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NARROWBAND INTERNET SERVICE
SALES AGENCY AGREEMENT
By and Among
SBC COMMUNICATIONS INC.
SBC INTERNET COMMUNICATIONS, INC.
PRODIGY COMMUNICATIONS CORPORATION
and
PRODIGY COMMUNICATIONS LIMITED PARTNERSHIP
Dated as of January 1, 2001
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TABLE OF CONTENTS
Page
----
Article I DEFINITIONS.......................................................... 2
ARTICLE II AMENDMENT AND RESTATEMENT OF THE STRATEGIC AND MARKETING AGREEMENT.. 9
2.1 Generally................................................................. 9
2.2 Single Point of Contact and Escalation Process............................ 10
ARTICLE III MARKETING.......................................................... 10
3.1 Generally................................................................. 10
3.2 Branding.................................................................. 11
3.3 License to Marketing Materials............................................ 12
3.4 Exclusivity and Limits on Exclusivity..................................... 12
3.5 Marketing Commitments..................................................... 13
3.6 SBC New Subscriber Marketing Payments..................................... 13
3.7 Telecommunications Services............................................... 16
3.8 DSL Preference............................................................ 17
3.9 Packaging................................................................. 17
3.10 Access to Residential Customer Information............................... 18
3.11 Access to Arrangements................................................... 18
ARTICLE IV INTELLECTUAL PROPERTY............................................... 19
4.1 License Grants............................................................ 19
4.2 Portal Intellectual Property.............................................. 20
4.3 Future Products........................................................... 21
ARTICLE V PRODUCT DEVELOPMENT; PORTAL.......................................... 22
5.1 Development of Client Software............................................ 22
5.2 Prodigy Portal............................................................ 22
5.3 Product Development Details............................................... 25
ARTICLE VI NETWORK SERVICES.................................................... 26
6.1 SBC Preference for Network Services....................................... 26
6.2 Qualifications on Preference.............................................. 26
6.3 Favored Pricing; Third Party Agreements................................... 26
6.4 Day-to-Day Business Operations of Prodigy................................. 26
6.5 Technical Assistance by SBC............................................... 27
6.6 Global Services Provider.................................................. 27
ARTICLE VII DISPUTE RESOLUTION................................................. 27
7.1 Negotiation............................................................... 27
7.2 Arbitration............................................................... 27
ARTICLE VIII ADDITIONAL AGREEMENTS............................................. 29
8.1 Additional Agreements..................................................... 29
8.2 Customer Care............................................................. 30
i
ARTICLE IX TERMINATION......................................................... 30
9.1 Termination of Agreement.................................................. 30
ARTICLE X REPRESENTATIONS AND WARRANTIES....................................... 32
10.1 Representations and Warranties of Prodigy and Operating Partnership...... 32
10.2 Representations and Warranties of SBC and SBC Sub........................ 32
ARTICLE XI MISCELLANEOUS....................................................... 33
11.1 Assignment............................................................... 33
11.2 Governing Law; Venue; Waiver of Jury Trial............................... 34
11.3 Counterparts............................................................. 34
11.4 Notices.................................................................. 35
11.5 Entire Agreement......................................................... 36
11.6 Amendment................................................................ 37
11.7 Severability............................................................. 37
11.8 Headings; Recitals....................................................... 37
11.9 No Waiver of Rights...................................................... 37
11.10 Remedies Cumulative..................................................... 37
11.11 No Agency............................................................... 38
11.12 No Third Party Beneficiaries............................................ 38
11.13 Force Majeure........................................................... 38
11.14 Further Assurances; Affiliates.......................................... 38
11.15 Export Controls......................................................... 38
11.16 Negotiated Terms........................................................ 39
11.17 Principles Of Construction.............................................. 39
11.18 Confidentiality......................................................... 39
11.19 Taxes................................................................... 39
11.20 Treatment in Accordance with Future Transactions........................ 40
ii
NARROWBAND INTERNET SERVICE SALES AGENCY AGREEMENT
--------------------------------------------------
This Narrowband Internet Sales Agency Agreement (the "Agreement"),
which is an amendment and restatement of the Strategic and Marketing Agreement
(as defined below) is made to be effective as of the first day of January, 2001
(the "Effective Date") by and among SBC Communications Inc., a Delaware
corporation ("SBC"), and SBC Internet Communications, Inc., a Delaware
corporation and an indirect wholly-owned subsidiary of SBC ("SBC Sub"), on the
one hand, and Prodigy Communications Corporation, a Delaware corporation
("Prodigy"), and Prodigy Communications Limited Partnership, a Delaware limited
partnership ("Operating Partnership"), on the other hand. Capitalized terms
used but not defined herein shall have the meaning assigned to them in the
Investment Agreement (as defined below).
WITNESSETH:
WHEREAS, as of the 19th day of November, 1999, SBC, SBC Sub, Prodigy,
Prodigy Transition Corporation, a Delaware corporation and a wholly owned
subsidiary of Prodigy ("PTC"), and Operating Partnership entered into the
Strategic and Marketing Agreement (the "Strategic and Marketing Agreement"), and
the Investment, Issuance, Contribution and Assumption Agreement (the "Investment
Agreement"), pursuant to which SBC, SBC Sub, Prodigy and PTC combined Prodigy's
Internet operations with SBC's consumer and small business Internet operations;
WHEREAS, SBC, SBC Sub, Prodigy and PTC acknowledge and agree that it
is in their respective best interests to amend and restate the Strategic and
Marketing Agreement as provided in this Agreement and the Internet Service
Resale Agreement by and between the Parties hereto of even date herewith (the
"Resale Agreement"), that the Strategic and Marketing Agreement and any and all
agreements and plans adopted pursuant to the Strategic and Marketing Agreement
will be of no further force and effect (except as provided herein) and the
Strategic and Marketing Agreement shall be replaced in all respects by this
Agreement and the Resale Agreement;
WHEREAS, SBC Sub wishes to sell, as a sales representative for Prodigy
and Operating Partnership, the Prodigy Service to residential customers of SBC
and its Affiliates' who desire Narrowband Access Retail ISP Services thereby
assisting Prodigy and Operating Partnership in acquiring new Narrowband Access
subscribers for the Prodigy Service and provide certain network and other
services to Prodigy and Operating Partnership;
WHEREAS, Prodigy, Operating Partnership, SBC and SBC Sub (each a
"Party" and collectively the "Parties") wish for Prodigy and Operating
Partnership to become a leading ISP in the United States; and
WHEREAS, the Parties desire that SBC and its Affiliates be the
preferred provider of Network Services used to Deliver the Prodigy Service.
NOW, THEREFORE, in consideration of the premises, agreements,
representations, covenants and warranties herein contained, the Parties agree as
follows.
1
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms will have the meaning
ascribed to them below:
"Advertisement" means an interactive advertisement, promotion, link,
banner, pointer or sponsorship.
"Affiliate" of any specified Person means any other Person that
directly, or indirectly through one or more intermediaries, Controls, is
Controlled by, or is under common Control with such specified Person. For the
purposes of this Agreement, SBC Sub is an Affiliate of SBC, each of Operating
Partnership and PTC is an Affiliate of Prodigy, and Cingular Wireless LLC shall
not be considered an Affiliate of SBC, provided, however, SBC shall use
commercially reasonable efforts to cause Cingular Wirelss LLC to comply with the
provisions of this Agreement as if Cingular Wireless LLC were an Affiliate of
SBC.
"Affinity and OEM Marketing Plan" has the meaning set forth in Section
8.1(d).
"Arbitration Notice" has the meaning set forth in Section 7.2(a).
"Assume" has the meaning set forth in the Investment Agreement.
"Bankruptcy and Equity Exception" has the meaning set forth in Section
10.1(a).
"Base Wholesale Price" has the meaning set forth in Section 3.4(c) of
the Resale Agreement.
"Brand" or "Branding" means the trademarks, tradenames, service marks
or logos of one Person and its Affiliates that are used to identify a particular
product or service.
"Broadband" or "Broadband Access" means Internet connectivity between
an Internet subscriber's location and up to and including the backbone and any
GSP through DSL access or other forms of high speed access with one or more
speeds at least one of which is at least 144 kilobits per second downstream,
including connectivity by means of coaxial cable, wireless and satellite
transmissions.
"Broadband Access Subscriber Commitment" has the meaning assigned to
such term in Section 3.6(d).
"Business Day" means any day other than Saturday, Sunday or a day on
which banks in the City of Austin, Texas are authorized or obligated by law or
executive order to close.
"Business Customer" means a customer of SBC that is subscribing to a
business class of telephone service.
"Business Customer Narrowband Wholesale Price" shall have the meaning
assigned to such term in Section 3.4(c) of the Resale Agreement.
2
"Category I Work Products" has the meaning set forth in Section
4.3(a).
"Category II Work Products" has the meaning set forth in Section
4.3(c).
"Claim" has the meaning set forth in Section 7.1.
"Client Documentation" means the documentation included with the
Commercial Client and the Licensed Client, including any Upgrades thereto.
"Closing" has the meaning set forth in Section 3.1 of the Investment
Agreement.
"Closing Date" has the meaning set forth in Section 3.1 of the
Investment Agreement.
"Co-Brand" means a composite ▇▇▇▇ or other combination of the Brands
of two or more Persons.
"Commercial Client" means the English and Spanish language versions
(and other versions as agreed by SBC Sub and Operating Partnership in writing)
of the Internet browser client software utilized by Prodigy and Operating
Partnership at the Effective Date for the Apple Macintosh OS and Microsoft
Windows platforms (and other platforms as agreed by SBC Sub and Operating
Partnership in writing), in executable object-code version only, and any
Upgrades or replacements thereto in executable object-code version only,
including any Third Party software embedded therein.
"Connectivity Software" means software drivers and small applications,
in some cases unseen by the user, typically provided by Microsoft, SBC Sub, and
Third Party vendors to allow networking drivers on the user's PC to communicate
with the network being used, as mutually agreed by SBC Sub or Operating
Partnership.
"Content" means text, images, video, audio (including music included
in synchronous or timed relation with visual displays) and other data, Products,
Advertisements and software, including any modifications, upgrades, updates,
enhancements and related documentation for any of the foregoing.
"Control," including its various tenses and derivatives (such as
"Controlled"), means, with respect to any Person, the presence of one of the
following: (i) the legal, beneficial or equitable ownership, directly or
indirectly, of more than 50% of the capital or voting stock (or other ownership
or voting interest, if not a corporation) of such Person or (ii) the ability,
directly or indirectly, to direct the voting of a majority of the directors of
such Person's board of directors or, if the Person does not have a board of
directors, a majority of the positions on any similar body, whether through
appointment, voting agreement or otherwise.
"CPE" means customer premises equipment.
"Customized Client" means versions of the Licensed Client which may be
modified by or for Prodigy or Operating Partnership and are Marketed and
distributed as a part of the Prodigy Service.
3
"Deliver" including its various tenses and derivatives (such as
"Delivered"), means providing a Retail Internet Service to an Internet service
subscriber and distributing the appropriate client software to such Prodigy
Subscriber.
"Development Plan" has the meaning set forth in Section 5.3(a).
"Development Projects" has the meaning set forth in Section 5.3(a).
"Documentation" means the Client Documentation and Tools
Documentation.
"DSL" means digital subscriber line.
"Escalation Process" has the meaning set forth in Section 2.2(b).
"Excess Narrowband Subscribers" shall have the meaning assigned to
such term in Section 3.6(b).
"Exclusivity Termination Date" means the earliest to occur of (i)
December 31, 2009, and any successive one year anniversary of such date, at
which one Party shall have delivered to the other Party in writing at least 180
days prior to such date a notice stating that it does not wish to continue this
Agreement (as it may be amended) and (ii) the occurrence of any Exclusivity
Termination Event and the delivery by SBC of a notice terminating its
exclusivity obligations hereunder.
"Exclusivity Termination Event" means (x) any action by Prodigy or any
of its Subsidiaries that facilitates or encourages any direct or indirect
acquisition by a SBC Designated Entity of beneficial ownership of shares in
Prodigy or any of its Affiliates entitling the holder to cast 15% or more of the
votes in any election of directors in Prodigy or any of its Affiliates (other
than through the issuance of shares), (y) the occurrence of an event referred to
in Section 5.2(h)(ii), or (z) any material breach by Prodigy or Operating
Partnership of any covenant or agreement contained in this Agreement as
determined in accordance with Section 9.1(b) of this Agreement.
"Executive Steering Committee" means a special committee of the
Prodigy Board, which is established by Prodigy in accordance with its Amended
and Restated Certificate of Incorporation and the Amended and Restated By-Laws
and which consists of four members, two of whom are selected by the SBC
Directors and two of whom are selected by Telefonos de Mexico, S.A. de C.V. and
Carso Global Telecom, S.A. de C.V. The purpose of the Executive Steering
Committee is to evaluate certain corporate actions of Prodigy, which are
specified in the Amended and Restated By-Laws and which require the approval of
the Executive Steering Committee prior to being submitted for the approval of
the Prodigy Board.
"GSP" means global services provider.
"Home Page" means the first screen appearing to a user accessing a
Retail ISP Service, including any personalized versions of such first screen
customized by a user.
4
"Intellectual Property" means all (i) patents and patent applications,
(ii) copyrights and registrations thereof, (iii) mask works and registrations
and applications for registration thereof, (iv) computer software, data and
documentation, (v) know-how, manufacturing and production processes and
techniques, research and development information, copyrightable works, trade
secrets, tangible or intangible proprietary information or materials, (vi)
trademarks, service marks, trade names and applications and registrations
therefor and (vii) other proprietary rights relating to any of the foregoing.
"ISDN" means integrated service digital network.
"ISP" means Internet service provider.
"Legacy Subscribers" means each subscriber of SBC's Retail ISP
Services (e.g., Pacific ▇▇▇▇ Internet, ▇▇ ▇▇▇▇ Internet, Nevada ▇▇▇▇ Internet,
SNET Internet and ▇▇▇▇▇▇▇▇▇.▇▇▇) as of the Closing Date.
"Licensed Client" means versions of the Commercial Client modified, in
executable object-code version only, including any Third Party software embedded
therein, by or for Prodigy or Operating Partnership to remove (including by
disabling access to, or the user interface of, without actually removing the
code for) any functionality, Advertising, Brands and other references that would
violate the exclusive rights granted to SBC in Section 3.7 of this Agreement,
unless Operating Partnership determines, with the approval of SBC, that certain
such functionality, Advertising, Brands or other references should not be
removed, together with the Licensed Connectivity.
"Licensed Connectivity" means the functionality, including drivers,
data link library, Winsock, dialers and configuration files, necessary to
provide connectivity for the Licensed Client through dial-up, local area network
and Broadband Access connections as developed by or for Prodigy or Operating
Partnership prior to the Closing Date for versions of the Licensed Client
initially developed from the Commercial Client and existing at the Closing Date,
in executable object-code version only.
"Licensed Tools" means any and all software provided by Prodigy
(whether produced by Prodigy or licensed to Prodigy by a Third Party) that
facilitates the modification (either in appearance, performance or content) of
the Customized Client.
"Losses" means all direct losses, liabilities, suits, claims, costs,
expenses (including reasonable attorneys' fees) and disbursements and costs of
investigation, litigation, settlement, judgment and interest), penalties, fines,
judgments and/or damages, and in no event shall include any indirect,
consequential or special damages.
"Market," including its various tenses and derivatives (such as
"Marketed"), means, in any medium, to market, offer, advertise, promote,
distribute, register a subscriber (including fulfilling an order), or complete a
sale, as applicable given the context.
"Marketing Plan" has the meaning set forth in Section 3.1(b).
"Marks" means the Prodigy Marks and SBC Marks.
5
"Narrowband" or "Narrowband Access" means Internet connectivity
between an Internet service subscriber's location up to and including the
backbone and any GSP with one or more speeds all of which are less than 144
kilobits per second downstream.
"Network Services" means Broadband Access and Other Network Services.
"Non-SBC Telecommunications Offering" has the meaning set forth in
Section 3.7(b).
"Nonsubscriber Revenue Performance Standard" shall have the meaning
assigned to such term in Section 5.2(g).
"Notice Period" has the meaning set forth in Section 7.2(a).
"Other Network Services" means all types of connectivity and transport
services required to Deliver the Prodigy Service between an Internet service
subscriber's location and up to and including the backbone and any GSP,
including but not limited to dial-up access, backbone, transport, and network
management and integration services, but specifically excluding Broadband
Access.
"Participating Parties" has the meaning set forth in Section 7.1.
"Performance Standards" has the meaning set forth in Section 5.2(g).
"Person" means a natural person, a corporation, a limited liability
company, a general or limited partnership, a trust, an estate, a joint venture,
any Governmental Entity, or any other entity or organization.
"Portal" means an interactive, browser based series of web sites
featuring a broad selection of aggregated interactive Content (or navigation
thereto) (e.g., an online service or search and directory service) and/or
marketing a broad selection of Products across numerous interactive commerce
categories (e.g., an online mall or other online commerce site other than
electronic yellow pages), and all functionality included within such interactive
site.
"Pre-existing Commitments" means the contracts, licenses and other
obligations or undertakings to which Prodigy and/or Operating Partnership is
subject as set forth in various Schedules to the Strategic and Marketing
Agreement.
"Prodigy Board" means the Board of Directors as established pursuant
to the Amended and Restated Certificate of Incorporation and the Amended and
Restated By-Laws and any successor board of directors or similar governing body
of Prodigy.
"Prodigy Marks" means the Prodigy and Prodigy Affiliate Brands set
forth on Exhibit 4.1(a) to the Strategic and Marketing Agreement, together with
any others adopted by Prodigy or Operating Partnership and used for the Prodigy
Service from time to time. Operating Partnership shall notify SBC promptly in
writing of any such other Prodigy Marks.
6
"Prodigy Portal" means the English version of the portal currently
accessible by the public via the Internet at the URL ▇▇▇▇://▇▇▇.▇▇▇▇▇▇▇.▇▇▇
and/or such other URL or location(s) as Prodigy or Operating Partnership may
designate for the Prodigy Service, including any successor or replacement
implemented by Prodigy or Operating Partnership (on its own or through a Third
Party) for such site(s), from time to time and all pages directly or indirectly
linked to such address to the extent controlled by Prodigy or Operating
Partnership and which include or could include any Prodigy or Operating
Partnership branding and any successors or replacements for such address and
pages.
"Prodigy Service" means all Retail ISP Services offered from time to
time by Prodigy or Operating Partnership to their customers.
"Prodigy Subscriber" means any Person that subscribes to the Prodigy
Service, either directly from Prodigy or Operating Partnership (including its
distributors) or from SBC or it's Affiliates (including their respective
distributors), on behalf of Prodigy or Operating Partnership.
"Product" means any product, good or service offered, sold, provided,
distributed, or licensed directly or indirectly through: (a) a Portal
(including through any interactive site linked to a Portal); (b) any other
electronic means directed at subscribers who receive a Retail ISP Service (e.g.,
e-mail offers); or (c) an "offline" means (e.g., toll-free number) for receiving
orders related to specific offers made electronically to Internet users
requiring purchasers to reference a specific promotional identified or tracking
code.
"Resale Agreement" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Residential Customer" means any non-Business Customer who is a
Narrowband Access Subscriber of the Prodigy Service acquired on behalf of
Prodigy or Operating Partnership by SBC, its Affiliates or any their
distributors.
"Retail ISP Service" means any service for consumers and small
businesses using any transport, any speed, via any device providing connectivity
to the Internet anywhere in the United States via a single IP address at any one
time, integrated with the provision of e-mail services, access to Usenet
newsgroups, chat or instant messaging and a default screen linking to an
aggregation of a broad variety of Internet based Content and excludes any Web
hosting services.
"SBC Brand Names" means the Brands utilized by SBC, Pacific ▇▇▇▇,
Southwestern ▇▇▇▇, Nevada ▇▇▇▇, Ameritech, SNET and SBC Telecom. In the event
SBC initiates a new brand name or a national brand of voice Telecommunications
Service that utilizes a new brand name, the term "SBC Brand Names" shall include
such new brand name(s). SBC shall notify Prodigy promptly in writing of any such
other brand names.
"SBC Designated Entity" means AOL, AT&T, MCI WorldCom, Sprint,
Microsoft, BellSouth, US West/Qwest and Verizon and any of their respective
Affiliates and any Person in which any of such companies or Affiliates owns a
25% or greater equity interest.
7
"SBC Marks" means the SBC and SBC Affiliate Brands set forth on
Exhibit 5.1(b) to the Strategic and Marketing Agreement, together with any
others adopted by SBC or its Affiliates and used for the Prodigy Service from
time to time. SBC shall notify Prodigy promptly in writing of any such other
SBC Marks.
"SBC Territory" means the states of California, Nevada, Connecticut,
Texas, Missouri, Arkansas, Oklahoma, Kansas, Illinois, Indiana, Ohio, Michigan,
Wisconsin and any other state in which SBC acquires 40% or more of the incumbent
local exchange carrier lines.
"Smart Pages" means the Internet site at the URL
▇▇▇▇://▇▇▇.▇▇▇▇▇▇▇▇▇▇.▇▇▇.
"Subscriber" means, with respect to any Retail ISP Service, a
subscriber that has remained a subscriber for at least one monthly billing cycle
(excluding any unpaid trial period) and has paid at least one monthly ▇▇▇▇.
"Telecommunications Advertisement" means an Advertisement related
primarily to Telecommunications Services.
"Telecommunications Services" means any of the following products or
services: (a) long distance phone service, local phone service, wireless phone
services, paging services, and any successors thereto; (b) all current and
future ancillary services offered in conjunction with any of the services listed
in (a), including voice mail, caller ID, call waiting, call forwarding,
directory listing services, calling card services, toll calling plans and
associated CPE and any successors thereto; (c) home and business security
services, virtual private networks and associated CPE; and (d) any product or
service that emulates or replicates the foregoing utilizing an IP protocol
and/or the PSTN (including IP telephony, IP fax, unified messaging and Internet
call waiting and associated CPE). Any issues between the Parties regarding the
classification of a particular service (or failure to classify a particular
service) as a Telecommunications Service shall be resolved by the Parties
pursuant to the Escalation Process.
"Third Party" means any Person other than Prodigy, Operating
Partnership, SBC Sub, SBC or any of their respective Affiliates.
"Tools Documentation" means the documentation included with the
Licensed Tools, including any Upgrades thereto.
"Traditional ISP Services" means any products or services that ISPs
traditionally make available to their subscribers as part of their basic ISP
offering, including Internet access, customer support, member services, billing,
e-mail, bulletin boards, newsgroups, chat, instant messaging and personal Web
space.
"Transaction Expenses" means all governmental fees, sales, use and
Transfer Taxes and charges incurred by any Party in connection with the
transactions contemplated hereby, including all related fees and charges of
counsel and financial advisors of any Party.
"Transfer Taxes" means all federal, state, local or foreign sales, use
or value-added taxes that may be imposed in connection with the transfer of
assets, together with any
8
interest, additions or penalties with respect thereto and any interest in
respect of such additions or penalties.
"Transition Date" means the date as of which the Narrowband Access
Retail ISP Service Delivered to at least 60% of the non-Business Customer
subscribers of the Narrowband Access Retail ISP Services of SBC and its
Affiliates as of the Effective Date have been transferred to receive the Prodigy
Service in a manner such that the Home Page of the Prodigy Service is accessible
by such subscribers.
"Transition Plan" has the meaning set forth in Section 8.1(c).
"United States" means the ▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ of America,
the District of Columbia and the Commonwealth of Puerto Rico.
"Upgrade" means, with respect to each of the Commercial Client,
Licensed Client, and Licensed Tools, any successor version or product
(irrespective of its name) of the foregoing reflecting one or more
modifications, upgrades, updates, enhancements, patches, "bug" fixes or other
improvements to the foregoing that is: (a) generally available to end-users or
(b) licensed by Prodigy or Operating Partnership to Third Parties licensed to
distribute the Commercial Client.
"Value Added Data Services" means products or services that ISPs
generally make available to their subscribers other than Traditional ISP
Services including Web hosting (shared or dedicated), associated CPE and virtual
private networks. Any issues between the Parties regarding the classification
of a particular service (or failure to classify a particular service) as a Value
Added Data Service shall be resolved by the Parties pursuant to the Escalation
Process.
"Wholesale Price" has the meaning set forth in Section 3.4(c) of the
Resale Agreement.
"Work Product" means any reports, designs, computer software,
documentation, inventions, discoveries, works of authorship, and other items
made by or on behalf of a Party in providing services, including any and all
Intellectual Property therein or with respect thereto, but expressly excluding
from the foregoing any items that are: (a) preexisting as of the Closing Date;
or (b) independently developed by or on behalf of a Party not pursuant to this
Agreement.
ARTICLE II
AMENDMENT AND RESTATEMENT OF THE STRATEGIC AND MARKETING AGREEMENT
2.1 Generally.
----- ---------
(a) Pursuant to Section 11.6 of the Strategic and Marketing Agreement, the
Parties mutually agree to amend and restate the Strategic and Marketing
Agreement as of the Effective Date as provided in this Agreement and the
Resale Agreement, subject to and conditioned upon approval by the Prodigy
Board on or before January 19, 2001.
9
(b) The Parties agree to review all agreements and plans adopted pursuant to
the Strategic and Marketing Agreement and determine their applicability and
appropriateness in light of the Parties' rights and obligations under this
Agreement and the Resale Agreement. The Parties agree to use their
reasonable best efforts to determine if such agreements and plans should be
maintained, terminated, or amended and restated in order to properly
reflect the Parties' intent, consistent with this Agreement and the Resale
Agreement. The resolution of any issues arising under the terms of this
Section 2.1(b) shall be resolved pursuant to the Escalation Process.
2.2 Single Point of Contact and Escalation Process.
----- ----------------------------------------------
(a) For purposes of making binding interpretative decisions regarding matters
arising under the terms of this Agreement, each of SBC and Prodigy shall
designate a single point of contact. SBC's single point of contact shall be
its Senior Vice President, Consumer Markets, who is currently ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇. Prodigy's single point of contact shall be its Chief Operating
Officer, who is currently ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
(b) In the event that any Party determines that there exists an issue or issues
as to any of the terms and conditions of this Agreement that requires
resolution by the Parties, such Party shall notify the other Parties in
writing that it wishes to resolve such issue and such notice shall include
the terms and conditions that require resolution and a detailed written
statement of the reasons why such Party believes the failure to resolve
such issue would materially disadvantage such Party. In the event that a
Party disagrees with the complaining Party's belief that such failure to
resolve such issue would materially disadvantage the complaining Party
(financially or competitively), representatives of each of SBC and Prodigy
shall meet (in person or telephonically) in good faith and use commercially
reasonable efforts to resolve whether such failure would materially
disadvantage the complaining Party (financially and competitively). If the
disagreement is not resolved within five Business Days, either Prodigy or
SBC may request in writing that such disagreement be referred to SBC's
President-Group Operations and Prodigy's Chief Executive Officer, who shall
consult and negotiate with each other in good faith and, recognizing their
mutual interests, attempt to reach an agreement as to whether such failure
would materially disadvantage the complaining Party (financially and
competitively). If such agreement is not reached by such officer
representatives within five Business Days, the disagreement will be
resolved pursuant to Article VII of this Agreement; provided, however, that
for purposes of this process, any award to be made pursuant to Article VII
shall be made within one month of filing of the Arbitration Notice
notwithstanding anything to the contrary contained in Section 7.2(f) (the
foregoing process set forth in this Section 2.2(b), which shall also be
used by the Parties to resolve certain disagreements among them as
specified in the relevant provisions of this Agreement, being hereinafter
referred to as the "Escalation Process").
ARTICLE III
MARKETING
3.1 Generally.
----- ---------
(a) The Parties agree that following the Closing Date, Prodigy and Operating
Partnership shall have the primary responsibility for Marketing the Prodigy
Service in
10
accordance with the terms and subject to the conditions of this Agreement.
SBC and its Affiliates, as sales representatives for Prodigy and Operating
Partnership, shall also be entitled to Market the Prodigy Service in
accordance with the terms and subject to the conditions of this Agreement.
Prodigy and Operating Partnership hereby appoint SBC, its Affiliates and
their respective distributors as authorized sales representatives of
Prodigy or Operating Partnership, to Market the Prodigy Service in the
United States, and SBC, its Affiliates and their respective distributors
hereby accept such appointment. Nothing herein shall preclude SBC or its
Affiliates from Marketing its other Products and services, including,
without limitation, DSL, long distance and Web hosting services, to such
customers. SBC and its Affiliates shall exercise their best faith efforts
to Market the Prodigy Service to potential customers that do not qualify
for Broadband Access Retail ISP Services or who do not otherwise desire to
acquire Broadband Access Retail ISP Services.
(b) As soon as practicable following the Effective Date, Prodigy and SBC shall
prepare an initial marketing plan relating solely to the Prodigy Service to
be sold by SBC, its Affiliates and their respective distributors hereunder
in their capacity as a sales representative for Prodigy (the "Marketing
Plan") covering the period from the date of adoption of the Marketing Plan
through the end of the calendar year in which such initial Marketing Plan
is adopted that will include, among other things, a branding strategy
consistent with Section 3.2 below, the SBC marketing commitments set forth
in Section 3.5 below and a bundling strategy. Thereafter, the Parties
shall prepare not later than October 1 of each calendar year a Marketing
Plan relating solely to the Prodigy Service to be sold by SBC, its
Affiliates and their respective distributors hereunder in their capacity as
a sales representative for Prodigy for the succeeding calendar year, which
plan shall reflect the objective of Marketing the Prodigy Service to
consumers and to small businesses.
3.2 Branding.
----- --------
(a) The Parties agree the primary brand name for the Prodigy Service sold by
Prodigy, Operating Partnership, SBC, its Affiliates and their respective
distributorships shall be a Prodigy Brand and shall include such SBC Brands
and logos as are geographically appropriate as a secondary Brand (e.g.;
"Prodigy Internet powered by SBC DSL" or "Prodigy Internet Powered by
SBC"). Such branding shall be implemented in accordance with the Parties'
reasonable guidelines for the use of such Parties' Intellectual Property,
as provided in writing from time to time to each other.
(b) Notwithstanding any other term of this Agreement, following the Closing (i)
the Parties agree that any Prodigy Service Delivered to (x) a Subscriber in
the SBC Territory or (y) a Subscriber outside the SBC Territory that is
either (a) a Residential Customer or (b) a retail local loop voice customer
of SBC or any of its Affiliates to the extent the identification of such
Subscribers is commercially reasonable (it being understood and agreed by
the Parties that identification of such Subscribers is not currently
commercially reasonable) shall always be Co-Branded with the Prodigy Marks
and such of the SBC Marks as SBC may request (which brands may vary
depending upon the location of the billing address for such subscriber of
the Prodigy Service) on (i) the Home Page for the Prodigy Service, (ii)
every page directly or indirectly linked to the Home Page for the Prodigy
Service that is owned or controlled by Prodigy or Operating Partnership,
and (iii) every other page of the Prodigy Service that includes the Prodigy
11
Marks unless, with respect to 3.2(b)(iii), pursuant to the Escalation
Process, it is determined by the Parties that such Co-Branding would
materially disadvantage Prodigy or Operating Partnership financially;
provided, that, in respect of any new states that become part of the SBC
Territory after the date hereof, each of Prodigy and Operating Partnership
shall use its reasonable best efforts to implement this Section 3.2(b) with
respect to such states as soon as practicable, and (ii) each of Prodigy and
Operating Partnership will continue such service and Co-Branding for one
year after any termination of this Agreement if requested to do so by SBC.
Such Co-Branding shall be effected in accordance with SBC's reasonable
guidelines for the use of its Intellectual Property, as provided in writing
from time to time to Prodigy and Operating Partnership.
3.3 License to Marketing Materials.
----- ------------------------------
Each of Prodigy and Operating Partnership shall grant to SBC and its
Affiliates and their respective distributors of Prodigy Services a non-
transferable, non-exclusive, fully-paid, royalty-free right and license to use
any marketing materials developed by Prodigy or Operating Partnership for the
sole purpose of Marketing the Prodigy Service, including the right to create
derivative works based upon such Prodigy or Operating Partnership materials;
provided, that, SBC include any proprietary rights, notices or legends included
on the Prodigy or Operating Partnership materials. SBC shall provide Prodigy
and Operating Partnership copies of all such derivative works at least 5
Business Days prior to their use, and Prodigy and Operating Partnership shall
receive a non-transferable, non-exclusive, fully-paid, royalty-free license to
use such derivative works for the sole purpose of Marketing the Prodigy Service;
provided, however, that in the event the use by SBC and its Affiliates or their
respective distributors of such derivative works is not within Prodigy's and
Operating Partnership's reasonable guidelines for the use of such derivative
works, as provided in writing from time to time to SBC, the use of such
derivative works will be subject to the consent of Prodigy and Operating
Partnership (which consent shall not be unreasonably withheld).
3.4 Exclusivity and Limits on Exclusivity.
----- -------------------------------------
(a) Except as otherwise set forth in this Agreement, from and after the Closing
Date and continuing until the Exclusivity Termination Date, SBC agrees that
it and its Affiliates shall exclusively Market the Prodigy Service as the
only Retail ISP Service within the United States Marketed by SBC and its
Affiliates to Residential Customers, and for a period of one year after the
Exclusivity Termination Date, SBC shall not Market on a stand-alone basis
any other Retail ISP Service within the United States to Prodigy
Subscribers; provided, however, that SBC and its Affiliates will be
permitted to engage in mass market advertising during such one-year period;
provided, further, that SBC and its Affiliates will only be subject to this
one-year restriction in the event that the Exclusivity Termination Date
results from SBC's delivery of a notice stating that it does not wish to
continue this Agreement or SBC's material breach of this Agreement. Each
Party understands and agrees that the Parties shall consult with each other
with respect to new access technologies and new Retail ISP Services over
time.
(b) The exclusivity obligations set forth in Section 3.4(a) above shall not
prohibit SBC or its Affiliates from (i) taking any action to preserve and
retain Legacy Subscribers, (ii) Co-Branding with a competitive Retail ISP
Service any products or services offered by SBC or
12
its Affiliates, (iii) entering into arrangements, including agreements to
provide DSL services, with competitive Retail ISP Service providers or
other Third Parties pursuant to which the competitive Retail ISP Service
providers or other Third Parties Market or Deliver their services in
conjunction with products or services of SBC or its Affiliates, (iv)
listing competitive Retail ISP Services and service providers on its web
sites or in its products so long as they are not more prominent than or
otherwise treated more favorably than the Prodigy Service and assisting
customers who refuse the Prodigy Service to select and procure competitive
Retail ISP Services, (v) providing any individual products and services
(other than a Portal) constituting a Retail ISP Service to a competitor
whose services and products are branded under the competitor's marks or on
a retail basis in bundles so long as such bundle does not constitute a
Retail ISP Service, (vi) conducting activities as a seller and supplier of
advertising and e-commerce through any medium, including electronic yellow
pages or a Portal, (vii) Marketing any device not manufactured by or
exclusively for SBC or its Affiliates and which includes a competitive
Retail ISP Service so long as such Marketing efforts are not predominantly
concentrated on the use of a Retail ISP Service or product, or (viii)
Marketing or Delivering a Retail ISP Service that includes components of
the Prodigy Service purchased pursuant to the Resale Agreement.
3.5 Marketing Commitments.
----- ---------------------
(a) Following the Effective Date, Operating Partnership, Prodigy, SBC Sub and
SBC agree to use commercially reasonable efforts to facilitate and
coordinate the Marketing of the Prodigy Service.
3.6 SBC New Subscriber Marketing Payments.
----- -------------------------------------
(a) Following the Effective Date, Prodigy or Operating Partnership shall pay
SBC Sub a one-time marketing fee in respect of each new gross additional
Subscriber of the Prodigy Service that is procured as a Subscriber by SBC,
its Affiliates or its distributors of the Prodigy Service during any
calendar year of $35 per Subscriber (a "Bounty") if the number of new gross
additional Subscribers of the Prodigy Service that are procured by SBC, its
Affiliates or their distributors during such calendar year is equal to or
less than 50,000; provided, however, the Bounty shall be increased to $40
per new additional gross Subscriber for those customers over 50,000 but
less than 100,000, provided, further, however, the Bounty shall be
increased to $50 per new gross additional Subscriber for the number of new
gross additional Subscribers of the Prodigy Service that are procured by
SBC, its Affiliates or their distributors during such calendar year is
greater than 100,000. SBC or its Affiliate shall not be entitled to any
payment pursuant to this Section 3.6(a) for any Legacy Subscriber to the
Retail ISP Service of SBC or its Affiliates as of the Closing Date even if
such Subscriber switches to become a Subscriber of the Prodigy Service, and
SBC or its Affiliate shall refund (or offset) any Bounty paid by Prodigy or
Operating Partnership with respect to a Subscriber procured by SBC, its
Affiliates or their distributors that SBC, its Affiliates or their
distributors converts such Subscriber from the Prodigy Service to SBC's
Broadband Access Retail ISP Service within six (6) months of the date that
the Prodigy Service was activated for such Subscriber. The Parties agree
that Prodigy and Operating Partnership shall have the primary
responsibility for service activation and support for Residential Customers
procured by SBC, its Affiliates or their distributors of the Prodigy
Service and that SBC, its Affiliates and their distributors of the Prodigy
Service may refer potential Residential Customers to Prodigy and Operating
Partnership for service activation and support.
13
(b) If in any of the following twelve (12) month periods, SBC, its Affiliates
and their distributors of the Prodigy Service in the aggregate procure
fewer gross additional Narrowband Access Subscribers (whether such
Narrowband Access Subscribers are procured by SBC, its Affiliates or their
distributors on behalf of Prodigy or its Affiliates pursuant to this
Agreement or procured by SBC, its Affiliates or their distributors pursuant
to the Resale Agreement) than SBC's Narrowband Access Aggregate Subscriber
Commitment for such period (set forth below), SBC or its Affiliate shall
pay Operating Partnership the product of (i) six (6), (ii) the Base
Wholesale Price applicable during such period, except for such period(s) in
which the Base Wholesale Price is $5.00, in which case, solely for purposes
of this calculation $6.00 shall be substituted for the Base Wholesale
Price, and (iii) the difference between (A) the Narrowband Access
Subscriber Commitment for such period, and (B) the actual aggregate gross
additional Narrowband Access Subscribers procured by SBC, its Affiliates
and their respective distributors during such period (whether such
Narrowband Access Subscribers are procured by SBC, its Affiliates or their
distributors on behalf of Prodigy or its Affiliates pursuant to this
Agreement or procured by SBC, its Affiliates or their distributors pursuant
to the Resale Agreement); provided, however, for purposes of calculating
the foregoing payment, the Narrowband Access Subscriber Commitment for the
period, shall be reduced by one (1) for every three (3) Broadband Access
Subscribers acquired by SBC, its Affiliates and their distributors that are
in excess of the Broadband Access Subscriber Commitment for such period.
If in any of the following twelve (12) month periods (an "Excess Period"),
SBC, its Affiliates and its distributors procure more gross additional
Narrowband Access Subscribers in such period (whether such Narrowband Access
Subscribers are procured by SBC, its Affiliates or their distributors on behalf
of Prodigy or its Affiliates pursuant to the Resale Agreement or procured by
SBC, its Affiliates or their distributors pursuant to this Agreement) than SBC's
Narrowband Access Subscriber Commitment for such period ("Excess Narrowband
Subscribers"), SBC or its Affiliate shall be entitled, at SBC's election, (i) to
reduce the Narrowband Access Subscriber Commitment for subsequent periods by the
amount of the Excess Narrowband Subscribers for such Excess Period, (ii) to
offset amounts payable to Prodigy under this Section 3.6(b) in subsequent
periods in an amount equal to the product of (A) the number of Excess Narrowband
Subscribers, (B) the Base Wholesale Price for such Excess Period, except for
such Excess Period(s) in which the Base Wholesale Price is $5.00, in which case,
solely for purposes of this calculation $6.00 shall be substituted for the Base
Wholesale Price, and (C) six (6), or (iii) to receive a payment from Prodigy,
but only up to the amount of any payments previously made by SBC to Prodigy or
Operating Partnership pursuant to this Section 3.6(b), equal to the product of
(A) the number of Excess Narrowband Subscribers, (B) the Base Wholesale Price
for such Excess Period, except for such Excess Period(s) in which the Base
Wholesale Price is $5.00, in which case, solely for purposes of this calculation
$6.00 shall be substituted for the Base Wholesale Price, and (C) six (6).
The foregoing payment shall be made, if applicable, by SBC or its Affiliate
to Prodigy or Operating Partnership annually; it being understood and
acknowledged by the Parties that such payment is the same as and not duplicative
of SBC's Narrowband Access Subscriber Commitment payment in Section 3.4(d) of
the Resale Agreement.
14
Period Broadband Access Subscriber Narrowband Access
Commitment Subscriber Commitment
---------------------------------------------------------------------------------------------------
January 1, 2001 to December 31, 2001 700,000 100,000
---------------------------------------------------------------------------------------------------
January 1, 2002 to December 31, 2002 650,000 75,000
---------------------------------------------------------------------------------------------------
January 1, 2003 to December 31, 2003 600,000 50,000
---------------------------------------------------------------------------------------------------
January 1, 2004 to December 31, 2004 500,000 25,000
---------------------------------------------------------------------------------------------------
January 1, 2005 to December 31, 2005 500,000 25,000
---------------------------------------------------------------------------------------------------
January 1, 2006 to December 31, 2006 400,000 25,000
---------------------------------------------------------------------------------------------------
January 1, 2007 to December 31, 2007 200,000 25,000
---------------------------------------------------------------------------------------------------
January 1, 2008 to December 31, 2008 100,000 25,000
---------------------------------------------------------------------------------------------------
January 1, 2009 to December 31, 2009 100,000 25,000
---------------------------------------------------------------------------------------------------
(c) Bounties shall be jointly calculated by Operating Partnership and SBC (or
its Affiliate) monthly and paid to SBC or its Affiliate in three (3) annual
payments, each equal to one third of the Bounty (each an "Installment")
plus interest on the unpaid portion of the Bounty at the Interest Rate (the
"Interest," and, together with the Installment, a "Payment").
(i) The "Interest Rate" shall be the lesser of twelve percent (12%)
per annum (on the basis of a 360 day year for the actual number of days
involved) or the maximum rate permitted by Texas law; provided, however,
that if Operating Partnership shall have failed to make a scheduled Payment
within seven (7) days of such Payment coming due, the Interest Rate shall
increase to the lesser of fifteen percent (15%) per annum or the maximum
rate permitted by Texas Law; provided, further, however, that once
Operating Partnership shall have paid all Payments in arrears, the Interest
Rate shall revert to the lesser of twelve percent (12%) per annum or the
maximum rate permitted by Texas law.
(ii) Interest shall begin to accrue on each Bounty on the day
following the date on which the Bounty was Earned (as defined below) by
SBC, its Affiliate or distributors of the Prodigy Service pursuant to
Section 3.6(a) ("SBC New Subscriber Marketing Payments") of this Agreement.
For purposes of this Section 3.6(c), a Bounty shall be deemed earned
("Earned") on the last day of the calendar month in which SBC, its
Affiliates or its distributors of the Prodigy Service shall have procured a
Subscriber in accordance with Section 3.6(a) of this Agreement as opposed
to the calendar day on which the Bounty is earned under the provisions of
this Agreement. For example, SBC shall be deemed to have Earned Bounties as
of October 31, 2000 for all Subscribers procured by SBC, its Affiliates or
its distributors of the Prodigy Service between October 1, 2000 and October
31, 2000.
(iii) The first Payment on any Bounty Earned in a fiscal year
commencing October 1 and ending on September 30 (a "Bounty Year") shall be
due on the day that is fifteen (15) calendar days after the end of such
Bounty Year (the "Due Date"). The two remaining Payments on such Bounty are
due on the first and second anniversary of such Due Date, respectively. For
example, Operating Partnership must make the first Payment for Bounties
Earned between
15
October 31, 2000 and September 30, 2001 (the "Example Bounty Year") no
later than October 15, 2001. Subsequent Payments on Bounties Earned in the
Example Bounty Year will be due on October 15, 2002 and October, 2003.
(iv) Nothing contained in this Agreement shall prohibit Operating
Partnership from making any Payment prior to the date on which it is due
hereunder.
(v) If Prodigy or Operating Partnership fails to make any Payment due
to SBC or SBC Sub within sixty (60) days of such Payment becoming due, SBC
may, in its sole discretion, require that all Bounties then due and payable
shall become immediately due and payable and all Bounties accruing after
such date shall be paid by Prodigy or Operating Partnership to SBC Sub on a
quarterly basis, without interest, thereafter.
(vi) Operating Partnership shall provide SBC and SBC Sub with all
information, data and calculations SBC and SBC Sub may request with respect
to any Payments due to enable SBC and SBC Sub to verify Operating
Partnership's and Prodigy's compliance with its obligations under this
Section 3.6.
(vii) SBC and SBC Sub or their representatives shall have the right to
make an inspection of the business, books and records of Operating
Partnership and Prodigy related to any Payments payable under this
Agreement, during normal business hours and upon five (5) days' written
notice to Operating Partnership and Prodigy, that are relevant for the
purpose of verifying Operating Partnership's and Prodigy's compliance with
its obligations under this Agreement. Operating Partnership and Prodigy
shall maintain business records, books, account information, computer logs
and related materials that are sufficient to permit SBC and SBC Sub to
reasonably verify that Operating Partnership and Prodigy is in compliance
with its obligations hereunder.
3.7 Telecommunications Services.
----- ---------------------------
(a) Subject to the Pre-existing Commitments set forth in Schedule 2.8(i) of the
Strategic and Marketing Agreement, in no event following the Closing Date
will the Prodigy Service include any advertising or other promotion or
product offering for a Telecommunications Service, Value Added Data
Service, or electronic yellow or white pages from any Person other than SBC
or an Affiliate of SBC unless such action complies with the requirements of
Section 5.2(d) of this Agreement and such exclusivity would materially
disadvantage Operating Partnership (financially or competitively) as
determined in accordance with Section 2.2(b). Following the Closing Date,
SBC and its Affiliates shall not offer any Telecommunications Service,
Value Added Data Service, or electronic yellow or white pages to any other
ISP, which is comparable to Operating Partnership in terms of both product
offerings and number of subscribers, with terms, prices and conditions more
favorable than the terms, prices and conditions offered to Operating
Partnership.
16
(b) In the event Prodigy or Operating Partnership wishes to include in the
Prodigy Service any such advertising or other promotion or product offering
for a Telecommunications Service, Value Added Data Service, or electronic
yellow or white pages from any Person other than SBC or an Affiliate of SBC
(a "Non-SBC Telecommunications Offering") because (i) neither SBC nor any
of its Affiliates offer such Telecommunications Service, Value Added Data
Service, or electronic yellow or white pages and (ii) Prodigy or Operating
Partnership believes the failure to include in the Prodigy Service any such
advertising or other promotion or other product offering would materially
disadvantage Prodigy or Operating Partnership (financially or
competitively), Prodigy or Operating Partnership may refer resolution of
such issue pursuant to the Escalation Process. If SBC agrees, or if it is
determined through the Escalation Process, that Prodigy or Operating
Partnership is permitted to include in the Prodigy Service a Non-SBC
Telecommunications Offering, Prodigy in consultation and cooperation with
SBC shall first use its commercially reasonable efforts to include in the
Prodigy Service a Non-SBC Telecommunications Offering offered by a Person
that is not a SBC Designated Entity. In the event that such Non-SBC
Telecommunications Offering is not offered by a Person that is not a SBC
Designated Entity, Prodigy and Operating Partnership may include in the
Prodigy Service such Non-SBC Telecommunications Offering offered by a SBC
Designated Entity so long as the term of the agreement pursuant to which
Prodigy and Operating Partnership agree to do so is limited in its duration
to one year or less or is otherwise terminable by Prodigy in its sole
discretion on 60 days' notice or less.
3.8 DSL Preference.
----- --------------
Each of Prodigy and Operating Partnership agrees that whenever a SBC-owned
or controlled method of Broadband Access is available to a Broadband Access
subscriber or potential subscriber, each of Prodigy and Operating Partnership
shall offer the Prodigy Service to such subscriber only through such SBC-owned
access unless the potential subscriber requests that the Prodigy Service be
Delivered via a competitive Broadband Access and refuses Prodigy's or Operating
Partnership's offer of the SBC-owned or controlled access. In areas outside the
SBC Territory where SBC owned or controlled Broadband Access is not available
and where SBC or its Affiliates do not have a then present intention to provide
Broadband Access in such territory, Prodigy or Operating Partnership may offer
the Prodigy Service to Broadband Access subscribers through cable modem access
or any other form of Broadband Access so long as Prodigy or Operating
Partnership first notifies SBC of its intent to offer such cable modem access or
other form of Broadband Access. Any issues regarding the implementation of the
provisions of this Section 3.8 shall be resolved pursuant to the Escalation
Process.
3.9 Packaging.
----- ---------
Prodigy and Operating Partnership acknowledge that SBC, its Affiliates and
their respective distributors expect to offer the Prodigy Service packaged with
products and services of SBC and its Affiliates, including, but not limited to,
SBC's DSL service, web hosting, e-commerce services, electronic yellow or white
pages offerings and other Telecommunications Services and Value Added Data
Services. SBC acknowledges that Prodigy and Operating Partnership, its
Affiliates and their distributors of the Prodigy Service expect to offer the
Prodigy Service packaged with products and services of Prodigy and its
Affiliates, including, but not limited to, Prodigy's web hosting and/or e-
commerce services other than Telecommunications
17
Services, Value Added Data Services, and electronic yellow or white pages
services. SBC, SBC's Affiliates, Prodigy and Operating Partnership each agrees
to work with the other and use commercially reasonable efforts to facilitate the
packaging, integration, creation and Marketing by SBC and its Affiliates of such
packages and to make available products and services for inclusion within
packages on terms, including pricing, and conditions (taking into account volume
requirements) that are not less favorable than those offered to any unaffiliated
Third Party. In respect of this Section 3.9 and other provisions in the
Agreement, the Parties agree to comply with the rules and regulations set forth
in the Telecommunications Act of 1996.
3.10 Access to Residential Customer Information.
------ ------------------------------------------
(a) Except to the extent prohibited by Law or confidentiality policies of
general applicability of SBC or its Affiliates that have been communicated
in writing to Prodigy and Operating Partnership, SBC will furnish Prodigy
and Operating Partnership with such information concerning Residential
Customers as Prodigy and Operating Partnership may reasonably request.
Except to the extent prohibited by Law or confidentiality policies of
general applicability of Prodigy or Operating Partnership or any of their
Affiliates that have been communicated in writing to SBC, each of Prodigy
and Operating Partnership will furnish SBC with such information concerning
Prodigy Service Subscribers as SBC or its Affiliates may reasonably
request.
(b) Neither Prodigy nor Operating Partnership may directly or indirectly
utilize any Subscriber information in connection with Marketing any
Telecommunications Service, Value Added Data Service, or electronic yellow
or white pages unless such action complies with the requirements of Section
3.10; provided, however, that in no event may Prodigy or Operating
Partnership directly or indirectly utilize any Subscriber information in
connection with Marketing any Telecommunications Service, Valued Added Data
Service, or electronic yellow or white pages of a SBC Designated Entity.
3.11 Access to Arrangements.
------ ----------------------
Following the Closing Date, each of Prodigy and Operating Partnership shall
use its respective commercially reasonable efforts to allow SBC and SBC's
Affiliates to have access to, participate in and benefit from Prodigy's and
Operating Partnership's purchasing and distribution agreements including but not
limited to Prodigy's and Operating Partnership's wholesale DSL contracts.
Following the Effective Date, Prodigy or Operating Partnership may notify SBC of
the types of purchasing and distribution agreements that Prodigy or Operating
Partnership desires to participate in or benefit from, and each of SBC and SBC's
Affiliates shall use its respective commercially reasonable efforts to allow
Prodigy and Operating Partnership to participate in and benefit from such
purchasing and distribution agreements that SBC or its Affiliates have or will
have with Third Parties, subject to the terms and conditions of SBC's and its
Affiliates' contracts with Third Parties, applicable law and SBC's or its
Affiliates' discretion with respect to matters implicating its non-
discriminatory obligations under applicable law.
18
ARTICLE IV
INTELLECTUAL PROPERTY
4.1 License Grants.
----- --------------
(a) Subject to the terms and conditions of this Agreement, each of Prodigy and
Operating Partnership hereby grants to SBC, its Affiliates and their
respective distributors of the Prodigy Service a non-transferable, royalty-
free, fully-paid, non-exclusive license for the term of this Agreement to
use the Prodigy Marks in the United States in connection with the
identification, rendering, operation, Marketing and Delivery of the Prodigy
Service, including the Prodigy Portal for the Prodigy Service and product
packages including the Prodigy Service. Following the Closing, neither
Prodigy nor Operating Partnership shall grant or permit to be granted any
right to any SBC Designated Entity to use the Prodigy Marks to identify,
render, operate, Market or Deliver an ISP Service or any Telecommunications
Services, Value Added Data Services, or electronic yellow or white pages,
provided that either Prodigy or Operating Partnership may license SBC
Designated Entities to use the Prodigy Marks in connection with any
separate Prodigy products or services (other than those that in the
aggregate constitute an ISP Service) so long as the Prodigy Marks are
appreciably less prominent than the identifying marks of the Retail ISP
Service and do not create an impression of sponsorship or ownership of such
Retail ISP Service on the part of SBC or its Affiliates.
(b) Subject to the terms and conditions of this Agreement, at the Closing SBC
shall grant to each of Prodigy and Operating Partnership a non-
transferable, royalty-free, fully-paid, non-exclusive license for the term
of this Agreement to use the SBC Marks in the United States in connection
with the identification, rendering, operation, Marketing and Delivery of
the Prodigy Service, including the Prodigy Portal and product packages
including the Prodigy Service. Following the Closing, SBC shall not grant
or permit any Third Party to use the SBC Marks to identify, render,
operate, Market or Deliver an ISP Service in the United States, provided
that SBC may license third parties to use the SBC Marks in connection with
any separate SBC products or services (other than those that in the
aggregate constitute an ISP Service) so long as the SBC Marks are
appreciably less prominent than the identifying marks of the ISP Service
and do not create an impression of sponsorship or ownership of such ISP
Service.
(c) Following the Closing, each of SBC, its Affiliates and its distributors of
the Prodigy Service, on the one hand, and Prodigy and Operating
Partnership, on the other hand, shall enter into such agreements, with
respect to usage guidelines, quality standards, quality control monitoring
and other matters as Prodigy and Operating Partnership and SBC,
respectively, may reasonably request in order to protect their ownership
interest in the Prodigy Marks and SBC Marks. SBC and Prodigy and Operating
Partnership agree that they shall, at their own expense, bring and control
legal proceedings or other actions to eliminate any infringement,
misappropriation or other violation of its respective marks and that the
other Party may not bring any such proceedings or take any such action
unless Prodigy and Operating Partnership or SBC, as the case may be, has
failed after a written request to do so to protect its interests and, in
the case of Prodigy and Operating Partnership, such failure would
materially disadvantage Prodigy or Operating Partnership (as determined in
accordance with the Escalation Process).
19
(d) Each of Prodigy and Operating Partnership jointly and severally represents
and warrants to SBC with respect to the Prodigy Marks and each of SBC and
SBC Sub represents and warrants to Prodigy and Operating Partnership with
respect to the SBC Marks that (i) it or its Affiliate is the sole and
exclusive owner of such marks and has the full right and authority to grant
the licenses hereunder, (ii) such Marks do not infringe the trademark,
trade name, service ▇▇▇▇, logo or copyright rights or other intellectual
property right of any Third Party and (iii) there are not any pending or
threatened material claims of infringement, misappropriation or dilution
against such marks.
(e) SBC agrees to indemnify and hold harmless Operating Partnership, its
Affiliates and permitted sublicensees, and the respective partners,
directors, officers, employees and agents of any of the foregoing from and
against any and all Losses that may be incurred by them to the extent
arising out of or relating to Third Party claims that Operating
Partnership's use of the SBC Marks as authorized or licensed by SBC
hereunder infringes such Third Party's Intellectual Property rights.
(f) Operating Partnership agrees to indemnify and hold harmless SBC, its
Affiliates and permitted sublicensees, and the respective partners,
directors, officers, employees and agents of any of the foregoing from and
against any and all Losses that may be incurred by them to the extent
arising out of or relating to Third Party claims that SBC's use of the
Prodigy Marks as authorized or licensed by Prodigy or Operating Partnership
hereunder infringes such Third Party's Intellectual Property rights.
(g) Operating Partnership and SBC recognize and agree that the Prodigy Service,
including the associated Prodigy Portal, and certain Internet sites of SBC
and its Affiliates, will be available globally on the Internet and
accordingly agree that each of Prodigy and Operating Partnership and SBC
shall not be in breach of their respective licenses granted hereunder as a
result of access by Internet subscribers to material containing the Marks
on the Internet outside of the United States, incidental communications
with persons located outside of the United States and the unintentional
dissemination of Marketing materials outside the United States.
(h) The licenses granted under this Section 4.1 shall commence on the Closing
Date and continue for the term of this Agreement.
4.2 Portal Intellectual Property.
----- ----------------------------
(a) Each of Prodigy and Operating Partnership acknowledges that ownership of
all proprietary rights in and to the SBC Content shall remain the property
of SBC or its information provider, licensor or supplier. Each of Prodigy
and Operating Partnership shall include any Intellectual Property notices,
legends, symbols or labels appearing in the SBC Content on all copies
thereof in the same manner as they appear in the SBC Content.
(b) SBC acknowledges that ownership of all proprietary rights in and to the
Prodigy Portal and Prodigy Content shall remain the property of Prodigy,
Operating Partnership or their respective information provider, licensor or
supplier.
20
(c) Each of Prodigy and Operating Partnership shall enter into such agreements
with respect to usage guidelines, quality standards and other matters as
SBC may reasonably request in order to protect its ownership or other
interest in the SBC Content.
4.3 Future Products.
----- ---------------
(a) Following the Closing Date, any Work Products developed in connection with
Development Projects paid for by Prodigy or Operating Partnership
("Category I Work Product") shall be owned by and are the exclusive
property of Prodigy or Operating Partnership, except that if SBC contracts
to perform a Development Project on behalf of Prodigy or Operating
Partnership, SBC shall reserve the perpetual right to use the methods,
techniques, algorithms, knowledge, underlying design and architectural
elements and reusable subroutines contained or used in Category I Work
Products developed in connection with such Development Projects that are of
general applicability, but not any actual code included therein.
(b) For the term of this Agreement, each of Prodigy and Operating Partnership
shall grant SBC on the Closing Date an irrevocable, fully-paid (except as
expressly provided herein), worldwide, non-exclusive, transferable license
to use, reproduce (in any medium), adapt, distribute, perform, display,
modify and create derivative works of any such Category I Work Product,
which license shall include the right to grant sublicenses, such license to
be effective after final acceptance of such Category I Work Product by
Prodigy or Operating Partnership in accordance with the terms of this
Agreement and any agreement relating to a particular project; provided,
that in connection with the grant of sublicenses, SBC shall pay Prodigy or
Operating Partnership, as the case may be, on a quarterly basis not later
than 30 days after the end of the quarter in which such royalties accrue, a
royalty equal to a percentage of its revenues, net of direct costs,
relating to the sublicensee's use of such Category I Work Product, such
percentage to be mutually agreed by Prodigy or Operating Partnership, as
the case may be, and SBC; provided, further, that if Prodigy or Operating
Partnership, as the case may be, and SBC are unable to agree on such
percentage, such percentage shall be determined in accordance with the
Escalation Process; provided, however, that SBC shall not grant such
sublicenses to a competitive Retail ISP Service provider.
(c) To the extent SBC and Prodigy or Operating Partnership agree that SBC shall
undertake a Development Project at SBC's expense (a "Category II Work
Product") then all Work Products developed by SBC in connection with such
Development Project shall be owned by and will be the exclusive property of
SBC. In addition, to the extent SBC develops any product or service at its
own expense that would be useful for the Prodigy Service, SBC shall make
such product or service available to Prodigy and Operating Partnership, on
commercially reasonable terms not later than the time it makes such product
or service available for resale by any Third Party.
(d) For the term of this Agreement, on the Closing Date SBC shall grant to
Prodigy and Operating Partnership an irrevocable, fully-paid (except as
expressly provided herein), worldwide, non-exclusive, transferable license
to use, reproduce (in any medium), adopt, distribute, perform, display,
modify and create derivative works of such Category II Work Products and
distribute such Category II Work Products to Prodigy Subscribers, which
license shall include the right to grant sublicenses to facilitate the
business of Prodigy and Operating
21
Partnership; provided, that in connection with the grant of sublicenses,
Prodigy or Operating Partnership, as the case may be, shall pay SBC, on a
quarterly basis not later than 30 days after the end of the quarter in
which such royalties accrue, a royalty equal to a percentage of its
revenues, net of direct costs, relating to the sublicensee's use of such
Category II Work Product, such percentage to be mutually agreed by Prodigy
or Operating Partnership, as the case may be, and SBC; provided, further,
that if Prodigy or Operating Partnership, as the case may be, and SBC are
unable to agree on such percentage, such percentage shall be determined in
accordance with the Escalation Process; provided, however, that neither
Prodigy nor Operating Partnership shall grant such sublicenses to any
provider of Telecommunications Services or Value Added Data Services, or
its Affiliates.
ARTICLE V
PRODUCT DEVELOPMENT; PORTAL
5.1 Development of Client Software.
----- ------------------------------
(a) Licensed Client; Connectivity. Following the Closing, each of Prodigy and
Operating Partnership agrees that prior to obtaining a Commercial Client it
shall contract for (a) the ability to remove (including by disabling access
to, or the user interface of, without actually removing the code for)
functionality, advertising, trademarks and other references from such
Commercial Client, including any Upgrades thereto, if such items would
violate the exclusive rights granted to SBC in Section 3.7 of this
Agreement, or (b) the ability to package and integrate the Commercial
Client with software used, owned, licensed, provided or sold by SBC. In
the event Operating Partnership is unable to contract for the ability to
remove such functionality, advertising, trademarks and other references
from such Commercial Client including any Upgrades thereto or the ability
to package and integrate the Commercial Client with software used, owned,
licensed, provided or sold by SBC, Operating Partnership shall not enter
into a contract with such Commercial Client without the prior written
consent of SBC (which consent shall not be unreasonably withheld).
Operating Partnership shall obtain Documentation to reflect the removal of
such functionality from such Commercial Client and the ability to package
an integrate the Commercial Client with software used, owned, licensed,
provided or sold by SBC. Operating Partnership shall utilize Connectivity
Software to Deliver the Prodigy Service.
(b) Support. Operating Partnership shall provide the back-end technical
support and assistance reasonably required by SBC for the Licensed Client,
Licensed Tools and Customized Client on commercially reasonable terms.
5.2 Prodigy Portal.
----- --------------
(a) Provision of Prodigy Portal. The intent of the Parties is to enable
Prodigy and Operating Partnership to Deliver a browser based Portal, within
90 days of the Closing Date, that is comparable in respect of quality,
depth of content, and ability to generate revenue as the Portals used by
other ISPs and that makes use of the functionality afforded by DSL access
offered by SBC and other Third Parties. SBC may request that Prodigy add
certain features and functionality to the Prodigy Portal that is Delivered
pursuant to the Resold Prodigy Service that are in excess of Prodigy's
requirement to maintain a competitive Portal as provided in this Section
5.2. Prodigy will consider adoption of such requested features and
functionality upon
22
mutually agreed terms and conditions, including allocation of the costs of
the development and integration of such features and functionality that is
requested by SBC, as the Parties may agree.
(b) Procurement of Advertising for the Prodigy Portal. The Parties agree that,
except as otherwise provided herein with respect to Telecommunications
Services, Value Added Data Services, Smart Pages and any city guide service
provided by SBC or its Affiliates, all Advertising for the Prodigy Portal
shall be procured by Prodigy or Operating Partnership.
(c) Prodigy Portal Generated Revenues. The Parties agree that, except as
otherwise provided herein with respect to Telecommunications Services,
Value Added Data Services, Smart Pages and any city guide service provided
by SBC or its Affiliates, all Advertising revenue and e-commerce revenue
generated from the Prodigy Portal or from any other channel owned or
controlled by Prodigy or Operating Partnership shall belong to Prodigy or
Operating Partnership with no sharing by Prodigy or Operating Partnership
of revenue with SBC or its Affiliates.
(d) Telecommunications and Value Added Data Services Advertisements and
Products. Following the Closing, subject to Pre-existing Commitments set
forth on Schedule 4.2(b) of the Strategic and Marketing Agreement, SBC
shall have the exclusive right to sell and to place all of the
Telecommunications Advertisements and Value Added Data Services
Advertisements on the Prodigy Portal (subject to payment by SBC to
Operating Partnership of rates that are the best rates offered by Operating
Partnership to any unaffiliated Third Party for similar Advertisements on
the Prodigy Portal on a non-exclusive basis) with no sharing by SBC or its
Affiliates of revenue with Prodigy or Operating Partnership and provide all
products for the provision of Telecommunications Services and Value Added
Data Services to Subscribers of the Prodigy Service except to the extent
such sale, placement or provision materially disadvantages Operating
Partnership (either financially or competitively) as determined in
accordance with the Escalation Process. Notwithstanding SBC's exclusive
right to sell and place all of the Value Added Data Services Advertisements
on the Prodigy Portal as described above, Operating Partnership may sell
and place Advertisements on the Prodigy Portal relating to Prodigy's or its
Subsidiaries' Web hosting services (shared or dedicated) that are provided
directly by Prodigy or its Subsidiaries to its customers. In the event SBC
does not offer a Telecommunications Service, Value Added Data Service, or
electronic yellow or white pages which the Prodigy Board determines that
Operating Partnership should provide, Operating Partnership shall notify
SBC in writing that Operating Partnership wishes to provide such
Telecommunications Service, Value Added Data Service, or electronic yellow
or white pages. SBC shall have 60 days from receipt of such notification
within which to provide or procure such service on a basis that does not
materially disadvantage Operating Partnership (as determined in accordance
with the Escalation Process) relative to competitive alternatives and if
SBC fails to provide such service on such basis Operating Partnership shall
be permitted to carry such services of a Third Party; provided, that,
Operating Partnership in consultation and cooperation with SBC, shall first
use its commercially reasonable efforts to procure such services from a
Person that is not an SBC Designated Entity. In the event that Operating
Partnership is unable to procure such services from a Person that is not an
SBC Designated Entity, Operating Partnership may procure such services from
an SBC Designated Entity so long as the term of the agreement pursuant to
which Operating Partnership agrees to do so is limited to one year or less
or is otherwise terminable by Prodigy in its sole discretion on 60 days' or
less notice. If SBC subsequently obtains the ability
23
to provide such services then, subject to the Pre-existing Commitments set
forth in Schedule 4.2(b)(i) of the Strategic and Marketing Agreement or
other commitments entered into in accordance with this Section 5.2(d) after
the Closing Date, Operating Partnership will give SBC an opportunity to
match the terms upon which any Third Party is providing such services and
replace the Third Party as promptly as is commercially practicable if SBC
does match such terms.
(e) Non-Portal Transactions. Nothing herein shall prohibit SBC or its
Affiliates from Marketing products and services to SBC Subscribers through
channels other than the Prodigy Portal.
(f) Distribution of Smart Pages and City Guides.
(i) Following the Closing, the Parties agree that, except as required
by the Pre-existing Commitments set forth in Schedule 4.2(b)(ii) of the
Strategic and Marketing Agreement, the Prodigy Portal shall Deliver Smart
Pages and any city guide services provided by SBC or its Affiliates (at
SBC's sole expense) as the exclusive yellow and white pages and city guide
offerings of the Prodigy Portal with no sharing by SBC of revenue with
Prodigy or Operating Partnership (subject to payment by SBC to Operating
Partnership of rates that are the best rates offered by Prodigy or
Operating Partnership to any unaffiliated Third Party for the Delivery of
similar services on the Prodigy Portal on a non-exclusive basis); provided,
that, the foregoing exclusivity shall terminate to the extent and for so
long as (x) Operating Partnership determines, based on objective criteria,
that Smart Pages or a city guide, as the case may be, functionality has
become inferior to competitive products in ways that materially
disadvantages Operating Partnership (either financially or competitively)
as determined in accordance with the Escalation Process and SBC has failed
to correct such competitive or financial inferiority within six months
after written notice from Operating Partnership of such inferiority and
intention to add an additional electronic yellow or white pages or city
guide or (y) neither SBC nor any of its Affiliates are able to provide such
Smart Pages or city guide services.
(ii) Following the Closing, in no event shall the Prodigy Portal cease
to Deliver Smart Pages or any city guide services of SBC or its Affiliates
on the Prodigy Portal. The Parties agree that the operation of Smart Pages
and city guide services by SBC (including any future development as an e-
commerce mall or other functionality) shall not violate any exclusivity or
other obligations of SBC under this Agreement.
(g) Performance Standards.
Following the Closing, the Prodigy Portal must demonstrate compliance with
the following performance standards (the "Performance Standards"), to be
measured on a quarterly calendar basis. The Prodigy Portal shall comply
with the following performance standards, to be measured on a quarterly
calendar basis: (i) nonsubcriber revenue per Subscriber will be
substantially equivalent to or exceed the nonsubscriber revenue per
subscriber of other competitive ISPs generated from their Portal, taking
into account the relative size of subscriber base, access mix and other
relevant factors to be mutually determined (the "Nonsubscriber Revenue
Performance Standard"); provided, however, the Nonsubscriber Revenue
Performance Standard shall not apply if, pursuant to the Escalation
Process, it is determined that the failure to satisfy the Nonsubscriber
Revenue
24
Performance Standard results from SBC's or its Affiliates' exercise of their
rights under Section 5.2(d), and (ii) the Prodigy Portal will be accessible to
Subscribers on average of at least ninety-eight (98%) of the time, (excluding
planned outages).
(h) Remedies for Failure to Meet Performance Standards.
(i) Quarterly Failure. In the event that the Performance Standards
are not met in any quarter, then representatives of Prodigy and SBC shall
meet to discuss such underperformance and seek to identify ways to improve
the performance of the Prodigy Portal. In the event that the Performance
Standards are not met in any two consecutive quarters or any two quarters
out of four consecutive quarters, then Prodigy and SBC shall meet to
develop corrective actions and Prodigy and Operating Partnership shall use
commercially reasonable efforts to implement such corrective actions.
(ii) Three Consecutive Quarters. The Prodigy Portal's failure to meet
the Performance Standard in any three or more consecutive quarters after
the Transition Date shall be an Exclusivity Termination Event.
5.3 Product Development Details.
----- ---------------------------
(a) Development Plan. On or before the Closing Date (for the calendar year of
the Closing Date), and annually thereafter on a calendar year basis during
the term of this Agreement, in consultation with SBC, Operating Partnership
shall prepare and adopt a twelve month plan, which plan shall be approved
by the Prodigy Board (the "Development Plan") of the software and other
development and related integration, support and maintenance activities
that Prodigy or the Operating Partnership desires to undertake, and other
operating services each desires to obtain from SBC or Third Parties, in
connection with the Prodigy Service during such twelve month period which
shall be implemented through individual projects (the "Development
Projects"). Each Development Plan shall be approved by the Prodigy Board
prior to the adoption and implementation of such Development Plan and shall
be updated quarterly. Each Development Plan shall include reasonable detail
such as personnel requirements, budget and description of work to be done.
Once approved by the Prodigy Board, the Development Plan may only be
modified in any material respect with the approval of the Prodigy Board,
provided that Prodigy Board approval of modifications shall not be required
so long as the Development Plan is being implemented within the budget and
general strategy set forth therein. Operating Partnership shall manage
Development Projects substantially in accordance with the Development Plan.
(b) Designation of Software. The Parties shall use their best faith efforts to
mutually agree upon the Commercial Client software and the Connectivity
Software necessary for Delivery of the Prodigy Service; provided, however,
this cooperative process shall not have the effect of granting Prodigy or
Operating Partnership veto rights with respect to the selection or design
of the Commercial Client software or the Connectivity Software. Any
disagreement between the Parties as to the Commercial Client software or
the Connectivity Software shall be resolved by the Parties pursuant to the
Escalation Process.
25
(c) Similar Software. Following the Closing, subject to the restrictions
contained herein, SBC may develop software that is similar to software it
has developed for Operating Partnership provided that such software is
developed without reference to, or using any confidential information of
Operating Partnership unless otherwise agreed in writing between SBC and
Operating Partnership.
ARTICLE VI
NETWORK SERVICES
6.1 SBC Preference for Network Services.
----- -----------------------------------
Subject to the Pre-existing Commitments set forth in Schedule 5.1(i) of the
Strategic and Marketing Agreement, following the Closing, each of Prodigy and
Operating Partnership shall offer SBC the first opportunity to provide all
Network Services for Delivery of the Prodigy Service and shall, subject to
Section 6.2, utilize such Network Services provided by SBC.
6.2 Qualifications on Preference.
----- ----------------------------
The rights granted to SBC in Section 6.1 shall only apply to the extent SBC
provides Network Services on terms that do not materially disadvantage Prodigy
or Operating Partnership (as determined in accordance with the Escalation
Process) as compared to terms available from a Third Party and with a service
quality level competitive, in the aggregate, with that of Third Parties.
6.3 Favored Pricing; Third Party Agreements.
----- ---------------------------------------
To the best of its knowledge, following the Closing, SBC shall always offer
Network Services to Operating Partnership at the best price, that it offers such
particular Network Service to any other similarly situated non-governmental
Third Party purchaser of a similar type and quantity of such Network Services.
To the extent SBC offers any Third Party ISP Service access to any cable
Broadband Access networks that are owned by Affiliates of SBC for the purpose of
providing an ISP Service, following the Closing, SBC shall make such cable
Broadband Access available to Operating Partnership on at least equivalent terms
and conditions. Each of Prodigy and Operating Partnership agrees that it shall
not enter into any exclusive contracts with Third Parties for the provision of
Network Services following the Closing. Following the Closing, each of Prodigy
and Operating Partnership agrees that it shall not enter into any long-term
contracts with Third Parties for the provision of Network Services without the
consent of SBC (which consent shall not be unreasonably withheld).
6.4 Day-to-Day Business Operations of Prodigy.
----- -----------------------------------------
Subject to the Pre-existing Commitments as set forth in Schedule 4.2(b) and
Schedule 5.4(i) of the Strategic and Marketing Agreement, or as contemplated by
Section 5.2(d), following the Closing, each of Prodigy and Operating Partnership
shall use commercially reasonable efforts to acquire the Telecommunications
Services for its day-to-day business operations (other than for the Delivery of
the Prodigy Service) from SBC to the extent such Telecommunications Services are
available to be provided by SBC; provided, that, Prodigy shall
26
not be required to connect its current in-house security system to SBC's
security system at its White Plains, New York offices, if any. Subject to
compliance with applicable law, following the Closing, SBC shall offer such
Telecommunications Services to Prodigy and Operating Partnership on terms that
are no less favorable than those offered by SBC to other comparable ISPs.
6.5 Technical Assistance by SBC.
----- ---------------------------
Following the Closing, SBC shall provide on terms at least as favorable as
those offered to any other similarly situated unaffiliated Third Party the
technical support and assistance reasonably required by Prodigy and Operating
Partnership in connection with the use by Prodigy and Operating Partnership of
the Network Services.
6.6 Global Services Provider.
----- ------------------------
Following the Closing, SBC shall provide Network Services to Prodigy and
Operating Partnership consistent with SBC's GSP obligations. Nothing in this
Agreement shall require SBC to modify its existing, or enter into new, GSP
contractual arrangements. Each of Prodigy, Operating Partnership and SBC, where
required, shall comply with applicable GSP legal requirements. Subject to
applicable legal requirements, SBC agrees to cooperate with the reasonable
requests of Operating Partnership in connection with the management of GSP
relationships. Following the Closing Date, each of Prodigy and Operating
Partnership agrees that it will continue to comply with such GSP obligations, if
applicable.
ARTICLE VII
DISPUTE RESOLUTION
7.1 Negotiation.
----- -----------
In the event of any controversy or claim arising from or relating to this
Agreement or the breach thereof (each, a "Claim"), SBC and SBC Sub, on the one
hand, and Prodigy and Operating Partnership, on the other hand, shall use
commercially reasonable efforts to resolve the Claim. To this end,
representatives on the Prodigy Board of parties having an interest in the Claim
(collectively, the "Participating Parties"), shall consult and negotiate with
each other in good faith and, recognizing their mutual interests, attempt to
reach a just and equitable solution satisfactory to all Participating Parties.
If they do not reach such solution within a period of 30 Business Days from the
date of their first meeting, then the Participating Parties shall commence
arbitration in accordance with this Article VII.
7.2 Arbitration.
----- -----------
If the Claim is not resolved by negotiation by the conclusion of the
negotiation period referred to above, such Claim shall be resolved by final and
binding arbitration administered by the American Arbitration Association (AAA)
in accordance with its Commercial Arbitration Rules and Title 9 of the U.S.
Code. Judgment on the award rendered by the arbitrators may be entered in any
court having jurisdiction thereof.
27
(a) Any Participating Party desiring to commence arbitration shall send a
written notice (an "Arbitration Notice") to the other Participating Parties
and to the AAA describing the dispute and setting forth the matters to be
resolved by the arbitration. Within ten Business Days of the date of such
notice (the "Notice Period"), any other Participating Party may, if such
Participating Party does not agree with the description or statement of
matters to be resolved, send an Arbitration Notice to the other
Participating Parties and to the AAA describing the dispute and setting
forth the matters to be resolved by the arbitration. Within ten Business
Days of the end of the Notice Period, the Participating Parties shall, if
they can agree, select an arbitrator to resolve the dispute. In the event
that the Participating Parties have not selected an arbitrator within ten
Business Days of the end of the Notice Period, then the dispute shall be
resolved by majority decision of a panel of three arbitrators, selected by
the AAA in accordance with its rules.
(b) In selecting arbitrators, the Participating Parties or the AAA shall select
persons who are experienced in and knowledgeable about the information
technology and telecommunications industries and are rendering no advice or
services to, and within the past two years have rendered no material advice
or services to, any party to this Agreement.
(c) The place of arbitration shall be Austin, Texas.
(d) The arbitrator(s) shall have no authority to award punitive damages or any
other damages not measured by the prevailing party's actual damages, and
may not, in any event, make any ruling, finding or award that does not
conform to the terms and conditions of this Agreement.
(e) At any time after the commencement of a proceeding hereunder, any Party may
make an application to the arbitrators seeking injunctive relief until such
time as the arbitration award is rendered or the controversy is otherwise
resolved. Any Participating Party may also apply to any court having
jurisdiction hereof at any time to seek injunctive relief until such time
as the arbitration award is rendered or the controversy is otherwise
resolved.
(f) The award shall be made within one month of filing of the Arbitration
Notice, and the arbitrator(s) shall agree to comply with this schedule
before accepting appointment. However, this time limit may be extended by
agreement of the parties or by the arbitrator(s) if necessary. The failure
to meet these time limits shall not invalidate the award when rendered.
(g) Except as required by law or by regulation, or with the consent of all
parties involved in the proceeding, no party hereto shall disclose or
disseminate any information relating to a Claim or to the dispute
resolution proceedings called for hereby except for disclosure to those of
its officers, employees, accountants, attorneys and agents whose duties
reasonably require them to have access to such information.
(h) The Participating Parties in the arbitration shall share equally the costs
and expenses of the arbitration. Each Participating Party shall otherwise
bear its own fees and expenses.
28
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1 Additional Agreements.
----- ---------------------
(a) Each of Prodigy and Operating Partnership acknowledges that the
transactions contemplated by this Agreement create a strategic relationship
with SBC and in order to facilitate the fullest possible cooperation
between Prodigy and Operating Partnership, on the one hand, and SBC and SBC
Sub, on the other hand, each of Prodigy and Operating Partnership agrees
for itself and its Subsidiaries that:
(i) they shall not issue or sell, or facilitate the issuance or sale, to
any SBC Designated Entity of any equity or other voting securities of
Prodigy or any Affiliate of Prodigy, or make any investment in the
securities of or enter into any joint venture with any SBC Designated
Entity;
(ii) they shall not enter into any agreement, arrangement or understanding
with any SBC Designated Entity that includes any Co-Branding, co-
Marketing, co-funded advertising or packaging of any Prodigy or
Prodigy Affiliate name, product or service provided that the
prohibitions in this Section 8.1(a)(ii), shall not prohibit Prodigy
and its Affiliates from: (y) including the Prodigy Service in a bundle
with any SBC Designated Entity products so long as the Prodigy Service
is just one of several products in the bundle, the Prodigy Brand is
used materially less prominently than that of the SBC Designated
Entity and there is no Co-Branding or co-Marketing or co-funded
advertising of the bundle or (z) agreeing to "ingredient branding" of
a unique function which requires ingredient branding as a condition to
its availability, that is competitively significant for Operating
Partnership to offer its subscribers and which function Prodigy or
Operating Partnership has been unable to obtain after 60 days of
commercially reasonable efforts from SBC or any non-SBC Designated
Entity; and
(iii) they shall not utilize any method of Internet access (e.g., cable,
satellite or broadband wireless) obtained from any SBC Designated
Entity unless such access is non-exclusive and available (by law or
otherwise) to all Internet service providers, including Operating
Partnership, on a non-discriminatory basis on the same terms and
conditions.
(b) Except as otherwise provided in Section 11.19(a), Operating Partnership and
Prodigy, on the one hand, and SBC and SBC Sub, on the other hand, shall
each bear their own Transaction Expenses.
(c) Prodigy shall, as soon as practicable after the execution and delivery of
this Agreement, prepare with SBC a transition plan (the "Transition Plan")
covering the period from the date of this Agreement through the date that
the Residential Customers procured prior to the Effective Date are
transitioned to the Prodigy Service, which will include, among other
things, strategies consistent with this Agreement relating to Network
Services, the transitioning of the Residential Customers to the Prodigy
Service, customer care services and the implementation of interim marketing
arrangements. The Parties agree, in the context of the Transition Plan, to
29
develop methods for SBC's provisioning of billing services to Prodigy
Subscribers located in the SBC Territory.
(d) As soon as practicable following the Effective Date, Prodigy and SBC
shall use commercially reasonable, good faith efforts to negotiate and
jointly prepare an initial marketing plan for Affinity and OEM programs and
programs for Marketing and Delivering each Party's Retail ISP Service
through national and regional retailers (the "Affinity and OEM Marketing
Plan") covering the period from the date of adoption of such plan through
the end of the calendar year in which such plan is adopted. Thereafter, the
Parties shall prepare not later than October 1 of each year an Affinity and
OEM Marketing Plan for the succeeding year. The Affinity and OEM Marketing
Plan will include, among other things, plans, programs and policies for
each of the Parties to Market and Deliver their respective Retail ISP
Services consistent with the terms and conditions of this Agreement, the
Resale Agreement and applicable Law. Each Party may refer matters of
disagreement regarding the provisions of the Affinity and OEM Marketing
Plan for resolution pursuant to the Escalation Process.
8.2 Customer Care.
----- -------------
(a) Prodigy or Operating Partnership shall be responsible for all Tier 1 and
higher customer service for their customers regarding administrative
issues, billing inquiries and the Prodigy Service.
(b) SBC shall provide all Tier 2 and higher customer service for Prodigy
customers regarding Network Services provided by SBC or its Affiliates.
Each Party shall bear all costs of providing customer care (including costs for
all facilities, employees, hardware and software) with respect to the customer
care matters for which it is responsible under the terms of this Agreement.
ARTICLE IX
TERMINATION
9.1 Termination of Agreement.
----- ------------------------
(a) This Agreement shall terminate upon the earliest to occur of the following:
(i) the mutual written consent of SBC and Prodigy by action of their
respective boards of directors to so terminate this Agreement; and (ii) the
Exclusivity Termination Date; provided, that, following the occurrence of
an event referred to in clause (x) of the definition of Exclusivity
Termination Event that SBC does not utilize to declare an Exclusivity
Termination Date, Article VI shall survive until the later of the ninth
anniversary of the date of this Agreement and the second anniversary of
such event.
(b) (i) In the event one Party materially breaches or fails to perform any of
its material obligations under this Agreement, the other Party (the
"Notifying Party") may notify the allegedly breaching Party (the "Receiving
Party") of such breach or failure (a "Breach Notice") and the Parties shall
first meet in good faith to try to determine whether a material breach has
occurred, and if so, an appropriate manner for correcting or otherwise
addressing such breach or failure, with a preference where appropriate for
a remedy other than termination, and establish a
30
plan for the prevention of similar breaches or failures in the future. The
Receiving Party shall use commercially reasonable efforts to remedy
promptly any such breach or failure.
(ii) In the event the Parties disagree over whether such breach or
failure has occurred or such breach or failure is not cured within 30 days
after the Receiving Party's receipt of such breach notice, or, in the case
of a breach or failure that is not capable of being remedied, the Parties
cannot reach agreement on an appropriate manner for addressing such breach
or failure, other than termination, either of the Parties may request in
writing that such matter be referred to the senior management officers of
each of the Parties designated in Section 2.2(a), hereof, for an
appropriate resolution. Upon such a request, such senior management
officers of each of the Parties shall meet in good faith to determine an
appropriate manner for addressing such breach or failure, with a preference
where appropriate for a remedy other than termination.
(iii) In the event such breach or failure is not cured within 30 days
after the referral of the matter to such senior management officials, or,
in the case of a breach or failure that is not capable of being remedied,
the Parties cannot reach agreement on an appropriate manner for addressing
such breach or failure, other than termination, within such 30 day period,
the Notifying Party shall have the right to commence an action affirming
the existence of such breach or failure and may terminate this Agreement
only upon receipt of a final arbitral award pursuant to Article VII of this
Agreement affirming the existence of such breach or failure; provided,
however, that for purposes of this Section 9.1(b), any award to be made
pursuant to Article VII shall be made within one month of filing of the
Arbitration Notice notwithstanding anything to the contrary contained in
Section 7.2(f) of this Agreement.
(iv) Notwithstanding the foregoing, in the event that any such breach
or failure occurs again within 120 days of the Receiving Party's receipt of
a Breach Notice for the first such breach or failure, the Notifying Party
shall have the right to terminate this Agreement immediately only upon
receipt of a final arbitral award pursuant to Article VII of this Agreement
affirming the existence of such breach or failure and that such breach or
failure was material; provided, however, that for purposes of this Section
9.1(b)(iv), any award to be made pursuant to Article VII shall be made
within one month of filing of the Arbitration Notice notwithstanding
anything to the contrary contained in Section 7.2(f) of this Agreement.
Termination in accordance with Section 9.1(b)(iii) or 9.1(b)(iv) shall be
immediately effective upon the receipt by the Receiving Party of written
notice of the final arbitral award affirming the existence of such breach
or failure and termination from the Notifying Party. This Section 9.1(b)
shall not in any way limit any Party's right to seek injunctive relief or
any other remedy available at law or in equity prior to any termination of
this Agreement.
31
ARTICLE X
REPRESENTATIONS AND WARRANTIES
10.1 Representations and Warranties of Prodigy and Operating Partnership.
------ -------------------------------------------------------------------
Each of Prodigy and Operating Partnership jointly and severally hereby
makes the following representations and warranties to SBC and SBC Sub:
(a) Authorization; Enforcement. Subject to and conditioned upon approval by
the Prodigy Board on or before January 19, 2001, (i) each of Prodigy and
Operating Partnership has all requisite corporate power and authority to
execute and to deliver this Agreement and to perform its obligations under
this Agreement in accordance with its terms, (ii) each of Prodigy and
Operating Partnership has taken all necessary action to authorize the
execution and delivery of this Agreement, and the consummation of the
transactions contemplated hereby, and (iii) this Agreement is a valid and
legally binding obligation of each of Prodigy and Operating Partnership,
enforceable against each of them in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles (the "Bankruptcy and Equity
Exception").
(b) Compliance with Law and Obligations. The execution and delivery by each of
Prodigy and Operating Partnership of this Agreement do not and the
performance by each of Prodigy and Operating Partnership of its respective
obligations under this Agreement and the consummation by each of Prodigy
and Operating Partnership of the transactions contemplated hereby will not,
violate any provision of any law or regulation, or any existing writ or
decree of any court or Governmental Entity applicable to Prodigy or
Operating Partnership, or violate, conflict with or constitute a breach of,
or a default under, the certificate of incorporation or bylaws of Prodigy,
the Amended and Restated Certificate of Incorporation of Prodigy or the
Amended and Restated By-Laws of Prodigy or the Certificate of Limited
Partnership of Operating Partnership or the comparable governing
instruments of any of their respective Subsidiaries, or result in a
violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of termination,
cancellation, modification or acceleration) (whether after the giving of
notice or the passage of time or both) under any material contract to which
Prodigy or Operating Partnership is a party or which is binding on it or
its assets, and will not result in the creation of any Lien on, or security
interest in, any of the assets or properties of Prodigy or Operating
Partnership or any of their Subsidiaries. Schedule 9.1(b) to the Strategic
and Marketing Agreement sets forth a correct and complete list of material
Contracts of Prodigy and its Subsidiaries pursuant to which consents or
waivers are or may be required prior to consummation of the transactions
contemplated by this Agreement.
(c) Consents and Approvals. All notices, reports or other filings required to
be made by Prodigy or Operating Partnership, and all consents,
registrations, approvals, permits, authorizations and orders of
Governmental Entities or other third parties required to be obtained by
Prodigy or Operating Partnership, in connection with the execution and
delivery of this Agreement by each of Prodigy and Operating Partnership,
the performance by each of Prodigy and Operating Partnership of its
respective obligations under this Agreement and the consummation by each of
Prodigy and Operating Partnership of the transactions contemplated hereby
have been made or obtained.
32
10.2 Representations and Warranties of SBC and SBC Sub.
---- --------------------------------------------------
Each of SBC and SBC Sub jointly and severally hereby makes the following
representations and warranties to Prodigy and Operating Partnership:
(a) Authorization; Enforcement. Each of SBC and SBC Sub has all requisite
corporate power and authority to execute and deliver this Agreement and to
perform its obligations under this Agreement in accordance with its terms.
Each of SBC and SBC Sub has taken all necessary action to authorize the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby. This Agreement is a valid and legally
binding obligation of each of SBC and SBC Sub, enforceable against each of
them in accordance with its terms, subject to the Bankruptcy and Equity
Exception.
(b) Compliance with Law and Obligations. The execution and delivery by each of
SBC and SBC Sub of this Agreement do not, and the performance by each of
SBC and SBC Sub of its respective obligations under this Agreement and the
consummation by each of SBC and SBC Sub of the transactions contemplated
hereby will not, violate any provision of any law or regulation, or any
existing writ or decree of any court or Governmental Entity applicable to
SBC or SBC Sub, or violate, conflict with or constitute a breach of, or a
default under, the certificate of incorporation or bylaws of SBC or SBC
Sub, or result in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right
of termination, cancellation, modification or acceleration) (whether after
the giving of notice or the passage of time or both) under any material
Contract to which SBC or SBC Sub is a party or which is binding on it or
its assets, and will not result in the creation of any Lien on, or security
interest in, any of the assets or properties of SBC or any of its
Subsidiaries.
(c) Consents and Approvals. All notices, reports or other filings required to
be made by SBC or SBC Sub, and all consents, registrations, approvals,
permits, authorizations and orders of Governmental Entities or other third
parties required to be obtained by SBC or SBC Sub in connection with the
execution and delivery of this Agreement by each of SBC and SBC Sub, the
performance by each of SBC and SBC Sub of its respective obligations under
this Agreement and the consummation by each of SBC and SBC Sub of the
transactions contemplated hereby, have been made or obtained.
ARTICLE XI
MISCELLANEOUS
11.1 Assignment.
---- -----------
Neither this Agreement nor any rights or obligations hereunder may be
assigned by any Party without the prior written consent of the other Parties
hereto. For purposes of this Section 11.1, the following transactions shall be
deemed an assignment of this Agreement that shall require the other Parties'
written consent: (i) the acquisition of ownership, directly or indirectly,
beneficially or of record, by any person or group (within the meaning of the
Securities Exchange Act of 1934 and the rules of the Securities and Exchange
Commission thereunder as in effect on the date hereof), other than by
shareholders of record as of the Effective Date, of shares representing more
than 25% of the aggregate ordinary voting power represented by the issued and
outstanding capital stock of a Party, and (ii) with respect to Prodigy, the
occupation of a
33
majority of the seats (other than vacant seats) on the Prodigy Board by persons
who were neither (A) nominated by SBC or its Affiliates, nor (B) appointed by
directors so nominated. Any attempted assignment that does not comply with this
Section 11.1 shall be void.
11.2 Governing Law; Venue; Waiver of Jury Trial.
------ ------------------------------------------
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH AND SUBJECT TO THE LAWS OF THE
STATE OF TEXAS, WITHOUT REFERENCE TO CONFLICTS OF LAWS PRINCIPLES.
The parties hereby irrevocably submit to the jurisdiction of the
courts of the State of Texas and the Federal court of the United States of
America located in the State of Texas solely in respect of the interpretation
and enforcement of the provisions of this Agreement, and hereby waive, and agree
not to assert, as a defense in any action, suit or proceeding for the
interpretation or enforcement hereof or of any such document, that it is not
subject thereto or that such action, suit or proceeding may not be brought or is
not maintainable in said courts or that the venue thereof may not be appropriate
or that this Agreement or any such document may not be enforced in or by such
courts, and the parties hereto irrevocably agree that all claims with respect to
such action or proceeding shall be heard and determined in such a Texas State or
Federal court. The parties hereby consent to and grant any such court
jurisdiction over the person of such parties and over the subject matter of such
dispute and agree that mailing of process or other papers in connection with any
such action or proceeding in the manner provided in Section 11.4 of this
Agreement or in such other manner as may be permitted by Law shall be valid and
sufficient service thereof.
EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT,
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 11.2.
11.3 Counterparts.
------ ------------
This Agreement may be executed in any number of counterparts, each such
counterpart being deemed to be an original instrument, and may be executed by
facsimile signature. All counterparts shall collectively constitute one and the
same Agreement.
34
11.4 Notices.
------ -------
In any case where any notice or other communication is required or
permitted to be given hereunder, such notice or communication shall be in
writing and deemed to have been duly given and delivered: (a) if delivered in
person, on the date of such delivery; (b) if sent by overnight express or
registered or certified mail (with return receipt requested), on the date of
receipt of such mail; or (c) if sent by confirmed facsimile transmission (with
answer back received), on the date of such facsimile transmission provided that
notice is also sent on the same day by one of the methods set forth in (a) or
(b) above. Such notice or other communication shall be sent to the following
address(es) (or such other address(es) as a Partner may designate from time to
time in writing):
35
If to SBC or SBC Sub:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Senior Vice President-Consumer Markets
SBC Communications Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ Street, Room 1224
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy, which shall not constitute notice, to:
▇▇. ▇▇▇▇▇ ▇▇▇▇▇
Vice President and Assistant General Counsel
SBC Communications Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ Street, Room 4-H-60
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
If to Prodigy or Operating Partnership:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Executive Vice President and COO
Prodigy Communication Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
With copies, which shall not constitute notice, to:
General Counsel
Prodigy Communication Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
11.5 Entire Agreement.
------ ----------------
The terms and conditions contained in this Agreement (including the
exhibits and/or schedules attached hereto) constitute the entire agreement
between or among the Parties relating to the subject matter of this Agreement
and shall supersede all previous communications
36
between the Parties with respect to the subject matter of this Agreement. No
Party has entered into this Agreement in reliance upon any representation,
warranty, covenant or undertaking of any other Party that is not set out or
referred to in this Agreement.
11.6 Amendment.
------ ---------
Except as expressly provided otherwise in this Agreement, this Agreement
may be varied, amended or extended only by the written agreement executed and
delivered by duly authorized officers or representatives of the respective
Parties.
11.7 Severability.
------ ------------
In the event that any provision of this Agreement is held to be illegal,
invalid or unenforceable in a final, unappealable Order or judgment (each such
provision, an "invalid provision"), then such provision shall be severed from
this Agreement and shall be inoperative, and the Parties promptly shall
negotiate in good faith a lawful, valid and enforceable provision that is as
similar to the invalid provision as may be possible and that preserves the
original intentions and economic positions of the Parties as set forth herein to
the maximum extent feasible, while the remaining provisions of this Agreement
shall remain binding on the Parties hereto. Without limiting the generality of
the foregoing sentence, in the event a change in any applicable Law, rule or
regulation makes it unlawful for a Party to comply with any of its obligations
hereunder, the Parties shall negotiate in good faith a modification to such
obligation to the extent necessary to comply with such Law, rule or regulation
that is as similar in terms to the original obligation as may be possible while
preserving the original intentions and economic positions of the Parties as set
forth herein to the maximum extent feasible.
11.8 Headings; Recitals.
------ ------------------
The descriptive headings of the articles and sections of this Agreement and
its Schedules and Exhibits and the recitals herein are inserted for convenience
only and do not constitute a part of this Agreement.
11.9 No Waiver of Rights.
------ -------------------
No failure or delay on the part of a Party in the exercise of any power or
right hereunder shall operate as a waiver thereof. No single or partial
exercise of any right or power hereunder shall operate as a waiver of such right
or of any other right or power. The waiver by any Party of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
other or subsequent breach hereunder. No waiver shall be effective unless in
writing signed by the waiving Party.
11.10 Remedies Cumulative.
------- -------------------
Unless expressly provided otherwise herein, all rights and remedies granted
to each Party under this Agreement are cumulative and in addition to, and not in
lieu of, any other rights or remedies otherwise available to such Party at law
or in equity.
37
11.11 No Agency.
------- ---------
Each of the Parties hereto is an independent contractor and shall have no
right, power or authority to assume or create any obligation or responsibility
on behalf of any of the other Parties. This Agreement shall not create or
imply, or be construed to create or imply, any partnership, association, agency,
or joint venture between or among the Parties.
11.12 No Third Party Beneficiaries.
------- ----------------------------
This Agreement is entered into solely among, and may be enforced only by,
the Parties hereto. This Agreement shall not be deemed to create any rights in
any Third Parties, including suppliers, customers and employees of any Party, or
to create any obligations of a Party to any such Third Parties.
11.13 Force Majeure.
------- -------------
If any circumstance beyond the reasonable control of any Party occurs which
delays or renders impossible the performance of that Party's obligations under
this Agreement on the dates herein provided, such obligation shall be postponed
for such time as such performance necessarily has had to be suspended or delayed
on account thereof, provided such Party shall notify the other Parties in
writing as soon as practicable, but in no event more than ten days, after the
occurrence of such force majeure. In such event, the Parties shall meet
promptly to determine an equitable solution to the effects of any such event,
provided that such Partner who fails because of force majeure to perform its
obligations hereunder shall use commercially reasonable efforts to implement
work-arounds or otherwise minimize the length of the delay and to resume
promptly performance upon the cessation of the force majeure. Events of force
majeure shall include war, revolution, invasion, insurrection, riots, mob
violence, sabotage or other civil disorders, power outages, and acts of God;
provided, however, that, in the event that a change in any applicable Law, rule
or regulation makes it unlawful for a Party to comply with any of its
obligations hereunder and could be considered an event of force majeure, the
characterization of such change in Law, rule or regulation as an event of force
majeure shall be without prejudice to the obligations of the Parties under
Section 11.7 above.
11.14 Further Assurances; Affiliates.
------- ------------------------------
In addition to any other obligations set forth in the Agreement, each Party
agrees to take such action (including, but not limited to, the execution,
acknowledgment and delivery of documents) as may reasonably be requested by the
other Party for the implementation or continuing performance of this Agreement.
Unless otherwise expressly set forth herein, any agreement by a Party to take or
refrain from taking any action shall constitute an agreement by such Party to
cause each of its Subsidiaries, and to use all reasonable best efforts to cause
each of its Affiliates, to so act or refrain from acting.
11.15 Export Controls.
------- ---------------
Each Party agrees to comply fully with all relevant export laws and
regulations of the United Sates to ensure that no information or technical data
provided pursuant to this Agreement is exported or re-exported directly or
indirectly in violation of law.
38
11.16 Negotiated Terms.
------- ----------------
Each Party acknowledges that the provisions of this Agreement were
negotiated to reflect an informed, voluntary allocation between the Parties of
all risks (both known and unknown) associated with the transactions contemplated
by this Agreement.
11.17 Principles Of Construction.
------- --------------------------
In this Agreement and all other attached Schedules, Exhibits or Attachments
to this Agreement, unless otherwise expressly indicated or required by the
context:
(a) reference to and the definition of any document shall be deemed a reference
to such document as it may be amended, supplemented, revised, or modified,
in writing, from time to time but disregarding any amendment, supplement,
replacement or novation made in breach of this Agreement;
(b) references in this Agreement to any statute, decree or regulation shall be
construed as a reference to such statute, law, decree or regulation as re-
enacted, redesignated, amended or extended from time to time and references
herein or in this Agreement to any document or agreement shall be deemed to
include references to such document or agreement as amended, varied,
supplemented or replaced from time to time in accordance with such
document's or agreement's terms;
(c) defined terms in the singular shall include the plural and vice versa, and
the masculine, feminine or neuter gender shall include all genders;
(d) the words "including" or "includes" shall be deemed to mean "including
without limitation" and "including but not limited to" (or "includes
without limitation" and "includes but is not limited to") regardless of
whether the words "without limitation" or "but not limited to" actually
follow the term;
(e) accounting terms used herein but not defined herein shall have their
respective meanings provided under U.S. GAAP;
(f) the words "hereof," "herein" and "hereunder" and words of similar import
when used in this Agreement or its Schedules or Exhibits shall refer to
this Agreement and its Schedules and Exhibits as a whole and not to any
particular provision hereof or thereof, as the case may be; and
(g) any reference herein to a time of day means the time of day in Austin,
Texas.
11.18 Confidentiality.
------- ---------------
The Parties shall maintain the confidentiality of this Agreement and of any
provisions of this Agreement in accordance with any applicable laws, rules and
regulations.
11.19 Taxes.
------- -----
(a) Payments. All payments under this Agreement shall be made exclusive of any
applicable taxes and shall be made free and clear of, and without reduction
for (and the
39
payor shall be responsible for and shall indemnify the payee against), any
applicable federal, state, local or foreign sales, use or value-added taxes
pertaining to the payments under this Agreement (but specifically excluding
taxes based upon the net income of the payee). At the payee's request, the
payor shall promptly furnish the payee with receipts evidencing the payment
of any taxes referred to in the preceding sentence. The payor and the payee
shall cooperate with each other in minimizing any applicable tax and in
obtaining any exemption from or reduced rate of tax available under any
applicable law.
11.20 Treatment in Accordance with Future Transactions.
------- ------------------------------------------------
Each of Prodigy and Operating Partnership agrees that it shall provide SBC
with copies of all agreements and documentation that could reasonably be
construed to impact SBC's rights or obligations hereunder that Prodigy or
Operating Partnership enters into with any Third Party ("Third Party
Agreement"). If SBC reasonably believes that any such Third Party Agreement
materially disadvantages SBC with respect to its obligations and rights under
this Agreement, SBC may request a determination, pursuant to the Escalation
Process, whether SBC has been or will be materially disadvantaged as a result of
such Third Party Agreement and seek appropriate remedies therefor.
40
IN WITNESS WHEREOF, each of the Parties hereto has caused this
Agreement to be duly executed in its name and on its behalf, all as of the date
first above written.
SBC COMMUNICATIONS INC.
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇
Title: Senior Executive Vice President,
Treasurer and CFO
SBC INTERNET COMMUNICATIONS, INC.
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President
PRODIGY COMMUNICATIONS CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman, CEO & President
PRODIGY COMMUNICATIONS LIMITED PARTNERSHIP
By: Prodigy Communications Corporation, as
general partner of Prodigy Communications
Limited Partnership
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman, CEO & President
41