EXHIBIT 7
Execution Copy
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STRATEGIC AND MARKETING AGREEMENT
By and Among
SBC COMMUNICATIONS INC.
SBC INTERNET COMMUNICATIONS, INC.
PRODIGY COMMUNICATIONS CORPORATION
and
PRODIGY COMMUNICATIONS LIMITED PARTNERSHIP
Dated as of November 19, 1999
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TABLE OF CONTENTS
Page
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Article I DEFINITIONS...................................................... 2
ARTICLE II MARKETING....................................................... 9
2.1 Generally............................................................. 9
2.2 Branding.............................................................. 9
2.3 Exclusivity and Limits on Exclusivity................................. 10
2.4 Marketing Commitments................................................. 11
2.5 SBC New Subscriber Marketing Payments................................. 11
2.6 Legacy Subscribers.................................................... 12
2.7 Telecommunications Services........................................... 13
2.8 DSL Preference........................................................ 15
2.9 Bundling.............................................................. 15
2.10 Access to Subscriber Information..................................... 15
2.11 Access to Arrangements............................................... 16
ARTICLE III INTELLECTUAL PROPERTY.......................................... 16
3.1 (a) License Grants................................................... 16
3.2 Portal Intellectual Property.......................................... 17
3.3 Future Products....................................................... 18
ARTICLE IV PRODUCT DEVELOPMENT; PORTAL..................................... 19
4.1 Development of Client Software........................................ 19
4.2 Prodigy Portal........................................................ 19
4.3 Product Development Details........................................... 21
ARTICLE V NETWORK SERVICES................................................. 22
5.1 SBC Preference for Network Services................................... 22
5.2 Qualifications on Preference.......................................... 22
5.3 Favored Pricing; Third Party Agreements............................... 22
5.4 Day-to-Day Business Operations of Prodigy............................. 22
5.5 Technical Assistance by SBC........................................... 23
5.6 Global Services Provider.............................................. 23
ARTICLE VI DISPUTE RESOLUTION.............................................. 23
6.1 Negotiation........................................................... 23
6.2 Arbitration........................................................... 23
ARTICLE VII ADDITIONAL AGREEMENTS.......................................... 25
7.1 Additional Agreements................................................. 25
ARTICLE VIII TERMINATION................................................... 26
8.1 Termination of Agreement.............................................. 26
ARTICLE IX REPRESENTATIONS AND WARRANTIES.................................. 27
9.1 Representations and Warranties of Prodigy and Operating Partnership... 27
9.2 Representations and Warranties of SBC and SBC Sub..................... 28
ARTICLE X MISCELLANEOUS.................................................... 29
10.1 Assignment........................................................... 29
10.2 Governing Law; Venue; Waiver of Jury Trial........................... 29
10.3 Counterparts......................................................... 29
10.4 Notices.............................................................. 30
10.5 Entire Agreement..................................................... 31
10.6 Amendment............................................................ 31
10.7 Severability......................................................... 31
10.8 Headings; Recitals................................................... 32
10.9 No Waiver of Rights.................................................. 32
10.10 Remedies Cumulative................................................. 32
10.11 No Agency........................................................... 32
10.12 No Third Party Beneficiaries........................................ 32
10.13 Force Majeure....................................................... 33
10.14 Further Assurances; Affiliates...................................... 33
10.15 Export Controls..................................................... 33
10.16 Negotiated Terms.................................................... 33
10.17 Principles Of Construction.......................................... 33
10.18 Confidentiality..................................................... 34
10.19 Taxes............................................................... 34
10.20 Treatment in Accordance with Future Transactions.................... 34
STRATEGIC AND MARKETING AGREEMENT
---------------------------------
This Agreement (the "Agreement") is made as of the 19th day of November,
1999 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, contemporaneously with the execution and delivery of this
Agreement SBC, SBC Sub, Prodigy, Prodigy Transition Corporation, a Delaware
corporation and a wholly owned subsidiary of Prodigy ("PTC"), and Operating
Partnership are entering into an Investment, Issuance, Contribution and
Assumption Agreement (the "Investment Agreement") pursuant to which, among other
things, Prodigy and PTC are contributing to Operating Partnership all of the
Prodigy Assets and Prodigy Liabilities (as such terms are defined in the
Investment Agreement); SBC Sub is contributing to Operating Partnership all of
the SBC Assets and SBC Liabilities (as such terms are defined in the Investment
Agreement); Prodigy is issuing the Investment Share (as such term is defined in
the Investment Agreement) to SBC Sub; and Operating Partnership is issuing the
SBC Units (as such term is defined in the Investment Agreement) to SBC Sub;
WHEREAS, SBC Sub wishes to provide the existing subscribers of the Internet
access services of SBC Sub, as of the Closing, with the Prodigy Service, assist
Prodigy and Operating Partnership in acquiring new 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 analog dial-up, ISDN and DSL Retail ISP Service in the United
States;
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.
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 and each of Operating Partnership and
PTC is an Affiliate of Prodigy.
"Aggregate Subscriber Commitment" means, with respect to the three year
period commencing on the Closing Date, 1,200,000 gross additional Subscribers.
"Arbitration Notice" has the meaning set forth in Section 6.2(a).
"Assume" has the meaning set forth in the Investment Agreement.
"Average Retail Price" means the average of the monthly price that America
Online, Inc., The Microsoft Network, and Mindspring Enterprises, Inc. (or such
other Internet service providers as the Parties may agree from time to time
specifically excluding the Prodigy Service) charge their respective retail
subscribers.
"Bankruptcy and Equity Exception" has the meaning set forth in Section
9.1(a).
"Broadband" or "Broadband Access" means Internet connectivity between an
End User's location and up to and including the backbone and any GSP through DSL
access or other forms of high speed access with speeds of at least 144 kilobits
per second downstream, including connectivity by means of coaxial cable,
wireless and satellite transmissions.
"Business Day" means any day other than Saturday, Sunday or a day on which
banks in the City of New York, New York are authorized or obligated by law or
executive order to close.
"Business Plan" means the two-year operating plan of each of Prodigy and
Operating Partnership (including the then-current (i) Development Plan and (ii)
Marketing Plan) and each subsequent two-year operating plan of each of Prodigy
and Operating Partnership.
"Category I Work Products" has the meaning set forth in Section 3.3(a).
"Category II Work Products" has the meaning set forth in Section 3.3(c).
"Claim" has the meaning set forth in Section 6.1.
"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 xxxx or other combination of the trademark(s),
trade name(s), service xxxx(s) or logo(s) of two or more Persons that is used to
identify a particular product or service.
"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 Closing 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 and 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.
"Deliver" including its various tenses and derivatives (such as
"Delivered"), means providing the Prodigy Service to Prodigy Subscribers by
making broadband or narrowband access available to such Prodigy Subscriber and
distributing the appropriate client software to such Prodigy Subscriber.
"Development Plan" has the meaning set forth in Section 4.3(a).
"Development Projects" has the meaning set forth in Section 4.3(a).
"Documentation" means the Client Documentation and Tools Documentation.
"DSL" means digital subscriber line.
"End User" means a subscriber to the Prodigy Service.
"Escalation Process" has the meaning set forth in Section 2.8(b).
"Excess Narrowband Subscriber" means, in any annual measurement period in
which SBC has procured for the Prodigy Service in excess of 300,000 gross
additional Subscribers (the "Excess Subscribers"), those Excess Subscribers that
are not receiving Broadband Access.
"Exclusivity Termination Date" means the earliest to occur of (i) a date
that is three years following the date hereof, and any successive third
anniversary of such date, at which one Party shall have delivered to the other
Party in writing at least 135 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 marketing exclusivity.
"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 4.2(e)(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 8.1(b) of this Agreement.
"Executive Steering Committee" means a special committee of the Prodigy
Board, which will be established by Prodigy in accordance with the Amended and
Restated Certificate of Incorporation and the Amended and Restated By-Laws at or
prior to the Closing and which will consist of four members, two of whom will be
selected by the SBC Directors and two of whom will be 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 will be to evaluate certain corporate actions of
Prodigy, which will be specified in the Amended and Restated By-Laws and which
will 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" of a Retail ISP Service means the first screen appearing to a
user accessing such Retail ISP Service, including any personalized versions of
such first screen customized by a user.
"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" has the meaning set forth in Section 2.7(a).
"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, trademarks and other references that
would violate the exclusive rights granted to SBC in Section 2.8 of this
Agreement, unless Operating Partnership determines, with the approval of SBC,
that certain such functionality, advertising, trademarks 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 Client
Software.
"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 2.1(c).
"Marks" means the Prodigy Marks and SBC Marks.
"Narrowband" or "Narrowband Access" means Internet connectivity between an
End User's location up to and including the backbone and any GSP with speeds of
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
2.8(b).
"Notice Period" has the meaning set forth in Section 6.2(a).
"Other Network Services" means all types of connectivity and transport
services required to Deliver the Prodigy Service between an End User's location
and up to and including the backbone and any GSP other than Broadband Access,
including but not limited to dial-up access, backbone, transport, and Network
Management and Integration Services.
"Participating Parties" has the meaning set forth in Section 6.1.
"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 trademarks, trade names, service marks and logos
set forth on Exhibit 3.1(a) hereto, 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.
"Prodigy Portal" means the English version of the portal currently
accessible by the public via the Internet at the URL
xxxx://xxx.xxxxxxx.xxx/xxxxxxx.xxxx and/or such other URL or location(s) as
Prodigy or Operating Partnership may designate, including any successor or
replacement implemented by Prodigy or Operating Partnership (on its own or
through a Third Party) for such site, 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 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.
"Prodigy Subscriber" means any Person that subscribes to the Prodigy
Service, either directly from Prodigy or Operating Partnership (including its
distributors) or from SBC (including its distributors).
"Performance Standards" has the meaning set forth in Section 4.2(d).
"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 web site 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 this Agreement.
"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 Prodigy Subscribers (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.
"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.
"Retail Price" has the meaning set forth in Section 2.7(b).
"Smart Pages" means the Internet site at the URL xxxx://xxx.XxxxxXxxxx.xxx.
"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 xxxx.
"SBC Brand Names" means SBC, Pacific Xxxx, Southwestern Xxxx, Nevada Xxxx,
Ameritech, SNET and SBC Telecom. In the event SBC initiates a national brand of
voice Telecommunications Service that utilizes a new brand name, the term "SBC
Brand Names" shall include such new brand name. SBC shall notify Prodigy
promptly in writing of any such other brand names.
"SBC Designated Entity" means AT&T, MCI Worldcom, Sprint, Microsoft,
Time-Warner, Xxxx Atlantic, Bellsouth, US West/Qwest and GTE and any of their
respective Affiliates and any Person in which any of such companies or
Affiliates owns a 25% or greater equity interest.
"SBC Marks" means the trademarks, trade names, service marks and logos set
forth on Exhibit 5.1(b) hereto, together with any others adopted by SBC 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.
"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).
"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 end users 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 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 Retail ISP Service
Delivered to at least 60% of the then-existing subscribers of the Retail ISP
Services of SBC and its Affiliates have been transferred to the Prodigy Service
in a manner such that the Home Page of the Prodigy Service is accessible by such
subscribers as contemplated by Section 2.7(c).
"Transition Plan" has the meaning set forth in Section 7.3(c).
"United States" means the 00 xxxxxx xx xxx Xxxxxx Xxxxxx 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 end users other than Traditional ISP Services, including
Web hosting (shared or dedicated), associated CPE and virtual private networks.
"Wholesale Price" has the meaning set forth in Section 2.7(b).
"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
MARKETING
2.1 Generally. The Parties agree that following the Closing Date, Prodigy
and Operating Partnership shall have the primary responsibility for Marketing
the Prodigy Service in accordance with the terms and subject to the conditions
of this Agreement. SBC and its Affiliates shall also be entitled to Market the
Prodigy Service in accordance with the terms and subject to the conditions of
this Agreement.
(b) Prior to the Closing Date, Prodigy and SBC shall prepare an initial
Business Plan covering the period from the Closing Date through calendar year
2002. Thereafter, the Parties shall prepare not later than October 1 of the
relevant year (beginning October 1, 2001) a Business Plan for the succeeding two
years. The Business Plan shall be subject to the approval of the Executive
Steering Committee prior to being submitted for the approval of the Prodigy
Board.
(c) Prior to the Closing Date, Prodigy and SBC shall prepare an initial
marketing plan (the "Marketing Plan") covering the period from the Closing Date
through calendar year 2001 that will include, among other things, a branding
strategy consistent with Section 2.2 below, the SBC marketing commitments set
forth in Section 2.5 below and a bundling strategy. Thereafter, the Parties
shall prepare not later than October 1 of each year (beginning October 1, 2000)
a Marketing Plan for the succeeding year, which plan shall reflect the objective
of Marketing the Prodigy Service to consumers and to small businesses. The
Marketing Plan shall reflect dial-up, ISDN and DSL Retail ISP Service with a
strong preference for Marketing the Prodigy Service through DSL to the extent
available.
2.2 Branding.
(a) The Parties agree the core brand name for the Prodigy Service shall be
Prodigy, and that prior to the Closing Date they shall agree upon additional
brand name or names and logo or logos for the Prodigy Service. Such brand names
and logos shall include, unless the Parties otherwise agree, the Prodigy name
and such SBC Brand Names as are geographically appropriate for use by Prodigy.
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) procured by SBC Sub, its Affiliates or any of its distributors of the
Prodigy Service 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 on every page in which any Prodigy or Operating Partnership brand
appears with such of the SBC Brand Names as SBC Sub may request (which brands
may vary depending upon the portion of the SBC Territory if any, in which such
Prodigy Subscriber is located); 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 2.2(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.
License to Marketing Materials.
At the Closing, each of Prodigy and Operating Partnership shall grant to SBC and
its Affiliates and its 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 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 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).
2.3 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 dial-up analog, ISDN and DSL
Retail ISP Service within the United States Marketed by SBC and its Affiliates
to consumers and small businesses, and for a period of one year after the
Exclusivity Termination Date, SBC shall not Market on a stand- alone basis any
other dial-up analog, ISDN or DSL 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 2.4(a) above shall not
prohibit SBC or its Affiliates from (i) taking any action to preserve and retain
Legacy Subscribers prior to their transition to the Prodigy Service, (ii)
Co-Branding with a competitive dial-up analog, ISDN or DSL Retail ISP Service
any products or services offered by SBC or its Affiliates, other than a dial-up
analog, ISDN or DSL Retail ISP Service of SBC or its Affiliates, (iii) entering
into arrangements, including agreements to provide DSL services, with
competitive Retail ISP Services pursuant to which the competitive Retail ISP
Service Markets or Delivers their service 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
dial-up analog, ISDN or DSL 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 or (vii) Marketing any device not
manufactured by or exclusively for SBC or its Affiliates and which includes a
competitive dial-up analog, ISDN or DSL Retail ISP Service so long as such
Marketing efforts are not predominantly concentrated on the use of a dial-up
analog, ISDN or DSL Retail ISP Service or product.
2.4 Marketing Commitments. (a) Following the Closing Date, Operating
Partnership, Prodigy, SBC Sub and SBC agree to use commercially reasonable
efforts to facilitate and coordinate the Marketing of the Prodigy Service.
(b) Promptly after the execution and delivery of this Agreement, Prodigy
and SBC shall commit a Vice President level (or higher) marketing executive
empowered to make final Marketing decisions to confer with the other on
Marketing matters at least once each quarter and coordinate the Marketing
efforts, including the Marketing of bundles in accordance with Section 2.10, for
the Prodigy Service.
2.5 SBC New Subscriber Marketing Payments.
(a) Following the Closing Date, Operating Partnership shall pay SBC Sub a
one-time marketing fee in respect of each new gross additional Subscriber of the
Prodigy Service that was procured as a Subscriber by SBC, its Affiliates or its
distributors of the Prodigy Service of $40 per Narrowband Subscriber and $75 per
Broadband Subscriber. SBC Sub shall not be entitled to any payment pursuant to
this Section 2.6(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. The Parties agree that Prodigy and
Operating Partnership shall have the primary responsibility for service
activation and support for Subscribers procured by SBC, its Affiliates or its
distributors of the Prodigy Service and that SBC, its Affiliates and its
distributors of the Prodigy Service may refer potential subscribers to Prodigy
and Operating Partnership for service activation and support.
(b) In addition to the payments referred to in Section 2.6(a), in any
annual measurement period commencing on the Closing Date in which SBC, its
Affiliates and its distributors of the Prodigy Service in the aggregate procure
for the Prodigy Service in excess of 300,000 gross additional Subscribers,
Operating Partnership shall pay SBC Sub an additional one-time marketing fee of
$20 per new Excess Narrowband Subscriber in accordance with Section 2.6(e) of
this Agreement.
(c) If SBC, its Affiliates and its distributors of the Prodigy Service in
the aggregate procure in the three-year measurement period commencing on the
Closing Date for the Prodigy Service fewer gross additional Subscribers than
SBC's Aggregate Subscriber Commitment, SBC Sub shall pay Operating Partnership
the following amounts: in the event that SBC, its Affiliates and its
distributors of the Prodigy Service in the aggregate procure less than (i)
900,000 gross additional Subscribers, $100 times the difference between 900,000
and the number of gross additional Subscribers credited in such three-year
measurement period plus $75 million; or (ii) 1,050,000 but at least 900,000
gross additional Subscribers, $400 times the difference between 1,050,000 and
the number of gross additional Subscribers credited in the three-year
measurement period plus $15 million; or (iii) the Aggregate Subscriber
Commitment but at least 1,050,000 gross additional Subscribers, $100 times the
difference between the Aggregate Subscriber Commitment and the number of gross
additional Subscribers credited in the three-year measurement period; provided,
that, SBC Sub shall not be required to make any payment in respect of
any shortfall in the three-year measurement period except to the extent
that gross additional Subscribers procured in the three-year measurement period
by SBC, its Affiliates and its distributors of the Prodigy Service in the
aggregate were fewer than the gross additional Subscribers of the Prodigy
Service procured through all other channels excluding acquisitions by Prodigy
and Operating Partnership in such three-year measurement period in the aggregate
so long as SBC used its good faith efforts to Market the Prodigy Service.
(d) Unless SBC otherwise agrees in its sole discretion, neither SBC nor SBC
Sub shall be required to bear any one-time, up-front or other non- recurring
charges (e.g., for CPE, installation or software) and such charges shall be
borne either by Prodigy, Operating Partnership or the customer.
(e) The marketing fees described in Sections 2.6(a) and 2.6(b) above shall
be jointly calculated by Operating Partnership and SBC Sub monthly and paid to
SBC Sub quarterly.
2.6 Legacy Subscribers.
(a) Following the Closing Date, SBC Sub shall retain a direct relationship
(contractual, billing and payment) with each subscriber of SBC's Retail ISP
Services (e.g. Pacific Xxxx Internet, XX Xxxx Internet, Nevada Xxxx Internet,
SNET Internet, and Xxxxxxxxx.xxx) as of the Closing Date ("Legacy Subscribers"),
all such Legacy Subscribers shall be transitioned to receive the Prodigy
Service, and Prodigy and Operating Partnership shall provide the Prodigy Service
to such Legacy Subscribers in accordance with this Section 2.7 and the
Transition Plan. All costs associated with transitioning such Legacy Subscribers
shall be borne by Operating Partnership and Prodigy. Following the Closing Date,
SBC Sub will retain responsibility for its Legacy Subscribers for billing,
including bad debt risk and contractual relationships (which SBC shall use
commercially reasonable efforts to conform with the contractual terms for
Subscribers of the Prodigy Service). Following the Closing Date, SBC shall
cooperate with Prodigy and Operating Partnership to provide, to the extent
lawful, credit card information and authorizations to Prodigy and Operating
Partnership for Legacy Subscribers or to use commercially reasonable efforts to
obtain such information and any necessary consents from Legacy Subscribers.
(b) Following the Closing Date, SBC Sub shall purchase from Operating
Partnership the Prodigy Service and resell it to Legacy Subscribers. Operating
Partnership will set the wholesale price for narrowband and broadband service
equal to (i) the weighted average price of the amounts charged by SBC and its
Affiliates to the Legacy Subscribers at retail as of the Closing Date (the
"Retail Price"); provided, that, in the event that following the Closing Date,
the Average Retail Price increases or decreases by more than ten percent (10%)
from the Average Retail Price as of the Closing Date, SBC Sub and Operating
Partnership agree to hold discussions to determine whether its is appropriate to
adjust the Retail Price, less (ii) any reasonable and necessary expenses, direct
or indirect, actually incurred by SBC Sub or its Affiliates in serving Legacy
Subscribers, such expenses to be determined in a manner consistent with SBC
Sub's historical practices and consistent with regulatory cost accounting
requirements applicable to SBC and its regulated subsidiaries (such sum, the
"Wholesale Price"). For illustrative purposes only, an example of how this
provision would be implemented in practice is attached hereto as Schedule
2.7(b)(i). SBC Sub shall pay to Operating Partnership the Wholesale Price for
each Legacy Subscriber in respect of which it is obligated to purchase from
Operating Partnership the Prodigy Service pursuant to this Section 2.7(b) on a
monthly basis so long as such Legacy Subscriber (x) is (i) a Prodigy Subscriber
during the month for which such payment is made or (ii) a subscriber on a full
or partial payment waiver pursuant to a SBC promotional offer and (y) has not
cancelled the Prodigy Service. On a quarterly basis, such monthly payments shall
be reconciled to reflect actual experience.
(c) SBC Sub shall use commercially reasonable efforts to cause the Home
Page of each dial-up Legacy Subscriber to be the start page of the Prodigy
Service on or as promptly after the Closing Date as is practicable; provided,
that, SBC Sub shall not be required to override any Legacy Subscriber's
designated start page or prohibit such overrides. SBC Sub will coordinate with
Prodigy and Operating Partnership, to the extent necessary, to implement this
Section 2.7(c).
2.7 Telecommunications Services.
(a) Subject to the Pre-existing Commitments set forth in Schedule 2.8(i) of
this 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, 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 4.2(b) and such exclusivity would
materially disadvantage Operating Partnership (financially or competitively) as
determined in accordance with Section 2.8(b). Following the Closing Date, SBC
and its Affiliates shall not offer any Telecommunications Service, Value Added
Data Service, electronic yellow or white pages to any other Retail ISP, which is
comparable to Operating Partnership in terms of both product offerings and
number of subscribers, on terms more favorable than those offered to Operating
Partnership.
(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, 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, 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 shall notify SBC in writing that it wishes to include such
advertising or other promotion or product offering and such notice shall include
the terms and conditions of such advertising or other promotion or product
offering and a detailed written statement of the reasons Prodigy or Operating
Partnership believes such failure would materially disadvantage Prodigy or
Operating Partnership. In the event that SBC disagrees with Prodigy's or
Operating Partnership's belief that such failure would materially disadvantage
Prodigy or Operating Partnership (financially or competitively), representatives
of SBC and Prodigy shall meet in good faith and use commercially reasonable
efforts to resolve whether such failure would materially disadvantage Prodigy or
Operating Partnership (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 the SBC and Prodigy
representatives appointed pursuant to Section 2.5(b) of this Agreement, 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 Prodigy or Operating Partnership (financially and
competitively). If such agreement is not reached by such representatives within
five Business Days, the disagreement will be resolved pursuant to Article VI of
this Agreement; provided, however, that for purposes of this process, any award
to be made pursuant to Article VI shall be made within one month of filing of
the Arbitration Notice notwithstanding anything to the contrary contained in
Section 6.2(f) (the foregoing process set forth in this Section 2.8(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"). 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.
2.8 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 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
where SBC owned or controlled Broadband Access is not available, each of Prodigy
and Operating Partnership agrees that if DSL access is available that each of
Prodigy and Operating Partnership shall offer the Prodigy Service to broadband
subscribers only through such DSL access unless the potential broadband
subscriber requests that the Prodigy Service be delivered through a non-DSL
access and refuses Prodigy's or Operating Partnership's offer of DSL access.
Neither Prodigy nor Operating Partnership will promote any non- DSL or non-ISDN
Broadband Access; provided, that, Prodigy or Operating Partnership may offer the
Prodigy Service to broadband subscribers through cable modem access so long as
the promotion of such offer through cable modem access is appreciably less
prominent than the promotion of its offer of DSL access (e.g., such promotion of
cable modem access does not take place on the Prodigy Service's Home Page).
2.9 Bundling. The Parties acknowledge that they expect to offer the Prodigy
Service bundled with products and services of SBC and its Affiliates. SBC, SBC's
Affiliates, Prodigy and Operating Partnership each agrees to work with the other
and use commercially reasonable efforts to facilitate the creation and Marketing
by SBC and its Affiliates of such bundles and to make available products and
services for inclusion within bundles 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
2.9 and other provisions in the Agreement, the Parties agree to comply with the
rules and regulations set forth in the Telecommunications Act of 1996.
2.10 Access to Subscriber 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 Legacy Subscribers 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 may reasonably
request.
(b) Except as provided in Section 4.2(b), no Party may directly or
indirectly utilize any Subscriber information in connection with the Marketing
or Delivery of any Retail ISP Service other than the Prodigy Service. Neither
Prodigy nor Operating Partnership may directly or indirectly utilize any
Subscriber information in connection with Marketing any Telecommunications
Service, Value Added Data Service, electronic yellow or white pages unless such
action complies with the requirements of Section 2.8; 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, electronic yellow or white pages of a SBC
Designated Entity.
2.11 Access to Arrangements. Following the Closing Date, each of Prodigy
and Operating Partnership shall use its respective commercially reasonable
efforts to allow SBC and Prodigy'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.
Article III
INTELLECTUAL PROPERTY
3.1 (a) License Grants. Subject to the terms and conditions of this
Agreement, each of Prodigy and Operating Partnership hereby grants to SBC, its
Affiliates and its 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 and product bundles 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 a Retail ISP
Service or any Telecommunications Services, Value Added Data Services,
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 a Retail 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.
(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 bundles 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 a Retail 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 a Retail ISP Service) so long as the
SBC 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.
(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).
(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
xxxx, 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 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 end users
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 3.1 shall commence on the
Closing Date and continue for the term of this Agreement.
3.2 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.
(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.
3.3 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 Retail ISP Service.
(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 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 its Affiliates.
Article IV
PRODUCT DEVELOPMENT; PORTAL
4.1 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 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 2.8 of this Agreement. 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, 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. 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.
4.2 Prodigy Portal.
(a) Provision of Prodigy Portal. The intent of the Parties is to enable
Prodigy and Operating Partnership to Deliver a 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 Retail ISPs and that
takes advantage of the functionality afforded by DSL access.
(b) Telecommunications and Value Added Data Services Advertisements and
Products. Following the Closing, subject to Pre-existing Commitments set forth
on Schedule 4.2(b), 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) and provide all products for the provision of
Telecommunications 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, 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, 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 to provide such services then, subject to the Pre-existing Commitments
set forth in Schedule 4.2(b)(i) of this Agreement or other commitments entered
into in accordance with this Section 4.2(b) after the date hereof, 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.
(c) 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 this
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.
(d) 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,
taking into account the relative size of subscriber base, access mix and other
relevant factors to be mutually determined, and (ii) the Prodigy Portal will be
accessible to Subscribers on average of at least ninety-eight (98%) of the time,
(excluding planned outages).
(e) 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.
4.3 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 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 Client Software. Following the Closing, Operating
Partnership shall have the rights to designate client software and SBC shall
provide or designate any required Connectivity Software.
(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 V
NETWORK SERVICES
5.1 SBC Preference for Network Services. Subject to the Pre-existing
Commitments set forth in Schedule 5.1(i) of this Agreement, following the
Closing, each of Prodigy and Operating Partnership shall offer SBC the first
opportunity to provide all Network Services for Delivery via analog dial-up,
ISDN and DSL of the Prodigy Service and shall, subject to Section 5.2, utilize
such Network Services provided by SBC.
5.2 Qualifications on Preference. The rights granted to SBC in Section 5.1
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.
5.3 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 Retail ISP Service access to any cable Broadband Access networks that are
owned by Affiliates of SBC for the purpose of providing a Retail 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).
5.4 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), or as
contemplated by Section 4.2(b), 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 not be required to connect its current in-house security system to
SBC's security system, 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 Retail ISPs.
5.5 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.
5.6 Global Services Provider. Following the Closing, SBC shall provide
Network Services to Prodigy and Operating Partnership consistent with such 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. Each of Prodigy and Operating
Partnership agrees that promptly after the date hereof it shall diligently
pursue the actions necessary to satisfy all applicable GSP obligations prior to
the Closing Date. Following the Closing Date, each of Prodigy and Operating
Partnership agrees that it will continue to comply with such GSP obligations, if
applicable.
Article VI
DISPUTE RESOLUTION
6.1 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 (or persons to be representatives, if before the Closing) 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 an arbitration in
accordance with this Article VI.
6.2 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.
(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 New York, New York.
(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 four months 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.
Article VII
ADDITIONAL AGREEMENTS
7.1 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 bundling of any Prodigy or Prodigy
Affiliate name, product or service provided that the prohibitions in this
Section 7.1(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 10.19(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 Closing Date,
which will include, among other things, strategies consistent with this
Agreement relating to Network Services, the transitioning of the Legacy
Subscribers to the Prodigy Service, customer care services, the implementation
of interim marketing arrangements and the implementation of the Business Plan.
The Parties agree, in the context of the Transition Plan, to discuss the
feasibility of SBC's provisioning of billing services to Prodigy Subscribers
located in the SBC Territory.
Article VIII
TERMINATION
8.1 Termination of Agreement.
(a) This Agreement shall terminate upon the earliest to occur of the
following: (i) the termination of the Investment Agreement in accordance with
its terms; (ii) the mutual written consent of SBC and Prodigy by action of their
respective boards of directors to so terminate this Agreement; and (iii) 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 V shall survive until the later of the fifth 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 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 senior management officers of each
of the Parties for an appropriate resolution. Upon such a request, 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 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 VI of this
Agreement affirming the existence of such breach or failure; provided,
however, that for purposes of this Section 8.1(b)(iii), any award to be
made pursuant to Article VI shall be made within one month of filing of the
Arbitration Notice notwithstanding anything to the contrary contained in
Section 6.2(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 VI 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
8.1(b)(iv), any award to be made pursuant to Article VI shall be made
within one month of filing of the Arbitration Notice notwithstanding
anything to the contrary contained in Section 6.2(f) of this Agreement.
Termination in accordance with Section 8.1(b)(iii) or 8.1(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 8.1(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.
Article IX
REPRESENTATIONS AND WARRANTIES
9.1 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. 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. 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. 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) 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.
9.2 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 X
MISCELLANEOUS
10.1 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. Any attempted assignment that does not comply with this
Section 10.1 shall be void.
10.2 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 NEW YORK, WITHOUT
REFERENCE TO CONFLICTS OF LAWS PRINCIPLES.
The parties hereby irrevocably submit to the jurisdiction of the courts of
the State of New York and the Federal court of the United States of America
located in the State of New York 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 New York 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 10.4 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 10.2.
10.3 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.
10.4 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):
If to SBC or SBC Sub:
Xxxxx X. Xxxxx
Senior Vice President
Corporate Development
SBC Communications Inc.
000 Xxxx Xxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
With copies, which shall not constitute notice, to:
Senior Counsel - M&A
SBC Communications Inc.
000 Xxxx Xxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
Xxxxxx X. Frumpkin, Esq.
Xxxxx X. Xxxxxxx, Esq.
Xxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
If to Prodigy or Operating Partnership:
Prodigy Communications Corporation
00 Xxxxx Xxxxxxxx
Xxxxx Xxxxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
Executive Vice President
Business Development
and General Counsel
With a copy, which shall not constitute notice, to:
Xxxxx X. Xxxxxxxxxx, Esq.
Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
10.5 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 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.
10.6 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.
10.7 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.
10.8 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.
10.9 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.
10.10 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.
10.11 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.
10.12 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.
10.13 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 10.7 above.
10.14 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.
10.15 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.
10.16 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.
10.17 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 New
York, New York.
10.18 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.
10.19 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 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.
10.20 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 relating to the Marketing or Delivery of a Retail
ISP Service within the United States that it 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.
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/ Xxxxx X. Xxxxx
------------------------
Name: Xxxxx X. Xxxxx
Title: Senior Executive Vice President --
Corporate Development
SBC INTERNET COMMUNICATIONS, INC.
By: Xxxxxxx X. XxXxx
-----------------------
Name: Xxxxxxx X. XxXxx
Title: President
PRODIGY COMMUNICATIONS
CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
------------------------
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President
PRODIGY COMMUNICATIONS LIMITED
PARTNERSHIP
By: Prodigy Communications Corporation, as
general partner of Prodigy Communications
Limited Partnership
By: /s/ Xxxxxx X. Xxxxxx
-----------------------
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President
Schedule 2.7(b)(i)
------------------
SBC Sub would receive the retail subscription fee directly from the
Subscriber. Expenses associated with the functions for which SBC Sub retains
responsibility would be netted against retail revenue to derive the wholesale
fee paid to Operating Partnership. For example:
Retail Subscription Fee (revenue
from Subscriber to SBC Sub): $18.00
Billing Expense (expense borne
by SBC Sub): (0.50)
Bad Debt Expense (2% -- expense
borne by SBC Sub): (0.36)
=======
Wholesale Subscription Fee (expense
borne by SBC Sub; revenue for Prodigy) $17.14
This example assumes that only billing and bad debt expenses are the
responsibility of SBC Sub. Other expenses of this general nature may be
incurred, however, which would affect this calculation. If any such other
expenses are incurred by SBC Sub, SBC Sub will notify Operating Partnership in
writing of these expenses prior to the time of payment by SBC Sub. In the event
Operating Partnership disagrees with SBC Sub's determination to deduct such
other expenses from the retail revenue received by SBC Sub, such expenses will
not be deducted from the retail revenue received by SBC Sub and such
disagreement will be resolved in accordance with the Escalation Process. If as a
result of the Escalation Process it is determined that such expenses should have
been deducted from the retail revenue received by SBC Sub, Operating Partnership
shall refund SBC Sub for such expenses. The figures provided in this example are
for illustrative purposes only and do not represent actual revenues and
expenses.
