additional fees at its then-standard rates for services performed in connection with reported Program Errors which are later determined to have been due to hardware or software not supplied by Netscape. Notwithstanding the foregoing, Netscape has no obligation to perform services in connection with Program Errors (i) resulting from hardware or software not supplied by Netscape; or (ii) which occur in the Netscape Product release which is not the then-current release. b. Front-line Support. IDT, and not Netscape, will provide front-line, or first and second level, technical support to its Distributors and End Users. IDT shall employ at least two (2) fully trained full time support personnel and provide support five days a week between 8:00AM to 5:00pm local time. Such support includes call receipt, entitlement verification, call screening, installation assistance, problem identification and diagnosis, product defect determination, efforts to create a repeatable demonstration of the Program Error and, if applicable, the replacement of any defective media. IDT agrees that any documentation or packaging distributed by IDT will clearly and conspicuously state that End Users should call IDT for technical support for the Netscape Products and shall not reference Netscape in any manner with respect to support. Netscape will have no obligation to furnish any assistance, information or documentation with respect to the Netscape Products, to any Distributor or End User. If Netscape customer support representatives are being contacted by a significant number of IDT's Distributors or End Users then, upon Netscape's request, IDT and Netscape will cooperate to minimize such contact. In the event Netscape is able to identify any End User obtaining front-line support from Netscape as a customer of IDT, IDT hereby agrees to pay Netscape the then current charges for such support as set forth in Netscape's price list for End User support. Netscape shall promptly notify IDT of such charges. IDT pa-69666.2 -31- Rev. 030496 CONFIDENTIAL ATTACHMENT F NETSCAPE NAVIGATOR CUSTOM PROGRAM REQUEST FORM See attached IDT pa-693662 REV 030496 CONFIDENTIAL Netscape Confidential Netscape Navigator Custom Program Request Form This document is intended to provide a template of what can be customized in Netscape Navigator 2.0 for Windows. Please electronically complete this template and return to Catherine Evans for acceptance and scheduling at cat@netscape.com Due to differing specification requirements, duration of each customization will vary. Please contact Cat for an delivery target date. This document is not a formal contract between the customer and Netscape Communications Corporation. Netscape Communications Corporation is under no obligation to complete the requested changes until a contract has been signed by the customer and Netscape Communications. Customer Name: __________________________________________________ Customer Address: _______________________________________________ _______________________________________________ _______________________________________________ Customer Phone number: __________________________________________ Customer e-mail address: ________________________________________ Netscape Employee Representing Customer: ________________________ Representatives e-mail: ___________ phone number: _______________ Navigator Version(s) to be customized: r 2.0 LAN - 16 bit - domestic r 2.0 LAN - 16 bit - export r 2.0 LAN - 32 bit - domestic r 2.0 LAN - 32 bit - export Each version customized will be assessed a separate customization fee. Please speak to your Netscape Representative to discuss fee schedule and contract details. ****No customization work will begin until a contract is signed**** 2.0 Windows v1.4 3/20/96 Netscape Confidential [GRAPHIC OF NETSCAPE PREFERENCES MENU SCREEN OMITTED] Preferences User Agent: limited to 10 alpha numeric characters "_" and "-" (underscore and hyphen) r Netscape to choose r Customize _ _ _ _ _ _ _ _ _ _ Homepage: r Leave pointing to Netscape r Customize URL: ____________________________________ Auto load Home page? r Yes (default) r No Services: specify server name if you'd like it to be locked. Outgoing Mail (SMTP) Server: _______________________ Incoming Mail (POP) Server: ________________________ News (NNTP) Server: ________________________________ Leave Mail on Server: r Yes (default) r No User Organization: _______________________________________ This information is used to identify you in email messages and news articles. Proxy Information: A network proxy is a conduit between your computer and the internet and is used to access the internet through a firewall. If you have a direct connection to the internet you do not need to configure proxies. r No Proxies r Manual Proxy Configuration (see below if you'd like to lock-in proxies) r Automatic Proxy Configuration Configuration Location (URL): __________________________ Manual Proxy Configuration: You may configure a proxy and port number for each of the internet protocols that Netscape supports. FTP Proxy: ______________________ Port: ______ Gopher Proxy: ___________________ Port: ______ 2.0 Windows v1.4 3/20/96 Netscape Confidential HTTP Proxy: ________________________ Port: ______ Security Proxy: ____________________ Port: ______ WAIS Proxy: ________________________ Port: ______ SOCKS Host: ________________________ Port: ______ No Proxy for: ______________________ Animation: [GRAPHIC OF NETSCAPE ANIMATION MENU SCREEN OMITTED] r Leave Netscape's animation r Customize (Netscape logo moves to toolbar for co-branding) -URL: _____________________________________ -A Windows .BMP file of both small AND large version. Small version is 30x30 pixels Large version is 48x48 pixels -Frames stored continuously for each, small and large (e.g. small, 20 frame = 30x600 pixel BMP file) -Number of Frames (maximum is 25): _____________ -Use standard Windows 16-color palette, RGB values below Color 1: 0,0,0 Color 9: 128,128,128 Color 2: 128,0,0 Color 10: 255,0,0 Color 3: 0,128,0 Color 11: 0,255,0 Color 4: 128,128,0 Color 12: 255,255,0 Color 5: 0,0,128 Color 13: 0,0,255 Color 6: 128,0,128 Color 14: 255,0,255 Color 7: 0,128,128 Color 15: 0,255,255 Color 8: 192,192,192 Color 16: 255,255,255 USE MAXIMUM 16 COLORS AND SAVE ANIMATION BMP FILES IN 16 COLORS 2.0 Windows v1.4 3/20/96 [GRAPHIC OF NETSCAPE DIRECTORY BUTTONS SCREEN OMITTED] Directory Buttons: Button1 r Leave pointing to Netscape item: ________________________ r Customize Label: _________________ URL: ________________________________________________ Button2 r Leave pointing to Netscape item: ________________________ r Customize Label: _________________ URL: ________________________________________________ Button3 r Leave pointing to Netscape item: ________________________ r Customize Label: _________________ URL: ________________________________________________ Button4 r Leave pointing to Netscape item: ________________________ r Customize Label: _________________ URL: ________________________________________________ Button5 r Leave pointing to Netscape item: ________________________ r Customize Label: _________________ URL: ________________________________________________ Button6 r Leave pointing to Netscape item: ________________________ r Customize Label: _________________ URL: ________________________________________________ 2.0 Windows v1.4 3/20/96 [GRAPHIC OF NETSCAPE DIRECTORY MENU SCREEN OMITTED] Directory Menu: Item1 r Same as Netscape item: ______________________________________ r Separator r Custom Label: ___________________ Keyboard Accelerator: ________ URL: ____________________________________________________ Status Bar Text: ________________________________________ Item2 r Same as Netscape item: ______________________________________ r Separator r Custom Label: ___________________ Keyboard Accelerator: ________ URL: ____________________________________________________ Status Bar Text: ________________________________________ Item3 r Same as Netscape item: ______________________________________ r Separator r Custom Label: ___________________ Keyboard Accelerator: ________ URL: ____________________________________________________ Status Bar Text: ________________________________________ Item4 r Same as Netscape item: ______________________________________ r Separator r Custom Label: ___________________ Keyboard Accelerator: ________ URL: ____________________________________________________ Status Bar Text: ________________________________________ 2.0 Windows v1.4 3/20/96 Netscape Confidential Page 6 Item5 r Same as Netscape item: _____________________________________ r Separator r Custom Label: ______________________ Keyboard Accelerator: ____________ URL: ___________________________________________________________ Status Bar Text: _______________________________________________ Item6 r Same as Netscape item: _____________________________________ r Separator r Custom Label: ______________________ Keyboard Accelerator: ____________ URL: ___________________________________________________________ Status Bar Text: _______________________________________________ Item7 r Same as Netscape item: _____________________________________ r Separator r Custom Label: ______________________ Keyboard Accelerator: ____________ URL: ___________________________________________________________ Status Bar Text: _______________________________________________ Item8 r Same as Netscape item: _____________________________________ r Separator r Custom Label: ______________________ Keyboard Accelerator: ____________ URL: ___________________________________________________________ Status Bar Text: _______________________________________________ Item9 r Same as Netscape item: _____________________________________ r Separator r Custom Label: ______________________ Keyboard Accelerator: ____________ URL: ___________________________________________________________ Status Bar Text: _______________________________________________ Item10 r Same as Netscape item: _____________________________________ r Separator r Custom Label: ______________________ Keyboard Accelerator: ____________ URL: ___________________________________________________________ Status Bar Text: _______________________________________________ Item11 r Same as Netscape item: _____________________________________ r Separator r Custom Label: ______________________ Keyboard Accelerator: ____________ URL: ___________________________________________________________ Status Bar Text: _______________________________________________ 3/20/96 Netscape Confidential Page 7 Item12 r Same as Netscape item: _____________________________________ r Separator r Custom Label: ______________________ Keyboard Accelerator: ____________ URL: ___________________________________________________________ Status Bar Text: _______________________________________________ Item13 r Same as Netscape item: _____________________________________ r Separator r Custom Label: ______________________ Keyboard Accelerator: ____________ URL: ___________________________________________________________ Status Bar Text: _______________________________________________ Item14 r Same as Netscape item: _____________________________________ r Separator r Custom Label: ______________________ Keyboard Accelerator: ____________ URL: ___________________________________________________________ Status Bar Text: _______________________________________________ Item15 r Same as Netscape item: _____________________________________ r Separator r Custom Label: ______________________ Keyboard Accelerator: ____________ URL: ___________________________________________________________ Status Bar Text: _______________________________________________ Limited to 25 items (item count includes separator bars) 3/20/96 Netscape Confidential Page 8 [MENU] Help Menu: - ---------- Item1: About Netscape... Keyboard Accelerator: A Item2 r Same as Netscape item: _____________________________________ r Separator r Custom Label: ______________________ Keyboard Accelerator: ____________ URL: ___________________________________________________________ Status Bar Text: _______________________________________________ Item3 r Same as Netscape item: _____________________________________ r Separator r Custom Label: ______________________ Keyboard Accelerator: ____________ URL: ___________________________________________________________ Status Bar Text: _______________________________________________ Item4 r Same as Netscape item: _____________________________________ r Separator r Custom Label: ______________________ Keyboard Accelerator: ____________ URL: ___________________________________________________________ Status Bar Text: _______________________________________________ Netscape Confidential Page 9 Item5 r Same as Netscape item: _____________________________________ r Separator r Custom Label: ______________________ Keyboard Accelerator: ____________ URL: ___________________________________________________________ Status Bar Text: _______________________________________________ Item6 r Same as Netscape item: _____________________________________ r Separator r Custom Label: ______________________ Keyboard Accelerator: ____________ URL: ___________________________________________________________ Status Bar Text: _______________________________________________ Item7 r Same as Netscape item: _____________________________________ r Separator r Custom Label: ______________________ Keyboard Accelerator: ____________ URL: ___________________________________________________________ Status Bar Text: _______________________________________________ Item8 r Same as Netscape item: _____________________________________ r Separator r Custom Label: ______________________ Keyboard Accelerator: ____________ URL: ___________________________________________________________ Status Bar Text: _______________________________________________ Item9 r Same as Netscape item: _____________________________________ r Separator r Custom Label: ______________________ Keyboard Accelerator: ____________ URL: ___________________________________________________________ Status Bar Text: _______________________________________________ Item10 r Same as Netscape item: _____________________________________ r Separator r Custom Label: ______________________ Keyboard Accelerator: ____________ URL: ___________________________________________________________ Status Bar Text: _______________________________________________ Item11 r Same as Netscape item: _____________________________________ r Separator r Custom Label: ______________________ Keyboard Accelerator: ____________ URL: ___________________________________________________________ Status Bar Text: _______________________________________________ 3/20/96 Netscape Confidential Page 10 Item12 r Same as Netscape item: _____________________________________ r Separator r Custom Label: ______________________ Keyboard Accelerator: ____________ URL: ___________________________________________________________ Status Bar Text: _______________________________________________ Item13 r Same as Netscape item: _____________________________________ r Separator r Custom Label: ______________________ Keyboard Accelerator: ____________ URL: ___________________________________________________________ Status Bar Text: _______________________________________________ Item14 r Same as Netscape item: _____________________________________ r Separator r Custom Label: ______________________ Keyboard Accelerator: ____________ URL: ___________________________________________________________ Status Bar Text: _______________________________________________ Item15 r Same as Netscape item: _____________________________________ r Separator r Custom Label: ______________________ Keyboard Accelerator: ____________ URL: ___________________________________________________________ Status Bar Text: _______________________________________________ Limited to 25 items (item count includes separator bars) 3/20/96 EX-10.14 3 ACCESS AGREEMENT BETWEEN PSINET INC. AND COMPANY Exhibit 10.14 Access Agreement between PSINet Inc. and the Registrant Pages where confidential treatment has been requested are stamped 'Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission,' and the appropriate section has been marked in the margin with a star(*). ACCESS AGREEMENT THIS AGREEMENT is made as of June 28, 1996, between PSINet Inc., a corporation incorporated under the laws of the State of New York and having its principal place of business at 510 Huntmar Park Drive, Herndon, Virginia 22070 ("PSI"), and IDT Corporation ("IDT"), a corporation incorporated under the laws of the State of Delaware and having its principal place of business at 294 State Street, Hackensack, New Jersey 07601. W I T N E S S E T H: WHEREAS, IDT desires to obtain from PSI network access for the benefit of IDT's individual customers desiring access at speeds up to 28.8 Kbps (hereinafter, "Customers"); and WHEREAS, PSI is willing and able to provide such access; NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the parties agree, intending to be legally bound, as follows: 1. Definitions. The following terms shall have the following meanings for purposes of this Agreement and for purposes of the Exhibits hereto: 1.1 "Authorized User" shall mean any person authorized by an IDT Customer to have an account on a Host. 1.2 "Backdoor Connection" shall mean a connection over the Network to any person who is not an Authorized User. 1.3 "Host" shall mean a computer with a Network address. 1.4 "Network" shall mean the combination of computer hardware, computer software programs and data transmission facilities operated by PSI which will permit computers operated by IDT Customers to communicate with computers at remote locations which are operated by others and to provide access to Internet. 2. Access. 2.1 Provision of Access. Throughout the term of this Agreement, PSI shall provide IDT's Customers with the right to access at speeds up to 28.8 Kbps and use its Network at the levels then provided and supported by PSI ("Access"), as more specifically defined in paragraph 3.1 hereof. A list of points of presence ("POPs") currently maintained by PSI is annexed hereto as Exhibit A. PSI reserves the right to install new POPs and/or to close existing POPs as it, in its sole discretion, deems appropriate. In the event PSI deems it necessary to close an existing POP, PSI shall provide IDT with sixty (60) days written notice thereof. IDT may order such Access on behalf of its present or future Customers and there shall be no limit on the number of Customers who may use the Network; provided, however, that upon 30 days written notice to IDT PSI may refuse service to a proposed IDT Customer because there is insufficient capacity on the Network or in the POP to provide the Services to such proposed Customer. 2.2 Termination of Access. PSI shall terminate the Access rights of any IDT Customer as soon as is reasonably practical upon written notice from IDT to do so or upon mutually agreed upon electronic process with receipt confirmed, but shall have no liability in connection therewith. 2.3 Authorized Users. IDT may not permit any person or entity other than an Authorized User to have access to the Network, except with the consent of PSI. No person may be authorized to use the Network by means of a connection between a Host owned or leased by a Customer and a Host owned or leased by a person other than a Customer. 2.4 Local Loop Facilities. Local Loop to PSI's Network shall be the sole responsibility of IDT and its Customers and PSI shall have no responsibility in connection therewith. 2.5 Primary Access Provider. During the initial term of this Agreement and any and all renewal terms, PSI shall be the primary alliance provider of Access for IDT's Customers, excluding access provided by other providers pursuant to alliance agreements to which IDT is a party and which are in force prior to the date of this Agreement. Additionally, IDT may enter into similar alliance agreements in areas which are not covered by PSI's Network or areas PSI chooses not to service due to a lack of capacity in accordance with the provisions of paragraph 2.1 hereof. 2.6 Additional Users. IDT will use its best efforts to increase the number of users of PSI's Network. Additional Users obtained by IDT shall be entitled to use the Network through IDT in the same manner and to the same extent as other IDT Customers. 3. Term. The initial term of this Agreement shall be one (1) year from the date hereof. This Agreement shall be automatically renewed for successive one-year terms, unless terminated by either party upon at least ninety (90) days prior written notice to the expiration of the initial or any renewal term. Either party may terminate this Agreement at any time during the term of this Agreement with at least one-hundred eighty (180) days written notice to the other; provided, however, that neither party may terminate this Agreement during its initial term except in the event of a material breach by the other party. 4. Charges. 4.1 Base Charge. On the execution of this Agreement, and on the first day of each month thereafter throughout the term of this Agreement, IDT agrees to pay PSI for each of IDT's Customers who is then or was at any time during the immediately preceding month authorized to use PSI's Network a base charge pursuant to the following schedule: 2 [ ]* The applicable base charges above are to be applied to all IDT Customers irrespective of the rate that previously was applied to each group of Customers. For example, if there are [ ]* IDT Customers on PSI's Network, the applicable base charge of [ ]* shall apply to the entire Customer base. Should the amount of Customers subsequently fall below the threshold, the applicable base charge shall adjust to the base charge indicated in the above schedule for such number of Customers. The payment to be made for the initial month of Access for any IDT Customer shall include (i) an amount equal to the applicable base charge for such initial month, prorated in the case of a partial month, and [Initialed KB] 4.2 Taxes. IDT shall be liable for and shall reimburse PSI for all taxes and related charges however designated resulting from the transactions contemplated hereby, including state or local sales or use taxes and excise taxes, imposed in connection with or arising from the provision of Access. IDT will pay all surcharges levied in connection with the local loops. 4.3 Invoices. PSI shall invoice IDT monthly in advance for all charges under this Agreement. All invoices will be payable within seven (7) days of receipt of invoice. Delinquent payments are subject to a late payment charge at the rate of prime plus four percent (4%) per month, or portion thereof, of the amount due (but not to exceed the maximum lawful rate). In the event IDT shall fail to pay PSI any amount due under this Agreement for a period of 14 days, PSI, in addition to charging applicable delinquency fees, may discontinue providing Access to IDT and its Customers upon twenty-four (24) hours prior written notice to IDT. PSI shall resume providing Access immediately upon receipt of such payment, and in such event IDT shall pay PSI a reasonable reconnection fee. 4.4 Minimum Commitment. Commencing six (6) months from the date PSI begins to service IDT Customers on PSI's Network, the minimum monthly revenue to PSI from IDT for Access provided pursuant to the terms of this Agreement shall be [ ]* In the event PSI's gross revenues from IDT in any month thereafter shall be less than the required minimum, IDT, at its discretion, shall either: (a) remit to PSI an amount equal to the difference between the aforesaid minimum monthly revenue amount and such gross revenues; or (b) give PSI the right of first refusal to purchase from IDT all IDT Customers who receive Access to PSI's Network pursuant to the 3 Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission terms of this Agreement at the lower of [ ]* and (ii) the rate of [ ]* per Customer. In the event that PSI chooses not to purchase the IDT Customers and IDT chooses not to remit to PSI the amount stated above in subparagraph (a), PSI shall continue to service the Customers [ ]* specified in paragraph 4.1 hereof for a period of sixty (60) days following such failure by IDT to provide the minimum monthly revenue payment, in order to assure a smooth transition for said customers. 5. Maintenance Services 5.1 Maintanence of Network. PSI shall keep and maintain its Network in good condition and repair with a minimum uptime of [ ]*. In the event that PSI fails to maintain said minimum uptime in any given month, the monthy base charges for customers affected shall decrease by [ ]* for each full percentage point below the [ ]* threshold. Additionally, any downtime of [ ]* hours or greater during any given day, shall result in the same adjustment of the applicable monthly base charge. The Network shall be properly maintained, serviced and upgraded by PSI as it, in its sole discretion, shall determine is necessary in order to ensure connectivity to IDT Customers. PSI shall maintain a user to modem ratio of no greater that [ ]* for its Network. 5.2 Customer Equipment. PSI shall not be responsible for the installation, operation or maintenance of any computer equipment or computer software programs provided by an IDT Customer. 6. WARRANTIES EXCLUDED. PSI MAKES NO WARRANTIES IN CONNECTION WITH ITS NETWORK OR THE PROVISION OF ACCESS AS CONTEMPLATED HEREIN, WHETHER WRITTEN OR ORAL, STATUTORY, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTY OF MERCHANTIBILITY AND THE WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OR USE. IDT'S SOLE AND EXCLUSIVE REMEDY SHALL BE PSI'S OBLIGATION TO GIVE A CREDIT OR REFUND, AT PSI'S SOLE DISCRETION, BASED ON THE ORIGINAL CHARGE FOR THE SERVICES. 7. LIMITATION OF LIABILITY. NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT TO THE CONTRARY, THE PARTIES AGREE THAT PSI SHALL IN NO EVENT BE LIABLE TO IDT OR ANY OTHER PERSON FOR ANY INDIRECT, CONSEQUENTIAL, SPECIAL, INCIDENTAL, RELIANCE, PUNITIVE OR ANY OTHER DAMAGES, OR FOR ANY LOST PROFITS OF ANY KIND OR NATURE WHATSOEVER, REGARDLESS OF THE FORESEEABILITY THEREOF, ARISING OUT OF THE PROVISION OF ACCESS OR IN ANY WAY ARISING OUT OF THIS AGREEMENT, WHETHER IN ACTION ARISING OUT OF BREACH OF CONTRACT, BREACH OF WARRANTY, DELAY, NEGLIGENCE, STRICT TORT LIABILITY FOR ANY CLAIM OR LOSS, DAMAGE OR EXPENSE FROM ANY CAUSE WHATSOEVER, EXCEPT FOR PSI'S GROSS NEGLIGENCE, SHALL IN NOT EVENT EXCEED THE MONIES ACTUALLY PAID TO PSI 4 Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission UNDER THIS AGREEMENT BY IDT FOR THE SPECIFIC SERVICES THAT GIVE RISE TO THE CLAIM. NO ACTION OR PROCEEDING AGAINST PSI MAY BE COMMENCED MORE THAN TWO YEARS AFTER THE SERVICES ARE RENDERED. THIS CLAUSE SHALL SURVIVE FAILURE OF AN EXCLUSIVE REMEDY. PSI'S TOTAL LAIBILITY FOR GROSS NEGLIGENCE DURING THE LIFETIME OF THIS AGREEMENT SHALL IN NO EVENT EXCEED [ ]* IN THE AGGREGATE. 8. Force Majeure. To the extent provided in this Section 8, PSI shall not be liable for failure to fulfill its obligations hereunder if such failure is due to causes beyond its reasonable control, including, without limitation, actions or failures to act of IDT or any IDT Customer, acts of God, fire, catastrophe, governmental prohibitions or regulations, viruses which did not result from the acts or omissions of PSI, its employes or agents, national emergencies, insurrections, riots or wars, or strikes, lockouts, work stoppages or other labor difficulties. The time for any performance required hereunder shall be extended by the delay incurred as a result of such act of force majeure, and PSI shall act with diligence to correct such force majeure. 9. Indemnification of PSI. IDT shall idemnify and hold harmless PSI and PSI's directors, officers, employees, agents and advisors from and against any and all claims of other persons or entities arising out of material, data, information or other content transmitted by IDT Customers or other acts or omissions IDT and/or its Customers. 10. Confidential Information. 10.1 Nondisclosure. If either party acquires Confidential Information of the other, such receiving party shall maintain the confidentiality of the disclosing party's Confidential Information shall use such Confidential Information only for the purposes for which it is furnished and shall not reproduce or copy it in whole or in part, except for use as authorized in the Agreement. Confidential Information shall mean all information of the disclosing party which it treats as confidential or proprietary. Confidential Information shall not include information which is or hereafter becomes generally available to others without restriction or which is obtained by the receiving party without violating the disclosing party's rights under this Article 10 or any other obligation of confidentiality. The terms and conditions of this Agreement shall constitute Confidential Information. 10.2 Duration. With respect to all Confidential Information, the parties' rights and obligation under this Article shall remain in full force and effect following the termination of this Agreement. 10.3 Ownership. All materials and records which consititute Confidential Information, other than service orders and copies of this Agreement, shall be and remain the property of, and belong exclusively to, the disclosing Party, and the receiving party agrees either to surrender possession of and turn over or to destroy all such Confidential Information which it may possess or control upon request of the disclosing party or upon the termination of this Agreement. 10.4 Injunctive Relief The parties acknowledge and agree that, in the event of a breach or threatened breach by any party of any provision of this Article, 5 Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission. the other party will have no adequate remedy in money or damages and accordingly, shall be entitled to an injunction against such breach. However, no specification in this Section of a specific legal or equitable remedy shall be construed as a waiver or prohibition against any other legal or equitable remedies in the event of a breach of this Article of this Agreement. 10.5 Legal Obligation to Disclose. Each party shall be released from its obligations under this Article 10 with respect to information which such party is required to disclose to others pursuant to obligations imposed by law, rule or regulation; provided, however, that prior to any such required disclosure, such party provide written notice and consult with the other party. 11. Miscellaneous. 11.1 No Agency. Except as otherwise expressly provided in this Agreement, this Agreement does not constitute either party as the agent or legal representative of the other party and does not create a partnership or joint venture between the parties. Except as otherwise expressly provided in this Agreement, neither party shall have any authority to contract for or bind any other party in any manner whatsoever. This Agreement confers no rights of any kind upon any third party. 11.2 Governing Law. This Agreement shal be governed in all respects by the laws of the State of New York without reference to its principles of conflicts of laws. 11.3 Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors and assigns of the parties hereto; provided, however, that neither party may assign its rights hereunder without the prior written consent of the other, which consent shall not be unreasonably withheld. 11.4 Entire Agreement; Amendment. This Agreement (including all Exhibits) constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof. Neither this Agreement nor any term hereof may be amended, waived, discharged or terminated, except by a written instrument signed by the parties hereto. 11.5 Notices, etc. (a) All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by certified or registered mail (return receipt requested), express air courier, charges prepaid or facsimile addressed as follows: To IDT: IDT Corporation 294 State Street Hackensack, New Jersey 07601 Facsimile: (201)928-1057 Attn: Howard Balter, Chief Operating Officer To PSI: PSINet Inc. 510 Huntmar Park Drive Herndon, Virginia 22070 6 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the date first above written, and the persons signing warrant that they are duly authorized to sign for and on behalf of the respective parties. PSINET INC. By: /s/ Harold S. Willis ------------------------------ Name: Harold S. Willis Title: Chief Operating Officer IDT CORPORATION By: /s/ Howard Balter ------------------------------ Name: Howard Balter Title: Chief Operating Officer 8 EX-10.15 4 RESTATED SALES AGREEMENT Exhibit 10.15: RESTATED SALES AGREEMENT BETWEEN INTERNATIONAL COMPUTER SYSTEMS, INC. AND THE REGISTRANT. PAGES WHERE CONFIDENTIAL TREATMENT HAS BEEN REQUESTED ARE STAMPED 'CONFIDENTIAL TREATMENT REQUESTED AND THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION,' AND THE APPROPRIATE SECTION HAS BEEN MARKED IN THE MARGIN WITH A STAR (/*/). RESTATED SALE AGREEMENT BETWEEN INTERNATIONAL COMPUTER SYSTEMS, INC. AND IDT CORPORATION This Sale Agreement (the "Agreement") is entered into as of the 29th day of July, 1996 by and between INTERNATIONAL COMPUTER SYSTEMS, INC., a Louisiana corporation (hereinafter referred to as "Seller"), represented herein by Gordon E. Kime, who has been duly authorized by the Board of Directors of Seller, and IDT CORPORATION, a Delaware corporation (hereinafter referred to as "Purchaser"), represented herein by Howard Balter, who has been duly authorized by the Board of Directors of Buyer WITNESSETH WHEREAS, the parties hereto entered into an Agreement styled Sale Agreement, dated July 29, 1996, and desire to restate in its entirety that Agreement; and WHEREAS, Seller is an Internet service provider doing business under the trade name of "Linknet" and provides Internet access to customers, including management of the Internet for its customers and customer support for all customers of Linknet, throughout the State of Louisiana; and WHEREAS, Purchaser is an Internet service provider throughout the United States providing Internet services to its customers, management of the network and customer support for the customers on its network; and WHEREAS, Purchaser desires to purchase and seller desires to sell all of Seller's equipment and other assets comprising the Linknet network; which equipment is more fully described on Exhibit A attached hereto and incorporated herein by reference (the "Equipment") 1 and NOW THEREFORE, it is mutually agreed as follows: 1. SALE OF ASSETS For and in consideration of the Purchase Price, defined below, Seller does hereby grant, bargain, sell, convey, assign, set over and deliver unto Purchaser who does hereby accept and purchase for itself, its successors and assigns, and does hereby acknowledge delivery and possession thereof, all of Seller's interests in the Equipment and other assets of the seller referenced in Exhibit A, and all interests, rights and privileges of ownership of the Equipment, to have and to hold unto said Purchaser, its successors and assigns forever. 2. CONSIDERATION As used herein, the term "Purchase Price" shall mean [ ]/*/ Purchaser shall pay the Purchase Price to Seller follows: [ ]/*/ has already been paid, with respect to which Seller acknowledges receipt; [ ]/*/ is hereby paid in cash with respect to which Seller hereby acknowledges receipt, the balance, to wit [ ]/*/ shall be paid in [ ]/*/ payments due on the first date of each month commencing October 1, 1996. The [ ]/*/ balance of the Purchase Price shall bear interest at the rate of [ ]/*/ per annum, commencing August 1, 1996. The first 6 payments shall be [ ]/*/ in the following amounts: October 1, 1996 - [ ]/*/; November 1, 1996 - [ ]/*/; December 1, 1996 - [ ]/*/; January 1, 1997 - [ ]/*/; February 1, 1997 - [ ]/*/; March 1, 1997 - [ ]/*/. The next [ ]/*/ payments shall be of interest and principal, each in the amount of [ ]/*/. The final payment, due on September 1, 2000, shall be in an amount equal to the sum of all accrued and 2 CONFIDENTIAL TREATMENT REQUESTED AND THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION unpaid interest due under this note, all principal due under this note and all other amounts due under this note. All payments due under the Note shall be made to Hibernia National Bank in satisfaction of Seller's indebtedness to such bank until fully repaid and until any security interest Hibernia National Bank may have in the Equipment is satisfied. ICS directs that the [ ]/*/ be paid as follows: (i) [ ]/*/ to Bank One Equity Investors, Inc. ("Bank One") for the purchase by ICS of Bank One's preferred stock in ICS [ ]/*/ and (iii) [ ]/*/ to Sullivan, Stolier & Daigle, APLC, as Escrow Agent, pursuant to the terms of the Escrow Agreement attached hereto as Exhibit D, and will pay all of the liabilities listed as an attachment to Exhibit D. ICS will have no other remaining material liabilities except as set forth as Exhibit E. Except as set forth in Exhibit F, ICS has incurred no other liabilities since July 29, 1996 which IDT shall assume pursuant to this agreement. 3. SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS Seller makes the following representations, warranties and covenants: i) The Equipment is in good condition and in proper working order, and is fit for the intended use by Purchaser, to wit: Internet access and service for its customers, management of the network by Purchaser and customer support by Purchaser and other uses normally made of such Equipment by a company in the business of the Seller. 3 CONFIDENTIAL TREATMENT REQUESTED AND THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION ii) Other than as set forth on Exhibit B, the Seller has good, clear and absolute record and marketable title to all of the Equipment sold free and clear of any and all liens, pledges, encumbrances, charges, rights of first refusal; transfer restrictions, options, or any similar claim or right, legal or equitable, or any other such restriction which could interfere with the possession, use and enjoyment of anything sold pursuant to this Agreement, and interests of any other person or entity, including without limitation, tax liens, mortgages, security interests and interests of co- owners, and that Seller has the ability to transfer good title free of interests of any person or entity. iii) The Seller has paid all applicable federal, state, local and other taxes as of the date of the closing of this transaction and that no taxes are due and payable as of the date of the closing of this transaction, and that the Seller has properly filed all required Federal, State or local tax returns. The property tax on the Equipment due after the date hereof shall be paid by Purchaser. iv) The Seller is not involved in any controversy, including without limitation, lawsuits and settlement negotiations, wherein the Seller's ownership, right of use, or right of sale of the Equipment and other assets sold in this transaction are in any doubt whatsoever. v) The Seller has fully disclosed to the Purchaser the scope of any and all manufacturers' warranties on the Equipment, which are hereby assigned to the Purchaser. vi) The Seller has taken no action to cause the manufacturer warranties on the equipment to be questioned or eliminated, including without limitation repairs in a manner other than that authorized by the warranty, and has taken all actions necessary to cause all 4 warranties on the Equipment to remain in full force and effect. vii) The Seller may sell the Equipment and other assets sold in this transaction without conflicting with, constituting a default under, or breaching any provision of any agreement, contract, whether oral or written, commitment, binding arrangement, deed, lease or other instrument to which Seller is a party. viii) The Seller may sell the Equipment and other assets sold in this transaction consistent with all applicable Federal, State and local law, including without limitation, statutes, regulations and court orders. ix) Other than as set forth on Exhibit B, the Equipment sold in this transaction are not subject as of the date of the signing of this agreement nor will they become subject to any material liabilities except those voluntarily incurred by the Purchaser after the completion of transfer of title, nor will Purchaser's entering into this agreement give rise to any liabilities on the part of the Purchaser other than those expressly accepted by Purchaser under this agreement. x) Seller is a corporation duly incorporated and in good standing under the laws of Louisiana and has all requisite power, capacity and authority to enter into this Agreement. Attached hereto as exhibit C is a copy of a duly adopted Board resolution authorizing Seller's entering into this Agreement and acknowledging that this Agreement is a binding and enforceable obligation of Seller. Seller has full right and authority to enter into this Agreement without any other governmental or private consent or approval. xi) Other than as set forth on Exhibit B, neither Purchaser nor the Equipment are subject, nor will become subject, to any material liabilities other than those expressly 5 disclosed herein. This provision applies to liabilities accruing before or after closing which relate to the period prior to closing. xiii) No representations or warranties of Seller made in any document, certificate, exhibit or omit to state a material fact necessary to make any statement of fact contained herein or therein not misleading. All documents and other papers delivered in connection hereto are true, complete and authentic. The foregoing representations, warranties and covenants shall survive the closing of the transaction hereunder. Notwithstanding any other provision of this agreement, or any provision of any other agreement or contract between Purchaser and Seller, the Purchaser shall have the right to deduct from payments due to the seller under the promissory note any damages caused by a breach of the above representations, covenants or warranties, or any other provision of this agreement, and any representations covenants or warranties provided by applicable state or federal law; including without limitation UCC Article 2. The Purchaser shall have the right to withhold sufficient payments to satisify any and all damages suffered by it including without limitation costs of repair, costs of unpaid taxes, costs to clear encumbrances, lost profits and attorneys fees, until such time and in such amount that purchaser's damages have been fully redressed by withheld funds. The above right of deduction shall be without prejudice to the right of the Purchaser to pursue any other remedies, including without limitation, a lawsuit for breach of contract. 4. ADDITIONAL UNDERTAKINGS 6 Seller agrees (i) that Purchaser shall be and hereby is subrogated to all claims and rights of Seller under any insurance coverage maintained by Seller against casualty or other damage to any properties or assets of Seller sold to Purchaser, even if the loss with respect to such properties or assets arises after the date of this Agreement; (ii) to remit promptly to Purchaser any insurance proceeds which it may receive on account of any such claim or right; and (iii) to cooperate with Purchaser in obtaining payment with respect to any such claim or right. 5. ASSIGNMENT OF LINES Effective as of July 29, 1996, Purchaser shall assume all financial responsibility for all dial up access telephone lines (Bell South) and all Internet access lines (MCI) used by customers of Seller/Purchaser to access the Internet. Seller hereby represents that all of its access and telephone lines are fully assignable without limitation, and hereby assigns and agrees to do all other acts necessary to assign all access telephone lines. Seller also warrants that the leases of all premises where such lines are installed are assignable and will be assigned to Purchaser as of the closing of this agreement. 6. COVENANT NOT TO COMPETE Seller covenants that for three years following the closing date, neither it nor any of its officers, agents or employees will solicit any of Purchaser's current or former customers, clients or employees as of the date of this Agreement. Seller further covenants that, except as provided in paragraph l of the Royalty Agreement, for three years following the closing of this agreement 7 it will not attempt to solicit potential Internet service customers in the state of Louisiana. Seller's undersigned officers and directors personally accept the obligation imposed by this paragraph as evidenced by their signatures at the end of this Agreement. Any breach of this paragraph by Seller or any of its officers or directors, whether material or not, shall be considered a breach of all agreements between the parties. 7. INDEMNIFICATION Without limiting its obligations and liabilities to Purchaser under this agreement and applicable laws, Seller and the undersigned officers and directors of Seller agree to jointly and severally indemnify Purchaser against and to hold Purchaser harmless from any and all losses, liabilities, damages, demands, claims, assertions, actions and suits, whether groundless or otherwise, and all costs and expenses, including reasonable attorneys fees, from or in connection with: (a) Any claim made against Purchaser in respect of liabilities of Seller not (b) Any breach of representations, covenant or warranty or incorrect or this or other agreements between Seller and Purchaser. 8. GOVERNING LAW This Agreement shall be governed by the laws of the State of Louisiana. Any dispute arising out of this agreement shall be resolved by binding arbitration before the American Arbitration Association, to be held in New York City. 8 9. MISCELLANEOUS This Agreement may be executed in any number of counterparts, each of which shall be an original and all of which shall together constitute one agreement. If any covenant, warranty or representation made by the Seller in this Agreement is not correct, the Seller will be deemed to have defaulted under this Agreement, granting to the Purchaser all the rights and remedies provided herein. To the extent that this Agreement conflicts with any agreement entered into prior to the signing of this Agreement, this Agreement shall control with respect to matters covered herein. Purchaser shall not be obligated to assume or become liable for any liabilities, obligations, debts, contracts, or commitments of Seller, including any future liability relating to the period prior to closing, of any kind whatsoever, including, without limitation, liabilities of Seller under express or implied warranties for the replacement, repair or reworking of products or services sold by Seller, except as otherwise provided for in this Agreement. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Each of the parties hereto shall pay its own expenses incident to the preparation and carrying out of this Agreement and the transactions contemplated hereby. No provision of this Agreement shall be construed against or interpreted to the disadvantage of any party by reason of such party having or being deemed to have drafted such provision. 9 IN WITNESS WHEREOF, Seller and Purchaser have executed this Agreement on October 14, 1996 effective as of the day and year first written above. WITNESSES: INTERNATIONAL COMPUTER SYSTEMS, INC. BY: - -------------------------- ----------------------------------- - -------------------------- IDT CORPORATION BY: - -------------------------- ----------------------------------- - -------------------------- APPROVED AND ACCEPTED BY: /s/ Gordon Kime ----------------------------------- Gordon Kime /s/ ----------------------------------- [Linknet Officer] /s/ ----------------------------------- [Linknet Officer] /s/ ----------------------------------- [Linknet Officer] 10 ADDENDUM TO SALE AND ROYALTY AGREEMENTS BETWEEN ICS AND IDT, DATED AS OF 7/31/96 ICS hereby acknowledges that it is liable to hold IDT harmless and to indemnify IDT with respect to any and all of ICS' indebtedness to Hibernia National Bank, which indebtedness encumbers the Equipment purchased by IDT. Accordingly, ICS agrees that IDT may pay directly to Hibernia revenues otherwise payable to ICS pursuant to the Royalty Agreement in sufficient amounts so that by the termination date of the Royalty Agreement, the scheduled payments due under the Note by IDT to ICS dated October 14, 1996, will be sufficient to satisfy all remaining scheduled payments due at that time to Hibernia. Notwithstanding the law applicable to the other agreements among the parties, this Addendum shall be governed pursuant to the laws of the State of New York. Dated: October 14, 1996 Accepted: International Computer Systems, Inc. By: Gordon E. Kime /s/ Gordon E. Kime 11 Exhibit A to Sale Agreement Current Network Equipment Cost Description Type Units Retail Deprec Selling - -------------------------------------------------------------------------------- Alpha 2100 System 1 [ Alpha 1000 System 1 Alpha 1000 System 1 Alpha 200/166 System 1 Alpha 150 System 1 DEC Dual P120 System 1 Alpha 266 System 2 Pentium 100 System 1 Pentium 100 System 1 DEC P75 System 5 DEC 486/66 System 2 DEC P133 System 2 DEC P100 System 1 SUBTOTAL Cisco 2501 Router 3 Cisco 4000M Router 2 Cisco 4000M Router 5 Vanguard Router 2 Vanguard 300 Router 2 Livingston Route Router 1 Cisco FDDI Router 5 Cisco Cables Router 9 SUBTOTAL Micom 10K CSU 5 Micom 5K CSU 7 Micom 10K CSU 1 TSU 600 CSU 2 TSU 100 CSU 5 Motorola CSU CSU 8 Datacom 56K CSU 1 Motorola FDP CSU 13 SUBTOTAL Pipeline 400 ISDN 6 NT1 ACE ISDN 29 Pipeline 50 ISDN 1 Pipeline 25 ISDN 1 Bitsurfer Pro ISDN 2 Bitsurfer Central ISDN 2 Xircom ISDN ISDN 1 SUBTOTAL 925 Modem Modem 495 925 LIU Modem 15 925 SMC Modem 20 925 Power Sup Modem 15 Multitech 2834M Modem 11 ]/*/ Page 1 Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission Current Network Equipment Cost Description Type Units Retail Deprec Selling - -------------------------------------------------------------------------------- SUBTOTAL 925 Shiva Term Serv 52 [ 900 GM Term Serv 9 Digiboard EISA Term Serv 1 Liv Portmaster Term Serv 2 Liv Portmaster2E Term Serv 1 SUBTOTAL DEC 900MX Networking 8 DEC 900MS Networking 9 DEC 900EF Networking 1 DEC 900TX Networking 1 DEC 900TM Networking 1 DEC 90T Networking 12 DEChub PS Networking 23 DEChub 1 Networking 3 Asante Hub Networking 1 Asante Hub Networking 1 DEC FDDI Networking 2 DEC FDDI Mods Networking 9 SUBTOTAL VT420 TERM Misc. 2 Toshiba NB Misc. 2 APC 900 Misc. 9 APC 1400 Misc. 11 APC 2000 Misc. 2 DecLaser 1152 Misc. 1 Tool Kits Misc. 2 Blue Racks Misc. 8 Black Racks Misc. 9 Grey Racks Misc. 1 Patch Panels Misc. 7 SUBTOTAL Net Comm Srv Software 1 Dec Mailwrk Software 1 Net Comm Srv Software 2 Net Comm Srv Software 1 OSF Unlim Software 3 OSF Docs Software 3 OSF Libs Software 3 SNMP Manag Software 1 PM2 Src Software 1 QR Bbinet Software 1 SysDraw Software 2 Post Office Software 1 ]/*/ Page 2 Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission Current Network Equipment Cost Description Type Units Retail Deprec Selling - -------------------------------------------------------------------------------- SUBTOTAL Salaries/Labor Labor 1 [ Salaries/Prog Labor 1 Salaries/Train Labor 1 SUBTOTAL DEC AlphaSrv Consulting 1 DEC Remote Mg Consulting 1 DEC Kerberos Consulting 1 DEC Tech Supp Consulting 1 DEC Tech Supp Consulting 1 Oth Tech Supp Consulting 1 Oth Tech Supp Consulting 1 Oth Tech Supp Consulting 1 Oth Tech Supp Consulting 1 Oth Tech Supp Consulting 1 SUBTOTAL Phone Install Install 1 Cable Install Install 1 T1 Install Install 1 Oth Install Install 1 Bell Backbone Install 1 Bell Backbone Install 1 Bell Phone Liines Install 1 MCI Install Install 1 SUBTOTAL Cisco Smartnet Warranty 7 DEC Uplift Warranty 1 DEC Uplift Warranty 1 ]/*/ SUBTOTAL GRAND TOTAL Page 3 Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission Exhibit E to Sale Agreement Liabilities After Close All creditors in the amount set forth on the attached 11 page listing of creditors entitled "ICS, INC. d/b/a Linknet Internet Services - Aged Open Income Summary" with exception to those creditors being paid pursuant to the Escrow Agreement and listed on Schedule 2 to the Escrow Agreement. $374,097.26 Security National Bank $499,000.00 Hibernia National Bank $825,000.00 Amounts Due Stockholders $492,973.63 Total $2,191,070.89 Page 1 RESTATED CONSULTANT AND CUSTOMER SUPPORT AGREEMENT BETWEEN INTERNATIONAL COMPUTER SYSTEMS, INC. AND IDT CORPORATION This Consultant and Customer Support Agreement (the "Agreement") is entered into as of the 29th day of July, 1996 by and between INTERNATIONAL COMPUTER SYSTEMS, INC., a Louisiana corporation (hereinafter referred to as "ICS"), represented herein by Gordon E. Kime, who has been duly authorized by the Board of Directors of ICS, and IDT CORPORATION, a Delaware corporation (hereinafter referred to as "IDT"), represented herein by Howard Balter, who has been duly authorized by its Board of Directors. WITNESSETH WHEREAS, the parties hereto entered into an Agreement styled Consultant and Customer Support Agreement, dated July 29, 1996, and desire to restate in its entirety that Agreement; and WHEREAS, ICS is an Internet service provider doing business under the trade nane of "Linknet" and provides for Internet access to customers, including management of the Internet and customer support for all customers of Linknet, throughout the State of Louisiana; and WHEREAS, IDT is an Internet service provider throughout tne United States providing Internet services to its customers, management of the network and customer support for the customers on its network; and WHEREAS, IDT has purchased or is in the process of purchasing the equipment and other assets comprising the Linknet network; and 1 WHEREAS, IDT desires to expand its Internet services by contracting with ICS for it to provide consulting services; and WHEREAS, ICS has the expertise required to implement and operate the consulting and customer support needs of IDT. NOW THEREFORE, it is mutually agreed as follows: 1. PROVISION OF SERVICES ICS shall provide to IDT and/or its network customers the Consulting Services, described below, and the Customer Support Services, described below. 2. TERM AND TERMINATION SECTION 2.1 TERM. ICS shall provide the Consulting Services for an initial term commencing August 15, 1996, and terminating July 31, 2000. ICS shall provide the Customer Support Services for an initial term commencing July 1, 1996, and terminating July 31, 2000. This Agreement shall be automatically renewed for successive two (2) year additional term(s), absent written notice, from either party, provided at least ninety (90) days prior to the commencement of such additional term(s). SECTION 2.2 TERMINATION FOR CAUSE. This Agreement may be terminated by either party for cause in the event of a breach by the other party (the "Breaching Party") of any material term or condition hereof and the failure of the Breaching Party to cure such breach within thirty (30) days following the receipt of notice of such breach. 2 3. CONSIDERATION SECTION 3.1 CONSULTING SERVICES FEE. As consideration for the Consulting Services to be provided by ICS in accordance with the terms of this Agreement, IDT shall pay to ICS a Base Consulting Services Fee and a Supplemental Consulting Services Fee. The Base Consulting Services Fee shall be [ ]/*/ Dollars per month. The Supplemental Consulting Services Fee shall be an amount equal to the product of [ ]/*/ ("Supplemental Unit Rate") times each Supplemental Unit, defined below. As used herein, a "Supplemental Unit" shall mean groups of ten points of presence ("POPs") in excess of 21 POPs. For example, if there are 18 POPs, then the number of Supplemental Units is 0; if there are 21 POPs, then the number of Supplemental Units is 0; if there are 22 POPs, then the number of Supplemental Units is 1; if there are 27 POPs, then the number of Supplemental Units is 1; and if there are 37 POPs, then the number of Supplemental Units is 2. The Base Consulting Services Fee and the Supplemental Consulting Services Fee (collectively the "Total Consulting Services Fee") shall be paid monthly, and such payment shall be due and payable on or before the first day of the month during which services are to be rendered. The Base Consulting Services Fee for the first month in which consulting services are rendered shall be prorated to reflect that the Consulting Services will be provided only for a given portion of the month, i.e., for the first month in which consulting services are provided, the Base Consulang Services Fee will be [ ]/*/ 3 CONFIDENTIAL TREATMENT REQUESTED AND THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION SECTION 3.2 REIMBURSEMENT. IDT shall reimburse ICS for reasonable travel expenses incurred by ICS in connection with performing the Consulting Services. Such travel expenses shall include, but shall not be limited to, air fare, ground transportation, lodging, meals, etc. ICS shall prepare and forward to IDT a detailed invoice with supporting documentation describing ICS's travel expenses of approved travel by IDT. IDT shall pay such travel expense reimbursement invoices within 30 days receipt thereof. SECTION 3.3. [DELETED] SECTION 3.4. [DELETED] SECTION 3.5. ANNUAL FEE ADJUSTMENT. Effective August 1 of each year during the term of this Agreement (other than August 1, 1996), the Base Consulting Fee and the Supplemental Unit Rate shall be increased by five percent (5%) over the Base Consulting Fee and the Supplemental Unit Rate then in effect, respectively. SECTION 3.6. [DELETED] SECTION 3.7. EFFECT OF TERMINATION. Payments due to ICS for expenses incurred or services rendered by ICS prior to the effective date of the termination of this Agreement shall be paid by IDT to the extent earned, notwithstanding the termination of this Agreement. 4. DESCRIPTION OF SERVICES TO BE PROVIDED BY ICS SECTION 4.1. CONSULTING SERVICES. As used herein, the term "Consulting Services" shall mean (i) router management, (ii) modem management and asset management (iii) usage reporting, (iv) bandwith reporting, (v) server management, (vi) overall network consulting, (vii) telephony consulting and provisioning, (viii) network maintenance and monitoring with a response to faults or problems 4 within one hour from occurrence, (ix) programming staff to include (a) two programmers at 20 hours per week for network programming, (b) two programmers at 20 hours per week for IDT projects, in the event IDT is dissatisfied with or chooses for any reason to discontinue use of the programming services set forth in this subsection, IDT reserves the right, excercisable on or before January 15, 1997, to do so and decrease the base consulting fee as well as the supplemental unit rate by [ ]/*/ per month, and (x) network set up (in-house set up by ICS) of new POPs. In the event the network is for any reason, within the control of ICS, not functioning during the term of this Agreement, ICS agrees that IDT may deduct [ ]/*/ per hour from the fees otherwise due hereunder. SECTION 4.2 CUSTOMER SUPPORT SERVICES. As used herein, the term "Customer Support Services" shall mean telephone support supplied by ICS to IDT customers relating to Internet access software distributed by IDT. SECTION 4.3 ADDITIONAL SERVICES. If IDT desires to purchase additional network services management services for IDT projects, IDT shall pay for hours in excess of an average of twenty hours a week over a two month period at the rate of [ ]/*/. 5. INDEPENDENT CONTRACTOR It is expressly acknowledged by the parties hereto that ICS is an independent contractor, and nothing in this Agreement is intended, nor shall be construed, to create any employer/employee relationship or a joint venture relationship; provided that the services to be rendered hereunder by ICS shall be provided in a manner consistent with the standards governing 5 CONFIDENTIAL TREATMENT REQUESTED AND THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION such services and the provisions of this Agreement. As such, IDT shall have the final say and dictate all technical strategy and implementation. Notwithstanding this paragraph, ICS agrees that intellectual property rights, including copyrights to all source codes, and programs, patents and trademarks are "work for hire" belonging to IDT. ICS shall not have the right to use or sell software or components of software created for IDT without the written consent of IDT. ICS will cause all of its employees or agents that perform services pursuant to this agreement or in any connection for IDT to execute a non-compete agreement that precludes such employee from competing with IDT in any of its businesses during the term of this Agreement or for 12 months following temination or soliciting IDT's employees during the term of this agreement and for 18 months following its termination. 6. NOTICES Any notice, demand or consent required or permitted hereunder shall be in writing and shall be delivered in person or mailed to the following: IF TO ICS: International Computer Systems, Inc. 1316 Mayer Avenue Alexandria, Louisiana 71303 Attention: Gordon E. Kime IF TO IDT: IDT Corporation 294 State Street Hackensack, New Jersey 07601 Attention: Joyce Mason, Esq. AND Peretz Bronstein, Esq. Easton & Echtman, P.C. 270 Madison Ave. 7th Floor 6 New York, NY 10016 7. GOVERNING LAW This Agreement shall be govered by the laws of the State of Louisiana. Any disputes under this agreement shall be resolved before The American Arbitration Association in New York City. 8. ASSIGNMENT No assignment of this Agreement or the rights or obligations hereunder shall be valid without the specific written consent of both parties, such written consent to be mailed as provided in paragraph 6. 9. ENTIRE AGREEMENT This Agreement supersedes all previous contracts and constitutes the entire agreementX betsveen the parties relating to the matters covered by this Agreement. No oral statements or prlor written materials not specifically incorporated herein shall be of any force and effect, and no changes in or additions to this Agreement, shall be recognized unless incorporated herein by amendment, as provided herein, such amendment(s) to become effective on the date stipulated in such amendment(s). 10. HEADINGS The headings of tEs Agreement are inserted for convenience only and are not to be 7 considered in the interpretation of this Agreement. They shall not in any way limit the scope or modify the substance or context of any section of this Agreement. 11. WAIVER OF BREACH The waiver by either party of a breach or violation of any provision of this Agreement shall not operate as or be construed to be, a waiver of any subsequent or other breach thereof. 12. PROVISIONS HELD INVALID If any one or more of the provisions contained in this Agreement shall be held to be invalid, illegal or unenforceable, for any reason or in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such provision had never been contained herein. 13. AMENDMENTS This Agreement may be amended only by an instrument in writing, signed by both parties. Such signed instrument shall state the effective date of the amendment. 14. MUTUAL COOPERATION Both the ICS and IDT acknowledge that mutual cooperation and assistance is essential to either party's performance under this Agreement; therefore, it will be the duty of both parties to make all good faith efforts to fully cooperate in the execution of this Agreement. 15. COUNTERPARTS 8 This Agreement may be executed in any number of counterparts, each of which shall be an original and all of which shall together constitute one agreement. 16. RECORDS IDT and ICS agree to make available for inspection to each other any books, documents and records of the other party that may be necessary to verify the nature and amount of any payments due pursuant to this Agreement. 17. ICS MANAGEMENT AND OPERATIONS IDT reserves the right to terminate this Agreement in the event that Mr. Gordon Kime ceases to function as the Chief Technical Officer of ICS. 18. INTERPRETATION No provision of this Agreement shall be construed or interpreted against any party on the basis of such parties being deemed to have drafted such provision. 9 IN WITNESS WHEREOF, ICS and IDT have executed this Agreement effective as of the day and year first written above. WITNESSES: INTERNATIONAL COMPUTER SYSTEMS, INC. /s/ BY: /s/ - ------------------------ ------------------------------------- /s/ - ------------------------ IDT CORPORATION BY: /s/ - ------------------------ ------------------------------------- - ------------------------ 10 ROYALTY AGREEMENT BETWEEN INTERNATIONAL COMPUTER SYSTEMS, INC. AND IDT CORPORATION This Royalty Agreement (the "Agreement") is entered into as of the 29th day of July, 1996 by and between INTERNATIONAL COMPUTER SYSTEMS, INC., a Louisiana Corporation, (hereinafter referred to as "ICS"), represented herein by Gordon Kime, who has been duly authorized by the Board of Directors of ICS, and IDT CORPORATION, a Delaware corporation (hereinafter referred to as "IDT"), represented herein by Howard Balter, who has been duly authorized by its Board of Directors. WITNESSETH WHEREAS, ICS is an Internet service provider doing business under the trade name of "LinkNet" and provides for Internet access to customers, including management of the Internet and customer support for all customers of LinkNet, throughout the State of Louisiana; and WHEREAS, IDT is an Internet service provider throughout the United States providing Internet services to its customers, management of the network and customer support for the customers on its network; and WHEREAS, IDT has purchased the equipment comprising the LinkNet network (the "Equipment Purchase"); and WHEREAS, coinciding with the Equipment Purchase, IDT has agreed to pay a royalty to ICS in accordance with this Agreement. NOW THEREFORE, it is mutually agreed as follows: 1 1. ROYALTY A. Payment of Royalty. IDT shall pay to ICS a royalty equal in amount to ------------------- (i) the [ ]/*/ during the Royalty Period, defined below, plus (ii) the [ ]/*/ plus (iii) the [ ]/*/ The royalty due with respect to collections made within any calendar month shall be paid by IDT to ICS on or before the 10/th/ day of the following calendar month. Collections received by IDT after the Royalty Period for providing Internet access to Base Customers, Non Dedicated New Customers, and Dedicated New Customers during the Royalty Period shall be paid by IDT to ICS as provided in this paragraph 1 notwithstanding that such collections were received after the Royalty Period. B. Non Dedicated Customers Defined. As used herein, "Non Dedicated -------------------------------- Customers" shall mean Internet access customers who do not use a dedicated line. C. Dedicated Customers Defined. As used herein, "Dedicated ---------------------------- Customers" shall mean Internet access customers who use a dedicated line. D. Base Customers Defined. As used herein, "Base Customers" shall mean ICS' ----------------------- existing Internet access customers, less Internet access customers who discontinue their Internet access service with IDT/ICS during the Royalty Period, plus any new Internet access customers 2 Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission in Louisiana that ICS signs up through ICS' efforts during the Royalty Period, provided however, in no event shall the number of Base Customers exceed [ ]/*/ the number of Customers existing as of [ ]/*/. Attached hereto as Exhibit A is a listing by category of the Base Customers. E. Non Dedicated New Customers Defined. As used herein, "Non Dedicated New ------------------------------------ Customers" shall mean the number of IDT/ICS Non Dedicated Customers in Louisiana that ICS signs up through ICS' efforts during the Royalty Period in excess of the number of Non Dedicated Base Customers existing as of July 29, 1996. F. Dedicated New Customers Defined. As used herein, "Dedicated New ------------------------------- Customers" shall mean the number of IDT/ICS Dedicated Customers in Louisiana that ICS signs up through ICS' sole efforts during the Royalty Period in excess of the number of Dedicated Base Customers existing as of July 29, 1996. G. Royalty Period Defined. As used herein, "Royalty Period" shall mean the ----------------------- period commencing July 29, 1996, and terminating on July 31, 1997. 2. TRANSFER OF CUSTOMERS ICS agrees to assist IDT in the immediate and orderly transition of customers from ICS to IDT, which may include development of dedicated connectivity between ICS and IDT, as well as programming and customization of either or both accounting systems to transition such customers. ICS agrees to expend all necessary resources to transition the network systems, accounting systems, and customers as quickly as possible, with the goal and objective of completing such transition on or before December 31, 1996. Until such time as the transition is 3 Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission completed, ICS shall serve as agent for IDT in collecting amounts due IDT for providing Internet access to the ICS Base Customers or any other customers of IDT designated by IDT. ICS may retain from amounts collected by it as agent for IDT the amount due ICS by IDT as royalties as provided in paragraph l hereof. 3. ICS INDEMNITY ICS hereby agrees to protect, defend and indemnify IDT, its officers, members, agents, managers and employees against, and hold the same harmless from any and all liability, losses, damages, obligations, judgments, claims, causes of action and expenses associated therewith (including reasonable attorney fees), resulting from or arising out of, directly or indirectly, any intentional act, wanton misconduct or negligent act or omission by ICS or its employees or agents. 4. IDT INDEMNITY IDT hereby agrees to protect, defend and indemnify ICS, its officers, members, agents, managers and employees against, and hold the same harmless from any and all liability, losses, damages, obligations, judgments, claims, causes of action and expenses associated therewith (including reasonable attorney fees), resulting from or arising out of, directly or indirectly, any intentional act, wanton misconduct or negligent act or omission by IDT or its employees or agents. 5. NOTICES 4 Any notice, demand or consent required or permitted hereunder shall be in writing and shall be delivered in person or mailed to the following: IF TO ICS: International Computer Systems, Inc. 1316 Mayer Avenue Alexandria, Louisiana 71303 Attention: Gordon E. Kime IF TO IDT: IDT Corporation 294 State Street Hackensack, New Jersey 07601 Attention: Joyce Mason, Esq. AND Peretz Bronstein, Esq. Easton & Echtman, P.C. 270 Madison Ave., 7th Floor New York, NY 10016 6. GOVERNING LAW This Agreement shall be governed by the laws of the State of Louisiana applicable to contracts executed and to be performed wholly within such state. Any dispute arising out of this transaction shall be resolved before the American Arbitration Association in New York City. 7. ASSIGNMENT No assignment of this Agreement or the rights or obligations hereunder shall be valid without the specific written consent of both parties hereto. 8. ENTIRE AGREEMENT This Agreement supersedes all previous contracts and constitutes the entire agreement between the parties relating to the matters covered by this Agreement. No oral statements or 5 prior written materials not specifically incorporated herein shall be of any force and effect, and no changes in or additions to this Agreement, shall be recognized unless incorporated herein by amendment, as provided herein, such amendment(s) to become effective on the date stipulated in such amendment(s). 9. HEADINGS The headings of this Agreement are inserted for convenience only and are not to be considered in the interpretation of this Agreement. They shall not in any way limit the scope or modify the substance or context of any section of this Agreement. 10. WAIVER OF BREACH The waiver by either party of a breach or violation of any provision of this Agreement shall not operate as or be construed to be, a waiver of any subsequent or other breach thereof. 11. PROVISIONS HELD INVALID If any one or more of the provisions contained in this Agreement shall be held to be invalid, illegal or unenforceable, for any reason or in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such provision had never been contained herein. 12. AMENDMENTS This Agreement may be amended only by an instrument in writing, signed by both parties. Such signed instrument shall state the effective date of the amendment. 13. 6 MUTUAL COOPERATION Both the ICS and IDT acknowledge that mutual cooperation and assistance is essential to either party's performance under this Agreement; therefore, it will be the duty of both parties to make all good faith efforts to fully cooperate in the execution of this Agreement. 14. COUNTERPARTS This Agreement may be executed in any number of counterparts, each of which shall be an original and all of which shall together constitute one agreement. 15. RECORDS IDT and ICS agree to make available for inspection to each other any books, documents and records of the other party that may be necessary to verify the nature and amount of any payments due pursuant to this Agreement. 16. USAGE AGREEMENT This Agreement completely supersedes and replaces the Usage Agreement between ICS and IDT, dated July 29, 1996 (the "Usage Agreement"). The Usage Agreement is void. 17. INTERPRETATION No provision of this Agreement shall be construed against or interpreted to the disadvantage of any party by reason of such party having or being deemed to have drafted such 7 provision. 8 IN WITNESS WHEREOF, ICS and IDT have executed this Agreement effective as of the day and year first written above. WITNESSES: INTERNATIONAL COMPUTER SYSTEMS, INC. /s/ /s/ Gordon Kime - ------------------------ ------------------------------------- By: Gordon Kime Its: Duly Authorized Agent /s/ - ------------------------ IDT CORPORATION /s/ Howard Balter - ------------------------ ------------------------------------- By: Howard Balter Its: Duly Authorized Agent - ------------------------ 9 EX-21.01 5 SUBSIDIARIES OF REGISTRANT Exhibit 21.01 Subsidiaries of Registrant IDT America, Corp. IDT International Corp. IDT Internet Services, Inc. Internet Online Services, Inc. Media Response, Inc. New World Telecommunications, Corp. Shmuelco Equipment Corp. Phone Depot, Inc. 1 EX-27.01 6 FINANCIAL DATA SCHEDULE
5 12-MOS JUL-31-1996 AUG-01-1995 JUL-31-1996 14,893,756 0 13,597,565 2,100,000 0 30,501,411 14,106,544 1,653,214 43,797,371 16,954,695 0 0 0 96,669 26,746,007 43,797,371 0 57,693,880 0 36,437,583 37,011,393 4,041,573 0 (15,409,792) 0 (15,409,792) 0 (233,500) 0 (15,643,292) (0.86) (0.86)
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