{"id":43763,"date":"2015-09-17T11:25:58","date_gmt":"2015-09-17T16:25:58","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/contracts\/uncategorized\/tax-sharing-and-indemnification-agreement-idt-corp-and.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"tax-sharing-and-indemnification-agreement-idt-corp-and","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/planning\/tax-sharing-and-indemnification-agreement-idt-corp-and.html","title":{"rendered":"Tax Sharing and Indemnification Agreement &#8211; IDT Corp. and Net2Phone Inc."},"content":{"rendered":"<pre>\n                   TAX SHARING AND INDEMNIFICATION AGREEMENT\n\n     THIS TAX SHARING AND INDEMNIFICATION AGREEMENT (\"Agreement\") is made and\nentered into as of May 7, 1999, by and between IDT Corporation, a Delaware\ncorporation (\"IDT\"), and Net2Phone, Inc., a Delaware corporation (\"Net2Phone\").\n              ---                                                  ---------   \n\n                                    RECITALS\n\n     A.  IDT is the common parent corporation of an affiliated group of\ncorporations (the \"IDT Consolidated Group\") within the meaning of Section\n1504(a) of the Internal Revenue Code of 1986, as amended (the \"Code\").  The IDT\nConsolidated Group includes Net2Phone.  The IDT Consolidated Group have\nheretofore joined in the filing of consolidated federal income tax returns.\n\n     B.  IDT expects that as a result of sales of shares of Net2Phone, including\nthrough a public offering, Net2Phone will cease to be a member of the IDT\nConsolidated Group, although Net2Phone may continue to be included in Combined\nTax returns (as defined herein).\n\n     C.  IDT and Net2Phone desire to provide for the payment of Income Taxes (as\ndefined herein) and entitlement to refunds thereof, allocate responsibility and\nprovide for cooperation in connection with the filing of returns in respect of\nIncome Taxes, and provide for certain other matters relating to Income Taxes.\n\n     NOW, THEREFORE, in consideration of the agreements contained herein and\nintending to be legally bound hereby, IDT and Net2Phone agree as follows:\n\n                                   ARTICLE 1.\n                                  DEFINITIONS\n\n1.1  Definitions.\n\n     For purposes of this Agreement, the terms set forth below shall have the\nfollowing meanings, in addition to the terms defined elsewhere in this\nAgreement:\n\n     (a)  \"Actually Realized\" or \"Actually Realizes\" shall mean, for purposes of\ndetermining the timing of the occurrence of any Income Tax Benefit, the time at\nwhich the amount of Income Taxes paid by such person is reduced below the amount\nof Income Taxes that such person would have been required to pay but for the\noccurrence of such Income Tax Benefit. In the case of an Income Tax Benefit in\nthe form of a Refund, \"Actually Realized\" or \"Actually Realizes\" means the date\nsuch Refund is received.\n\n     (b)  \"Carryback\" shall mean the carryback of a Tax Asset (including,\nwithout limitation, a net operating loss, a net capital loss or a tax credit) by\nNet2Phone from a Post-Deconsolidation Taxable Period to a Pre-Deconsolidation\nTaxable Period.\n\n\n                                       1\n\n \n     (c)  \"Combined Tax\" shall mean, with respect to each foreign, state or\nlocal taxing jurisdiction, any Income Tax payable to such foreign, state or\nlocal taxing jurisdiction in which a member of the Net2Phone Group files tax\nreturns with a member of the IDT Sub-Group, on a consolidated, combined, or\nunitary basis for purposes of such Income Tax.\n\n     (d)  \"Deconsolidation\" shall mean any event pursuant to which Net2Phone\nceases to be a member of the IDT Consolidated Group.\n\n     (e)  \"Deconsolidation Date\" means the day on which Net2Phone ceases to be a\nmember of the IDT Consolidated Group, as determined under Treas. Reg. (S)1.1502-\n76(b).\n\n     (f)  \"Federal Tax\" shall mean any tax imposed under Subtitle A of the Code.\n\n     (g)  \"Final Determination\" shall mean (i) with respect to Federal Taxes, a\n\"determination\" as defined in Section 1313(a) of the Code or execution of an\nInternal Revenue Service Form 870AD and, with respect to taxes other than\nFederal Taxes, any final determination of liability in respect of a tax that,\nunder applicable law, is not subject to further appeal, review, or modification\nthrough proceedings or otherwise, (ii) any final disposition of a tax issue by\nreason of the expiration of a statute of limitations, or (iii) the payment of\ntax by IDT with respect to any item disallowed or adjusted by any taxing\nauthority where IDT determines in good faith that no action should be taken to\nrecoup such payment.\n\n     (h)  \"IDT Consolidated Group\" shall mean, at any time, IDT and each direct\nand indirect corporate subsidiary eligible to join with IDT in the filing of a\nconsolidated Federal Tax return.\n\n     (i)  \"IDT Sub-Group\" shall mean, at any time, IDT and each of its direct\nand indirect corporate subsidiaries other than those subsidiaries that are\nmembers of the Net2Phone Group.\n\n     (j)  \"IDT Sub-Group Separate Return\" shall mean an Income Tax return of IDT\nor a member of the IDT Sub-Group for a Post-Deconsolidation Tax Period other\nthan a Combined Tax return.\n\n     (k)  \"Income Tax\" (i) shall mean (A) any foreign or any United States\nfederal, state or local tax, charge, fee, impost, levy or other assessment which\nis based upon, measured by, or calculated with respect to (1) net income or\nprofits (including, but not limited to, any capital gains, gross receipts, or\nminimum tax, and any tax on items of tax preference, but not including sales,\nuse, value added, real property gains, real or personal property, transfer or\nsimilar taxes), or (2) multiple bases (including, but not limited to, corporate\nfranchise, doing business or occupation taxes), if one or more of the bases upon\nwhich tax may be based, by which it may be measured, or with respect to which it\nmay be calculated, is described in clause (i)(A)(1) of this definition, together\nwith (B) any interest, penalties, fines, additions to tax or additional amounts\nimposed by any taxing jurisdiction with respect thereto, \n\n                                       2\n\n \nand (ii) shall include any transferee liability in respect of an amount\ndescribed in clause (i) of this definition.\n\n     (l)  \"Income Tax Benefit\" shall mean, in respect of a person or group of\npersons for any taxable period, the excess of (A) the hypothetical Income Tax\nliability of such person or group of persons for such taxable period, calculated\nas if the use of a Tax Asset had not occurred but with all other facts\nunchanged, over (B) the actual Income Tax liability of such person or group of\npersons for such taxable period, calculated taking into account the use of such\nTax Asset (and treating a Refund as a negative Income Tax liability, and taking\ninto account credits (if any), for purposes of such calculation).\n\n     (m)  \"Net2Phone Combined Tax Liability\" shall mean, with respect to any\njurisdiction and any taxable year or part thereof for which Combined Tax is due,\nan amount of Combined Tax determined in accordance with the principles set forth\nin the definition of Net2Phone Federal Tax Liability; provided, however, that\nthe total amount of the Net2Phone Combined Tax Liability shall also include, to\nthe extent not included after application of the principles set forth in the\ndefinition of Net2Phone Federal Tax Liability, any actual Income Tax liability\nowed in a jurisdiction in which a member of the Net2Phone Group files or is\nincluded in a Combined Tax return, to the extent the Income Tax liability shown\non such return exceeds the amount of such liability that would have been owed\nhad no member of the Net2Phone Group been included in such return.\n\n     (n)  \"Net2Phone Federal Tax Liability\" shall mean, with respect to any\ntaxable year or portion thereof during which Net2Phone is a member of the IDT\nConsolidated Group, the sum of the Net2Phone Group's Federal Income Tax\nliability, computed as if the Net2Phone Group were not and never were part of\nthe IDT Consolidated Group, but rather were a separate affiliated group of\ncorporations filing a consolidated federal income tax return pursuant to Section\n1501 of the Code; provided, however, that transactions with members of the IDT\nSub-Group shall be reflected according to the provisions of the consolidated\nreturn regulations promulgated under the Code governing intercompany\ntransactions, and that Deconsolidation will trigger any deferred amounts, excess\nloss accounts, or similar items. Such computation shall be made (A) without\nregard to the income, deductions (including net operating loss and capital loss\ndeductions), and credits in any year of any member of the IDT Group that is not\na member of the Net2Phone Group, (B) by taking account of all Tax Assets of the\nNet2Phone Group other than any Tax Asset which produces an Income Tax Benefit to\nIDT in accordance with Section 2.1(c)(iii), (C) as though the highest rate of\ntax specified in subsection (b) of Section 11 of the Code (for any other similar\nrates applicable to specific types of income) were the only rate set forth in\nthat subsection, and with other similar adjustments as described in Section 1561\nof the Code, (D) reflecting the positions, elections, and accounting methods\nused by IDT in preparing the consolidated Federal Tax return for the IDT Group,\nand (E) by not permitting the Net2Phone Group any compensation deductions\narising in respect of the issuance by IDT of IDT stock to any employee of the\nNet2Phone Group.\n\n                                       3\n\n \n     (o)  \"Net2Phone Group\" shall mean, at any time, Net2Phone and any direct or\nindirect corporate subsidiaries of Net2Phone that would be eligible to join with\nNet2Phone, with respect to Federal Taxes, in the filing of a consolidated\nfederal income tax return and, with respect to Combined Taxes, in the filing of\na consolidated, combined, or unitary Income Tax return if Net2Phone were not\nconsolidated, combined, or filing on a unitary basis with any member of the IDT\nSub-Group.\n\n     (p)  \"Net2Phone Group Separate Return\" shall mean an Income Tax return of\nNet2Phone or a member of the Net2Phone Group for a Post-Deconsolidation Tax\nPeriod other than a Combined Tax return.\n\n     (q)  \"Post-Deconsolidation Tax Period\" means (i) any tax period, or portion\nthereof, beginning and ending after the date of Deconsolidation, and (ii) with\nrespect to a tax period that begins before and ends after the date of\nDeconsolidation, such portion of the tax period that commences on the day\nimmediately after the date of Deconsolidation.\n\n     (r)  \"Pre-Deconsolidation Tax Period\" means (i) any tax period, or portion\nthereof, beginning and ending before or on the date of Deconsolidation, and (ii)\nwith respect to a period that begins before and ends after the date of\nDeconsolidation, such portion of the tax period ending on and including the date\nof Deconsolidation.\n\n     (s)  \"Refund\" shall mean any refund of Income Taxes, including any\nreduction in Income Tax liabilities by means of a credit, offset or otherwise.\n\n     (t)  \"Tax Asset\" means any net operating loss, net capital loss, investment\ntax credit, foreign tax credit, charitable deduction, or any other deduction,\ncredit, or tax attribute which could reduce Income Tax (including, without\nlimitation, deductions and credits related to alternative minimum taxes).\n\n  1.2  Internal References.\n\n     Unless the context indicates otherwise, references to Articles, Sections,\nand paragraphs shall refer to the corresponding articles, sections, and\nparagraphs in this Agreement and references to the parties shall mean the\nparties to this Agreement.\n\n                                  ARTICLE 2.\n                                  TAX SHARING\n\n  2.1  Tax Sharing.\n\n       (a) General. For each taxable year of the IDT Consolidated Group during\nwhich income, loss, or credit against tax of the Net2Phone Group is includible\nin the consolidated Federal Tax return of the IDT Group, Net2Phone shall pay to\n\n                                       4\n\n \nIDT an amount equal to the Net2Phone Federal Tax Liability, and for each taxable\nperiod during which income, loss, or credit against tax of any member of the\nNet2Phone Group is includible in a return relating to a Combined Tax, Net2Phone\nshall pay to IDT an amount equal to the Net2Phone Combined Tax Liability for\nsuch taxable period, each as shown on the Pro Forma Returns (as defined in\nparagraph (c) below). Subject to receipt of the payments described in the first\ntwo sentences of this Section 2.1(a), and subject to the provisions of Section\n2.1(d), IDT shall be liable for and shall indemnify the Net2Phone Group against\nall Income Taxes due with respect of all consolidated Federal Tax returns of the\nIDT Group, and all returns relating to a Combined Tax.\n\n       (b)  Estimated Payments. For each taxable period as to which Section\n2.1(a) applies, IDT may determine the amount of the estimated tax installment of\nthe Net2Phone Federal Tax Liability (corresponding to IDT's estimated Federal\nTax installment), as determined under the principles of Section 2.1(a). If IDT\nmakes such a determination, Net2Phone shall pay to IDT, within ten (10) business\ndays (i) of the statutorily mandated payment date or (ii), if later, of the date\nof delivery of a written request for such payment under this Section 2.1(b), the\namount so determined. In addition for each taxable period as to which Section\n2.1(a) applies, IDT may determine under provisions of applicable law the amount\nof the estimated tax installment of the Net2Phone Combined Tax Liability\n(corresponding to the relevant estimated Combined Tax installment), as\ndetermined under the principles of Section 2.1(a). If IDT makes such a\ndetermination, Net2Phone shall pay to IDT, within ten (10) business days (i) of\nthe statutorily mandated payment date or (ii), if later, of the date of delivery\nof a written request for such payment under this Section 2.1(b), the amount so\ndetermined.\n\n     (c)  Payment of Taxes at Year-End.\n\n     (i)    Within thirty (30) days after the date the IDT Consolidated\n     Group's Federal Tax return is filed, IDT shall make available to Net2Phone\n     a pro forma Federal Tax return (a \"Pro Forma Federal Return\") of the\n     Net2Phone Group reflecting the Net2Phone Federal Tax Liability. Within\n     thirty (30) days after the date the last Combined Tax return is filed for\n     the fiscal year to which such returns relate, IDT shall make available to\n     Net2Phone the relevant pro forma Combined Tax returns (each a \"Pro Forma\n     Combined Tax Return\" and together with the Pro Forma Federal Returns, the\n     \"Pro Forma Returns\") of the Net2Phone Group reflecting the relevant\n     Net2Phone Combined Tax Liability. The Pro Forma Returns shall be prepared\n     in good faith in a manner generally consistent with past practice.\n\n     (ii)   Within ten (10) days of the receipt by Net2Phone of a Pro Forma\n     Federal Return, Net2Phone shall pay to IDT, or IDT shall pay to Net2Phone,\n     as appropriate, an amount equal to the difference, if any, between the\n     Net2Phone Federal Tax Liability reflected on the Pro Forma Federal Return\n     for such year and the aggregate amount of the estimated installments of the\n     Net2Phone Federal Tax Liability for such year made pursuant to Section\n     2.1(b). Within ten (10) days of the receipt of the Pro Form Combined Tax\n     Returns, Net2Phone shall pay to IDT, or IDT shall pay to Net2Phone, as\n     appropriate, an amount equal to the difference, if any, between the\n\n                                       5\n\n \n     Net2Phone Combined Tax Liability reflected on the relevant Pro Forma\n     Combined Tax Returns and the aggregate amount of the estimated installments\n     paid with respect to the corresponding Net2Phone Combined Tax Liability\n     pursuant to Section 2.1(b).\n\n     (iii)   If, under applicable law and consistent with this Agreement, the\n     IDT Sub-Group avails itself of a Tax Asset of the Net2Phone Group, IDT\n     shall pay to Net2Phone an amount equal to the Income Tax Benefit\n     attributable to such Tax Asset, if and when Actually Realized by IDT. The\n     parties agree that all net operating losses and net capital losses of the\n     IDT Group shall be taken into account by IDT in the order in which such net\n     operating losses and net capital losses have arisen; all other Tax Assets\n     of the Net2Phone Group shall be taken into account by IDT in the above-\n     described manner, subject, however, to the ordering rules then in effect\n     under the Code.\n\n     (iv)    In the event that IDT makes a cash deposit with a taxing authority\n     in order to stop the running of interest or makes a payment of tax and\n     correspondingly takes action to recoup such payment (such as suing for a\n     refund), Net2Phone shall pay to IDT, within ten (10) days (i) of the date\n     such cash deposit is made by IDT or (ii) if later, of the date of delivery\n     of a written request for such payment under this Section 2.1(c)(iv), an\n     amount equal to Net2Phone's share of the amount so deposited or paid\n     (calculated in a manner consistent with the determinations provided in this\n     Article 2). Upon receipt by IDT of a refund of any amounts paid by it in\n     respect of which Net2Phone shall have advanced an amount hereunder, IDT\n     shall pay to Net2Phone the amount of such refund, together with any\n     interest received by it on such refund, within ten (10) days of the receipt\n     of such refund. If and to the extent that any claim for refund or contest\n     based thereupon shall be unsuccessful, the payment by Net2Phone under this\n     Section 2.1(c)(iv) may be credited by IDT toward any of Net2Phone's\n     obligations under this Section 2.1.\n\n     (d)  Treatment of Adjustments.  If any adjustment is made in a Federal Tax\nreturn of the IDT Group or in a return relating to a Combined Tax of the IDT\nGroup, after the filing thereof, in which income or loss of the Net2Phone Group\n(or any member thereof) is included, then at the time of a Final Determination\nof the adjustment Net2Phone shall pay to IDT, or IDT shall pay to Net2Phone, as\nthe case may be, the difference between all payments actually made under Section\n2.1 with respect to the taxable year or period covered by such tax return and\nall payments that would have been made under Section 2.1 taking such adjustment\ninto account together with any penalties actually paid and interest for each day\nuntil the date of Final Determination calculated at the rate determined, in the\ncase of a payment by Net2Phone, under Section 6621(a)(2) of the Code and, in the\ncase of a payment by IDT, under Section 6621(a)(1) of the Code.\n\n     (e)  Preparation of Consolidated and Combined Returns. For all taxable\nperiods ending on or before the Deconsolidation Date, so long as the IDT Group\n\n                                       6\n\n \nelects to file (i) consolidated Federal Tax returns as permitted by Section 1501\nof the Code or (ii) any Combined Tax return as permitted by applicable state\nlaw, Net2Phone shall consent to the filing of such returns by IDT. IDT shall\nprepare and file such returns and any other returns, documents, or statements\nrequired to be filed with the Internal Revenue Service with respect to the\ndetermination of the Federal Tax liability of the IDT Group and with the\nappropriate taxing authorities with respect to the determination of a Combined\nTax liability. With respect to such return preparation, IDT shall act in good\nfaith with regard to all members included in an applicable return. IDT shall\nhave the right with respect to any consolidated Federal Tax return or return\nrelating to a Combined Tax that it has filed or will file to determine in good\nfaith (i) the manner in which such returns, documents or statements shall be\nprepared and filed, including, without limitation, the manner in which any item\nof income, gain, loss, deduction or credit shall be reported, (ii) whether any\nextensions should be requested, and (iii) the elections that will be made by any\nmember of the IDT Group.\n\n     (f)    Contest of Consolidated and Combined Returns. IDT shall have the\nright, in good faith, to (i) contest, compromise, or settle any adjustment or\ndeficiency proposed, or as a result of any audit of any Federal Tax return or\nreturn relating to a Combined Tax, (ii) file, prosecute, compromise or settle\nany claim for refund, and (iii) determine whether any refunds shall be received\nby way of refund or credited against tax liabilities. In addition, IDT shall\nprepare and file ruling requests, and take all other actions on behalf of any\nmember of the IDT Group that it deems appropriate in providing tax services to\nthe members of the IDT Group. IDT shall, to the extent such information is\navailable, advise Net2Phone of any significant Net2Phone tax issue being audited\nor contested by the federal, state, local or other relevant taxing authorities,\nshall keep Net2Phone informed with respect to any audit, contest, compromise or\nsettlement thereof, and shall provide to Net2Phone copies (subject to deletion\nof nonrelevant information) of all material correspondence relating to such\ncontest.\n\n     (g)    Net2Phone Consent. Notwithstanding anything to the contrary in\nSection 2.1(e) or Section 2.1(f), except as IDT shall determine, in good faith,\nis required by law, without the express written consent of Net2Phone, which\nconsent shall not be unreasonably withheld or delayed, IDT shall not file any\namended Federal Tax return or Combined Tax return, settle any tax claim or\nassessment, file any ruling request, make any Tax election, or surrender any\nright to claim a Refund, if a principal effect of such action is to increase a\nNet2Phone Federal Tax Liability or a Net2Phone Combined Tax Liability.\n\n     (h)    Separate Returns. Net2Phone shall prepare, or cause to be prepared,\nand file, or cause to be filed, all Net2Phone Group Separate Returns, and shall\npay, or cause to be paid, all Income Tax due with respect to such returns. IDT\nshall prepare, or cause to be prepared, and file, or cause to be filed, all IDT\nSub-Group Separate Returns, and shall pay, or cause to be paid, all Income Tax\ndue with respect to such returns.\n\n                                       7\n\n \n2.2  Reimbursement for Certain Services.\n\n     IDT shall provide services in connection with this Agreement, including,\nbut not limited to, (i) those services relating to the preparation of returns\n(including Pro Forma Returns) described in paragraph 2.1(b) above, and (ii)\nservices relating to the other activities described in paragraph 2.1(e) above.\nAs compensation for these services, Net2Phone shall pay IDT a fee calculated on\na basis such that IDT is reimbursed for all reasonable direct and indirect costs\nand expenses incurred with respect to Net2Phone's share of the overall costs and\nexpenses incurred by IDT with respect to tax-related services.  IDT shall\ncalculate and invoice Net2Phone for the fee payable, and Net2Phone will pay the\ninvoiced amount in a manner consistent with the invoice and payment procedures\nprovided for in that certain Services Agreement, between IDT, certain members of\nthe IDT Sub-Group, and Net2Phone, dated of even date herewith.\n\n                                  ARTICLE 3.\n                             POST-DECONSOLIDATION\n\n3.1  Additional Rights and Liabilities Post-Deconsolidation.\n\n     (a)   Apportionment of Tax Attributes. If the IDT Consolidated Group has a\nTax Asset, the portion, if any, of such Tax Asset that shall be apportioned to\nthe Net2Phone Group and treated as a carryover to the first Post-Deconsolidation\ntaxable period of the Net2Phone Group shall be determined in accordance with\nTreasury Regulations (S)(S)1.1502-79 and 1.1502-79A; provided, however, that the\nportion, if any, of any consolidated unused foreign tax credit which shall be\napportioned to the Net2Phone Group shall be determined separately with respect\nto each of the items of income listed in Code section 904(d). No consolidated\nFederal Income Tax Asset of the IDT Consolidated Group, other than those\ndescribed in the first sentence hereof, and no Combined Tax Asset of the IDT\nGroup, shall be apportioned to the Net2Phone Group, except as IDT determines is\notherwise required under the provisions of applicable law. IDT shall determine\nthe portion, if any, of any Tax Asset which must (absent a Final Determination\nto the contrary) be apportioned to the Net2Phone Group in accordance with this\nSection 3.1(a) and applicable law, and shall provide written notice of the\ncalculation thereof to Net2Phone as soon as practicable after the information\nnecessary to make such calculation becomes available to IDT.\n\n     (b)   Apportionment of Consolidated Section 382 Limitation. In the event\nthat, after the date of this Agreement and prior to Deconsolidation, the IDT\nGroup suffers an ownership change resulting in a consolidated Section 382\nlimitation (within the meaning of Treasury Regulations (S)1.1502-95T), then,\nupon Deconsolidation, IDT shall equitably apportion the consolidated Section 382\nlimitation between the IDT Sub-Group and the Net2Phone Group as permitted by\nTreasury Regulations (S)1.1502-95T(c) and shall prepare and file the election to\napportion the consolidated Section 382 limitation in accordance with the\nprovisions of Treasury Regulations \n\n                                       8\n\n \n(S)1.1502-95T(e). Net2Phone agrees to cooperate in the preparation, execution\nand filing of such election.\n\n     (c)    Net2Phone Group Separate Returns. Net2Phone shall prepare, or cause\nto be prepared all Net2Phone Group Separate Returns. Net2Phone covenants that on\nor after a Deconsolidation it will not, nor will it cause or permit any member\nof the Net2Phone Group to make or change any tax election, change any accounting\nmethod, amend any tax return or take any tax position on any tax return, take\nany other action, omit to take any action, or enter into any transaction that\nresults in any increase in the tax liability or reduction of any Tax Asset of\nthe IDT Group in respect of any Pre-Deconsolidation Tax Period, without first\nobtaining the written consent of an authorized representative of IDT.\n\n     (d)   Carrybacks. Except to the extent otherwise consented to by IDT or\nprohibited by applicable law, Net2Phone (on its own behalf and on behalf of the\nNet2Phone Group) shall elect to relinquish, waive or otherwise forego all\nCarrybacks. In the event that Net2Phone is prohibited by applicable law to\nrelinquish, waive or otherwise forego a Carryback (or IDT consents thereto), (i)\nIDT shall cooperate with Net2Phone, at Net2Phone's expense, in seeking from the\nappropriate taxing jurisdiction such Refund as reasonably would result from such\nCarryback, and (ii) Net2Phone shall be entitled to any Income Tax Benefit\nActually Realized by a member of the IDT Group (including any interest thereon\nreceived from such taxing jurisdiction), to the extent that such Income Tax\nBenefit is directly attributable to such Carryback, within 10 days after such\nIncome Tax Benefit is Actually Realized; provided, however, that Net2Phone shall\nindemnify and hold the members of the IDT Group harmless from and against any\nand all collateral tax consequences resulting from or caused by any such\nCarryback, including (but not limited to) the loss or postponement of benefit\nfrom the use of tax attributes generated by a member of the IDT Group (x) that\nexpire unutilized, but would have been utilized but for such Carryback, or (y)\nthe use of which is postponed to a later taxable period than the taxable period\nin which such tax attributes otherwise would have been utilized but for such\nCarryback. Nothing in this Agreement shall require IDT to file a claim for\nrefund of Federal Taxes or Combined Taxes which IDT, in its sole discretion,\ndetermines lacks substantial authority, as defined in the Code and the Treasury\nRegulations thereunder. If there is a Final Determination that results in any\nchange to or adjustment of an Income Tax Benefit Actually Realized by a member\nof the IDT Group that is directly attributable to a Carryback, then IDT (or its\ndesignee) shall make a payment to Net2Phone, or Net2Phone shall make a payment\nto IDT (or its designee), as may be necessary to adjust the payments between\nNet2Phone and IDT (or its designee) to reflect the payments that would have been\nmade under this Section 3.1(d) had the adjusted amount of such Income Tax\nBenefit been taken into account in computing the payments due under this Section\n3.1(d).\n\n     (e)    Refunds. Except to the extent provided in Section 3.1(d) hereof, IDT\nshall be entitled to all Refunds (and any interest thereon received from the\napplicable taxing jurisdiction) in respect of Income Taxes for all Pre-\n\n                                       9\n\n \nDeconsolidation Tax Periods. Except to the extent provided in Section 3.1(d),\nNet2Phone shall be entitled to all Refunds (and any interest thereon received\nfrom the applicable taxing jurisdiction) in respect of Income Taxes paid by\nNet2Phone with respect to Net2Phone Group Separate Returns and attributable to\nPost-Deconsolidation Tax Periods included in Combined Tax returns. A party\nreceiving a Refund to which another party is entitled pursuant to this Section\n3.1(e) shall pay the amount to which such other party is entitled within ten\ndays after such Refund is Actually Realized. IDT shall be permitted to file, and\nNet2Phone shall fully cooperate with IDT in connection with, any claim for\nRefund in respect of an Income Tax for which IDT is responsible pursuant to\nSection 2.1 (a) hereof.\n\n                                  ARTICLE 4.\n                                 MISCELLANEOUS\n\n4.1  Limitation of Liability.\n\n     Neither IDT nor Net2Phone shall be liable to the other for any special,\nindirect, incidental, or consequential damages of the other arising in\nconnection with this Agreement.\n\n4.2  Subsidiaries.\n\n     (a)  Performance. IDT agrees and acknowledges that IDT shall be responsible\nfor the performance of the obligations of each member of the IDT Sub-Group\nhereunder applicable to such subsidiary. Net2Phone agrees and acknowledges that\nNet2Phone shall be responsible for the performance by each member of the\nNet2Phone Group of the obligations hereunder applicable to such member.\n\n     (b)  Application to Present and Future Subsidiaries. This Agreement is\nbeing entered into by IDT and Net2Phone on behalf of themselves and each member\nof the IDT Sub-Group and the Net2Phone Group, respectively. This Agreement shall\nconstitute a direct obligation of each such member and shall be deemed to have\nbeen readopted and affirmed on behalf of any corporation which becomes a member\nof the IDT Sub-Group or the Net2Phone Group in the future. IDT shall cause each\nmember of the IDT Group, and Net2Phone shall cause each member of the Net2Phone\nGroup, to comply fully with the terms of this Agreement. Each party shall, upon\nthe written request of the other, cause any of their respective group members to\nexecute and deliver a counterpart of this Agreement.\n\n4.3  Cooperation.\n\n     (a) Net2Phone, on behalf of itself and each member of the Net2Phone Group,\nagrees to provide IDT (or its designee) with such cooperation or information as\nIDT (or its designee) reasonably shall request in connection with the\ndetermination of any other calculations described in this Agreement, the\npreparation or filing of any Income Tax return or claim for Refund, or the\nconduct of any proceeding relating to Income Tax. Such cooperation and\ninformation shall include, \n\n                                       10\n\n \nwithout limitation, upon reasonable notice (i) promptly forwarding copies of\nappropriate notices and forms or other communications (including, without\nlimitation, information document requests, revenue agent's reports and similar\nreports, notices of proposed adjustments and notices of deficiency) received\nfrom or sent to any taxing jurisdiction or any other administrative, judicial or\ngovernmental authority, (ii) providing copies of all relevant Income Tax\nreturns, together with accompanying schedules and related workpapers, documents\nrelating to rulings or other determinations by taxing authorities, and such\nother records concerning the ownership and tax basis of property, or other\nrelevant information that Net2Phone or any member of the Net2Phone Group may\npossess, (iii) the provision of such additional information and explanations of\ndocuments and information provided under this Agreement (including statements,\ncertificates and schedules delivered by either party) as shall be reasonably\nrequested by IDT (or its designee), (iv) the execution of any document that may\nbe necessary or reasonably helpful in connection with the filing of an Income\nTax return, a claim for a Refund, or in connection with any proceeding,\nincluding such waivers, consents or powers of attorney as may be necessary for\nIDT to exercise its rights under this Agreement, and (v) the use of Net2Phone's\nreasonable efforts to obtain any documentation from a governmental authority or\na third party that may be necessary or reasonably helpful in connection with any\nof the foregoing. Upon reasonable notice, Net2Phone shall make its, or shall\ncause each member of the Net2Phone Group to make its, employees and facilities\navailable on a mutually convenient basis to provide explanation of any documents\nor information provided hereunder. Any information obtained under this Section\n4.3(a) shall be kept confidential, except as otherwise reasonably may be\nnecessary in connection with the filing of Income Tax returns or claims for\nRefund or in conducting any proceeding. It is expressly the intention of the\nparties to this Agreement to take all actions that shall be necessary to\nestablish IDT as the sole agent for Income Tax purposes with respect to all IDT\nconsolidated Federal Returns and Combined Tax returns.\n\n     (b) IDT, on behalf of itself and each member of the IDT Sub-Group, agrees\nto provide Net2Phone (or its designee) with such cooperation or information as\nNet2Phone (or its designee) reasonably shall request in connection with the\ndetermination of any other calculations described in this Agreement, the\npreparation or filing of any Income Tax return or claim for Refund, or the\nconduct of any proceeding relating to Income Tax. Such cooperation and\ninformation shall include, without limitation, upon reasonable notice (i)\npromptly forwarding copies of appropriate notices and forms or other\ncommunications (including, without limitation, information document requests,\nrevenue agent's reports and similar reports, notices of proposed adjustments and\nnotices of deficiency) received from or sent to any taxing jurisdiction or any\nother administrative, judicial or governmental authority, (ii) providing copies\nof all relevant Income Tax returns, together with accompanying schedules and\nrelated workpapers, documents relating to rulings or other determinations by\ntaxing authorities, and such other records concerning the ownership and tax\nbasis of property, or other relevant information that IDT or any member of the\nIDT Sub-Group may possess, (iii) the provision of such additional information\nand explanations of documents and information provided under this \n\n                                       11\n\n \nAgreement (including statements, certificates and schedules delivered by either\nparty) as shall be reasonably requested by Net2Phone (or its designee), (iv) the\nexecution of any document that may be necessary or reasonably helpful in\nconnection with the filing of an Income Tax return, a claim for a Refund, or in\nconnection with any proceeding, including such waivers, consents or powers of\nattorney as may be necessary for Net2Phone to exercise its rights under this\nAgreement, and (v) the use of IDT's reasonable efforts to obtain any\ndocumentation from a governmental authority or a third party that may be\nnecessary or reasonably helpful in connection with any of the foregoing. Upon\nreasonable notice, IDT shall make its, or shall cause each member of the IDT \nSub-Group to make its, employees and facilities available on a mutually\nconvenient basis to provide explanation of any documents or information provided\nhereunder. Any information obtained under this Section 4.3(b) shall be kept\nconfidential, except as otherwise reasonably may be necessary in connection with\nthe filing of Income Tax returns or claims for Refund or in conducting any\nproceeding. Notwithstanding any other provision of this Agreement, neither\nNet2Phone, nor any of member of the Net2Phone Group shall have any right to\nreceive or obtain any information relating to Income Taxes of IDT or the IDT\nGroup other than (i) information relating solely to Net2Phone or a member of the\nNet2Phone Group, and (ii) information required to be provided pursuant to\nSection 2.1(f) hereof.\n\n4.4  Retention of Records.\n\n     Net2Phone agrees to retain all Income Tax returns, related schedules and\nworkpapers, and all material records and other documents as required under Code\nSection 6001 and the Treasury Regulations promulgated thereunder (and any\nsimilar provision of state, local, or foreign Income Tax law) existing on the\ndate hereof or created in respect of (i) any taxable period that ends on or\nbefore or includes the Deconsolidation Date or (ii) any taxable period that may\nbe subject to a claim hereunder, until the later of (x) the expiration of the\nstatute of limitations (including extensions) for the taxable periods to which\nsuch Income Tax returns and other documents relate and (y) the Final\nDetermination of any payments that may be required in respect of such taxable\nperiods under this Agreement. IDT shall notify Net2Phone whenever the applicable\nstatute of limitations for any taxable period, including extensions, expires or,\nif sooner or later, as the case may be, whenever a Final Determination has\noccurred with respect to such taxable period.  From and after the end of the\nperiod described in the first sentence of this Section 4.4, if Net2Phone wishes\nto dispose of any such records and documents, then Net2Phone shall provide\nwritten notice thereof to IDT and shall provide IDT the opportunity to take\npossession of any such records and documents within 90 days after such notice is\ndelivered, at IDT's sole cost and expense; provided, however, that if IDT does\nnot, within such 90-day period, confirm its intention to take possession of such\nrecords and documents, Net2Phone may destroy or otherwise dispose of such\nrecords and documents.\n\n                                       12\n\n \n4.5  Agent.\n\n     Each member of the Net2Phone Group hereby irrevocably appoints IDT as its\nagent and limited attorney-in-fact to take any action as IDT may deem necessary\nor appropriate to effect Section 2.1 including, without limitation, those\nactions specified in Treasury Regulation (S)1.1502-77(a).\n\n4.6  Amendments.\n\n     This Agreement may not be amended or terminated orally, but only by a\nwriting duly executed by or on behalf of the parties hereto.  Any such amendment\nshall be validly and sufficiently authorized for purposes of this Agreement if\nit is signed on behalf of IDT and Net2Phone by any of their respective\npresidents or vice presidents.\n\n4.7  Resolution of Disputes.\n\n     Any disputes between the parties concerning the calculation of amounts,\nallocation, or attribution of costs, or any Tax Asset or Income Tax Benefit, or\nsimilar accounting matters shall be resolved in accordance with IDT's\ninterpretation of this Agreement, unless Net2Phone shall provide IDT with an\nopinion of a nationally recognized public accounting firm to the effect that\nsuch interpretation is unreasonable.  If such opinion takes the position that\nIDT's interpretation of this Agreement is unreasonable, and the parties,\nconferring in good faith, cannot thereafter successfully resolve such dispute in\na timely manner, then either party may submit the matter to binding arbitration\nin accordance with the Rules of Commercial Arbitration of the American\nArbitration Association.  Judgment upon the award rendered by the arbitrator(s)\nmay be entered in any court having jurisdiction thereof.  Such arbitration shall\noccur in New York City pursuant to Article VIII of the Separation Agreement\nentered into between the parties as of the date hereof , unless the otherwise\nagreed by the parties.  The arbitrator(s) may, in such proceeding, award\nattorney's fees and costs to the prevailing party.\n\n4.8  Severability.\n\n     If any provision of this Agreement or the application of any such provision\nto any party or circumstances shall be determined by any court of competent\njurisdiction to be invalid, illegal, or unenforceable to any extent, the\nremainder of this Agreement or such provision or the application of such\nprovision to such party or circumstances, other than those to which it is so\ndetermined to be invalid, illegal, or unenforceable, shall remain in full force\nand effect to the fullest extent permitted by law and shall not be affected\nthereby, unless such a construction would be unreasonable.\n\n                                       13\n\n \n4.9  Notices.\n\n     All notices and other communications required or permitted hereunder shall\nbe in writing, shall be deemed duly given upon actual receipt, and shall be\ndelivered (a) in person, (b) by registered or certified mail, postage prepaid,\nreturn receipt requested, or (c) by facsimile or other generally accepted means\nof electronic transmission (provided that a copy of any notice delivered\npursuant to this clause (c) shall also be sent pursuant to clause (a) or (b)),\naddressed as follows:\n\n      (1)  If to IDT to:\n           IDT Corporation\n           190 Main Street\n           Hackensack, NJ  07601\n \n \n           Attn:  Chief Financial Officer\n\n      (2)  If to Net2Phone, to:\n           Net2Phone, Inc.\n           171 Main Street\n           Hackensack, NJ  07601\n\n\n           Attn:  Chief Financial Officer\n\n4.10  Expenses.\n\n      Unless otherwise expressly provided in this Agreement, each party shall\nbear any and all expenses that arise from its respective obligations under this\nAgreement.\n\n4.11  Further Assurances.\n\n      IDT and Net2Phone shall execute, acknowledge, and deliver, or cause to be\nexecuted, acknowledged, and delivered, such instruments and take such other\nactions as may be necessary or advisable to carry out their obligations under\nthis Agreement and under any exhibit, document, or other instrument delivered\npursuant hereto.\n\n4.12  Entire Agreement.\n\n      This Agreement constitutes the entire understanding of the parties hereto\nwith respect to the subject matter hereof.\n\n4.13  Successors.\n\n      This Agreement shall be binding upon and inure to the benefit of any\nsuccessor, by merger, acquisition of assets, or otherwise, to any of the parties\nhereto (including but not limited to any successor of IDT and Net2Phone\nsucceeding to the \n\n                                       14\n\n \ntax attributes of such party under Section 381 of the Code), to the same extent\nas if such successor had been an original party hereto.\n\n4.14  Authorization, etc.\n\n      Each of the parties hereto hereby represents and warrants that it has the\npower and authority to execute, deliver, and perform this Agreement, that this\nAgreement has been duly authorized by all necessary corporate action on the part\nof such party, that this Agreement constitutes a legal, valid and binding\nobligation of each such party, and that the execution, delivery and performance\nof this Agreement by such party does not contravene or conflict with any\nprovision of law or of its charter or bylaws or any agreement instrument or\norder binding on such party.\n\n4.15  Titles and Headings.\n\n      Titles and headings to sections herein are for convenience and reference\nonly and are not intended to be a part, or to affect the meaning or\ninterpretation, of this Agreement.\n\n4.16  Governing Law.\n\n      This Agreement shall be governed by and construed in accordance with the\nlaws of the State of New York.\n\n4.17  Counterparts.\n\n      This Agreement may be executed in any number of counterparts, each of\nwhich shall be deemed an original, but all of which together shall constitute\none and the same Agreement.\n\n                                       15\n\n \n     IN WITNESS WHEREOF, each of the parties hereto has caused this agreement to\nbe executed by a duly authorized officer as of the date first above written.\n\n\nIDT CORPORATION                           NET2PHONE, INC.\n\n\nBy  \/s\/ Steve Brown                       By  \/s\/ Howard Balter\n   --------------------------------          ----------------------------------\n    Title:  Chief Financial Officer              Title: Chief Executive Officer\n\n                                       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