Exhibit 10.1
================================================================================
RESALE AGREEMENT
BY AND AMONG
SBC COMMUNICATIONS INC.
COVAD COMMUNICATIONS GROUP, INC.
COVAD COMMUNICATIONS COMPANY
DIECA COMMUNICATIONS COMPANY
LASER XXXX.XXX, INC.
================================================================================
November 12, 2001
TABLE OF CONTENTS
Page
Article I DEFINITIONS ..................................................2
Article II EFFECTIVE DATE AND TERM ......................................6
2.1 Effective Date and Term ............................................6
Article III SALES AND MARKETING OF COVAD PRODUCTS ..........................6
3.1 Wholesale Sales of Covad Products to SBC ...........................6
3.2 Resale of Covad Products by SBC ....................................7
3.3 Prepayment for Services ............................................8
3.4 Non-Exclusivity ...................................................10
3.5 Protection of SBC Customer Information ............................10
3.6 Protection of CPNI ................................................10
3.7 Law Enforcement Processes .........................................11
Article IV SYSTEMS INTEGRATION ...........................................11
4.1 Need For Systems Integration ......................................11
4.2 Manual Processes ..................................................11
4.3 API License .......................................................11
Article V ACKNOWLEDGMENT OF RIGHT TO COMPETE ............................12
5.1 Acknowledgment of Right to Compete ................................12
Article VI PRICING AND PAYMENT ...........................................12
6.1 Product Pricing ...................................................12
6.2 MFN Pricing .......................................................13
6.3 Payment Terms .....................................................14
6.4 Audit Rights ......................................................16
6.5 Efficiency Gains ..................................................16
Article VII DELIVERY AND QUALITY OF COVAD PRODUCTS ........................17
7.1 Competitive Services and Products .................................17
7.2 Benchmarking of SLAs ..............................................17
7.3 Content of SLAs ...................................................17
7.4 Non-Performance of SLAs ...........................................18
7.5 Regulatory Authority ..............................................18
7.6 Identification of Technical Difficulties ..........................18
i
TABLE OF CONTENTS
(continued)
Page
7.7 Covad Access to SBC Customer Premises .............................18
7.8 Covad Facilities ..................................................19
7.9 Title and Power ...................................................19
7.10 Customer-Provided Equipment .......................................19
7.11 Service Charges ...................................................20
7.12 Removal of Equipment ..............................................20
Article VIII TERMINATION ...................................................20
8.1 Termination by Mutual Consent .....................................20
8.2 Termination by Either Party .......................................20
8.3 Termination by SBC ................................................21
8.4 Remedies ..........................................................22
8.5 Transition ........................................................23
Article IX SOFTWARE TERMS ................................................24
9.1 License ...........................................................24
Article X CONFIDENTIAL AND PROPRIETARY INFORMATION ......................24
10.1 General ...........................................................24
10.2 Obligation to Protect Proprietary Information .....................25
10.3 Judicial or Administrative Proceedings ............................25
10.4 Loss or Unauthorized Use ..........................................25
10.5 Proprietary Information Exchange Agreements .......................25
10.6 Nondisclosure Agreements ..........................................25
10.7 Termination .......................................................26
10.8 Irreparable Injury by Disclosure to Competitors ...................26
10.9 Survival of Nondisclosure Obligations .............................26
Article XI REGULATORY FILINGS ............................................26
11.1 Regulatory Submissions ............................................26
11.2 Modification or Amendment of this Agreement .......................27
Article XII INDEMNIFICATION ...............................................27
12.1 General ...........................................................27
ii
TABLE OF CONTENTS
(continued)
Page
12.2 Notice ............................................................27
12.3 Assumption of Defense of Claim ....................................28
12.4 Right of Indemnified Party To Undertake Defense ...................28
12.5 Claim of Infringement .............................................28
Article XIII REPRESENTATIONS, WARRANTIES AND COVENANTS ...................29
13.1 Organization, Standing and Authority ..............................29
13.2 No Violation ......................................................29
13.3 Consents and Approvals ............................................29
13.4 CALEA .............................................................30
Article XIV LIMITATION OF LIABILITY .......................................30
14.1 Limited Responsibility ............................................30
14.2 Limitation of Damages .............................................30
14.3 Warranty Disclaimer ...............................................30
Article XV INTELLECTUAL PROPERTY .........................................31
15.1 Retention of Intellectual Property Rights .........................31
15.2 Allocation of Intellectual Property Rights ........................31
15.3 Securing Patent Rights ............................................32
15.4 Branded Products and Services .....................................32
15.5 Assignment Documents ..............................................32
15.6 License to Use Covad Marks ........................................32
15.7 No Infringement ...................................................34
Article XVI APPLICABLE TAXES ..............................................34
16.1 Payment of Taxes ..................................................34
16.2 Assessments .......................................................34
16.3 Reimbursement of Taxes on Covad Products ..........................34
16.4 Certificate of Exemption ..........................................34
16.5 Tax Indemnification by Covad ......................................35
16.6 Schedule of Taxes .................................................35
16.7 Audits ............................................................35
iii
TABLE OF CONTENTS
(continued)
Page
16.8 Collection ........................................................36
16.9 Cooperation .......................................................36
Article XVII INDEPENDENT CONTRACTOR ........................................37
17.1 Covad Warranty of Independent Contractor Status ...................37
Article XVIII COVAD'S USE OF SBC SERVICES ...................................38
18.1 SBC as Preferred Provider .........................................38
Article XIX MINORITY, WOMEN AND DISABLED VETERANS BUSINESS
ENTERPRISES....................................................39
19.1 Covad's Commitment ................................................39
19.2 Definitions .......................................................39
Article XX COVENANTS .....................................................40
20.1 Publicity .........................................................40
20.2 Third Party Warranties ............................................41
20.3 Unauthorized Warranties ...........................................41
20.4 Cooperation .......................................................41
20.5 Sales by Affiliates ...............................................41
20.6 Relationship Manager ..............................................41
20.7 Forecasts .........................................................42
Article XXI GENERAL .......................................................42
21.1 Americans With Disabilities Act ...................................42
21.2 Amendment .........................................................42
21.3 Assignment ........................................................42
21.4 Attachments .......................................................42
21.5 Costs, Expenses and Attorneys' Fees ...............................42
21.6 Dispute Resolution ................................................43
21.7 Entire Agreement; Further Agreements ..............................43
21.8 Environmental Hazard ..............................................43
21.9 Execution .........................................................43
21.10 Force Majeure .....................................................43
21.11 Consent or Agreement ..............................................44
iv
TABLE OF CONTENTS
(continued)
Page
21.12 Governing Law .....................................................44
21.13 Insurance .........................................................44
21.14 Joint Work Product ................................................44
21.15 Labor Relations ...................................................44
21.16 No Solicitation ...................................................45
21.17 No Waiver .........................................................45
21.18 Nonexclusive Dealings .............................................45
21.19 Notices ...........................................................45
21.20 Relationship of Parties; Independent Contractor ...................46
21.21 Rules of Construction .............................................47
21.22 Severability ......................................................47
21.23 Third Party Beneficiaries; Disclaimer of Agency ...................48
Addendum 1: Schedule of Services
Addendum 2: Performance Specifications
Addendum 3: List of Collateral Agreements
Addendum 4: API License
v
RESALE AGREEMENT
This Resale Agreement ("Agreement"), dated as of November 12, 2001 is made
by and among SBC Communications Inc., a Delaware corporation having its
principal office at 000 Xxxx Xxxxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxx 00000 (together
with its affiliates, "SBC"), Covad Communications Group, Inc. ("CGI") a Delaware
corporation, Covad Communications Company ("CCC"), a California corporation,
DIECA Communications Company ("DIECA"), a Virginia corporation, and Laser
Xxxx.xxx, Inc. ("Laser Link"), a Delaware corporation, each corporation having
its principal office at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000 (CGI,
CCC, DIECA and Laser Link, together with their affiliates, are sometimes
hereinafter referred to as "Covad", CCC, DIECA and Laser Link are sometimes
hereinafter referred to as the "Operating Companies"). SBC and Covad are
individually referred to as a "Party" and collectively referred to as the
"Parties."
-------
RECITALS
WHEREAS, SBC and Covad are parties to that certain Resale and Marketing
Agreement dated as of September 10, 2000 (the "Prior Resale Agreement"),
pursuant to which Covad agreed to sell Covad Products (as defined below) to SBC,
and granted to SBC the right to market and resell such Covad Products; and
WHEREAS, said Prior Resale Agreement further required that SBC meet certain
sales revenue commitments set forth therein, or make payments of the shortfall,
subject to certain terms, conditions and limitations described therein; and
WHEREAS, SBC and Covad have agreed to terminate the Prior Resale Agreement
and certain other agreements entered into contemporaneously therewith, pursuant
to the terms of a Termination and Release Agreement of even date herewith, (the
"Termination Agreement") while at the same time amending and retaining in full
force and effect the Dispute Resolution Agreement (as amended, the "Dispute
Resolution Agreement") and the In-Region Wholesale Agreement that were entered
into contemporaneously with the Prior Resale Agreement; and
WHEREAS, SBC desires to continue to have the right, but not the obligation
to resell Covad Products to SBC's customers in both Out-of-Region Markets and
In-Region Markets, and Covad desires to grant to SBC the right to resell and to
sell the Covad Products to SBC on a wholesale basis, on the terms and subject to
the conditions set forth herein; and
WHEREAS, the Parties agree that the Prepayment for Services (as defined
below), together with the transactions contemplated by the Collateral Agreements
(as defined below), shall constitute a "Conversion Event" under the terms of the
Certificate of Designation and Determination of Rights and Preferences of Series
A Convertible Preferred Stocks of CGI;
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement and the Collateral Agreements, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
SBC, CGI and the Operating Companies agree as follows:
Article I
DEFINITIONS
The following definitions shall apply whenever the words appearing in bold
are used in the Agreement.
"Act" or "Communications Act" shall mean the federal Communications Act of
1934, as amended, including by the Telecommunications Act of 1996, and as it may
be amended in the future.
"Affiliate" shall have the meaning assigned thereto pursuant to Rule 405
under the Securities Act of 1933, as amended.
"Applicable Law" shall mean, with respect to any Party, any statute, law,
regulation, ordinance, rule, judgment, rule of common law, order, decree, award,
concession, grant franchise, license agreement, or other governmental
restriction of any similar form or decision or determination by, or any
interpretation or administration of any of the foregoing by, any Governmental
Entity, whether in effect as of the date hereof or thereafter, and in each case
as amended, applicable to such Party or its Affiliates or their respective
assets.
"Bankruptcy Plan" shall mean that certain Plan of Reorganization of CGI
filed by CGI on October 18, 2001, in the Chapter 11 Proceeding Case No. 01-10167
in the United States Bankruptcy Court for the District of Delaware, as such Plan
shall have been amended.
"Business Customer" shall mean an end-user of Covad Products that is
located at a business address.
"Business Day" shall mean a week day except for New Years Day, Xxxxxx
Xxxxxx Xxxx Day, President's Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
"Change in Control" shall mean the occurrence of any one or more of the
following events with respect to any company: (i) any Person or any Group,
together with any Affiliates thereof (provided that solely for purposes of this
--------
definition of "Change in Control", a controlled Person shall not be deemed to be
an Affiliate of a controlling Person unless the controlling Person has the right
or ability to exercise at least 20% of the total voting power of all classes of
the controlled Person's capital stock entitled to vote generally in the election
of the
2
controlled Person's directors), is or becomes, whether as a result of a tender
or exchange offer, open market purchases, privately negotiated purchases or
otherwise, the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act or any successor provisions thereto), directly or indirectly, of
Stock or other securities of such company entitling or resulting in the ability
of such Person or Group and its or their Affiliates to exercise more than 50% of
the total voting power of all classes of such company's capital stock entitled
to vote generally in the election of such company's directors or (ii) such
company shall consolidate with or merge into any other Person, or any other
Person shall consolidate with or merge into such company, or such company shall
sell, convey, exchange, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets (in one transaction or a series
of related transactions) to any Person or Group, together with their Affiliates,
and, in the case of any such transaction the outstanding Stock of such company
is reclassified into, exchanged for or converted into the right to receive any
other property or security, unless the stockholders of such company immediately
before the consummation of such transaction, own, directly or indirectly,
immediately following the consummation of such transaction, at least a majority
of the combined voting power of the outstanding voting securities of the Person
resulting from such transaction or the Person acquiring such properties and
assets, entitled to vote generally on the election of such resulting or
acquiring Person's directors, in substantially the same proportion as their
ownership of the Stock of such company immediately before such transaction, or
(iii) the stockholders of such company shall approve any plan or proposal for
the liquidation or dissolution of such company, or (iv) during any period of two
consecutive years, individuals who at the beginning of such period constituted
such company's board of directors (together with any new directors whose
election by such board of directors or whose nomination for election by the
stockholders of such company was approved by a vote of at least 51% of the
directors of such company then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of such
company's board of directors then in office.
"Collateral Agreements" shall mean the credit agreements, notes, mortgages,
security agreements, pledge agreements, amendments and similar documents and
instruments executed in connection herewith and listed on Addendum 3 to this
Agreement.
"Covad Network" shall mean the network facilities used by Covad from time
to time during the term of this Agreement to provide Telecommunications Service.
"Covad Products" shall mean (a) Covad's existing DSL and DSL plus IP
products and services as set forth in Addendum 1, (b) any future enhancements,
upgrades or improvements to such services and (c) any other Telecommunications
Service offered by Covad during the term of this Agreement for which an addendum
to this Agreement has been executed in accordance with Section 3.1.3.
"Customer" shall mean a Residential Customer or Business Customer of SBC
that is the end-user of the Covad Products resold by SBC.
3
"Customer Proprietary Network Information" ("CPNI") shall have the meaning
set forth in the Act and the rules and regulations of the FCC.
"CPE" shall mean customer premises equipment.
"Data Systems" shall mean the hardware and/or software data processing
systems used to process, exchange, analyze, store and retrieve data concerning
systems for pre-ordering, ordering, service activation, service assurance and
billing (commonly known as operating support systems), and separate technical
systems, such as middleware software, that permit the Parties' disparate
operating and/or administrative systems to interoperate.
"Dispute Resolution Agreement" shall have the meaning given in the preamble
hereto.
"Effective Date" shall mean the "Effective Date" as defined in the
Bankruptcy Plan; provided that on such date, the transactions contemplated by
this Agreement and the Collateral Agreements shall be consummated (and shall be
deemed to be so consummated on a simultaneous basis) immediately prior to the
consummation of the other transactions contemplated by the Bankruptcy Plan to be
consummated on the Effective Date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"FCC" or "Federal Communications Commission" shall mean the Federal
Communications Commission created pursuant to the Act or any successor agency.
"Governmental Entity" shall mean any government or political subdivision
thereof, including without limitation, any regional or municipal authority, any
governmental department, ministry, commission, board, bureau, agency, regulatory
authority, instrumentality, judicial, or administrative body, having
jurisdiction over the matter or matters in question.
"Group" shall mean any Persons acting together in a manner that would
constitute a "group" for purposes of Section 13(d) of the Exchange Act.
"ILEC" shall mean an incumbent local exchange carrier, as defined in the
Act.
"In-Region Markets" shall mean markets in the states in which SBC's
subsidiaries are ILECs.
"New Special Agent" shall have the meaning given in Section 3.3.4.3.
"Note" shall mean that certain promissory note of even date herewith issued
by CGI in the original principal amount of $50 million, and payable to the order
of SBC.
4
"Out-of-Region Markets" shall mean markets outside the states in which
SBC's subsidiaries are ILECs.
"Person" shall mean an individual, partnership, corporation (including a
business trust), joint stock company, trust, limited liability company,
unincorporated association, joint venture or other entity, or a Governmental
Entity.
"Prepayment for Services" shall mean the payment made by SBC to CGI in
accordance with Section 3.3.1 hereof, for the purchase of Covad Products in
accordance with this Agreement.
"Prior Resale Agreement" shall have the meaning set forth in the preamble
hereto.
"Proprietary Information" shall mean information of a confidential or
proprietary nature that a Party has a right to possess and which that Party
maintains in confidence.
"Regulatory License" shall mean any license, approval, consent,
authorization, grant or other authority issued by the FCC, any State public
utility commission, municipal or county government or agency or any other
governmental consent that is required to perform any activity under this
Agreement, but shall not be construed to mean any license, approval, consent,
authorization, grant or other authority that may be issued or become available
under Section 271 of the Act.
"Residential Customer" shall mean an end-user of Covad Products that is
located at a residential address.
"SBC Agents" shall have the meaning given in Section 3.3.4.
"SBC Customer Information" shall mean information concerning any SBC
Customer concerning the location, type of service, quantity of service and any
information, whether or not included in the foregoing, that is included in the
definition of Customer Proprietary Network Information.
"SBC Resold Product" shall mean any Covad Product resold by SBC and
provided by SBC to a Customer.
"Service Order" shall mean an order for Covad Products submitted by SBC to
Covad as set forth in Section 3.1.1.
"Special Agent" shall have the meaning given in Section 3.3.4.1.
5
"Stock" shall mean shares of capital stock, beneficial, partnership or
membership interests, participations or other equivalent equity interests
(regardless of how designated) of or in a corporation or equivalent entity,
whether voting or non-voting, and includes common stock and preferred stock.
"Telecommunications Service" shall mean a telecommunications service as
defined in the Act.
"Term" shall have the meaning given in Section 2.1.
"Termination Agreement" shall have the meaning set forth in the preamble
hereto.
Article II
EFFECTIVE DATE AND TERM
2.1 Effective Date and Term.
-----------------------
This Agreement shall become effective as of the Effective Date and will
terminate on the earlier of (a) December 31, 2011 and (b) any earlier
termination pursuant to ARTICLE VI1I (the "Term"). Notwithstanding the
foregoing, this Agreement shall not become effective unless and until
all of the following conditions precedent have occurred or have been
waived in writing by SBC:
2.1.1 The Collateral Agreements and the Termination Agreement shall have been
duly executed and delivered, and all conditions precedent to the
effectiveness thereof shall have been satisfied.
Article III
SALES AND MARKETING OF COVAD PRODUCTS
3.1 Wholesale Sales of Covad Products to SBC.
----------------------------------------
3.1.1 Sale of Services to SBC. The Operating Companies shall sell Covad
-----------------------
Products to SBC, pursuant to the terms of this Agreement and upon SBC's
submission of a Service Order to the Operating Companies for such Covad
Products. SBC shall have the right but not the obligation to market and
resell all Covad Products to any Customers, for resale in Out-of-Region
Markets and In-Region Markets. Covad agrees that an Affiliate of SBC
may place orders for, market or sell Covad Products, and that the term
"SBC" shall be deemed to refer to an Affiliate, when an Affiliate
places an order with the Operating Companies under this Agreement or
takes any other action in connection with the ordering, marketing or
reselling hereunder.
6
3.1.2 Ordering Procedures and Intervals. The Operating Companies shall
---------------------------------
provision Covad Products to SBC pursuant to the mutually agreed
processes, procedures and forms. In the event that no agreement is
reached, or until such agreement is reached, the Operating Companies
shall provision Covad Products to SBC pursuant to the processes,
procedures and forms that the Operating Companies generally utilize for
their larger customers.
3.1.3 New and Enhanced Covad Products. Any new Covad Products or enhancements
-------------------------------
to - Covad Products that are commercially released by the Operating
Companies during the term of the Resale Agreement shall be made
commercially available to SBC for resale pursuant to this Article III
at the same time they are commercially available in the market to the
Operating Companies or any other Person, upon rates, terms and
conditions which comply with Section 6.1. SBC may only purchase new
Covad Products after the Parties have agreed to a revised Addendum 1
setting forth the rates, terms, and conditions for such new products.
Upon execution of such Addendum, such new products will become Covad
Products, and may be marketed to any Customer in accordance with
Section 3.1.
3.2 Resale of Covad Products by SBC.
-------------------------------
3.2.1 Sale of Covad Products. SBC shall be entitled at its sole and absolute
----------------------
discretion to advertise, promote and sell any and all Covad Products,
including SDSL and ADSL products to any Customers in any market.
3.2.2 No Obligation or Commitment. Notwithstanding any other term or
---------------------------
provision of this Agreement, or any other document or agreement
delivered in connection herewith, SBC shall have no duty, obligation or
commitment whatsoever, express or implied, to sell any Covad Products.
3.2.3 Customer Premises Equipment. SBC reserves the right to utilize its own
---------------------------
supplier agreements and CPE, subject to Covad's prior approval of
product interoperability, which shall not be unreasonably withheld, and
certification of all such CPE.
3.2.4 Branding. SBC shall be permitted to offer, market and sell the Covad
--------
Products in SBC's own brand name or any brand name selected by SBC, in
its sole and absolute discretion and in combination with its own
Internet access service, or in combination with any other Internet
access service, goods or services from any source. SBC may, in its sole
and absolute discretion, co-brand the Covad Products (including all
advertisements, brochures, mailings and the like) with the tag line
"The Internet as it should be," the Covad name and logo, and the legend
"DSL service provided by Covad" or equivalent in conformity with
Covad's branding practices.
3.2.5 Relationship with Customer. With respect to any SBC Resold Product,
--------------------------
SBC shall have all contractual relationships with Customers, and
unless otherwise agreed to in writing by the Parties, shall provide
Customers with all aspects of customer care, including but not
7
limited to receiving trouble reports, service inquiries, inquiries
concerning billing questions and disputes, change orders, and orders
for additional Covad Products. Any dealings Covad may have with a
Customer in connection with the provision of SBC Resold Products to
that customer shall be as a representative or agent of SBC; provided
that Covad shall have no obligation to display logos of SBC or its
affiliates or to market SBC products or services unless otherwise
agreed by the Parties.
3.3 Prepayment for Services.
-----------------------
3.3.1 On the Effective Date, SBC shall make the Prepayment for Services in
the amount of Seventy Five Million and no/100 Dollars ($75,000,000.00)
by wire transfer to an account which shall be designated in writing by
Covad to SBC not less than three (3) Business Days prior to the
Effective Date.
3.3.2 SBC shall be entitled to draw upon the unused balance of the Prepayment
for Services for the purchase of any and all Covad Products provided to
any Customer, subject only to the limitations set forth in this Section
3.3. The Prepayment for Services may not be used for CPE or
self-installation kits.
3.3.3 Notwithstanding the foregoing, the utilization of the Prepayment for
Services shall be limited as follows: (i) not more than $15 million
during the period commencing on November 1, 2001, and ending on
December 31, 2002; and (ii) not more than $40 million (including the
previously mentioned $15 million) during the period commencing on
November 1, 2001, and ending on December 31, 2003. The limits set forth
in this Section 3.3.3 shall not preclude SBC from ordering, purchasing
or paying for any Covad Products in excess of the amounts to which the
Prepayment for Services may be applied.
3.3.4 The Prepayment for Services can be used for all Covad Products provided
by Covad on or after the Effective Date, by SBC or, at SBC's option, on
behalf of SBC by any Special Agent or New Special Agent (collectively,
"SBC Agents"), provided that:
3.3.4.1 The Prepayment for Services can be used for all Covad
Products provided to Prodigy Communications Corp. and
Network Access Solutions Corporation, and their respective
successors and assigns (each a "Special Agent").
3.3.4.2 Subject to the limitation set forth in Section 3.3.4.5,
all revenues associated with Covad-based end-user lines
acquired through SBC's Special Agents may count towards
the Prepayment for Services.
3.3.4.3 SBC shall notify the Operating Companies when SBC
establishes a relationship with any additional agents,
resellers, strategic partners, channels or aggregators
(collectively referred to as "New Special Agents") by
sending a letter in the form attached as Exhibit A. No
prior notice or approval by the
8
Operating Companies or CGI is required to effect any New
Special Agent relationship.
3.3.4.4 Not later than thirty (30) days following SBC's
notification to the Operating Companies of any New Special
Agent status, Covad will establish all appropriate and
necessary steps to provision, track and count any
incremental Covad-based end-user lines as applicable
towards the Prepayment for Services.
3.3.4.5 In the event that SBC's New Special Agent (including for
this purpose any third party whose lines are acquired by a
Special Agent or a New Special Agent) has Covad-based
end-user lines activated prior to (i) the establishment of
New Special Agent status with SBC (or in the case of such
third party, the acquisition of such third party lines
("Existing New Special Agent Lines"), the revenues from
such Existing New Special Agent Lines (including contract
renewals) shall not count towards the Prepayment for
Services; provided, however, that any end user lines
activated by any Special Agent or New Special Agent that
has become a directly or indirectly owned consolidated
subsidiary of SBC shall count towards the Prepayment for
Services.
3.3.4.6 Except as provided in Section 3.3.4.5, all revenues
associated with Covad-based end-user lines activated by
New Special Agents, effective upon the expiration of the
thirty days prior written notice period of the
establishment of New Special Agent status with SBC, shall
count towards the Prepayment for Services.
3.3.4.7 Except as provided in Section 3.3.4.5, revenues arising
from and after the Effective Date from SBC's or any SBC
Agent's Covad-based end-user lines that were activated
under the Prior Resale Agreement shall count against the
Prepayment for Services.
3.3.4.8 SBC will be responsible for the payment obligations, if
any, of any Special Agents and New Special Agents for any
Covad Products purchased in accordance with this Section
3.3.
3.3.5 If SBC (including for this purpose the SBC Agents) fails to resell
Covad Products in accordance with Section 3.3.2 in an amount equal to
or greater than $75 million within ten (10) years after the Effective
Date, SBC shall forfeit the unused balance of the Prepayment for
Services which shall be retained by Covad.
3.3.6 No interest shall accrue on any portion of the Prepayment for Services.
9
3.3.7 Covad shall have the right to repay in whole or in part any remaining
balance of the Prepayment for Services any time after the expiration of
nine (9) months after the Effective Date, and upon such repayment Covad
shall have no further obligation with respect to the amount of the
Prepayment for Services so repaid.
3.3.8 In the event of a subsequent Chapter 11 filing, liquidation or any
similar proceeding in which either CGI or any of the Operating
Companies is involved as a debtor (a "Subsequent Restructuring"), and
in consideration of the Prepayment for Services, Covad will have a
repayment obligation in an amount equal to the remaining balance of the
Prepayment for Services as of the date of commencement of such
Subsequent Restructuring. Notwithstanding any other provision herein,
this Prepayment for Services shall not be refundable or repayable fewer
than nine months after the Effective Date.
3.3.9 The repayment obligation in respect of the remaining balance of the
Prepayment for Services pursuant to this Agreement will be secured by a
perfected first lien security interest in the assets as described in
and pursuant to the Collateral Agreements.
3.4 Non-Exclusivity.
---------------
Nothing in this Agreement shall be construed to prevent any of the
Operating Companies from selling or marketing its services through any
and all retail and wholesale channels of its choice, including direct
sales, or to prevent SBC from utilizing other channels or aggregators
of its choice to sell or market Covad Products or any other services
offered or resold by SBC. SBC and SBC Agents may resell Covad Products
within both In-Region Markets and Out-of-Region Markets.
3.5 Protection of SBC Customer Information.
--------------------------------------
Covad hereby acknowledges and agrees that SBC Customer Information is
sensitive and confidential business information that is entitled to
treatment as Proprietary Information subject to the provisions of
ARTICLE X of this Agreement. Covad hereby covenants and agrees that it
will not use any SBC Customer Information for any purpose other than
that which is necessary for it fulfill its obligations under this
Agreement. Covad further hereby covenants and agrees that, in order to
assure compliance with this Section 3.5, it shall employ systems and
procedures (including employee training as appropriate) that are
designed to assure, to the extent practicable, that only those
personnel with a need to know in order to provide Covad Products to SBC
and to SBC Customers shall have access to SBC Customer Information.
Where necessary and appropriate to assure the confidentiality of SBC
Customer information, Covad shall restrict access to SBC Customer
Information to specified employees. In no event shall Covad allow any
of its retail sales employees or agents to access information
concerning SBC Customer Information, except that Covad's Chief
Executive Officer, Chief Operating Officer, Senior Vice President
Sales, or officers holding positions with comparable responsibility
10
may have access to such information on a need to know basis and subject
to the confidentiality requirements of ARTICLE X.
3.6 Protection of CPNI.
------------------
Covad shall comply with the provisions of the Act and the rules of the
FCC thereunder, and those rules of other Governmental Entities that
have jurisdiction over Covad, with respect to CPNI. Covad's obligations
under this Section inure to the benefit of SBC and shall be in addition
to and notwithstanding any Covad obligation to comply with the Act and
the rules of the FCC, except that nothing in this Section shall require
Covad to act in a manner inconsistent with the Act or the rules of the
FCC.
3.7 Law Enforcement Processes.
-------------------------
Each Party shall be responsible for complying with any law enforcement
subpoena or similar law enforcement process received by that Party. The
Parties shall cooperate as may be necessary to comply with valid law
enforcement subpoena and similar processes, including requests to place
wire taps, pen registers, or similar devices on end user services,
provided, however, that either Party may, in the exercise of its
--------
reasonable judgment, challenge the legality of any law enforcement
process received by either Party. In such event, the other Party shall
cooperate with the Party challenging the law enforcement process.
Article IV
SYSTEMS INTEGRATION
4.1 Need For Systems Integration.
----------------------------
The Parties understand and agree that, in order to achieve the purposes
of this Agreement, the Parties' networks and Data Systems must
communicate and interoperate efficiently and in accordance with
reasonable commercial standards, and that SBC desires to have those
Data Systems flow through to SBC such data and information as may be
necessary for SBC to provide Covad Products to SBC Customers as
contemplated by this Agreement. In order to provide this level of
interoperability, the Operating Companies shall make available to SBC,
as promptly as possible after acceptance by SBC, the electronic Data
Systems developed by the Parties for exchanging information related to
pre-ordering, ordering, provisioning, service activation, service
assurance, maintenance, repair and billing for Covad Products. SBC
hereby covenants and agrees that it will not use any of Covad's Data
Systems for any purpose other than that which is intended by Covad and
is necessary for SBC to perform and fulfill its obligations under this
Agreement.
11
4.2 Manual Processes.
----------------
Pending deployment of the electronic Data Systems, the Operating
Companies and SBC shall employ mutually agreed upon manual processes
for exchanging information related to pre-ordering, ordering,
provisioning, service activation, service assurance, maintenance,
repair and billing for Covad Product. The Parties hereby stipulate and
agree that these manual processes are interim systems to be used for as
limited a period of time as practicable until the Parties develop and
deploy electronic Data Systems.
4.3 API License.
-----------
Covad's software is typically licensed through a "click-through"
agreement by which a representative of the licensee indicates he or she
will comply with standard presented terms. So as to avoid requiring
Covad to develop a separate "click-through" agreement, the parties
agree that representatives of SBC will indicate acceptance of such
standard terms, but that such indication of acceptance will not be
construed as acceptance of the standard terms and that such standard
terms will not apply to SBC's license. Instead, the parties agree the
terms set forth in Addendum 4 will govern such license subject to the
express terms of this Agreement.
ARTICLE V
ACKNOWLEDGMENT OF RIGHT TO COMPETE
5.1 Acknowledgment of Right to Compete.
----------------------------------
Each Party acknowledges and understands that it remains at all times
solely responsible for the success and profits of its business, and
that the other Party makes no promises, warranties or representations
regarding business success or prospects of business success in
connection with the provision of the Covad Products being sold and
marketed pursuant to this Agreement. Each Party acknowledges and
understands that the other Party will continue to market services
directly to the public, subject to the terms of this Agreement, and
that such marketing may from time to time bring the Parties into direct
or indirect competition. Each Party acknowledges and understands that
nothing in this Agreement diminishes or restricts in any way the rights
of the other Party to engage in competition for customers or to market
its services to competitors of the first Party.
ARTICLE VI
PRICING AND PAYMENT
6.1 Product Pricing.
---------------
12
6.1.1 Initial Pricing. Beginning on the Effective Date, the initial prices
---------------
that SBC shall receive from the Operating Companies for newly installed
Customer Circuits, as defined in Addendum 1, are the prices set forth
in Addendum 1, based on Tier 4 pricing, and shall be effective on the
first day of the month following the Effective Date. The price invoiced
to SBC for Customer Circuits installed prior to first day of the month
following the Effective Date shall be adjusted in a revenue neutral
manner such that SBC shall receive a blended weighted average monthly
recurring price for each Customer Circuit category (e.g., TeleSurfer
Plus, TeleSurfer Plus DSL + IP, TeleSpeed 144, TeleSpeed 144 DSL + IP,
etc.) that was installed prior to the Effective Date (the "Installed
Base Price"). The blended weighted average price for each such Customer
Circuit category shall be determined by the following formula:
[(Installed Customer Circuits for Product A x Price 1) + (Installed
Customer Circuits for Product A x Price 2)] divided by Total Installed
Customer Circuits for Product A , where Price 1 and Price 2 (and
additional prices, if necessary) reflect the Covad price offered to SBC
for new installations at the time such Customer Circuit was installed
(such methodology shall hereinafter be referred to as the "Weighted
Average Method"). The pricing for the initial Installed Base Price
based on the Weighted Average Method is attached hereto as Addendum 1A.
Under this pricing methodology, SBC will only have two prices on the
Effective Date: (a) a price for existing Customer Circuits prior to the
Effective Date and (b) a price for newly installed Customer Circuits
going forward from the Effective Date.
6.1.2 Annual Pricing Checkpoints; Pricing Tiers. Beginning on the first
-----------------------------------------
anniversary of the Effective Date, and then on an annual basis
thereafter (each a "Pricing Checkpoint"), SBC's price for newly
installed Customer Circuits from and after the Pricing Checkpoint
forward shall be adjusted to the lower of (i) the Annual Commitment
Tier in Addendum 1 that SBC would qualify for based on the number of
Net New Installed Circuits installed during the previous twelve month
period immediately preceding such Pricing Checkpoint; and (ii) the
Installed Base Commitment Tier in Addendum 1 that SBC would qualify for
based on the total number of Net Installed Customer Base Circuits as of
the Pricing Checkpoint. At each Pricing Checkpoint, the price for all
Customer Circuits installed prior to such Pricing Checkpoint shall be
adjusted according to the Weighted Average Method. Under this pricing
methodology, SBC will only have two prices at each Pricing Checkpoint:
(a) a price for existing Customer Circuits and (b) a price for newly
installed Customer Circuits going forward. For the purposes of
calculating pricing under this Section 6.1, SBC's volume shall be the
aggregate of all sales of all Covad Products by SBC, its Affiliates and
the SBC Agents .
6.1.3 Maximum Pricing. Except as set forth in Section 8.4.3, in no event
---------------
shall the prices charged to SBC, its Affiliates and the SBC Agents for
newly installed Covad Products during the term of this Agreement ever
exceed the Tier 4 prices set forth in the initial Addendum 1. This
Addendum 1 shall set forth pricing for all Covad Products, including
TeleSurfer, TeleSpeed, TeleSoho, TeleExtend (and the IP versions of
these Products).
13
Addendum 1 will be modified by the Parties to reflect pricing for VBSP
and VISP upon execution of mutually acceptable provider agreements for
such products. Pricing for products should indicate both (i) DSL only,
including additional set-up charges, and (ii) DSL + IP. All additional
prices that can be charged, including, but not limited to,
installation, customer missed appointments, cancellations,
disconnections, upgrades, downgrades, CPE pricing, and extensive inside
wiring, shall be listed in the Addendum 1.
6.2 MFN Pricing.
-----------
The Operating Companies will offer all Covad Products to SBC, the SBC
Affiliates and SBC Agents at prices and upon terms and conditions that
are at least as favorable to SBC as those that the Operating Companies
provide to other Covad resellers who resell comparable Covad Products
at comparable volumes ("MFN Pricing"). MFN Pricing shall only apply to
newly installed Covad Products. If Covad provides newly installed Covad
Products to another Covad reseller who resells comparable Covad
Products at comparable volumes at a price more favorable to such
reseller (a "More Favorable Price"), then, beginning on the date that
Covad starts providing such other Covad reseller with the More
Favorable Price (the "MFN Trigger Date"), Covad shall begin offering
SBC the same price for newly installed Covad Products. At any MFN
Trigger Date, the price for all Customer Circuits installed prior to
such MFN Trigger Date shall be adjusted according to the Weighted
Average Method. Under this pricing methodology, SBC will only have two
prices at any MFN Trigger Date: (a) a price for existing Customer
Circuits and (b) a price for newly installed Customer Circuits going
forward. For the purpose of calculating MFN Pricing, SBC's volume shall
be the aggregate of all sales of all Covad Products by SBC, its
Affiliates and the SBC Agents. Covad shall provide a notice of updated
prices to SBC to reflect current MFN Pricing within 15 days after such
MFN Trigger Date.
6.3 Payment Terms.
-------------
6.3.1 Due Date and Invoice. Subject to the provisions of Section 6.3.5, all
--------------------
amounts stated on each monthly invoice are due and payable thirty-five
(35) days from the date of the invoice ("Due Date"); provided, however,
that SBC may (i) deduct from any amount due any credit or remedy amount
authorized under Article VII for the Operating Companies' failure to
meet the identified performance specifications set forth in Addendum 2,
and any Disputed Amounts, in accordance with Section 6.3.5. , and (ii)
apply all or a portion of the unused balance of the Prepayment for
Services as provided in Section 3.3 above, subject to the conditions
and limitations set forth in said Section 3.3. SBC shall itemize the
credit or remedies that are deducted from the payment, SBC shall remit
payment to the Operating Companies at the remittance address. In the
event SBC fails to make full payment of the undisputed amounts to the
proper address by the Due Date, SBC shall also pay a late fee in the
amount of the lesser of one and one-half percent (1 1/2%) of the unpaid
balance per month or the maximum lawful rate under applicable state law
which
14
shall accrue from the Due Date. SBC acknowledges and understands that
all charges are computed exclusive of any applicable federal, state or
local use, excise, valued added, gross receipts, sales and privilege
taxes, tax or charge levied to support the Universal Service Fund
contemplated by the Communications Act, taxes on Payphone Charges,
duties, fees or similar liabilities (other than general income or
property taxes imposed on Covad), whether charged to or against Covad,
or SBC associated with the Covad Products provided to SBC ("Additional
Charges"). Such Additional Charges are not classified as Service
charges and shall be paid by SBC in addition to all other charges
provided for in this Agreement.
6.3.2 Billing Period. The Operating Companies will xxxx SBC monthly for the
--------------
Covad Products provided hereunder. Charges for usage and all prorated
monthly recurring charges (prorated monthly charges for Covad Products
provided for less than a calendar month), installation and other
non-recurring charges shall be billed following the receipt of any such
Covad Products. Charges for all monthly recurring charges for full
months during which Covad Products are to be provided shall be billed
at the beginning of the month in which the Covad Products are to be
provided.
6.3.3 Timeliness. The Operating Companies will render invoices for Covad
----------
Products not later than the tenth Business Day after the
monthly billing cycle in which any usage is recorded. The Operating
Companies shall account, and xxxx SBC for, not less than (1) 97.0% of
all usage no later than the first available monthly billing cycle after
the usage is recorded, (2) 98.0% of all usage no later than the second
available monthly billing cycle after the usage is recorded and (3)
99.8% of all usage no later than the third available monthly billing
cycle after the usage is recorded. The Operating Companies hereby
waives all charges for any usage not billed by the fourth billing cycle
unless (i) the Operating Companies can document that the delayed
billing was caused by SBC, its Affiliates, or the ILEC, (ii) the
Parties agree in writing to a longer time period, or (iii) such
requirement is otherwise excused under this Agreement. In all events,
the Operating Companies' failure to xxxx for any charge within two
years after the date on which the service was rendered shall constitute
a waiver of any claim for those charges. This waiver is SBC's sole
remedy for invoicing delay.
6.3.4 Accuracy. Unless the Parties agree otherwise in writing, with respect
--------
to any monthly billing cycle, the accuracy of the raw billing
information that the Operating Companies supplies to SBC with respect
to the Covad Products shall be at least equal to the industry standard
for similarly situated companies providing similar services (excluding
any DSL Affiliate of an ILEC), and in any event shall not be less than
90.0%, where the Operating Companies cannot document that such raw
billing inaccuracy was caused by SBC, any of its Affiliates, or the
ILEC. Notwithstanding the foregoing, this provision shall not apply to
the application of the Prepayment for Services to such invoices, the
dispute of which shall be governed by Section 6.3.5 below.
15
6.3.5 Payment Disputes. If SBC in good faith disputes any portion of an
----------------
invoice it must pay the undisputed amount of the invoice on or before
its Due Date and provide written notice to the Operating Companies of
the billing dispute within sixty (60) days thereafter. Such notice must
include documentation substantiating the dispute. The Parties will make
a good faith effort to resolve billing disputes expeditiously. If SBC
has already made payment of a disputed charge and a dispute is resolved
in favor of SBC, SBC shall receive a credit on its next invoice for the
amount determined to be due, including interest in the amount of the
lesser of one percent (1%) per month or the maximum rate allowed by law
from the date SBC paid the disputed amount.
6.3.6 Suspension of Service. In the event payment in full is not received
---------------------
from SBC on or before ninety (90) days following the Due Date (less any
amounts disputed pursuant to Section 6.3.5), the Operating Companies
shall have the right, after giving SBC ten (10) days written notice, to
suspend all or any portion of the Covad Products provided to SBC. If
only a portion of the Covad Products is suspended and SBC does not cure
within ten days of such partial suspension, the Operating Companies may
suspend all or any additional portions of the Covad Products provided
to SBC. The Operating Companies may continue suspension until such time
as SBC has paid in full all charges (less any amounts disputed pursuant
to Section 6.3.5), then due, including any late fees as specified in
this Agreement.
6.4 Audit Rights.
------------
SBC shall have the right to request an independent audit of Covad's
books and records by an independent, nationally recognized accounting
firm mutually acceptable to SBC and Covad with respect to MFN Pricing
as described in Section 6.1 not more than once during each twelve-month
period during the Term by giving written notice to Covad.
6.4.1 Scope of Audit. SBC and Covad shall agree upon the scope and
--------------
materiality standards aspects of the audit, provided that the audit
shall not exceed the scope of MFN pricing as described in Section 6.1.
The terms of the engagement of the auditor shall specifically define
the scope of the audit and materiality standards, and shall require, in
the case of a quantitative evaluation, a valid statistical sampling of
any information reviewed. Prior to any audit, the auditor must agree to
be bound by a customary non-disclosure agreement. If SBC and Covad are
unable to agree upon the selection of the auditor or the scope and
materiality standards of the audit, then the matter shall be submitted
for resolution under the terms of the Dispute Resolution Agreement.
6.4.2 Cooperation. Covad shall cooperate fully in connection with any audit,
-----------
providing access to any and all relevant books, records and contracts
and causing its employees, accountants, and other representatives and
agents to cooperate fully with the auditor. Covad shall maintain its
billing and associated records in accordance with accepted accounting
principles and shall retain those books and records for at least two
years after
16
an invoice is sent to SBC. If an audit is requested, Covad will retain
those books and records until such time as the audit is completed.
6.4.3 Findings. The auditor shall submit to SBC and Covad a full report of
--------
the findings of the audit, which report shall specify the conformity or
extent of non-conformity with Covad's obligations under this Agreement
that were the subject of the audit. The determination of the auditor
will be final and binding upon Covad and SBC.
6.4.4 Costs. The audit will be at SBC's expense, unless the auditor
-----
determines that Covad has failed to provide MFN Pricing in any material
respect (as determined by the auditor), in which case the audit will be
at Covad's expense. If the auditor determines that Covad is not in
compliance with its obligations that were the subject of the audit,
then Covad will make adjustments on a retroactive basis to reflect
adjustments in either SBC's or Covad's favor in accordance with the
findings of the auditor.
6.5 Efficiency Gains.
----------------
The Parties shall consider methods to equitably share reduced input
costs and efficiency gains during the Term of this Agreement that
affect the cost of the Covad Products.
ARTICLE VII
DELIVERY AND QUALITY OF COVAD PRODUCTS
7.1 Competitive Services and Products.
---------------------------------
The Covad Products shall be competitive from a quality perspective as
measured against comparable competitive offerings and shall meet or
exceed the quality and performance standards met by the Operating
Companies in providing services to others who place a volume of orders
with the Operating Companies comparable or less than the volume of
orders placed by SBC. The Covad Products that are the subject of this
Agreement shall be competitive in characteristics and performance with
the products and services SBC is deploying in the In-Region Markets to
the extent that Covad is able to secure line-sharing and other
arrangements with the relevant ILEC that are the same in term,
conditions, and practice as the line-sharing and other arrangements SBC
ILECs provide to themselves, or to SBC's advanced services Affiliate.
In all events, and subject to Sections 7.4, 8.1 et seq., and 8.2 et
seq., the Covad Products shall remain competitive with the service
level commitments, operational standards and performance standards the
Operating Companies set forth in Addendum 2 ("SLAs"), or as the SLAs
may be modified over time pursuant to the benchmarking analysis to be
undertaken at least annually pursuant to Section 7.2.
7.2 Benchmarking of SLAs.
--------------------
17
Given the dynamic nature of the telecommunications industry, the
Parties recognize that offering high quality, competitive services will
necessitate periodic review of the SLAs and their modification over
time. Accordingly, the Parties shall review, at least annually, the
SLAs to determine whether they are competitive with those offered in
the industry so that the Covad Products offered pursuant to this
Agreement are of the appropriate competitive quality. The Parties
recognize and agree that SBC's ability to solicit potential customers
for Covad Products, and the Operating Companies' ability to provide the
Covad Products, is dependent on the provision of services of the
highest quality and reliability to customers. Where the SLAs are not
competitive, the Parties shall adjust them in order to meet, or exceed,
industry standards.
7.3 Content of SLAs.
---------------
As set forth more particularly in Addendum 2, the Operating Companies
shall offer SLAs covering the Covad Network, the Customer's circuit,
and the circuit from the SBC Network to the Covad Network. The SLAs
shall contain commitments regarding the following performance
parameters: (1) network availability; (2) network delay; (3) message
delivery; (4) mean response time; (5) mean time to restore service; and
(6) ordering system reliability. In addition, the Operating Companies
shall offer SLAs covering the work it performs or equipment it provides
with respect to (1) customer installation; (2) CPE warranty; and (3)
inside wire warranty.
7.4 Non-Performance of SLAs.
-----------------------
In the event that the Operating Companies fails to perform in
accordance with the SLAs set forth in Addendum 2, the Operating
Companies shall compensate SBC as set forth in that Addendum. In
addition, Covad shall indemnify SBC for any and all liabilities arising
from the Operating Companies' failure to meet the SLAs with Customers
to the extent such liability is attributable to the Operating
Companies' failure to satisfy the commitments, standards and
performance levels set forth in the SLAs.
7.5 Regulatory Authority.
--------------------
Covad and SBC shall each maintain and keep in full force and effect any
and all Regulatory Licenses necessary for it or its Affiliates to
perform its obligations under this Agreement.
7.6 Identification of Technical Difficulties.
----------------------------------------
The Parties shall work together and coordinate their efforts, in
accordance with such procedures as they may adopt from time to time and
in a manner consistent with the Act, to identify, isolate, and resolve
technical difficulties with respect to the Covad Products that are
reported by Customers or identified by the Parties. SBC shall refer to
the
18
Operating Companies any trouble reports received from Customers and, to
the extent consistent with the Act, the Operating Companies shall keep
SBC advised of its efforts to resolve such trouble.
7.7 Covad Access to SBC Customer Premises.
-------------------------------------
7.7.1 Where the Operating Companies agrees to install or maintain equipment
used in connection with Covad Products resold by SBC that is to be
installed on the customer premise, SBC shall take, and shall use
commercially reasonable methods to cause its Customers to take,
reasonable steps to provide access to premises to the extent reasonably
requested by the Operating Companies solely for the provision of Covad
Products, or the maintenance of equipment, facilities and systems
relating to the Covad Products. The Operating Companies shall notify
SBC at least two (2) business days in advance of any regularly
scheduled maintenance that will require access to the SBC Customer
premises.
7.7.2 The Operating Companies personnel installing or maintaining any
equipment used by an SBC Customer in connection with Covad Products
shall adhere to the guidelines the Operating Companies has established
for conduct on customer premises and to any reasonable guidelines or
rules SBC shall establish and provide to the Operating Companies.
7.7.3 The Operating Companies personnel on the premises of an SBC Customer
shall not volunteer that Covad is the provider of the Covad Products
and, to the extent any inquiries are made of the Operating Companies
personnel on the premises of an SBC customer, the Operating Companies
personnel shall advise the SBC Customer, its officers, employees,
agents, consultants, etc. that the Operating Companies is performing
services under contract or agreement with SBC; provided, however, that
this provision shall not restrict the display of Covad logos on its
employees and their equipment, shall not require the Operating
Companies personnel to display SBC logos, or to market SBC products.
7.7.4 The rules set forth in this ARTICLE VII shall apply to any contractor,
subcontractor, agent or representative of Covad in the same manner as
to Covad and its officers, employees, and agents.
7.8 Covad Facilities.
----------------
SBC shall not, and shall use its reasonable efforts to cause its
customers to not, rearrange, disconnect, remove, attempt to repair, or
otherwise tamper with any of the facilities or equipment that the
Operating Companies installs on SBC's or the customer's premises to
deliver the Covad Products, except upon the Operating Companies'
consent. Equipment that the Operating Companies provides at a premises
for use in connection with Covad Products shall not be used for any
purpose other than that for which the Operating Companies provided it.
If SBC, SBC Customers, or their agents attempt to operate or
19
maintain any Covad facilities or equipment without Covad's approval, in
addition to any other remedies hereunder, SBC shall pay Covad for any
actual damage to Covad-owned equipment caused thereby. In no event
shall Covad be liable to SBC or any other person for interruption of
service, or for any other loss, cost or damage, caused by or related to
improper use or maintenance of Covad-owned equipment by SBC, SBC
Customers, or any third party not authorized by Covad. Notwithstanding
anything in this Section 7.8, SBC shall not be responsible for damage
to or failure of Covad equipment resulting from normal wear and tear.
7.9 Title and Power.
---------------
Title to all facilities provided by Covad (except those sold to SBC or
SBC Customers) and used to provide the Covad Products shall remain with
Covad. The electric power that such facilities consume on the premises
of SBC or SBC Customers shall be provided and maintained at the expense
of SBC or SBC's Customer.
7.10 Customer-Provided Equipment.
---------------------------
Covad shall not be responsible for the operation of any equipment
provided by SBC Customers, who shall be responsible for maintaining the
equipment required to provide answer supervision in accordance with
Subpart D of part 68 of the Rules of the FCC, as those rules may be
amended in the future.
7.11 Service Charges.
---------------
SBC shall be responsible for the payment of services charges, to be
billed in accordance with the provisions of Section 6.3.2, for visits
by the Operating Companies to the premises when the trouble report
results from causes attributable to any party other than Covad.
7.12 Removal of Equipment.
--------------------
Where SBC uses Covad equipment in connection with the provision of
Covad Products to an SBC Customer whose service is terminated,
interrupted or suspended or where Covad equipment is replaced because
of a Service upgrade, SBC shall, at Covad's option, either return all
Covad-owned equipment to Covad at SBC's expense or allow Covad to
remove all Covad-owned equipment. Any Covad equipment returned or
removed pursuant to the preceding sentence shall be in good working
condition, subject to normal wear and tear, and shall be returned by
SBC or reclaimed by Covad, as the case may be, within thirty (30) days
of SBC's receipt of Covad's choice of the option selected pursuant to
the first sentence of this Section 7.12. Where Covad equipment must be
returned for repair, the procedures for handling such matters shall be
worked out in advance by the Parties.
20
Article VIII
TERMINATION
8.1 Termination by Mutual Consent.
-----------------------------
This Agreement may be terminated, without penalty or termination
charges, by the mutual written consent of all Parties hereto.
8.2 Termination by Either Party.
---------------------------
For the purposes of this Article VIII, CGI and the Operating Companies
shall be deemed to be one and the same Party. Either Party may, but
shall not be obligated to, terminate this Agreement:
8.2.1 for failure by the other Party to make a payment when due, upon sixty
(60) days notice in writing to the defaulting Party, except that the
defaulting Party may cure the breach upon payment of the amount due
within the sixty (60) day notice period; provided, however, that SBC
shall not have a right to cure if it fails to make timely payment for
three consecutive months, or fails to make timely payment four times in
a consecutive twelve (12)-month period;
8.2.2 for a material breach by the other Party of its representations,
warranties, covenants, obligations or other agreements contained in
this Agreement, any of the Collateral Agreements, the Termination
Agreement, or the Dispute Resolution Agreement, after the
non-defaulting Party provides sixty (60) days written notice and if the
defaulting Party fails to cure to the reasonable satisfaction of the
non-defaulting party within such sixty (60) day notice period;
8.2.3 without prior notice in the event that either the Operating Companies
or CGI, with respect to SBC's right to terminate, or SBC, with respect
to Covad's right to terminate:
8.2.3.1 ceases to do business as a going concern;
8.2.3.2 is unable or admits in writing its inability to pay its debts
as they become due;
8.2.3.3 commences or authorizes a voluntary case or other proceeding
seeking liquidation, reorganization, suspension of payments or
other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, or consents to any such
relief or to the appointment of or taking possession by any
such official in an involuntary case or other proceeding
commenced against it, or makes a general assignment for the
benefit of
21
creditors, or fails to pay a substantial portion of its debts
as they become due, or takes any corporate action to authorize
any of the foregoing, is insolvent, bankrupt or the subject of
a receivership; or
8.2.3.4 has any substantial part of its property subjected to any
levy, seizure, assignment or sale for or by any creditor or
governmental agency without such levy, seizure, assignment or
sale being released, lifted, reversed, or satisfied within ten
(10) days.
8.2.4 In the event that the balance of the Prepayment for Services has been
repaid to SBC in full by Covad and/or has been used by SBC.
8.3 Termination by SBC.
------------------
SBC shall have the right to terminate this Agreement:
8.3.1 Failure to Satisfy SLAs.
-----------------------
8.3.1.1 for a material breach of the SLAs; provided, however, that a
material breach of the SLAs shall only exist if the aggregate
monthly credits resulting from breaches of the SLAs exceed 35
% of the total amount invoiced to SBC by the Operating
Companies for three (3) consecutive months or for six (6)
months in any twelve (12) month period.
8.3.1.2 Covad shall not be held responsible for failing to meet the
performance metrics set forth in Addendum 2 if such failure is
due to SBC's, the SBC Agents or any of their Customers'
personnel, applications, equipment, or facilities, the ILEC's
failure to perform in a timely fashion, provided, however,
that where Covad recovers in the form of a cash payment or
credit any damages or other compensation from the ILEC as a
result of the ILEC's failure to perform, Covad shall
reasonably allocate to SBC a portion of that recovery
according to the harm suffered by SBC as relative to the harm
suffered by Covad and its partners other than SBC. Covad shall
be responsible and liable to SBC for the remedies set forth in
Addendum 2 where a failure to meet any performance metrics is
due to the performance or actions of Covad's contractors and
subcontractors.
8.3.2 Change in Control Event.
-----------------------
In the event of a Change in Control of CGI or the Operating Companies.
8.3.3 Failure to maintain CO's and MSA.
--------------------------------
22
In the event that the Operating Companies at any time (i) have fewer
than 1530 central office locations that are open or (ii) operates in
fewer than 84 Metropolitan Service Areas.
8.4 Remedies.
--------
The Party having the right to terminate shall exercise such right
within a reasonable period of time, but in no event more than one
hundred eighty (180) days after actual notice of the event or
circumstances permitting termination by such Party.
8.4.1 In the event that SBC terminates this Agreement pursuant to Section 8.2
or 8.3, the Operating Companies shall (a) not assess any termination
charges or penalties which may otherwise be charged to SBC under this
Agreement, (b) provide SBC, its Affiliates and the SBC Agents and their
respective Customers an orderly transition of Covad Products to a new
provider in accordance with Section 8.5, and (c) have a repayment
obligation, payable on the later to occur of (i) the termination date =
set forth in such notice, or (ii) the first Business Day following the
nine month anniversary of the Effective Date, to SBC in an amount equal
to the remaining balance of the Prepayment for Services as of the date
of such notice of termination. In addition to the foregoing, if SBC
terminates the Agreement pursuant to Section 8.2 (other than Section
8.2.4) or Section 8.3 (other than Section 8.3.2 or 8.3.3), then the
Operating Companies shall reimburse SBC for its out-of-pocket expenses
associated with transitioning its Customers to the new DSL provider. In
the event that Covad fails to make any required repayment of the
balance of Prepayment for Services (the "Required Repayment"), then SBC
shall be entitled to exercise any and all of its remedies under the
Collateral Agreements in accordance therewith. With respect to Covad
Product performance failures, the remedies set forth in this Section
8.4.1 shall not be available to SBC except as permitted under Section
8.3.1. Without limitation of the foregoing, in no event shall a Covad
Product performance failure constitute an event of termination under
8.2.2.
8.4.2 In the event that Covad terminates this Agreement pursuant to Section
8.2, the Operating Companies shall first apply the remaining balance,
if any, of the Prepayment for Services toward any accrued but unpaid
amounts due the Operating Companies or CGI under this Agreement. The
balance, if any, of the Prepayment for Services shall be held by the
Operating Companies for a period ending on December 31, 2011, and may
be used by SBC for the purchase of Covad Products as set forth in
Section 3.3, or, at Covad's option, may be refunded to SBC.
8.4.3 In lieu of exercising its termination right set forth in Section 8.4.2
above, Covad may, at its option, upon the occurrence of an event that
would otherwise entitle Covad to terminate this Agreement, elect to
maintain this Agreement in full force and effect, provided that (i) SBC
shall no longer be entitled to MFN Pricing; (ii) notwithstanding the
limits on pricing in Section 6.1, SBC, its Affiliates and the SBC
Agents shall be charged at the prices reserved by the Operating
Companies for those customers having the lowest
23
volumes, and (iii) the Operating Companies may immediately apply the
remaining balance, if any, of the Prepayment for Services toward any
accrued but unpaid amounts due the Operating Companies or CGI under
this Agreement.
8.5 Transition.
----------
The Parties recognize that the Covad Products are vital to SBC
Customers to whom SBC has resold Covad Products and must be continued
in accordance with the terms of this Agreement after the cancellation
or other termination of the Agreement while SBC transitions to new
arrangements required for the continued provision of the Covad Products
to SBC Customers. Accordingly, the Parties hereby agree, to cooperate
in developing and implementing an orderly and efficient transition that
will minimize any adverse effects on (a) the quality and availability
of the Covad Products, (b) SBC's ability to provide the quality and
variety of services offered to its customers prior to termination, and
(c) SBC Customers. Unless SBC is in material breach of this Agreement
on account of non-payment for Covad Products, Covad will, as part of
such transition, and if requested by SBC prior to the expiration of the
Term, continue to provide the Covad Products for a period of not less
than nine (9) months after the expiration of the Term (or such lesser
period as SBC may specify), on the terms and conditions set forth in
this Agreement. Beginning nine (9) months after the expiration of the
Term, SBC shall pay prevailing market prices charged to similarly
situated customers for any Covad Products that SBC purchases from
Covad.
Article IX
SOFTWARE TERMS
9.1 License.
-------
If and to the extent that SBC, the SBC Agents or SBC Customers require
the use of Covad licensed software ("Covad Licensed Software") in order
to use the Covad Products supplied under any service order, then SBC,
the SBC Agents and SBC Customers shall have a nonexclusive,
nontransferable, limited license to use such Covad Licensed Software
only and to the extent required to permit delivery and use of the Covad
Products. SBC, the SBC Agents and SBC Customers shall in no event be
entitled to claim title to or any ownership interest in any Licensed
Software (or any derivations or improvements thereto), and SBC, the SBC
Agents and SBC Customers shall execute any documentation reasonably
required by Covad to document Covad's or its licensor(s)' existing and
continued ownership of Licensed Software.
9.1.1 Restrictions. SBC agrees that it shall not, and shall not permit the
SBC Agents or its customers, to:
24
9.1.1.1 Copy the Covad Licensed Software, except as allowed and
permitted by Covad's express written consent.
9.1.1.2 Reverse engineer, decompile or disassemble the Covad Licensed
Software.
9.1.1.3 Sell, lease, license or sublicense the Covad Licensed
Software, except that SBC may sublicense the Covad Licensed
Software to SBC Customers on a non-exclusive, non-transferable
basis.
9.1.1.4 Create, write or develop any derivative software or any other
software program based on the Covad Licensed Software or any
Proprietary Information of Covad.
Article X
CONFIDENTIAL AND PROPRIETARY INFORMATION
10.1 General.
-------
Each Party shall hold in confidence and withhold from third parties
(other than as permitted below) any and all Proprietary Information
received pursuant to this Agreement and shall use such Proprietary
Information only to fulfill its obligations or enforce its rights
hereunder and for no other purposes unless the disclosing Party shall
otherwise agree in writing.
10.2 Obligation to Protect Proprietary Information.
---------------------------------------------
Each Party shall use commercially reasonable efforts to safeguard any
Proprietary information received pursuant to this Agreement from theft,
loss or disclosure to others, and to limit access to Proprietary
Information to those officers, directors, and employees within the
receiving Party's organization, and subcontractors, consultants,
investors, advisors, attorneys, service providers, business partners
and others who reasonably require access in order to accomplish the
aforesaid purposes. Proprietary Information shall be protected
hereunder only if it is identified as proprietary when provided. The
receiving Party shall not be liable for unauthorized use or disclosure
of any such Proprietary Information if it can establish that the same:
(i) is or becomes public knowledge or part of the knowledge or
literature within the telecommunications industry without breach of
this Agreement by the receiving Party; (ii) is known to the receiving
Party without restriction as to further disclosure when received; (iii)
is independently developed by the receiving Party as demonstrated by
written records; or (iv) is or becomes known to the receiving Party
from a third party who had a lawful right to disclose it without breach
of its contractual obligations. Specific Proprietary Information shall
not be deemed to be available to the public or in the possession of the
receiving
25
Party merely because it is embraced by more general information so
available or in the receiving Party's possession.
10.3 Judicial or Administrative Proceedings.
--------------------------------------
Should the receiving Party be faced with judicial or administrative
governmental action to disclose Proprietary Information received
hereunder, said receiving Party shall use commercially reasonable
efforts to notify the originating Party in sufficient time to permit
the disclosing Party to intervene in response to such action.
10.4 Loss or Unauthorized Use.
------------------------
The receiving Party agrees promptly to notify the disclosing Party of
the loss or unauthorized use or disclosure of any Proprietary
Information.
10.5 Proprietary Information Exchange Agreements.
-------------------------------------------
Each Party shall ensure that all subcontractors providing Proprietary
Information to such Party in connection with this Agreement shall enter
into a "Proprietary Information Exchange Agreement" or a substantially
similar agreement that provides that such Proprietary Information may
be disclosed and used by the Parties for the purposes provided in this
ARTICLE X, subject to providing appropriate assurances of
confidentiality, but without requiring further permission from or
notice to such subcontractor.
10.6 Nondisclosure Agreements.
------------------------
Each Party shall have any third party, person or entity to whom it
provides the Proprietary Information of the other Party agree in
writing to be bound to protect such Proprietary Information on the same
conditions as set forth in this Agreement.
10.7 Termination.
-----------
Upon termination of this Agreement for any reason and subsequent
expiration of the transition described in Section 8.5 above, the
Parties shall cease use of all Proprietary Information furnished by the
other Party and shall, at the direction of the furnishing Party, return
or destroy all such Proprietary Information, together with all copies
made hereof, except to the extent that the receiving Party retains a
license to use such Proprietary Information. Upon request, the
receiving Party shall send the other Party a destruction certificate.
10.8 Irreparable Injury by Disclosure to Competitors.
-----------------------------------------------
26
Specifically, but without limiting the foregoing, each Party agrees and
acknowledges that the disclosure by a Party of any Proprietary
Information to any competitor of a Party could cause irreparable harm
to such Party, and agrees not to make such a disclosure. Each Party
shall have the right to enforce the provision of this Section by
injunctive relief, including specific performance. Personnel of one
Party or its Affiliates present at the premises of the other Party or
its Affiliates shall refrain from obtaining access to information that
is proprietary to the customers of such other Party or its Affiliates.
Such personnel shall comply with the other Party's or its Affiliates'
reasonable measures established to restrict such access.
10.9 Survival of Nondisclosure Obligations.
-------------------------------------
The nondisclosure obligations set forth in this ARTICLE X shall survive
the termination of this Agreement for two years.
Article XI
REGULATORY FILINGS
11.1 Regulatory Submissions.
----------------------
In the event that either Party reasonably concludes that it is
necessary or advisable to file this Agreement with a Governmental
Entity or that a Governmental Entity is required to approve or review
this Agreement or the arrangement between the Parties, the other Party
shall cooperate fully in the preparation and filing of any regulatory
filings which may be necessary or appropriate, including, without
limitation, providing such information as may reasonably be necessary
or which is requested by the Governmental Entity. Where a Party
reasonably believes that information to be filed with a Governmental
Authority is Proprietary Information, the Parties shall cooperate to
obtain such confidential treatment from the Governmental Authority as
may reasonably be secured.
11.2 Modification or Amendment of this Agreement.
-------------------------------------------
In the event a Governmental Entity with jurisdiction over a Party or
both Parties or over this Agreement determines that one or more
provisions of this Agreement are unlawful, contrary to public policy or
otherwise unenforceable, the Parties will negotiate in good faith to
amend the Agreement in order to comply with any such applicable
regulatory requirements or policies while preserving the business
objectives of both Parties. Either Party may, without the consent of
the other Party, appeal or seek reconsideration of any decision or
order which holds one or more provisions of this Agreement unlawful,
contrary to public policy or otherwise unenforceable, but such appeal
or request for reconsideration shall not affect the obligations of the
Parties under this Section to negotiate in good faith, unless a stay of
the decision or order is obtained and the terms
27
and conditions of the stay are acceptable to both Parties. In such
event, the obligations of the Parties to negotiate under this Section
shall attach at such time as the stay is lifted and the adverse order
or decision is reinstated or become effective or the stay is modified
in a manner which a Party reasonably finds unsatisfactory.
Article XII
INDEMNIFICATION
12.1 General.
-------
Each Party (the "Indemnifying Party") shall defend, indemnify and hold
harmless the other Parties, including any of its Affiliates, officers,
directors, shareholders, employees and agents (the "Indemnified
Party"), from and against any and all claims, damages, , liabilities
whatsoever, including reasonable legal fees and any damages, arising
out of, caused by, related to or based upon a claim (a) by a third
party for physical property damage, personal injury, or wrongful death,
whether sounding in tort or contract, claim of defamation, invasion of
privacy or similar claim based on any act or omission of the other
Party, its employees, agents or contractors in connection with this
Agreement, or (b) that the Indemnifying Party's products or services
infringe or violate any copyright, trade secret, trademark or service
xxxx, United States patent or other property right of a third party, or
(c) that the claimant was "slammed" or "crammed," as those terms are
understood in the industry.
12.2 Notice.
------
The Indemnified Party shall promptly notify the Indemnifying Party in
writing of any claim that the Indemnified Party reasonably considers
subject to the indemnity, giving a description in reasonable detail of
the relevant facts on which the claim is based. The Indemnified Party
shall provide the Indemnifying Party with all reasonable assistance in
investigating, defending, and pursuing such claim at the indemnifying
Party's expense. The Indemnifying Party shall not be required to
indemnify the Indemnified Party for any settlement entered into without
its consent except to the extent set forth in Section 12.4 of this
Agreement.
12.3 Assumption of Defense of Claim.
------------------------------
The Indemnifying Party shall assume the defense of any such claim or
any litigation resulting from such claim and shall have absolute
control over the litigation, including, but not limited to, the
selection of counsel, the legal strategy with respect to the claim, and
the settlement of such claim, either before or after litigation has
commenced. Notwithstanding the preceding sentence, (a) if there is a
reasonable probability that a claim may materially and adversely affect
the Indemnified Party, other than as a result of
28
monetary damages or monetary payment, the Indemnified Party shall have
the right, at its own expense, to participate in the defense of such
claim, and (b) to the extent any defense applicable to the Indemnified
Party shall involve a conflict of interest (other than the requirement
of indemnification) with the Indemnifying Party, the Indemnified Party
shall have the right to control such defense at the expense of the
Indemnifying Party.
12.4 Right of Indemnified Party To Undertake Defense.
-----------------------------------------------
If, within a reasonable period of time after notice of any claim, the
Indemnifying Party fails to defend such claim, the Indemnified Party
shall have the right to undertake the defense, or compromise or settle
such claim on behalf of and for the account and at the risk of the
Indemnifying Party, subject to the right of the Indemnifying Party to
assume the defense of such claim at any time prior to settlement,
compromise or final determination of the claim, except to the extent
set forth in the last sentence of Section 12.3 of this Agreement.
12.5 Claim of Infringement.
---------------------
In the case of a claim of infringement of any Intellectual Property
right, where a court of competent jurisdiction finds such infringement,
the Indemnifying Party shall, at its option and expense, use all
reasonable efforts either (a) to procure for the Indemnified Party the
right to continue to use the product, service or other item as provided
for herein, (b) to modify the infringing product, service or other item
so that it is noninfringing, without materially altering its
performance or function, or (c) to replace the infringing product,
service or other item with a substantially equivalent noninfringing
item.
Article XIII
REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Party hereby represents, warrants and covenants to the other Party as
follows:
13.1 Organization, Standing and Authority.
------------------------------------
The Party is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction where it is incorporated,
that it has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated herein,
that all corporate acts and other proceedings required to be taken to
authorize the execution, delivery and performance hereof and the
consummation of the transactions contemplated herein have been duly and
properly taken, and that this Agreement has been duly executed and
delivered by it and constitutes the legal, valid and binding obligation
of the Party, enforceable against it in accordance with its terms.
13.2 No Violation.
------------
29
The execution and delivery by the Party of this Agreement and the
consummation of the transactions contemplated hereby and compliance
with the terms hereof will not (a) conflict with or result in any
violation of any provision of the articles of incorporation or by-laws,
or the comparable organizational documents of the Party, (b) conflict
with, result in a violation or breach of, or constitute a default, or
give rise to any right of termination, revocation, cancellation, or
acceleration, under, any material contract, concession or permit issued
to Party, except for any such conflict, violation, breach, default or
right which is not reasonably likely to have a material adverse effect
on the ability of the Party to consummate the material transactions
contemplated by this Agreement, (c) conflict with or result in a
violation of any judgment, order, decree, writ, injunction, statute,
law, ordinance, concession, permit, rule or regulation applicable to
the Party or to the property or assets of the Party, except for any
such conflict or violation which is not reasonably likely to have such
a material adverse effect, or (d) violate any existing contractual
arrangement to which the Party is a party or give rise to a claim
against any other Party for inducing a breach of contract or
interfering with contractual or other rights, or similar claim.
13.3 Consents and Approvals.
----------------------
No consent, approval, license, permit, order or authorization of,
registration, declaration or filing with, or notice to, any
Governmental Entity is required to be obtained or made by or with
respect to the Party in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated
hereby. The Party has or will obtain all necessary consents, approvals,
authorizations and permits necessary to perform fully hereunder.
13.4 CALEA.
-----
Any equipment, facilities or services provided pursuant to this
Agreement complies or will comply with the Communications Assistance
for Law Enforcement Act ("CALEA").
Article XIV
LIMITATION OF LIABILITY
14.1 Limited Responsibility.
----------------------
Each Party shall be responsible for, and only for, services and
facilities which are provided by that Party, its Affiliates, authorized
agents, subcontractors, or others retained by such persons, and no
Party shall bear any responsibility for the services and facilities
provided by the other Party, the other Party's Affiliates, agents,
subcontractors, or other persons retained by such persons. No Party
shall be liable for any act or omission of another telecommunications
carrier (other than an Affiliate) providing a portion of a
30
service, unless such telecommunications carrier is an authorized agent,
subcontractor or other person retained by the Party providing such
service.
14.2 Limitation of Damages.
---------------------
The Parties will not be liable to each other for any indirect,
incidental consequential, reliance, or special damages suffered by
third parties (including without limitation damages for harm to
business, lost revenues, lost savings, or lost profits suffered by such
other parties), regardless of the form of action, whether in contract,
warranty, strict liability, or tort, including without limitation
negligence of any kind whether active or passive, and regardless of
whether the Parties knew of the possibility that such damages could
result. The Parties hereby release each other and their respective
Affiliates, officers, directors, employees, and agents from any such
claim. Nothing contained in this Section will limit one Party's
liability to another Party for bodily injury, death, or damage to
tangible real or tangible personal property proximately caused by a
Party's negligent act or omission or that of their respective agents,
subcontractors or employees, nor will anything contained in this
Section limit the Parties indemnification obligations under ARTICLE XII
of this Agreement.
14.3 Warranty Disclaimer.
-------------------
EXCEPT AS PROVIDED IN THE SLAs, THE COVAD PRODUCTS AND ALL OTHER
PRODUCTS AND SERVICES PROVIDED BY COVAD HEREUNDER ARE PROVIDED ON AN
"AS IS" BASIS, AND SBC's, THE SBC AGENTS', AND THEIR RESPECTIVE
CUSTOMERS' USE THEREOF IS AT THEIR OWN RISK. COVAD DOES NOT MAKE, AND
HEREBY DISCLAIMS, ANY AND ALL OTHER EXPRESS AND IMPLIED WARRANTIES,
INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, NONINFRINGEMENT AND TITLE, AND ANY WARRANTIES
ARISING FROM A COURSE OF DEALING, USAGE, OR TRADE PRACTICE. EXCEPT AS
PROVIDED IN THE SLA, COVAD DOES NOT WARRANT THAT THE COVAD PRODUCTS
WILL PERFORM AT A PARTICULAR SPEED, OR WILL BE UNINTERRUPTED,
ERROR-FREE, OR COMPLETELY SECURE.
Article XV
INTELLECTUAL PROPERTY
15.1 Retention of Intellectual Property Rights.
-----------------------------------------
Except as otherwise specifically provided in this Agreement, no Party
shall be deemed to have offered or granted to any other Party any
rights or licenses under any present or future Intellectual Property
disclosed or arising pursuant to this Agreement.
31
15.2 Allocation of Intellectual Property Rights.
------------------------------------------
The right of the Parties to any Intellectual Property that may be
created in connection with or as a result of the product or service
jointly developed by the Parties or otherwise developed pursuant to
this Agreement shall be allocated in connection with the decision of
the Parties to develop the product or service. In the absence of such a
decision, all Intellectual Property Rights developed in connection with
the joint development of a product or service shall be owned by the
Party which initially proposed the product or service in the form of a
marketing service description or similar document.
15.2.1 The Party owning Intellectual Property created in the performance of a
jointly developed product or service shall grant the other Parties a
royalty-free, worldwide, nonexclusive license during the term of this
Agreement to use, reproduce, adapt, distribute, perform, display and
otherwise practice all such Intellectual Property for their business
purposes, including the right to authorize third parties to do the
foregoing for the other Party's business purposes.
15.2.2 The Party owning Intellectual Property created in the performance of a
jointly developed product or service shall grant the other Parties a
perpetual, royalty-free, worldwide, nonexclusive license effective upon
the termination or expiration of this Agreement to use, reproduce,
adapt, distribute, perform, display, and otherwise practice all such
Intellectual Property as may be reasonably necessary to permit the
other Parties to continue pursuing their business in substantially the
manner that business was pursued prior to any termination or expiration
of this Agreement, including the right to authorize third parties to do
the foregoing for the purpose of so continuing the other Party's
business.
15.3 Securing Patent Rights.
----------------------
The Party owning Intellectual Property created in the performance of a
product or service shall have the first right to file patent
applications and obtain and maintain patents covering inventions made
in the development or implementation of the product or service. In the
event that such Party does not file patent applications covering such
patentable or potentially patentable inventions promptly after
receiving a written request from either of the other Parties, the Party
making the request shall have the right, at its option and its cost, to
file such patent applications and obtain and maintain patents covering
such inventions. In such case, (a) such first Party shall assign to the
requesting Party all its right, title and interest in the relevant
invention and any resulting patents and cooperate with the requesting
Party in filing such patent applications and obtaining such patents,
and (b) the requesting Party shall grant such first Party a perpetual,
royalty-free, worldwide, nonexclusive license to make, use, offer for
sale, sell, import and otherwise practice such invention for its
business purposes, including the right to authorize third parties to do
the foregoing for such first Party's business purposes.
32
15.4 Branded Products and Services.
-----------------------------
Notwithstanding the foregoing, (a) to the extent that the development
of a product or service results in the creation of unique, novel or
original branding for an SBC-branded product or service, SBC shall own
the Intellectual Property relating to such branding and shall be
permitted to establish distribution limitations for such branded
product or service, and (b) to the extent that the development of a
product or service results in the creation of unique, novel or original
branding for a Covad-branded product or service, Covad shall own the
Intellectual Property relating to such branding and shall be permitted
to establish distribution limitations for such branded product or
service. To the extent the branded product or service of one Party may
be distributed by the other Party, the Party which owns the
Intellectual Property shall set the royalty payment to be paid.
15.5 Assignment Documents.
--------------------
Each Party shall sign and deliver any assignment documents, patent
applications or other documents reasonably requested by another Party
to effectuate the provisions of this ARTICLE XV or the provisions of a
scope of work document concerning Intellectual Property.
15.6 License to Use Covad Marks.
--------------------------
15.6.1 Covad hereby grants to SBC, during the Term of this Agreement, a
license giving SBC and the SBC Agents the non-transferable right and
authorization to use all trademarks, services marks, and any other
intellectual property associated with the Covad Products identified in
Addendum 1 and any new products Covad shall offer (collectively "Covad
Marks"). SBC and the SBC Agents shall be entitled to use such Covad
Marks in connection with offering, marketing and selling the Covad
Products and any services related thereto, and in connection with the
branding of the Covad Products as set forth in Section 3.2.6 of this
Agreement, for so long as this Agreement remains in effect and during
any transition period as provided in Section 8.5 above. SBC
acknowledges Covad's title to such Covad Marks and the validity of the
registration of Covad as the proprietor in the Register of Trademarks
or Service Marks. SBC shall not claim any ownership or similar right to
the Covad Marks by reason of its use thereof pursuant to this
Agreement, and any rights which SBC should otherwise acquire in or to
the Covad Marks shall be deemed for the account and benefit of Covad.
15.6.2 SBC shall use its best efforts to preserve the value and validity of
the Covad Marks and in particular will:
(a) Endeavor to create, promote, and retain goodwill in the business
of selling the goods and services included under the Covad Marks.
33
(b) Give any information as to its use of the Covad Marks which Covad
may require and otherwise render any assistance to Covad in
maintaining the Covad Marks duly registered, except that Covad
shall pay all renewal fees for its Trademarks or Service Marks.
(c) Use the Covad Marks correctly, spelled as registered and not as a
verb or in the plural.
(d) Refrain from using the Covad Marks unaccompanied by words
describing the nature of the goods and services to which they
relate unless the Covad Marks in question are capitalized or
otherwise distinguished from the surrounding and adjacent text.
15.6.3 In the event that the Covad Marks are to be used with another trademark
or service xxxx or in relation to goods and services under the control
of SBC, SBC shall use its best efforts to have both trademarks or
service marks represented equally legibly, but nevertheless separated
from the other so that each xxxx appears to be a xxxx in its own right
distinct from the other xxxx. Any use by SBC of such trademarks or
service marks shall be in conformity with Covad's branding guidelines,
provided that a copy of such guidelines have been delivered to SBC
prior to such use. Any exception to such guidelines must be approved in
advance in writing by Covad.
15.6.4 Each Party agrees not to use in its business any other trademark which
is similar to or so nearly resembles the other Party's trademarks or
service marks or any of them as to be likely to cause deception or
confusion.
15.7 No Infringement.
---------------
Covad represents and warrants that its intellectual property and the
Covad Marks do not infringe upon any third party copyright, trademark,
patent, trade secret or other third party right and, to the best of
Covad's knowledge, any of the aforementioned items not created by it,
but nevertheless used by it, shall also conform to the foregoing
warranty.
ARTICLE XVI
APPLICABLE TAXES
16.1 Payment of Taxes.
----------------
Except as otherwise provided herein, each Party shall be fully
responsible for the payment of all taxes required by law to be paid by
that Party. SBC and Covad agree that Covad will be responsible for
paying all existing or future federal, state or local taxes imposed on
the receipt of payments made by SBC to Covad under this Agreement.
34
16.2 Assessments.
-----------
SBC is solely responsible for calculating and remitting any and all
taxes, fees and assessments, imposed directly on SBC's acquisition and
resale of Covad Products under this Agreement and billed directly to
SBC (collectively, "SBC Assessments"). Such SBC Assessments may be made
by any governmental, quasi-governmental agency or regulatory body and
Covad shall not be directly or indirectly responsible in any way for
SBC's remitting such SBC Assessments. Covad is solely responsible for
calculating and remitting any and all taxes, fees and assessments
imposed directly on Covad's provision of materials or services under
this Agreement and billed directly to Covad (collectively, "Covad
Assessments"). Such Covad Assessments may be made by any governmental,
quasi-governmental agency or regulatory body and SBC shall not be
directly or indirectly responsible in any way for Covad's remitting
such Covad Assessments.
16.3 Reimbursement of Taxes on Covad Products.
----------------------------------------
SBC shall pay to Covad all federal excise or state or local sales or
use taxes and fees which Covad is expressly required or permitted by
ordinance, statute, regulation or administrative pronouncement to
collect from SBC which are associated with SBC's acquisition of Covad
Products under this Agreement. All such taxes and fees shall be stated
as separate items on a timely invoice that shall comply with the
requirements of state law and shall indicate the jurisdiction imposing
the tax. Installation and other non-taxable charges, if any, must be
separately stated. SBC shall not be obligated to pay any amount
otherwise collectable under this Section that is invoiced more than
ninety (90) days after the date of the transaction giving rise to such
tax or fee.
16.4 Certificate of Exemption.
------------------------
Alternatively, SBC shall provide Covad with a certificate evidencing
SBC's exemption from payment of, or liability for the above taxes or
fees. For example, to the extent SBC claims that its acquisition of
materials or services qualifies for a purchase or sale for resale sales
tax exemption, SBC shall furnish Covad with a resale tax exemption
certificate as authorized or required by the jurisdiction providing
said exemption. If applicable law exempts the purchase from a sales tax
but does not also provide an exemption procedure then Covad will not
collect such sales tax if SBC furnishes Covad a letter from a Director
or higher level executive describing the exemption and identifying the
applicable statute, regulation, or other law of the jurisdiction that
both allows such exemption and does not require an exemption
certificate.
16.5 Tax Indemnification by Covad.
----------------------------
Covad agrees to pay, and to hold SBC harmless from and against, any
penalty, interest, additional tax, or other charge that may be levied
or assessed as a result of the delay or
35
failure of Covad, for any reason, to pay any tax or file any tax return
or information required by law, rule or regulation or by this Agreement
to be paid or filed by Covad. Covad agrees to pay and to hold SBC
harmless from and against any penalty or sanction assessed as a result
of Covad doing business with any country subject to U.S. trade
restrictions.
16.6 Schedule of Taxes.
-----------------
Following the issuance of an order of materials or supplies under this
Agreement, Covad shall within 20 days, (but in no event later than two
weeks before delivery of the product under the purchase order) present
SBC a schedule of the taxes and fees it proposes to collect from SBC
under Section 16.3. Upon SBC's request, the Parties shall consult with
respect to the basis and rates upon which Covad shall pay any taxes or
fees for which SBC is obligated to reimburse Covad under this
Agreement. If SBC determines that in its opinion any such taxes or fees
are not payable or should be paid on a basis less than the full price
or at rates less than the full tax or fee rate, Covad shall make
payment in accordance with such determinations and SBC shall be
responsible for such determination. Notwithstanding the foregoing,
nothing in this paragraph shall require Covad to provide SBC with a
schedule of USF fees.
16.7 Audits.
------
If any taxing authority advises Covad that it intends to audit Covad
with respect to any taxes for which SBC is obligated to reimburse Covad
under this Agreement, Covad shall: (1) promptly so notify SBC, (2)
afford SBC an opportunity to participate on an equal basis with Covad
in such audit with respect to such taxes and (3) keep SBC fully
informed as to the progress of such audit. Each Party shall bear its
own expenses with respect to any such audit, and the responsibility for
any additional tax, penalty or interest resulting from such audit shall
be determined in accordance with the applicable provisions of this
Section. Notwithstanding the above, Covad shall have the right, but not
the obligation to take control of an issue in such audit with respect
to taxes that SBC is obligated to reimburse Covad. In that event, SBC
shall be obligated to pay Covad the amount of tax, interest and
penalties that it reasonably believes that it owes, calculated through
the date that Covad takes control of the issue in dispute, and Covad
shall assume the obligation to pay all additional tax, interest and
penalties, and any further costs incurred in continuing to pursue the
issue. Covad's failure to comply with the notification requirements of
this section shall relieve SBC of its responsibility to reimburse Covad
for taxes, interest, and penalties if Covad's failure prejudiced SBC's
ability to contest the taxes, interest, or penalties.
16.8 Collection.
----------
36
In circumstances where collection is sought by a governmental authority
for a greater amount of taxes or fees than that so determined by SBC,
Covad shall promptly notify SBC. If SBC desires to contest such
collection, SBC shall promptly notify Covad. Covad shall cooperate with
SBC in contesting such determination, but SBC shall be responsible for,
and shall reimburse Covad for any fee, tax, interest, or penalty in
excess of its determination. If SBC, Covad, or a governmental authority
determines that SBC has reimbursed Covad for taxes or fees in excess of
the amount that SBC is obligated to reimburse Covad, SBC and Covad
shall consult to determine the appropriate method of recovery of such
excess reimbursements. Covad shall credit any excess reimbursements
against tax reimbursements or other payments due from SBC if and to the
extent, Covad can make corresponding adjustments to its payments to the
relevant tax authority. At SBC's request, Covad shall timely file any
claims for refund and any other documents required to recover any other
excess reimbursements, and shall promptly remit to SBC all such refunds
and interest received.
16.9 Cooperation.
-----------
SBC and Covad agree that they will reasonably cooperate with each other
with respect to any tax planning to minimize taxes, and with respect to
any tax audit, tax controversy, tax refund matter, claim, action, or
similar proceeding by a taxing authority or other governmental agency.
The degree of cooperation contemplated by this section is to enable any
tax inquiry or controversy to be resolved expeditiously and includes,
but is not limited to, assisting with responses to audit inquiries and
producing documents and information.
ARTICLE XVII
INDEPENDENT CONTRACTOR
17.1 Covad Warranty of Independent Contractor Status.
-----------------------------------------------
Covad warrants to SBC as follows:
17.1.1 Covad is engaged in an independent business and will perform all
obligations under this Agreement as an independent contractor and not
as the agent or employee of SBC, except as expressly provided in
Section 3.2.7;
17.1.2 Covad's personnel performing Services shall be considered solely the
employee personnel of Covad and not employees or agents of SBC, except
as expressly provided in Section 3.2.7;
37
17.1.3 Covad has and retains the right to exercise full control of and
supervision over the performance of the Services and full control over
the employment, direction, assignment, compensation, and discharge of
all personnel performing the Services;
17.1.4 Covad is solely responsible for all matters relating to compensation,
including payment of premium pay for overtime, of all Covad's personnel
who perform Services. Covad will pay all employee compensation and
related taxes and benefits from its own accounts, without regard to any
dispute concerning SBC's liability for payment to Covad under any
invoice related to any Service performed by Covad;
17.1.5 Covad is solely responsible for all matters relating to compliance with
all employer obligations to withhold employee taxes, pay employee and
employer taxes, and file payroll tax returns and information returns
under local, state, and federal income tax laws, unemployment
compensation insurance and state disability insurance tax laws, and
social security and Medicare tax laws, and all other payroll tax laws
or similar laws (all collectively hereinafter referred to as "payroll
tax obligations") with respect to all Covad personnel providing
Services. If any federal, state, or local authority including but not
limited to taxing authority may claim that SBC or any subsidiary of SBC
is or may be liable for any payroll, payroll tax, or benefit plan
obligations, including the payment of interest or penalties, with
respect to any such Covad personnel, then Covad shall:
(a) cooperate fully in SBC's defense of such claim;
(b) disclose its income tax returns, payroll tax returns,
information returns and transmittals, and associated payment
deposits records, canceled checks and instruments, and other
such documents reasonably necessary to enable SBC to perfect
its defense of such claims, subject to appropriate protections
for information deemed confidential by Covad;
(c) execute and deliver such powers of attorney or other consents
as may be necessary to enable SBC to obtain copies of such
returns and other documents from the taxing and other
authorities that are appropriate or helpful in order to prove
compliance with tax and other legal requirements; and
(d) indemnify and hold SBC harmless from any reasonable cost or
expense, and any taxes as well as any interest or penalties;
17.1.6 Covad is and will respond as the employer of all Covad personnel,
exclusive of SBC, for purposes of any federal, state, or local taxes,
benefits and unemployment insurance law. Covad will indemnify and hold
SBC harmless from any claim that SBC's reserve account should be taxed
to provide unemployment compensation to any Covad personnel or former
Covad personnel based upon Services provided to SBC under this
Agreement;
38
17.1.7 If any Covad personnel makes a claim for employee benefits under any
SBC employee benefit plan or for workers' compensation against SBC,
then Covad will indemnify and hold harmless SBC from any such claim,
including any and all costs an expenses, including interest and
penalties; Covad's employee benefit plans and self-employed benefit
plans will credit Covad's personnel with all time worked on SBC
assignments and all compensation earned on SBC assignments for plan
participation purposes, vesting purposes, and benefit accrual purposes,
on the same basis as Covad credits time worked on other assignments;
and Covad will be responsible for its own acts and those of Covad's
personnel during the performance of Covad's obligations under this
Agreement.
17.1.8 Each Party and each Party's contractors shall be solely responsible for
the withholding or payment of all applicable federal, state and local
income taxes, social security taxes and other payroll taxes with
respect to its employees, as well as any taxes, contributions or other
obligations imposed by applicable state unemployment or workers'
compensation acts or other legal requirements applicable to the
employees or the employer-employee relationship. Each Party has sole
authority and responsibility to hire, fire and otherwise control its
employees.
ARTICLE XVIII
COVAD'S USE OF SBC SERVICES
18.1 SBC as Preferred Provider.
-------------------------
Covad agrees that in those cities where SBC provides Telecommunications
Services, including local and long distance voice, data, wireless and
ISP service, Covad will grant SBC the right of first refusal to provide
all of such service requirements that Covad obtains from third parties
(which shall not include Affiliates of Covad), provided that SBC's
price is no higher than other offers for reasonably equivalent
services, that the terms, conditions, functionalities and quality of
service, when considered as a whole, are reasonably equivalent to
competitive options available to Covad, and that SBC can deliver such
services in a timely fashion. Nothing in this Section 18.1 shall
require Covad to cancel or to breach an existing agreement for such
services.
ARTICLE XIX
MINORITY, WOMEN AND DISABLED VETERANS BUSINESS ENTERPRISES
19.1 Covad's Commitment.
------------------
Covad commits to good faith efforts to develop procedures and policies
for the participation of M/WBE and DVBE firms as defined in Section
19.2 and to develop a
39
participation plan with identified participation levels by these firms.
Covad commits to institute procedures for tracking, validating and
reporting such efforts to SBC.
19.2 Definitions.
-----------
19.2.1 MBE/WBE.
-------
(a) For purchases under this Agreement by Pacific Xxxx, Pacific
Xxxx Directory, Pacific Xxxx Mobile Services, Pacific Xxxx
Information Services, Pacific Xxxx Communications, and any
other entity operating principally in California (collectively
"California Affiliates"), Minority and Women Business
Enterprises (MBEs/WBEs) are defined as businesses which
satisfy the requirements of paragraph (c) below and are
certified as MBEs/WBEs by the California Public Utilities
Commission Clearinghouse ("CPUC-certified").
(b) For purchases under this Agreement by any entity that is not a
California Affiliate, MBEs/WBEs are defined as businesses
which satisfy the requirements of paragraph (c) below and are
either CPUC-certified or are certified as MBEs/WBEs by a
certifying agency recognized by SBC.
(c) MBEs/WBEs must be at least fifty one percent (51%) owned by a
minority individual or group or by one or more women (for
publicly-held businesses, at least fifty one percent (51%) of
the stock must be owned by one or more of those individuals),
and the MBEs/WBEs' management and daily business operations
must be controlled by one or more of those individuals, and
these individuals must be either U.S. citizens or legal aliens
with permanent residence status. For the purpose of this
definition, minority group members include male or female
Asian Americans, Black Americans, Filipino Americans, Hispanic
Americans, Native Americans (i.e., American Indians, Eskimos,
Aleuts and Native Hawaiians), Polynesian Americans, and
multi-ethnic (i.e., any combination of MBEs and WBEs where no
one specific group has a fifty one percent (51%) ownership and
control of the business, but when aggregated, the ownership
and control combination meets or exceeds the fifty one percent
(51%) rule). "Control" in this context means exercising the
power to make policy decisions. "Operate" in this context
means actively involved in the day-to-day management of the
business and not merely acting as officers or directors.
19.2.2 DVBE.
(a) For purchases under this Agreement by California Affiliates,
Disabled Veteran Business Enterprises (DVBEs) are defined as
business concerns that satisfy the requirements of paragraph
(e) below and are certified as DVBEs by the California State
Office of Small and Minority Business (OSMB). The DVBE must
be a
40
resident of the State of California, and must satisfy the
requirements of Section 19.2.2(c) below.
(b) For purchases under this Agreement by any entity that is not a
California Affiliate, DVBEs are defined as any business
concern that satisfies the requirements of paragraph (c) below
and is either a defined DVBE for purchases by California
Affiliates, or is certified as a DVBE by a certifying agency
recognized by SBC.
(c) The DVBE must be (1) a sole proprietorship at least
fifty-one percent (51%) owned by one or more disabled
veterans; or (2) a publicly-owned business in which at least
fifty-one percent (51%) of the stock is owned by one or more
disabled veterans; or (3) a subsidiary which is wholly owned
by a parent corporation, but only if at least fifty-one
percent (51%) of the voting stock of the parent corporation is
owned by one or more disabled veterans; or (4) a joint venture
in which at least fifty-one percent (51%) of the joint
venture's management and control and earnings are held by one
or more disabled veterans. In each case, the management and
control of the daily business operations must be by one or
more disabled veterans. A disabled veteran is a veteran of the
military, naval or air service of the United States with a
service-connected disability. "Management and control" in this
context means exercising the power to make policy decisions
and actively involved in the day-to-day management of the
business and not merely acting as officers or directors.
ARTICLE XX
COVENANTS
20.1 Publicity.
---------
The Parties agree to cooperate in the preparation and dissemination of
publicity concerning this Agreement. No Party shall make a public
announcement about this Agreement or the Parties' discussions related
to any aspect of it, without the consent of the other Parties, which
consent shall not be unreasonably refused, delayed, or conditioned. Any
Party may at any time make announcements which are required by
applicable law, regulatory bodies, or stock exchange or stock
association rules, so long as the Party so required to make the
announcement notifies in advance the other Parties of such requirement
and promptly discusses with the other Parties in good faith the wording
of any such announcement.
20.2 Third Party Warranties.
----------------------
Each Party shall enforce any rights, warranties, licenses, terms and
conditions and other benefits accruing to it under each of its
agreements with third parties participating in or
41
providing equipment, software or other services used in connection with
the provision of services under this Agreement wherever and whenever
such Party's failure to enforce any such rights, warranties, licenses,
terms, conditions and other benefits could materially impair its
ability to provide such services in accordance with the terms and
conditions of the Agreement.
20.3 Unauthorized Warranties.
-----------------------
SBC shall not make any warranty or representation with respect to the
Covad Products inconsistent with or in addition to any warranty or
representation stated in writing by Covad.
20.4 Cooperation.
-----------
Each Party shall use its respective commercially reasonable efforts to
perform all actions or refrain from performing any action, in either
case as reasonably requested by another Party, in connection with the
performance of the activities contemplated by this Agreement.
20.5 Sales by Affiliates.
-------------------
Covad shall not permit any Covad Affiliate other than the Operating
Companies to sell any Covad Products, without SBC's prior written
consent.
20.6 Relationship Manager. Each Party shall designate a Relationship Manager
--------------------
reasonably acceptable to the other Party to serve as the principal
contact for matters related to the relationship between the Parties.
The Relationship Manager shall be an employee of the Party and shall be
given sufficient power and responsibility by the Party designating the
Relationship Manager to carry out the duties of a Relationship Manager.
The Relationship Manager for each Party shall serve at the pleasure of
the appointing Party, which shall have the right to remove its
Relationship Manager at its absolute discretion and to substitute a new
Relationship Manager reasonably acceptable to the other Party.
20.7 Forecasts. SBC shall provide the Operating Companies with quarterly
---------
forecasts of its proposed annual sales volumes, including breakdowns
between business and consumer products, all of which shall be subject
to the confidentiality provisions set forth in ARTICLE X.
ARTICLE XXI
GENERAL
21.1 Americans With Disabilities Act.
-------------------------------
42
The Parties agree to coordinate any activities taken collectively which
may be subject to the requirements of the Americans with Disabilities
Act (42 U.S.C. ss. 12101) and with the network disclosure rules adopted
by the FCC in proceedings to implement that Act or any amendments to
that Act.
21.2 Amendment.
---------
No amendment of this Agreement, including any amendment to any Addendum
hereto, shall be valid or binding on the Parties unless such amendment
shall be in writing and duly executed by an authorized representative
of each Party; provided, however, Covad may update the tier pricing in
accordance with the last sentence of Section 6.2 without execution by
SBC.
21.3 Assignment.
----------
No Party may assign or delegate any of its rights or obligations under
this Agreement, except to an Affiliate, without the consent of the
other Party.
21.4 Attachments.
-----------
Any attachments to this Agreement are incorporated into the Agreement
and governed by the terms hereof.
21.5 Costs, Expenses and Attorneys' Fees.
-----------------------------------
Except as otherwise specifically agreed in writing, each Party shall be
responsible for its own expenses arising under this Agreement,
including the preparation of this Agreement.
21.6 Dispute Resolution.
------------------
All disputes and disagreements between the Parties that can not be
resolved by mutual agreement regarding or relating to this Agreement
(including, but not limited to, the interpretation or construction of
this agreement, performance and implementation concerns, and any
potential claims, causes of action, lawsuits, arbitration or related
disputes), including Attachments to this Agreement, shall be resolved
in accordance with the Dispute Resolution Agreement entered into by SBC
and Covad on September 10, 2000, as such agreement may be amended from
time to time.
21.7 Entire Agreement; Further Agreements.
------------------------------------
This Agreement constitutes the entire agreement and understanding of
the Parties hereto with respect to the subject matter contained
therein.
21.8 Environmental Hazard.
--------------------
43
Each Party shall be solely responsible at its own expense for the
proper handling, storage, transport, treatment, disposal and use of all
hazardous substances by such Party and its contractors and agents. For
purposes of this Agreement, hazardous substances includes those
substances (a) included within the definition of hazardous substance,
hazardous waste, hazardous material, toxic substance, solid waste or
pollutant or contaminant under any applicable law or (b) listed by any
Government Entity as a hazardous substance.
21.9 Execution.
---------
This Agreement may be executed in counterparts each of which copies
shall be deemed an original.
21.10 Force Majeure.
-------------
21.10.1 Neither Party shall be liable for any delay or failure in performance
of any part of this Agreement from any cause beyond its control and
without its fault or negligence including, without limitation, acts of
nature, acts of civil or military authority, government regulations,
embargoes, epidemics, terrorist acts, riots, insurrections, fires,
explosions, earthquakes, nuclear accidents, floods, work stoppages,
equipment failure, cable cuts, power blackouts, volcanic action, other
major environmental disturbances or unusually severe weather
conditions. In such event, the Party affected shall, upon giving
prompt notice to the other Party, be excused from such performance on
a day-today basis to the extent of such interference (and the other
Party shall likewise be excused from performance of its obligations on
a day-to-day basis to the extent such Party's obligations are related
to the performance so interfered with). The affected Party shall use
its best efforts to avoid or remove the cause of nonperformance and
both Parties shall proceed to perform with dispatch once the causes
are removed or cease.
21.10.2 Notwithstanding the previous subsection, no delay or other failure to
perform shall be excused pursuant to this Section (i) by the acts or
omissions of a Party's subcontractors, material men, suppliers or other
third persons providing products or services to such Party, unless such
acts or omissions are themselves the product of a force majeure
condition, and (ii) unless such delay or failure and the consequences
thereof are beyond the reasonable control and without the fault or
negligence of the Party claiming excusable delay or other failure to
perform.
21.11 Consent or Agreement.
--------------------
In each case in which a Party's consent approval or agreement is
required or requested hereunder, such Party shall not unreasonably
withhold or delay such consent or agreement.
21.12 Governing Law.
-------------
44
This Agreement shall be construed in accordance with and governed by
the laws of the State of Delaware without regard to choice of law
provisions.
21.13 Insurance.
---------
At all times during the term of this Agreement or any Operating
Agreement, each Party shall keep and maintain in force at its own
expense all insurance required by applicable law, including, but not
limited to, workers' compensation insurance, and general liability
insurance (primary or umbrella) in the amount of ten million dollars
($10,000,000.00) for personal injury or death, property damage, and
automobile liability with coverage for bodily injury and property
damage; provided, however, that SBC may satisfy its obligations under
this Section 21.13 through self insurance, and provided further, that
Covad shall be entitled to satisfy its obligations for auto insurance
by self insurance. Upon request by any other Party, a Party shall
provide to the other Party evidence of such insurance.
21.14 Joint Work Product.
------------------
This Agreement is the joint work product of the Parties and has been
negotiated by the Parties and their respective counsel and shall be
fairly interpreted in accordance with its terms. In the event of any
ambiguities, no inferences shall be drawn against either Party.
21.15 Labor Relations.
---------------
Each Party shall be responsible for labor relations with its own
employees. Each Party agrees to notify the other Party as soon as
practicable whenever such Party has knowledge that a labor dispute
concerning its employees is delaying or threatens to delay such Party's
timely performance of its obligations under this Agreement and shall
minimize impairment of service to the other Party (by using its
management personnel to perform work or by other means) to the extent
permitted by Applicable Law.
21.16 No Solicitation.
---------------
During the term of this Agreement and for a period of twelve (12)
months thereafter, no Party or its Affiliates or SBC's Agents shall,
directly or indirectly, for itself or on behalf of any other Person,
induce or attempt to induce any employee of the other Parties or their
Affiliates engaged in activities related to this Agreement to leave his
or her employment. However, general employment advertisements in media
of general or industry specific circulation shall be permissible, and a
Party that hires an employee of another Party or its Affiliate due to
his or her response to such advertisement(s) shall not be in breach
hereunder. This Section 21.16 shall not apply in the event this
Agreement is terminated in accordance with Section 8.2.3.1 above.
21.17 No Waiver.
---------
45
The failure of any Party to insist upon or enforce strict performance
by any other Party of any provision of this Agreement or to exercise
any right under this Agreement shall not be construed as a waiver or
relinquishment to any extent of such Party's right to assert or rely
upon any such provision or right in that or any other instance; rather,
the same shall be and remain in full force and effect.
21.18 Nonexclusive Dealings.
---------------------
This Agreement does not prevent either Party from providing or
purchasing services to or from any other person.
21.19 Notices.
-------
Any notice, request, instruction or other document to be given
hereunder by any Party to any other Party under any section of this
Agreement shall be in writing and shall be deemed given upon receipt if
delivered personally or by telex or facsimile, the next day if by
express mail or three days after being sent by registered or certified
mail, return receipt requested, postage prepaid to the following
addresses (or at such other address for a Party as shall be specified
by like notice provided that such notice shall be effective only after
receipt thereof):
If to SBC: Xx Xxxxxxxxx
VP Business Development & Alliance Management
SBC Communications Inc.
000 Xxxx Xxxxxxx Xxxxxx
Xx. 00-X-00
Xxx Xxxxxxx, XX 00000
Fax: 000-000-0000
Voice: 000-000-0000
With a copy (which shall not Xxxxx Xxxxx
constitute notice) to: Vice President & Asst. General Counsel
SBC Communications Inc.
000 Xxxx Xxxxxxx Xxxxxx
Xxxx 0-X-00
Xxx Xxxxxxx, XX 00000
Fax: 000-000-0000
Voice 000-000-0000
Xxxxxx Xxxxx
Sr. VP & General Counsel-Business & Consumer
SBC Communications, Inc.
000 X. Xxxxxxx Xxxxxx, Xxx. 000
Xxx Xxxxxxx, XX 00000
Fax: 000-000-0000
46
Voice: 000-000-0000
if to Covad: Xxxxx X. Xxxx
EVP-External Affairs & Corporate Development
Covad Communications
0000 Xxxxx Xxxx.
Xxxxxx, XX 00000
Fax: 000.000.0000
Voice: 720.208.4050
With a copy (which shall not constitute Xxxxx Xxxxxx
notice) to: General Counsel
Covad Communications
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Fax: (000) 000-0000
Voice: (000) 000-0000
Xxxx Xxxxxxxxxx
Deputy General Counsel
Covad Communications
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Fax: (000) 000-0000
Voice: (000) 000-0000
Any notice given in accordance with this Section 21.19 to Covad shall
be deemed to be notice to each of the Operating Companies for all
purposes hereunder.
21.20 Relationship of Parties; Independent Contractor.
-----------------------------------------------
Each Party shall perform services hereunder as an independent
contractor and nothing in this Agreement shall be construed as creating
any other relationship between the Parties. The relationship
established by this Agreement or any other Operating Agreement shall
not render any Party an affiliate of any other Party (or of any of
their Affiliates) nor be construed to create a partnership, joint
venture, or any other form of legal entity, nor establish any fiduciary
relationship among the Parties or any affiliate of any Party. The
provision of the services described in this Agreement does not
establish any joint undertaking, joint venture, pooling arrangement,
partnership, agency, fiduciary relationship or formal business
organization of any kind. No Party shall act as or hold itself out as
agent for the other Party or create or attempt to create liabilities
for any other Party, except to the extent expressly set forth in this
Agreement.
21.21 Rules of Construction.
---------------------
47
For purposes of this Agreement, except as otherwise expressly provided
or unless the context otherwise requires, (a) words used in this
Agreement, regardless of the gender and number specifically used, shall
be deemed and construed to include any other gender and any other
number as the context requires; (b) as used in this Agreement, the word
"including" is not limiting, and the word "or" is not exclusive; (c)
except as specifically otherwise provided in this Agreement in a
particular instance, a reference to a Section, Schedule, Attachment,
Appendix, Addendum or Exhibit is a reference to a Section of this
Agreement or a Schedule, Attachment, Appendix, Addendum or Exhibit
hereto, and the terms "this Agreement "hereof," "herein," and other
like terms refer to this Agreement as a whole, including the Schedules,
Attachments, Appendices, Addenda and Exhibits to this Agreement, and
not solely to any particular part of this Agreement; (d) the
descriptive headings in this Agreement are inserted for convenience of
reference only and are not intended to be part of or to affect the
meaning or interpretation of this Agreement; (e) this Agreement shall
be construed to refer to the provision of services in the United States
of America; and (f) as used in this Agreement, unless otherwise
specifically noted herein, the word "day" or "days" means a calendar
day or days, respectively, including weekends and holidays.
21.22 Severability.
------------
In case any one or more of the provisions contained in this Agreement
shall for any reason be held to be invalid, illegal or unenforceable in
any respect by a court or other authority of competent jurisdiction,
such invalidity, illegality or unenforceability shall not affect any
other provision hereof shall be construed as if such invalid, illegal
or unenforceable provision had never been contained herein and, in lieu
of each such illegal, invalid or unenforceable provision, there shall
be added automatically as a part of this Agreement a provision as
similar in terms to such illegal, invalid or unenforceable provision as
may be possible and be legal, valid and enforceable, it being the
intent of the Parties to maintain the benefit of the bargain for all
Parties.
21.23 Third Party Beneficiaries; Disclaimer of Agency.
-----------------------------------------------
This Agreement is for the sole benefit of the Parties and their
permitted assigns and nothing herein expressed or implied shall create
or be construed to create any third-party beneficiary rights hereunder,
other than to permitted assigns. Except for provisions herein expressly
authorizing a Party to act for another, nothing in this Agreement shall
constitute a Party as a legal representative or agent of the other
Party, nor shall a Party have the right or authority to assume, create
or incur any liability or any obligation of any kind, express or
implied, against or in the name or on behalf of the other Party unless
otherwise expressly permitted by such other Party. Except as otherwise
expressly provided in this Agreement, no Party undertakes to perform
any obligation of the other Party, whether regulatory or contractual,
or to assume any responsibility for the management of the other Party's
business. Nothing contained in this Agreement shall be
48
deemed or construed by the Parties or any third party to create the
relationship of principal and agent or of partnerships or joint
venture.
[signatures follow on next page]
49
IN WITNESS WHEREOF, the Parties have caused this Resale Agreement to be executed
by their respective authorized representatives as of the date first written
above.
COVAD COMMUNICATIONS SBC COMMUNICATIONS INC.
GROUP, INC.
By: _________________________________ By: ___________________________________
Name: _______________________________ Name: Xxxxxxx Xxxxxxxxxx
Title: ______________________________ Title: Senior Executive Vice President and Chief
Financial Officer
COVAD COMMUNICATIONS
COMPANY
By: _________________________________
Name: _______________________________
Title: ______________________________
DIECA COMMUNICATIONS
COMPANY
By: _________________________________
Name: _______________________________
Title: ______________________________
LASER XXXX.XXX, INC.
By: _________________________________
Name: _______________________________
Title: ______________________________
50
ADDENDUM 3
LIST OF COLLATERAL AGREEMENTS
Credit Agreement
Term Loan Note
Subsidiary Guarantees
Pledge Agreements from CGI and each of its subsidiaries
Security Agreements from CGI and each of its subsidiaries
Intellectual Property Security Agreements from CGI and each of its subsidiaries
Mortgage
Termination and Release Agreement
51
API License Addendum 4
Covad xLink API Specification and Sample
Implementation License Agreement
--------------------------------
FOR PURPOSES OF THIS LICENSE:
1. GRANT. Subject to the terms of this License and the Resale Agreement
dated as of ________, 2001 (the "Resale Agreement"), by and among Covad
Communications Group, Inc., Covad Communications Company ("the Operating
Companies"), and SBC Communications Inc. ("SBC"), the Operating Companies hereby
grants SBC and the SBC Agents (as defined in the Resale Agreement) (SBC and the
SBC Agents are collectively referred to in this License as "Licensee"), for the
purposes stated in the Resale Agreement, a license to use the Covad xLink
application program interface ("API") specification for DSL provisioning (the
"Specification") and a sample implementation of the API specification (the
"Sample") (collectively, the "Downloaded Materials") that Licensee's
representatives will download from Covad's designated site, along with any
documentation that accompanies the Downloaded Materials. The Operating Companies
retains all rights to the Downloaded Materials. Licensee may copy, distribute,
install, and use the Specification, including distributing to third parties,
provided that each copy retains all of the original Specification's proprietary
notices and a copy of this license, and provided that the Operating Companies
gets attribution for the Specification. All use of the Downloaded Materials
shall be further subject to the web site branding and other requirements that
are set forth in Schedule A attached hereto, subject to the terms of the
Agreement.
2. RESTRICTIONS. Licensee may not, directly or indirectly, use the
Downloaded Materials for any commercial purpose except those specified in the
Agreement, nor remove any proprietary notices from the Downloaded Materials. As
between the parties, title, ownership rights, and intellectual property rights
in and to the Downloaded Materials, and any copies or portions thereof, shall
remain in the Operating Companies and its suppliers or licensors (if
applicable); and title, ownership rights, and intellectual property rights to
any modifications to the Downloaded Materials made by Licensee shall remain in
Licensee. Licensee understands that the Operating Companies may modify or
discontinue offering the Downloaded Materials at any time. The Downloaded
Materials are protected by the copyright laws of the United States and
international copyright treaties.
3. SUPPORT AND UPGRADES. This Agreement entitles Licensee to the support,
upgrades, patches, enhancements, and fixes (collectively "Support") for the
Downloaded Materials set forth in Schedule A attached hereto. Additional Support
for the Downloaded Materials may be made available by the Operating Companies.
4. WARRANTY AND DISCLAIMER. EXCEPT AS MAY BE PROVIDED IN THE AGREEMENT, THE
OPERATING COMPANIES PROVIDES THE DOWNLOADED MATERIALS AND ANY SERVICES THAT
LICENSEE RECEIVES "AS IS" AND WITHOUT WARRANTY OF ANY KIND, AND THE OPERATING
COMPANIES HEREBY DISCLAIMS ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING WITHOUT
LIMITATION WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
PERFORMANCE, ACCURACY, RELIABILITY AND NON-INFRINGEMENT. THIS DISCLAIMER OF
WARRANTY CONSTITUTES AN ESSENTIAL PART OF THIS LICENSE.
5. TERMINATION. Licensee may terminate this License and the license granted
herein at any time by destroying or removing from all hard drives, networks, and
other storage media under its control all copies of the Downloaded Materials.
The Operating Companies may terminate this License and the license granted
herein immediately if Licensee breaches any provision of this License. Upon
receiving notice of termination from the Operating Companies, Licensee agrees to
destroy or remove from such storage media all copies of the Downloaded
Materials. All Sections shall survive termination of this License except Section
3.
52
6. EXPORT CONTROLS. Licensee shall comply with all export laws and
restrictions and regulations of the Department of Commerce, the United States
Department of Treasury Office of Foreign Assets Control ("OFAC"), or other
United States or foreign agency or authority, and will not export, or allow the
export or re-export of the Downloaded Materials in violation of any such
restrictions, laws or regulations. By downloading or using the Downloaded
Materials, Licensee is agreeing to the foregoing and represents and warrants
that it is not located in, under the control of, or a national or resident of
any restricted country or on any such list.
7. U.S. GOVERNMENT RESTRICTED RIGHTS. Use, duplication or disclosure by the
Government is subject to restrictions set forth in subparagraphs (a) through (d)
of the Commercial Computer-Restricted Rights clause at FAR 52.227-19 when
applicable, or in subparagraph (c)(1)(ii) of the Rights in Technical Data and
Computer Software clause in DFARS 252.227-7013, and in similar clauses in the
NASA FAR Supplement.
8. MISCELLANEOUS. This License may be amended only by a writing executed by
both parties, in a manner which complies with the terms of the Agreement If any
provision of this License is held to be unenforceable for any reason, such
provision shall be reformed only to the extent necessary to make it enforceable.
53
Api License -- Appendix A
Schedule A
Technical Support Terms
E-mail support at xxxxx-xxxxxxx@xxxxx.xxx. Response time target is 1 business
day.
. Technical Support Hotline access. Response time target is 1 business day.
. Covad Certified Software Vendor (CCSV) referenced on a priority basis.
. Reference implementation of the Covad xLink specification provided as a
sample.
. Access to Covad xLink Beta programs on a priority basis.
Branding
The following are to be displayed in all web screen shots that use the Covad
xLink API to connect with Covad:
. Inserting "DSL provided by Covad" logo HTML in all web-site areas which
collect data that is used in Covad xLink API exchanges, (e.g. qualification,
order status, order entry tools).
. Retaining Covad branding and service names on any information returned by
Covad through the Covad xLink API, (including Covad names/logos and any
service names/speeds).
54
