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Strategic Development and Marketing Agreement - America Online Inc. and Sun Microsystems Inc.
STRATEGIC DEVELOPMENT AND MARKETING AGREEMENT
This Strategic Development and Marketing Agreement (this "Agreement") is made
and entered into this 23rd day of November, 1998, by and between America Online,
Inc. ("AOL") and Sun Microsystems, Inc. ("Sun").
Certain terms used in this Agreement are defined in Section 24 hereof. This
agreement is confidential between the parties, provided that either party may
disclose the terms of this Agreement, and any associated collateral documents,
in order to comply with applicable laws and regulations, including securities
laws and regulations, and further provided that either party may disclose
information regarding portions of the financial provisions of this Agreement
after consulting with and obtaining the approval of the other party's Executive
Representative, which consent will not be unreasonably withheld or delayed. AOL
and Sun hereby agree as follows:
1.0 OBJECTIVES. AOL and Sun intend to cooperate in the development and marketing
of software and services in the area of electronic commerce and extended
communities and connectivity ("EC(2)") to businesses worldwide. The parties
intend to offer together an integrated, end-to-end solution including consumer
traffic, dial-up connectivity, network services, client software, server
software, computer systems, computer hardware, professional services, help desk
and service and support, but, subject to the terms and conditions herein, each
party would be free to offer its components in conjunction with competitive
components from third-parties. As described in this Agreement, some components
of such solution will be collaboratively developed, and some will be developed
principally or entirely by AOL or Sun. The solution offered by the parties is
expected to include traffic from AOL's multiple brands and related directory
services, configurable Netcenter or AOL.Com services and information, AOL
network access services, AOL instant messaging functionality, Sun support
services, Sun or AOL consulting services and Netscape or AOL outsourcing
services. As described in this Agreement, some components of such solution will
be marketed and sold by both parties pursuant to collaborative marketing and
sales plans, and some components would be marketed and sold by AOL or Sun only.
The business objectives of the parties include the following:
1.1 Establish a cooperative relationship between AOL, the world's
leading internet content provider, and Sun, the world's leading network
computing platform supplier, to create and deliver the best, integrated,
end-to-end enterprise commerce solutions using, where appropriate, the
Java and Jini technology from Sun.
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1.2 Sustain and grow leadership in the browser marketplace for both
consumers and the enterprise to deeply penetrate the enterprise desktop
environment.
1.3 Accelerate revenues from merchants and build deep relationships with
top merchants by speeding their adoption of electronic commerce.
1.4 Create more value from relationships with electronic commerce
merchants and customers by *** creating new services revenues.
1.5 Sustain and grow a strong electronic commerce and enterprise
middleware software and services business, including developing a
leading commerce software and service platform that enables powerful
turnkey and customized solutions.
1.6 Sustain and grow the Sun Solaris, SPARC, Java and Jini business
technologies, as the choice for enterprises and service providers
worldwide.
1.7 *** APPROXIMATELY 3 LINES OMITTED ***
1.8 Establish and operate productive research and development,
marketing, sales and services to support this strategy.
2.0 SOFTWARE TO BE DEVELOPED. The parties intend to develop the following
products:
2.1 AOL DISTRIBUTED COMMUNICATOR CLIENT. The "AOL Distributed
Communicator Client" will be a client application that will include the
fullest and most robust set of features and functions of any of the
client applications to be developed pursuant to this Section 2,***
APPROXIMATELY 2 LINES OMITTED ***. The AOL Distributed Communicator
Client *** will include the initial Release of the AOL Distributed
Communicator Client and all subsequent Releases of such application. ***
APPROXIMATELY 9 LINES OMITTED ***
2.2 THIRD PARTY COMMUNICATOR CLIENT. The "Third Party Communicator
Client" will be a client application.*** APPROXIMATELY 6 LINES OMITTED
*** The specification of the features and functions included in the
Third Party Communicator Client may be modified from time to time by
AOL, after consultation with Sun. The Third Party Communicator Client
*** will include the initial Release of the Third Party Communicator
Client and all subsequent Releases of such application that are
commercially released during the term of this Agreement.
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2.3 OEM COMMUNICATOR CLIENT. The "OEM Communicator Client" will be a
client application incorporating a browser component, with features and
functions as set forth in the Collaborative Work Plans. The OEM
Communicator Client will include the initial Release of such application
and all subsequent Releases of such application that are commercially
released during the term of this Agreement.
2.4 NEW BROWSER. The "New Browser" will consist of a basic browser with
functions for browsing, rendering display of and accessing the Internet,
including enabling access to a portal, *** APPROXIMATELY 4 LINES OMITTED
***. The functions and features to be included in the New Browser will
be described in more detail in the Collaborative Work Plans. The New
Browser will include the initial Release of such application and all
subsequent Releases of such application that are commercially released
during the term of this Agreement. *** APPROXIMATELY 3 LINES OMITTED ***
2.5 NETWORK APPLICATION AND SERVER SOFTWARE. The "Network Application
and Server Software" will consist of network applications and server
software as specified in the Collaborative Development Work Plans, and
will include, without limitation, an application server, email server,
commerce server and directory software, as well as other software
specified in the Collaborative Development Work Plans.
2.6 COMMENCEMENT OF DEVELOPMENT. No collaborative development work shall
commence pursuant to this Agreement, and Sun shall not be provided with
access to any Netscape or AOL code, prior to the Closing Date.
3.0 DEVELOPMENT RESPONSIBILITIES.
3.1 AOL DISTRIBUTED COMMUNICATOR CLIENT. AOL will develop the AOL
Distributed Communicator Client, *** APPROXIMATELY 4 LINES OMITTED ***
3.2 THIRD PARTY COMMUNICATOR CLIENT. AOL will, with assistance from Sun,
develop the Third Party Communicator Client, *** APPROXIMATELY 6 LINES
OMITTED ***
3.3 OEM COMMUNICATOR CLIENT. AOL will, with assistance from Sun, develop
the OEM Communicator Client,*** APPROXIMATELY 6 LINES OMITTED ***
3.4 NEW BROWSER. AOL will, with assistance from Sun, develop the New
Browser, *** APPROXIMATELY 8 LINES OMITTED ***
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3.5 NETWORK APPLICATION AND SERVER SOFTWARE. AOL and Sun will
collaboratively develop the Network Application and Server Software, ***
APPROXIMATELY 3 LINES OMITTED ***. AOL and Sun shall cooperate and
coordinate their development efforts so that, to the extent commercially
reasonable, the Client Software shall be compatible with and support the
interfaces, protocols and APIs of the Network Application and Server
Software in the Product Suites and vice versa.
3.6 JAVA TECHNOLOGY. The parties agree to use reasonable efforts to
modify the existing Netscape browser to develop the New Browser to
incorporate, for each System Platform, the most current release
available of the complete Java Runtime Environment (JRE) on all System
Platforms for which Sun has a JRE available. The parties agree to use
all reasonable efforts to ensure that Java code executing on the JRE so
invoked has the same access privileges and capabilities as Java code
running native on the operating system and can display user interfaces
within the browser window consistent with the user experience of running
Java applets today, provided that Sun provides such JRE to AOL, *** in
binary form in a fully operational and commercially viable form. Without
limiting the foregoing, AOL shall have no obligation to incorporate into
any browser any JRE provided by Sun that fails to operate properly on
the applicable System Platform for such version of such browser due to
the fault of Sun or any party other than AOL, or *** or which would
cause a material degradation in the performance characteristics of such
browser relative to competitive browsers in the marketplace, or which
cannot ***APPROXIMATELY 8 LINES OMITTED*** Without limiting the
foregoing, with respect to the *** AOL shall have no obligation to
***APPROXIMATELY 3 LINES OMITTED*** Sun agrees to provide error
corrections and bug fixes for the JREs on all supported System Platforms
pursuant to its standard terms of support (but without fee to AOL). In
the event Sun fails to provide such error corrections and bug fixes in a
timely commercially reasonable manner, Sun shall, pursuant to the TLDA
entered into between AOL and Sun, provide AOL with the source code, test
suites and related development tools for such JREs and the right to use
such source code, test suites and related development tools for the
purpose of supporting and maintaining such JREs in accordance with the
TLDA. Sun agrees to use reasonable efforts to *** In order to permit the
binary JRE to be integrated into such browsers, AOL agrees to use
reasonable efforts to incorporate and support the Open Java Interface in
such browsers. AOL and Sun agree to collaborate and consult with one
another and to cooperate with one another in good faith in an effort to
define and integrate this interface into such browsers for use by the
JREs in such browsers. AOL further agrees that if such incorporation of
the JRE is successfully implemented in a version of such browser for any
applicable System Platform, AOL will incorporate such version of such
browser in the versions of the OEM Communicator Client, Third Party
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Client and AOL Distributed Communicator Client for such System Platform
*** If the JRE is so incorporated in the OEM Communicator Client, Third
Party Client or AOL Distributed Communicator Client, and AOL elects to
distribute any version of such product via download, such version shall
either be the JRE enabled version of such product, or AOL will make the
JRE enabled version of such product available for download in addition
to any non-JRE enabled version of such product made available for
download. If the JRE is so incorporated in the OEM Communicator Client,
Third Party Client or AOL Distributed Communicator Client, and AOL
elects to distribute any version of such product via CD-ROM, the version
of the product distributed by AOL via CD-ROM will be such JRE-enabled
version, to the extent contractually permissible and subject to size
limitations, and provided that AOL shall have no obligation to require
that its OEMs include the JRE-enabled version. AOL shall have the right
to distribute via download a smaller version of the New Browser without
the JRE, provided such version has hooks that permit the user optionally
to download and install the JRE. AOL will consider as part of the
Collaborative Development Work Plans whether to expose to the JRE all
public and private developer interfaces within the browser (including,
without limitation those in NSHTML.DLL), but shall have no obligation to
do so. AOL's obligations pursuant to this Section 3.6 are conditioned
upon Sun's granting to AOL *** any rights to Java technology necessary
to comply with this Section 3.6. In the event of any inconsistency or
conflict between this Section 3.6 or Section 9.8.1 of this Agreement and
the TLDA entered into between Sun and AOL, the terms of this Section 3.6
and the terms of Section 9.8.1 shall control.
3.7 INTENT TO DEVELOP LEADING PRODUCTS. The parties agree to use their
reasonable efforts to maintain the existing Netscape browser and the New
Browser as competitive alternatives to the browser component of Internet
Explorer from Microsoft, and agree that it is their intention to make
all products developed and distributed pursuant to this Agreement
leading and competitive products in their respective product categories.
3.8 JRE BUNDLING ON CD-ROMS. On any CD-ROMs on which AOL ships the AOL
classic client and on which AOL provides installation options permitting
third party software other than AOL classic client software to be a
separate installable item, ***APPROXIMATELY 3 LINES OMITTED*** AOL
agrees, subject to any third party contractual limitations, to use
reasonable efforts to co-package the latest version of the JRE with such
client and to offer to users an installation option to install such JRE,
provided that the JRE meets commercially reasonable standards making it
suitable for inclusion and installation, including without limitation
reasonable quality assurance and size limitations. AOL shall have no
obligation to display such installation option until after
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the user has gone through any included registration process for any AOL
Service Offering. AOL will also consider including*** APPROXIMATELY 6
LINES OMITTED ***
3.9 DESIGN OF CLIENTS. *** APPROXIMATELY 7 LINES OMITTED ***.
3.10 THIRD PARTY COMPONENTS AND PROTOCOLS; DIVERGENCE OF DEVELOPMENT. In
the event AOL (i) elects to use third party software or technology for
core functionality and features of the browser component of any of the
Client Software, (ii) adopts and maintains protocols or interfaces that
are inconsistent with Sun's reasonable server-dictated requirements; or
(iii) fails to support protocols or interfaces that are reasonably
required by Sun's server-dictated requirements, Sun shall have the
right, but not the obligation, to have AOL provide to Sun the source
code, test suites, and related development tools reasonably required for
Sun to pursue independent development of a browser based on the Existing
Netscape Software and/or Collaborative Software and to create client
applications incorporating such independently developed Sun browser. Any
resulting products developed by Sun shall be deemed to constitute
Designated Collaborative Software for purposes of this Agreement.
4.0 SALES AND MARKETING.
4.1 CUSTOMERS.
4.1.1 GENERAL. In accordance with the Marketing and Sales
Plan, the parties will work together to actively market
Product Suites, as well as other related products,
including Sun, Netscape, and AOL products and services,
to customers.
4.1.2 AOL COMMITTED SALES FORCE. Sun acknowledges that AOL
intends to commit an AOL sales force to target sales by
AOL to AOL EC Service Opportunities. Such sales force
may consist of (i) AOL interactive marketing sales
personnel and (ii) the current Netscape Netcenter sales
personnel. AOL shall bear all costs of such committed
sales force. Sun shall provide reasonable assistance to
AOL, as reasonably requested by AOL from time to time,
in connection with this AOL committed sales effort. Sun
shall provide such assistance through the sales and
marketing resources that Sun is required to provide
pursuant to the provisions of Section 4.1.3 and the
Marketing and Sales Plan, which may include access to
and participation of Sun employees who are not part of
the collaborative
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sales team, such as Sun technical personnel. Sun also
acknowledges that AOL intends to maintain a professional
services group to support AOL EC Services Opportunities
independent of any persons providing collaborative
services pursuant to this Agreement.
4.1.3 COLLABORATIVE SALES. AOL and Sun shall each form their
own respective sales forces targeting sales of the
Product Suites to non AOL EC Service Opportunities. The
AOL collaborative sales force shall consist of AOL and
Netscape enterprise sales and marketing, professional
services and technical support personnel selected by
AOL. The Sun collaborative sales force shall consist of
Sun sales personnel selected by Sun. The AOL and the Sun
collaborative sales forces shall both sell only off a
common pricelist and on standard terms and conditions,
with such pricelist and terms and conditions to be
designated by the Lead Executive for marketing and
sales. Each of AOL and Sun will, as specified in the
Marketing and Sales Plan, commit specified target levels
of sales and marketing resources (personnel and a
portion of marketing budget) to the staffing and support
of their respective collaborative sales forces and
coordinate the efforts of their respective collaborative
sales forces. In addition, Sun will support the
collaborative sales activities of the AOL collaborative
sales force with respect to any Sun products and
services, which may include access to and participation
of Sun employees who are not part of the collaborative
team, such as Sun technical personnel, and AOL will
support the collaborative sales activities of the Sun
collaborative sales force with respect to AOL Services
Offerings, which may include access to and participation
of AOL employees who are not part of the collaborative
team, such as AOL technical personnel.
4.1.4 SHARING OF REVENUES COLLECTED FROM CUSTOMERS. Subject to
the provisions of Section 4.2, revenues from the sale or
license of products or services shall be shared as set
forth below. Each party acknowledges that these
provisions are intended to reflect how revenues are
allocated and are not controlling as to which revenues
are recognized by which parties, which recognition shall
be at the sole discretion of each party in accordance
with Generally Accepted Accounting Principles.
4.1.4.1 AOL AND NETSCAPE SOFTWARE AND ASSOCIATED
SERVICES. AOL will receive 100% of the revenues
(and pay all of the associated cost of goods)
collected from any sale or license of AOL and
Netscape products and Associated Services,
including without limitation from sales or
licenses of the AOL Distributed Communicator
Client and Associated Services (but excluding
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Existing Netscape Software and Existing Netscape
Software Upgrades and Associated Services), less
a sales commission equal to *** of such revenues
which shall be payable to Sun if a Sun
salesperson was primarily responsible for making
the sale of the AOL products or Associated
Services.
4.1.4.2 THIRD PARTY COMMUNICATOR AND EXISTING NETSCAPE
SOFTWARE AND ASSOCIATED SERVICES. AOL will
receive 100% of the revenues (and pay all of the
associated cost of goods) collected from any
sale or license of the Third Party Communicator
and Associated Services and Existing Netscape
Software and Existing Netscape Software Upgrades
and Associated Services, less a sales commission
equal to *** of such revenues, which shall be
payable to Sun if a Sun salesperson not on the
collaborative marketing and sales force was
primarily responsible for making the sale of the
AOL products or Associated Services.
4.1.4.3 SUN SOFTWARE AND SERVICES. Sun will receive 100%
of the revenues collected (and pay all of the
costs of goods) from any sale or license of Sun
software and professional services, less a sales
commission equal to *** of such revenues, which
shall be payable to AOL if an AOL salesperson
was primarily responsible for making the sale of
the Sun products or Associated Services. This
Section 4.1.4.3 shall not apply to "Sun
Products" as defined in the Service Provider
Agreement between the parties of even date
herewith.
4.1.4.4 DESIGNATED COLLABORATIVE SOFTWARE AND SERVICES.
AOL will receive *** of the Gross Margin
collected from any sale or license of Designated
Collaborative Software products and Associated
Services and Sun will receive *** of the Gross
Margin collected from such sales or licenses.
Whichever party to this Agreement enters into
the sales contract with the customer will
receive the revenues from such contract and
remit *** of the Gross Margin to the other party
as provided in this Section.
4.1.4.5 SALES BONUS. To the extent the amounts payable
to AOL in any quarter that are applied to the
Minimum Commitment exceed one
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hundred twenty-five percent (125%) of the
applicable Minimum Commitment for such quarter
as set forth in Section 4.5, Sun shall, in
addition to any other amounts payable by Sun to
AOL, pay to AOL a bonus equal to*** of the
amount by which such amounts payable to AOL
exceed one hundred twenty-five percent (125%) of
the applicable Minimum Commitment for such
quarter.
4.1.5 MARKETING CO-OP FEE. During the term of this Agreement,
as consideration for the marketing and selling of Sun
products and services and the products and services
developed under the Collaborative Activity, Sun will pay
AOL a marketing co-op fee, which shall be applied as
determined by AOL. The marketing co-op fee shall be Ten
Million Dollars ($10,000,000) for the first year
following the Closing Date, Ten Million ($10,000,000)
for the second year following the Closing Date, and Ten
Million Dollars ($10,000,000) for the third year
following the Closing Date, payable each year in
quarterly payments as provided in Section 8.l.
4.2 ADDITIONAL REVENUE DETERMINATION AND ALLOCATION PROVISIONS
4.2.1 REVENUE CALCULATION. For purposes of determining the
appropriate revenue or Gross Margin allocation under
Section 4.1.4, in cases where a single product or
service is sold, the revenues received shall be deemed
to equal the gross revenues (before sales commission)
collected from the end user or the OEM customer and the
Gross Margin shall be calculated in accordance with
Section 21.20. In cases where multiple products or
services are sold in a bundled sale, the revenues per
product or service will be calculated by computing the
overall discount (or ***, whichever is lower) from list
price for the bundled sale (or the aggregate sum of the
list prices for each individual component in the bundled
sale, if there is no list price for the bundled sale)
and applying that discount to the list price for the
product. *** APPROXIMATELY 10 LINES OMITTED ***.
4.2.2 SPECIAL REVENUE ALLOCATIONS. Notwithstanding anything to
the contrary herein, including without limitation the
provisions of Section 4.1.4, AOL shall retain all
collected revenues from existing Netscape OEM and
customer contracts (including without limitation
revenues collected in connection with any existing
service, development, support, maintenance, reseller,
VAR, OEM and other contracts) and existing contracts for
the
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sale and distribution of Existing Netscape Software and
any updates, enhancements and/or new releases thereof.
As used in this Section 4.2.2, the term "existing
contracts" shall mean any contracts entered into on or
before the Closing Date for the duration of the
remaining term of such contracts as well as any
extensions or renewals of the term of such contracts to
the extent the customer or OEM elects to exercise any
unilateral right of extension or renewal contained in
such existing contracts. AOL and Sun each shall retain
their existing customer contracts for the Netscape
client software, with all service, maintenance and
support provided by AOL, to the extent Netscape is
obligated to provide such service, maintenance and
support under existing service, maintenance and support
agreements, and all service, maintenance and support
provided by Sun, to the extent Sun is obligated to
provide such service, maintenance and support under
existing service, support and maintenance agreements.
AOL and Sun will each have the right to fulfill its
respective obligations under existing contracts,
notwithstanding anything to the contrary contained in
this Agreement
4.3 PRIORITY OF MARKETING BY SUN. In conducting its marketing
activities, Sun shall prioritize the marketing of the following client
products, where they exist for the customer platform, in the following
manner:
(a) As part of the standard Product Suites offering and any
other time Sun is marketing, distributing or selling a browser
component, Sun will give first priority to the marketing and
sale of ***.
(b) If a customer indicates that it does not want ***,Sun will
next attempt to market and sell ***.
(c) If a customer indicates that it does not want ***, Sun will
next attempt to market and sell ***.
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4.4 AOL SERVICE COMPONENTS AND SERVICE OFFERINGS. AOL and Sun each
agrees actively to market, promote and support the Product Suites.
Without limiting the foregoing, Sun will actively market, promote and
support the AOL Service Components and AOL Service Offerings that are
incorporated into products comprising the Product
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Suites in connection with its marketing, promotion and sales of the
Product Suites, provided that Sun customers will not be required to use
or maintain any AOL Service Components included in the Product Suites.
Notwithstanding anything to the contrary herein, including without
limitation the provisions of Section 4.1.4, AOL shall retain all
collected revenues related to or derived from sales or licenses of AOL
Service Components and AOL Service Offerings. Neither Sun nor the
collaborative sales team shall have any right to sell any AOL Service
Offerings without AOL's prior written consent, and AOL shall have no
obligation to provide such consent.
4.5 MINIMUM REVENUE COMMITMENTS BY SUN. Sun will commit that, during the
term of this Agreement, the total of the net amounts paid per year to
AOL under Sections, 4.1.4.2, 4.1.4.4, 9.6.2 (including, without
limitation, net of commissions payable to Sun sales personnel) and under
4.2.2 (which includes revenues derived by AOL from the sale of Existing
Netscape Software and Existing Netscape Software Upgrades and Associated
Services), will be not less than Three Hundred Twelve Million Dollars
($312,000,000) for the first year following the Closing Date, Three
Hundred Thirty Million Dollars ($330,000,000) for the second year
following the Closing Date, and Three Hundred Thirty Three Million Two
Hundred Fifty Thousand Dollars ($333,250,000) for the third year
following the Closing Date, payable in quarterly minimum payments the
("Minimum Commitment") as set forth in Section 8.1.
4.6 PENETRATION RATE FOR BUSINESS DESKTOP. So long as certain specified
milestone deliverable dates are satisfied as set forth in the
Collaborative Development Work Plans, Sun shall use all reasonable
efforts to achieve penetration of enterprise desktops by the Third Party
Communicator Client and AOL Distributed Communicator Client as set forth
in the Marketing and Sales Plan as mutually-agreed in writing prior to
the Closing Date, including without limitation bundling the Third Party
Communicator with Sun's Solaris operating system, actively promoting the
Third Party Communicator on Sun's website, and such other actions as Sun
normally takes to promote and market its products, provided that Sun
shall be relieved of such obligations to achieve such penetration if Sun
embarks on a divergent development path with respect to the Third Party
Communicator Client pursuant to Section 3.10. If the agreed level of
penetration is not achieved, Sun will take reasonable steps (e.g.,
increased marketing, promotion and salesforce incentives) to increase
the penetration rate to the required level within six months; provided
that, if Sun believes that the failure to achieve the requisite level of
penetration was due to factors beyond its reasonable control and/or that
the penetration rate shortfall cannot reasonably be remedied through
increased marketing and promotion unless additional remedial action is
also taken during such six month period, Sun will so inform AOL and the
parties shall discuss Sun's concerns and attempt to agree through good
faith negotiation on an appropriate plan to increase the penetration
rate within such six month period. Such plan may include actions by Sun
and/or AOL, depending on the circumstances. The Executive
Representatives shall facilitate such negotiation. If either
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Executive Representative believes that negotiation will not succeed in a
timely fashion, he or she may refer such dispute to the two chief
executive officers to resolve. The Incentive Plan referred to in Section
13.1 will set forth the method by which Sun will provide incentives to
its sales force to achieve the requisite penetration rate. The
escalation procedures set forth in this Section 4.6 shall constitute
AOL's sole and exclusive remedy for any failure to achieve the specified
target penetration rate.
4.7 MARKETING AND SALES PLAN. The Marketing and Sales Plan will set
forth a detailed description of how the two sales and marketing teams
(i.e., the sale forces described in Sections 4.1.2 and 4.1.3,
respectively) will collaborate, including the initial sales force
compensation and incentive plans (as further described in Section 13.1)
to be implemented independently by the parties, the goal of which will
be to provide appropriate incentives for the sales forces to meet and
exceed the Minimum Commitments.
4.8 WARRANTIES, INDEMNIFICATION AND SUPPORT. Sun shall have the
exclusive right to provide and will provide all warranty and support
services in connection with sales and licenses (other than pursuant to
existing contracts as set forth in Section 4.2.2) by the collaborative
sales force and by the dedicated AOL sales force of the Product Suites,
including warranty and support services for supported Systems Platforms
other than the Sun Systems Platform, which may include Systems Platforms
such as Windows NT, HP-UX, Linux and IBM AIX. Sun will fulfill warranty
and support obligations in connection with all sales and licenses by AOL
arising from sales by the collaborative sales force and by the dedicated
AOL sales force of the Product Suites (other than pursuant to existing
contracts as set forth in Section 4.2.2). In consideration of Sun's
providing such support services, AOL will pay to Sun the sum of One
Million Dollars ($1,000,000) per month during the term of this
Agreement. In addition, Sun will, at the request of AOL, fulfill
warranty and support obligations for existing contracts as set forth in
Section 4.2.2 ***. Such support services shall include frontline
technical support, including call receipt, call screening, installation
assistance, problem identification and diagnosis, and other standard
support services customarily provided by Sun's twenty-four hour per day,
seven day per week support center. Backline escalation support shall be
provided by the collaborative development team. Sun shall defend,
indemnify and hold AOL harmless from all third party claims and
allegations relating to alleged breach or failure to provide support
services or breach of support service obligations under Sun's standard
maintenance contracts under which it is obligated to support the Product
Suites. AOL will promptly notify Sun in writing of any such claim or
allegation giving Sun the sole right of defense and settlement, and will
assist Sun, at Sun's expense (except for the value
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of time of AOL employees), to defend or settle such claim or allegation.
AOL shall have the right to employ separate counsel and to participate
in the defense of such claim at its own cost. Sun shall not be liable
for litigation expenses of or settlements by any third parties unless
Sun agrees in writing.
5.0 MANAGEMENT PROCESS FOR DEVELOPMENT AND SALES AND MARKETING.
5.1 EXECUTIVE REPRESENTATIVES. Each party shall designate a senior
executive reporting to its chief executive officer, president or chief
operating officer as its Executive Representative to the other for the
purpose of this Agreement. AOL's initial Executive Representative shall
be David Colburn, and Sun's initial Executive Representative shall be
William J. Raduchel. The Executive Representatives shall collaboratively
report quarterly in writing (which may be electronic) to both chief
executive officers on the progress of development under this Agreement
and shall work to facilitate cooperation between the parties to achieve
the development goals of this Agreement. The chief executive officers
shall consult prior to changing the Executive Representatives.
5.2 EXECUTIVE MEETING. In January and July of each year, the chief
executive officers and the relevant members of their management teams
including the Executive Representatives shall meet to review the
development progress and sales and marketing progress under this
Agreement. The January meetings shall be in California hosted by Sun and
the July meetings in Virginia, hosted by AOL. The host Executive
Representative shall be responsible, in consultation with the
participants and the other Executive Representative, for organizing such
meeting and establishing its agenda.
5.3 MANAGEMENT PROCESS FOR CLIENT SOFTWARE DEVELOPMENT AND NETWORK
APPLICATION AND SERVER SOFTWARE DEVELOPMENT.
5.3.1 LEAD EXECUTIVES. The initial Lead Executives and Deputy
Lead Executives for each major component ("MC") of the
collaborative development activity are set forth in
Sections 5.3.3 and 5.3.4. Future Lead Executives will be
designated by AOL after consultation with Sun. AOL shall
have the right, after consultation with Sun, to replace
the Lead Executive for either MC at any time if in its
good faith judgement such action is in the best
interests of the parties. The Lead Executive and Deputy
Lead Executive must be replaced by a person of similar
rank and stature unless the parties otherwise agree. The
Lead Executives and Deputy Lead Executives shall not be
changed prior to the Closing Date.
5.3.2 POWERS OF DEVELOPMENT LEAD EXECUTIVES; DEPUTY LEAD
EXECUTIVES. The Lead Executive shall maintain and revise
the corresponding
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Collaborative Development Work Plan for each MC in
accordance with its terms and will have the right, after
consultation with the Deputy Lead Executive, to
designate the project leader for each major project and
to establish teams and team leaders for various
development projects. For each Lead Executive there
shall be a Deputy Lead Executive. The Deputy Lead
Executive shall be assigned by the party other than the
party employing the Lead Executive, after consultation
with the Lead Executive. Each party shall structure all
employees and resources for each MC under the Lead
Executive or Deputy Lead Executive for that MC, and the
Lead and Deputy Lead Executives and project leaders
shall direct such resources in accordance with and to
achieve the objectives of the Collaborative Development
Work Plan.
5.3.3 CLIENT SOFTWARE. The initial Lead Executive for the
Client Software MC shall be Barry Schuler. The Lead
Executive for the Client Software MC shall have the
right, after consultation with the Deputy Lead
Executive, to make all decisions with respect to the
design and development of the Client Software and the
New Browser, including without limitation the features
and functions to be included in each such product design
and all decisions regarding development priorities and
resource allocation.
5.3.4 NETWORK APPLICATION AND SERVER SOFTWARE. The initial
Lead Executive for the Network Application and Server
Software MC shall be Ed Zander. As part of the
Collaborative Development Work Plans, with the consent
of each party through its Lead Executive or Deputy Lead
Executive, which consent shall not be unreasonably
withheld or delayed, the Lead Executive will establish
mutually agreeable targets for development of the
Network Application and Server Software. It is AOL's
present intention not to replace the initial Lead
Executive for Network Application and Server Software
unless such development targets are missed in a material
fashion, but AOL shall have the right, after
consultation with Sun, to replace the Lead Executive for
the Network Application and Server Software MC at any
time after the Closing Date. The Lead Executive for the
Network Application and Server Software may be an
employee of either party. In selecting the project
leader and team leaders for various development projects
to be undertaken in the development of the Network
Application and Server Software, the Lead Executive for
the Network Application and Server Software shall
appoint a significant number of AOL employees as project
and/or team leaders.
5.3.5 COLLABORATIVE DEVELOPMENT WORK PLANS. Prior to the
Closing Date, the Lead Executive and Deputy Lead
Executives shall establish and attach
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hereto as Schedule 5.3 the initial Collaborative
Development Work Plans for the two MCs of the initial
Collaborative Development Activity (consisting of an MC
for Client Software development and an MC for Network
Application and Server Software development), setting
forth the objectives, principal deliverables of each
such MC and providing for priorities in going forward.
Changes to the principal deliverables or priorities
sections of the Collaborative Development Work Plan for
Network Application and Server Software shall require
the consent of both parties not to be unreasonably
withheld or delayed, but all other changes to such
Collaborative Development Work Plans may be made by the
Lead Executive for the applicable MC after consultation
with the Deputy Lead Executive for such MC. In making
such changes, the Lead Executive must act solely in
accordance with the terms and objectives of this
Agreement.
5.3.6 CROSS PLATFORM DEVELOPMENT. Understanding that it is the
parties' intention to offer cross platform solutions,
the parties shall, to the extent commercially
reasonable, develop the Client Software and the Network
Applications and System Software to operate on a variety
of System Platforms, including the Sun System Platform
as well as other Systems Platforms including Windows NT,
IBM AIX, Linux, HP-UX and other Systems Platforms. Any
decision to support a platform other than Solaris or
Windows NT shall require a financial analysis showing a
reasonably appropriate return on investment, and in all
cases all Collaboratively Developed Software at the date
of first customer shipment must ship on Solaris.
5.3.7 NON-DISCLOSURE; LIMITATIONS ON WORK ON OTHER
DEVELOPMENT. All individuals engaged in Collaborative
Development Activities will be prohibited from using or
disclosing any confidential information or trade secrets
learned or developed in the course of such Collaborative
Development Activities other than in the course of their
work on the Collaborative Development Activities or
their work for AOL or Sun, respectively. AOL and Sun
each acknowledges that the parties may have to establish
procedures and/or enter into supplemental
confidentiality agreements to address issues that may
arise in connection with Collaborative Development
Activities, such as, by way of example, the use of
confidential information of third parties which one
party may not have the right to disclose to the other
party. In addition, AOL and Sun each agrees that after
it has assigned developers to the Collaborative
Development Activities, it shall use reasonable efforts
to keep such individuals assigned to the Collaborative
Development Activities, and
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AOL and Sun each agrees that it will not reassign
multiple employees engaged in the Collaborative
Development Activities to work on similar or competitive
development activities for other customers, clients, or
strategic partners. If AOL or Sun reassigns an
individual employee to work on similar or competitive
development activities for a customer, client, strategic
partner or other third party, such party to this
agreement shall advise the customer, client, strategic
partner or other third party that such employee was
involved in similar or competitive development
activities pursuant to this Agreement and that such
individual is subject to a confidentiality and
non-disclosure agreement prohibiting such individual
from using or disclosing any confidential information or
trade secrets learned or developed in the course of such
Collaborative Development Activities.
5.3.8 PROTECTION OF SOFTWARE. AOL and Sun will agree on
procedures so that development is conducted in a such a
manner that AOL Service Components, other AOL and
Netscape proprietary software, Sun software, and the
Collaborative Software are not inadvertently placed in
the public domain or required to be publicly disclosed
pursuant to the Mozilla Public License or Netscape
Public License. Both parties shall comply with such
procedures, and notwithstanding anything to the contrary
contained in this Agreement, in no event may a Lead
Executive make any decision to implement development in
a manner inconsistent with such procedures without the
written consent of both AOL and Sun, which either party
may withhold in its sole discretion.
5.4 MANAGEMENT PROCESS FOR SALES AND MARKETING.
5.4.1 MARKETING AND SALES PLANS. An initial draft of the
Marketing and Sales Plan for the Collaborative Marketing
and Sales Activity will be mutually agreed upon prior to
the Closing Date by the Lead Executive and Deputy Lead
Executive for marketing and sales, setting forth the
objectives and targets, and principal methods for
marketing and sales of the Product Suites and components
thereof. Major substantive changes to such initial
Marketing and Sales Plan shall require the consent of
both parties, such consent not to be unreasonably
withheld, but any minor changes may be made by the
corresponding Lead Executive after consultation with the
Deputy Lead Executive. In making such changes, the Lead
Executive must act solely in accordance with the terms
and objectives of this Agreement. The Lead Executive and
Deputy Lead Executive shall not be changed prior to the
Closing Date.
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5.4.2 POWERS OF MARKETING AND SALES LEAD EXECUTIVE. The Lead
Executive for Marketing and Sales shall maintain and
revise the Marketing and Sales Plan in accordance with
its terms. For each Lead Executive there shall be a
Deputy Lead Executive. The Deputy Lead Executive shall
be assigned by the party other than the party employing
the Lead Executive. The Lead Executive for Marketing and
Sales, after consultation with the Deputy Lead Executive
for Marketing and Sales, shall have the right to
establish projects and teams and project and team
leaders for various major sales efforts ("SE's") of the
Marketing and Sales Plan. Each party shall structure all
employees and resources of such party's respective
collaborative sales team under the Lead Executive or
Deputy Lead Executive, and the Lead Executive and Deputy
Lead Executives and their subordinates shall direct such
resources in accordance with and to achieve the
objectives of the applicable Marketing and Sales Plan.
5.4.3 LEAD EXECUTIVES. The initial Lead Executive for
Marketing and Sales shall be Ed Zander. The initial
Deputy Lead Executive for Marketing and Sales shall be
Barry Schuler. As part of the Marketing and Sales Plans,
AOL and Sun will establish mutually agreeable targets
for marketing and sales of the Product Suites. It is
AOL's present intention not to replace the initial Lead
Executive for Marketing and Sales unless such targets
are not met, but AOL shall have the right, after
consultation with Sun, to replace the Lead Executive for
Marketing and Sales at any time after the Closing Date.
In the event replaced, the Lead Executive and Deputy
Lead Executive may only be replaced by a person of
similar rank and stature unless the parties otherwise
agree. The Lead Executive for Marketing and Sales must
be an employee of either AOL or Sun.
5.4.4 COORDINATION. The AOL collaborative sales force and the
Sun collaborative sales force shall coordinate their
sales efforts and endeavor to cooperate with one another
to achieve maximum sales of the Product Suites in
accordance with the Marketing and Sales Plan.
5.4.5 CROSS PLATFORM MARKETING AND SALES. The collaborative
sales forces of AOL and Sun will be trained and
knowledgeable about and shall, to the extent
commercially reasonable, actively market and promote the
sale or license of the Product Suites on the Sun Systems
Platform, Windows NT and on a variety of other System
Platforms to which the Product Suites have been ported,
which may include IBM AIX, Linux, HP-UX and other
Systems Platforms, which marketing and promotion shall
include efforts to license the Product Suites on an OEM
basis.
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6.0 OTHER DEVELOPMENT AND MARKETING RIGHTS AND LIMITATIONS.
6.1 AOL. During the term of this Agreement, AOL will market Network
Application and Server Software only to AOL EC Service Opportunities and
only to enable such opportunities. In sales to AOL EC Service
Opportunities made by AOL personnel, AOL may elect to have the sales and
licensing agreements for the goods and services sold be between the
customer and AOL or may elect to have such agreements be between Sun and
the customer. AOL shall have the unrestricted right to market and
distribute the Client Software and New Browser during and after the term
of this Agreement in any manner whatsoever, including without limitation
through OEM licensing arrangements.
6.2 SUN. During the term of this Agreement, Sun will have the right to
market, including through reseller and OEM arrangements, the
Collaborative Software through the Collaborative Marketing and Sales
Activities as well as its independent sales force, subject to the
provisions of Section 4.1.4.
6.3 SUN DEVELOPMENT. Subject to the provisions of Sections 6.6 and 6.7,
Sun is free to develop at its own expense additional client, server and
application software, functionality and features for EC(2). Any such
software developed by Sun independently which is not a derivative work
of the Existing Netscape Software or the Collaborative Software and was
not developed pursuant to any Collaborative Development Work Plan shall
not constitute Collaborative Software or Designated Collaborative
Software, and Sun shall own such independent developments and all
proprietary rights therein.
6.4 AOL DEVELOPMENT. AOL is free to develop at its own expense and to
collaborate with one or more third parties in developing additional
client, server and application software, and functionality and features
for electronic commerce and extended communities and connectivity,
including without limitation software based on and derived from the
Existing Netscape Software. Any such software developed by AOL
independent of any Collaborative Development Work Plan shall not
constitute Collaborative Software or Designated Collaborative Software,
and AOL shall own such independent developments and all proprietary
rights therein.
6.5 REPLACEMENT OF IE BROWSER. To the extent contractually permissible,
AOL will periodically evaluate replacing the browser component of
Microsoft Internet Explorer browser with the New Browser in the AOL
classic online service offering and to use the New Browser in clients
for other brands such as ICQ and CompuServe, provided that the parties
acknowledge that AOL has no present intention to make any such
replacement or use and shall have no obligation to make any such
replacement or use, and that it is AOL's present expectation that it
will not seek to terminate or limit its present agreement
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
and may seek to renew and/or extend and expand its present agreement
with Microsoft Corporation to continue to distribute Microsoft Internet
Explorer. It is acknowledged that among the critical issues for AOL in
evaluating the merits of any such possible replacement would be ***
APPROXIMATELY 8 LINES OMITTED ***
6.6 NO DEVELOPMENT OR MARKETING OF COMPETITIVE CLIENTS. Except as
provided in Section 3.10, for any System Platform for which AOL
implements, in the OEM Communicator Client and Third Party Communicator
Client, the most recent version of Sun's JRE pursuant to Section 3.6,
Sun shall not during the term of this Agreement, directly or indirectly
through any third party, develop, market, advertise, or distribute any
software product or assist in advertising, marketing, or distributing
any software product on such System Platform (including without
limitation any other browser component) including or bundled with
features and functions which make it competitive with a desktop client
such as the client for the AOL classic online service, AOL Distributed
Communicator Client, the Third Party Communicator Client, the OEM
Communicator Client or Microsoft Internet Explorer (as it continues to
evolve away from a browser to a fully featured online desktop
client),*** APPROXIMATELY 11 LINES OMITTED *** This Section 6.6 shall
not be deemed to limit or prohibit Sun from continuing to develop,
market, advertise, promote and distribute browsers that are 100% Pure
Java or are for platforms other than personal computers or workstations,
subject to the provisions of Section 4.3, nor from continuing to
develop, market and promote client software other than browsers except
as provided in this Section.
6.7 SUPPORT FOR PRODUCT SUITES STANDARDS. It is the intention of the
parties that all client software will support industry-standard
protocols and the standards, protocols and defaults in the Product
Suites, including without limitation the standards, protocols and
defaults of the AOL Services Components in the Product Suites, and
except as provided in Section 3.10, Sun agrees not to implement, in the
Sun Systems Platform or in other software competitive with or offering
similar functionality to the Product Suites, inconsistent or conflicting
standards, protocols or defaults, including without limitation
inconsistent or conflicting with the components, features,
functionality, interfaces, protocols and APIs of the New Browser.
6.8 IMPACT OF LICENSE TO COMPETING OEM. If, during the term of this
Agreement, AOL grants an OEM license to any of the network application
and server software comprising the Existing Netscape Software or any
derivative works thereof developed by
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
AOL to any other Systems Platform suppliers, each such transaction must
be structured so that the revenues to AOL reflect *** and in such event
the Minimum Commitment as set forth in Section 4.5 for each quarter
subsequent to AOL granting such a license shall be reduced by *** of the
consideration received by AOL during the preceding quarter pursuant to
such license agreement for the rights granted to such OEM with respect
to any such software, provided that in the event AOL receives an upfront
large sum or advance pursuant to such an agreement, the reduction
arising from such amount shall be applied pro rata across all then
remaining quarterly Minimum Commitments.
6.9 LICENSES BY SUN. During the term of this Agreement, Sun shall
structure its license transactions for the Existing Netscape Software
and Designated Collaborative Software so that the revenues to Sun ***
and Sun shall not enter into licenses for such software intending to (a)
have a material adverse impact on the penetration rate for the business
desktop as set forth in Section 4.6 or (b) materially reduce the amounts
payable to AOL hereunder.
6.10 RESOURCES. AOL and Sun shall each provide a minimum level of
staffing through their respective collaborative sales forces, as set
forth in the Marketing and Sales Plan, to achieve the objectives of the
SE's, and AOL and Sun shall each provide a minimum level of development
staffing, as set forth in the initial Collaborative Development Work
Plans, to achieve the objectives of the Network Application and Server
Software development MC. Sun shall be responsible for using all
reasonable efforts at its expense to provide whatever remaining
resources are needed to achieve the goals of each SE as set forth in the
Marketing and Sales Plan and to achieve the goals set forth in the
Collaborative Development Work Plan for Network Application and Server
Software, but in no event will Sun be required to provide more than the
maximum levels of Sun staffing set forth in the Marketing and Sales Plan
and the Collaborative Development Work Plan for Network Application and
Server Software. Sun will provide a level of staffing for Sun's
collaborative sales force at least as large as that of AOL's
collaborative sales force, and Sun shall provide a level of staffing for
the Collaborative Development Activities at least as great as the
staffing AOL provides for the Collaborative Development Activities.
Either party may reduce its level of staffing if such party concludes
that then current and reasonably anticipated business conditions no
longer justify then current staffing levels. In the event the aggregate
level of staffing provided by AOL in any quarter for Collaborative
Development Activities and Collaborative Marketing and Sales Activities
is less than ***, the otherwise applicable Minimum Sales Commitment for
the next quarter shall be reduced by *** per person for such shortfall
(i.e., for each person by which such staffing by AOL is below ***),
provided that in the event the composition of
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
such AOL staffing with respect to mix of salary levels changes
materially, Sun and AOL will negotiate in good faith adjustments to such
*** per person shortfall reduction.
7.0 ESCALATION AND DISPUTE RESOLUTION FOR COLLABORATIVE DEVELOPMENT AND
MARKETING AND SALES.
7.1 GENERAL. The parties shall attempt to promptly resolve through good
faith negotiation any dispute or disagreement between them directly
relating to design and development priorities and decisions and resource
allocation under the Collaborative Development Work Plan for Network
Application and Server Software and marketing and sales priorities and
decisions under the Marketing and Sales Plans. ***APPROXIMATELY 10 LINES
OMITTED***
7.2 DEADLOCK ON MAJOR DISPUTES. ***APPROXIMATELY 48 LINES OMITTED***
8.0 PAYMENT TIMING PROVISIONS.
8.1 TIMING. Fees payable pursuant to Section 4.1.5, 4.5 and 9.8.2 shall
be paid quarterly in advance not later than the fifth business day of
the quarter for which due, except that amounts payable pursuant to such
Sections for the first quarter shall be paid on the Closing Date, and,
in the event to first quarter is not a complete quarter, amounts payable
pursuant to such Sections for the first partial quarter and the first
full quarter shall be payable on the Closing Date. Unless otherwise
specified, other fees shall be paid no later than 45 calendar days after
the end of the quarter for which due (including fees in excess of the
minimum amounts due with respect to any quarter). No fees are payable
until the quarter in which the Closing Date occurs, and any fees for
that quarter, including minimum quarterly fees specified in this
Agreement, including in Sections 4.1.5, 4.5 and 9.8.2, shall be a pro
rata amount based on the number of days remaining in such quarter. In
the event the first quarter is not a complete quarter (i.e., the Closing
Date occurs other than at the beginning of the quarter), any reductions
in minimum revenues or other fees specified in this Agreement, including
in Sections 4.1.5, 4.5 and 9.8.2, shall not apply until the second full
quarter. For partial quarters at the beginning and the end of each year
of the term of this Agreement, the quarterly amount payable shall be a
prorated portion of the full quarterly amount specified for such year,
based on the number of days in such partial quarter period. (For
example, if the first anniversary of the Closing Date is March 20, 2000,
the prorated Minimum Commitment payable pursuant to Section 4.5 for the
partial period running from January 1, 2000 through March 20, 2000 shall
be the applicable prorated portion of $78,000,000, which amount shall be
due and payable on January 1, 2000, and the prorated Minimum Commitment
for the partial period running
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from March 21, 2000 through March 30, 2000 shall be the applicable
prorated portion of $82,500,000, which amount shall also be due and
payable on January 1, 2000.
8.2 NO RIGHT TO WITHHOLD OR OFFSET. Sun will have no right whatsoever to
withhold payment of any minimum fees or revenues provided for in
Sections 4.1.5, 4.5 or 9.8.1 on the basis of any alleged right of offset
or any alleged breach by AOL of any of its obligations pursuant to this
Agreement or for any other reasons except to the extent permitted
pursuant to a final, non-appealable judgment obtained from a court of
competent jurisdiction in litigation between AOL and Sun.
Notwithstanding anything to the contrary set forth in this Agreement, in
the event Sun believes that AOL has breached any obligations under this
Agreement, Sun shall have no right to cease paying any such minimum fees
and revenues, even if Sun has terminated or purported to terminate this
Agreement, and Sun's sole and exclusive remedy shall be to litigate the
dispute and to continue making such payments during the pendency of the
litigation. AOL shall be entitled to injunctive relief to compel Sun to
continue making such payments during the pendency of such litigation.
8.3 LATE CHARGES. In the event that either party does not receive any
amounts from the other party hereunder on or before the day upon which
such amounts are due and payable, and fails to cure such breach within
ten (10) business days following written notice from the other party,
such outstanding amounts shall thereupon be subject to payment of a late
charge which shall accrue until payment at the rate of one percent (1%)
per month. Amounts received by shall first be credited against any
unpaid late charges accrued pursuant to this Section, and accrual of
such late charges shall be in addition to and without limitation of any
and all additional rights or remedies under this Agreement or at law or
in equity.
9.0 INTELLECTUAL PROPERTY RIGHTS.
9.1 OWNERSHIP. Each party shall own all preexisting software and/or
technology which it makes available to the Collaborative Development
Activity or which it developed or develops with its own resources
without use of any intellectual property of the other party and not as
part of the Collaborative Development Activities and all proprietary
rights therein. To the extent such software and/or technology is
incorporated into the Designated Collaborative Software, it shall, to
the extent so incorporated, be subject to the provisions of Sections
9.2, 9.3 and 9.4.
9.2 DESIGNATED COLLABORATIVE SOFTWARE. AOL shall own all improvements
and modifications to any preexisting software or technology of either
party, any new software and technology created through Collaborative
Development Activity to create the Client Software and/or New Browser,
and all newly-created intellectual property rights therein, whether
completed or work in progress. Sun shall own all improvements and
modifications to any preexisting software of either party and any new
software and
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technology created through Collaborative Development Activity to create
the Network Application and Server Software and all newly-created
intellectual property rights therein.
9.3 AOL LICENSE TO SUN. AOL hereby grants to Sun and its subsidiary, Sun
Microsystems International, B.V. ("Sun International B.V.") a Software
License to all Designated Collaborative Software owned by AOL pursuant
to Sections 9.1 and/or 9.2, subject only to the payment by Sun of the
amounts provided in this Agreement. Such license shall be unrestricted
as to field of use, except for those limitations set forth in Section
6.6 and 6.7. AOL also hereby grants to Sun a non-exclusive, perpetual,
non-terminable, fully sublicensable right under any patents issued
anywhere in the world for which AOL is or becomes the beneficial or
legal owner which were reduced to practice in the course of the
Collaborative Development Activity to make, have made, practice, have
practiced, use, lease, sell and otherwise transfer any and all
inventions, methods or processes which are the subject of any claim of
any such patent.
9.4 SUN LICENSE TO AOL. Sun shall grant to AOL a Software License to all
Designated Collaborative Software owned by Sun pursuant to Sections 9.1
and/or 9.2, whether written in Java or any other programming language.
Such license shall be unrestricted as to field of use. Notwithstanding
the foregoing grant to AOL, AOL's rights to the Java Platform shall be
governed solely by the TLDA executed concurrently herewith by the
parties. Sun also hereby grants to AOL a non-exclusive, perpetual,
non-terminable, fully sublicensable right under any patents issued
anywhere in the world for which Sun is or becomes the beneficial or
legal owner which were reduced to practice in the course of the
Collaborative Development Activity to make, have made, practice, have
practiced, use, lease, sell and otherwise transfer any and all
inventions, methods or processes which are the subject of any claim of
any such patent.
9.5 PROCEDURES FOR LITIGATING PROPRIETARY RIGHTS CLAIMS AGAINST THIRD
PARTIES. AOL and Sun agree to cooperate with one another and to
negotiate in good faith procedures and terms and conditions permitting
each party to pursue infringement claims against third parties with
respect to the Designated Collaborative Software and other rights
licensed to one another pursuant to this Agreement. The parties will
consider and discuss whatever arrangements might most efficiently and
fairly permit such actions to be pursued, which might include, by way of
example, an assignment of an undivided joint interest in the software at
issue in order to confer standing to sue on the party seeking to bring
such action, an agreement by which the other party is joined as a party
plaintiff in the action with provisions allocating the responsibilities
and costs of litigating such claims, or some other mechanism.
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9.6 LICENSE TO EXISTING NETSCAPE SOFTWARE.
9.6.1 LICENSE FOR DEVELOPMENT. As of the Closing Date, as
between AOL and Sun, AOL shall own all rights in and
shall grant to Sun a Software License to the Existing
Netscape Software. AOL may also elect to grant to Sun a
Software License to any Existing Netscape Software
Upgrades that AOL makes available for Collaborative
Development Activities pursuant to this Agreement. Such
license shall be subject to the limitations set forth in
this Agreement on Sun's marketing and licensing thereof
during the term of this Agreement, which shall include
those limitations set forth in Sections 6.3, 6.6 and 6.7
of this Agreement as well as limitations during and
after the term of this Agreement permitting Sun and Sun
International B.V. to use the Existing Netscape Software
(and any Existing Netscape Software Upgrades, if any,
licensed to Sun) solely for purpose of developing the
New Browser, the OEM Communicator Client, and the
Designated Collaborative Software as part of the
Collaborative Development Activity. Such licenses shall
also be subject to any contractual restrictions with
third parties for the duration of such contractual
restrictions. AOL represents that concurrently with the
execution of this Agreement, AOL is obtaining from
Netscape contractual commitments requiring that Netscape
cooperate with AOL between the date of this Agreement
and the Closing Date to identify any "Encumbrances" (as
defined in this Section) that may adversely affect AOL's
rights to Netscape Existing Software and/or any
components thereof as set forth below, including without
limitation AOL's rights to grant others access to source
code and sublicense such rights. Such cooperation shall
include granting AOL full access to Netscape technology
licenses, agreements by which technology rights were
acquired by Netscape and information regarding
intellectual property infringement or misappropriation
claims, if any, relating to the Netscape Existing
Software and all components thereof. As used in this
Section, "Encumbrances" means any restriction or limit
that would prevent or materially limit or restrict AOL
from granting pursuant to this Agreement the applicable
source and binary access, use and distribution rights
under Sections 9.6.1, 9.6.2 and 14.7 of the Agreement
with respect to the Netscape Existing Software or any
component thereof ("Sun License Rights"), including,
without limitation, limitations and restrictions on
source access and sublicensing fights, as well as
prohibitions or requirements to obtain consents to
assignment of rights from Netscape to AOL upon the
Closing Date where to failure to obtain such consent
would materially limit or restrict AOL's rights,
including sublicensing rights. AOL further represents
that it is obtaining from Netscape concurrently with the
execution of this Agreement contractual commitments
obligating Netscape to use reasonable efforts to remove,
limit or diminish such
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
Encumbrances, in a priority order to be specified by
AOL. After the Closing Date, AOL shall continue such
efforts. In no event shall AOL and Netscape be obligated
to spend, in the aggregate, more than $25 million in
out-of-pocket expenses or like-kind consideration in
connection with attempting to remove, limit or diminish
such Encumbrances. Sun and AOL will consider the scope
and impact of any such Encumbrances in determining what
work to undertake pursuant to the Collaborative
Development Plans and the products to be included in the
Product Suites.
9.6.2 RESELLER RIGHTS. AOL shall grant to Sun, effective as of
the Closing Date and continuing for the term of this
Agreement, (a) the right to distribute the Existing
Netscape Software in binary form only except as set
forth below; (b) the right to use the source code for
the Existing Netscape Software solely for purposes of
supporting and maintaining the binary copies distributed
to Sun customers; and (c) the right to license the
source code for the Existing Netscape Software to OEM
licensees solely for the purpose of permitting such OEM
licensees to support and maintain the binary copies
distributed by such OEMs, provided that Sun may provide
such source code to OEM licensees only pursuant to the
terms of a written agreement substantially in
conformance with a form approved by AOL, which approval
shall not be unreasonably withheld or delayed,
containing customary terms and conditions to preserve
the confidentiality of such source code and containing
customary limitations and disclaimers of warranties and
exclusions and limitations of liability. The rights
granted to Sun pursuant to this Section 9.6.2 with
respect to the Existing Netscape Software shall
terminate upon expiration or termination of this
Agreement, except that Sun shall retain thereafter a
limited source code license to retain and use such
software solely for the support of existing customers as
of such expiration or termination.
9.6.3 DELIVERY. Promptly following the Closing Date, AOL will
deliver to Sun a copy of all Existing Netscape Software
that is subject to the license granted pursuant to
Section 9.6.1 and 9.6.2.
9.7 POST TERMINATION RIGHTS. The license rights of the parties following
expiration or termination of this Agreement are set forth in Sections
14.5 and 14.7.
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
9.8 LICENSE FEES.
9.8.1 PAYMENTS FROM AOL TO SUN. AOL shall pay to Sun quarterly
license fees of $5 million per quarter during the term
of this Agreement for the Sun-owned components licensed
to AOL by Sun pursuant to Section 9.4. No license fee
shall be required after expiration or termination of
this Agreement for any such license rights that survive
termination. AOL may allocate up to *** of the fees
under this section to any payments required under any
TLDA between Sun and AOL, and any unused balance of such
amounts not applied to TLDA fees may be carried forward
and applied to future fees under any TLDA.
9.8.2 PAYMENTS FROM SUN TO AOL. Sun shall pay to AOL quarterly
license fees during the term of this Agreement for the
software and trademark rights granted to Sun by AOL
pursuant to Sections 9.3, 9.6 and 12, which shall be
Eighty-Six Million Dollars ($86,000,000) for the first
year following the Closing Date, Ninety-Five Million
Five Hundred Thousand Dollars ($95,500,000) for the
second year following the Closing Date, and Ninety-Seven
Million Dollars ($97,000,000) for the third year
following the Closing Date, payable in quarterly
payments as provided in Section 8.1. No license fee
shall be required after expiration or termination of the
definitive agreement for any such license rights that
survive termination.
10.0 NETCENTER.
10.1 OBJECTIVES. AOL shall develop the Netcenter to be a portal for a
variety of customers with a focus on business customers in terms of the
services, information and customization options offered.
10.2 OWNERSHIP. AOL owns and controls the Netcenter without restriction
and shall be responsible for all of its associated costs.
10.3 PORTAL REVENUES. Notwithstanding anything to the contrary herein,
AOL shall retain all revenue, and bear all costs, related to or derived
from the Netcenter.
10.4 PROMOTION. Sun agrees to cooperate with AOL to make the Netcenter
the Sun default network portal for the Product Suites and to help gain
additional traffic for the Netcenter. Without limiting the foregoing,
the Netcenter will be the default home page in the New Browser, Third
Party Communicator Client and OEM Communicator Client, any client
applications developed by Sun pursuant to Section 3.10, the HotJava
browser
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
and, to the extent practicable and commercially reasonable, the Bedouin
browser or any other thin client browser used on platforms other than
personal computers and workstations, although Sun customers shall not be
required to maintain such home page against their will. ***
APPROXIMATELY 5 LINES OMITTED *** Sun shall always position the
Netcenter in its meetings, promotions and advertising no less favorably
than any other portal addressed in such meetings, promotions and
advertising, if any, but the parties recognize and agree that the
objectives of this Agreement require that Sun market and distribute the
Product Suites and System Platform to other connectivity and portal
vendors without restriction, and in such cases such other connectivity
and portal vendors shall have the right to use and promote their own
home pages and/or portals in connection with the Products Suites and
System Platform.
11.0 SYSTEMS PLATFORM.
11.1 OWNERSHIP. Sun owns and controls the Sun System Platform without
restriction and shall be responsible for all of its associated costs.
Sun shall develop the Sun System Platform to be the premiere foundation
for Product Suites customers in terms of its performance, scalability,
reliability and cost-effectiveness.
11.2 PROMOTION. AOL agrees to cooperate with Sun to make the Sun System
Platform the AOL preferred System Platform for Products Suites for both
AOL and AOL EC Service Opportunities. AOL shall always position the Sun
System Platform in its meetings, promotions and advertising no less
favorably than any other Systems Platform addressed in such meetings,
promotions and advertising, if any, but the parties recognize and agree
that the objectives of this Agreement may require that AOL market and
distribute the Product Suites on other System Platforms to meet customer
requirements.
12.0 BRANDING.
12.1 OWNERSHIP. Each party shall retain all rights, title and other
interest to its brand names, service marks, trademarks and other
proprietary markings except as expressly provided otherwise in this
Agreement.
12.2 BRAND NAMES AND TRADEMARKS. Subsequent to the execution of this
Agreement and prior to the Closing Date, AOL and Sun shall negotiate in
good faith and enter into a written trademark license, which shall
include reasonable and customary terms, including appropriate quality
control provisions, pursuant to which AOL shall license to Sun on a
royalty-free, non-sublicensable basis effective as of the Closing Date:
(a) the right to use the Netscape Communicator trademark in connection
with the Third-Party Communicator
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Client and related sales and marketing materials, and shall license to
Sun the right to use successors or replacements of the Netscape
Communicator trademark in connection with the Third-Party Communicator
Client and related sales and marketing materials, provided the
Third-Party Communicator Client meets the requirements for branding with
such mark(s); (b) the right to use the Netscape trademarks that Netscape
currently uses as the titles for the Existing Netscape Software in
connection with the collaborative marketing and sales of the Existing
Netscape Clients pursuant to this Agreement; and (c) such other
trademarks, if any, as AOL and Sun may mutually agree. Such trademarks
shall be licensed to Sun following expiration or termination of this
Agreement subject to reasonable quality control requirements and a
reasonable transition period (not to exceed fifteen (15) months) and
plan which shall be set forth in the definitive trademark license. Such
trademark license shall also provide for a trademark license from AOL to
Sun to use the Netscape Communicator trademark, and such other
trademarks, if any, as AOL and Sun may mutually agree, for any software
developed by Sun pursuant to Section 3.10, subject to such software
meeting AOL's reasonable quality control and other transition
requirements for such branding and subject to a phase-out of Sun's use
of such trademarks in connection with such products after a reasonable
transition period (not to exceed fifteen (15) months).
12.3 BRANDING OF COLLABORATIVE SOFTWARE. The branding for the
Collaborative Software shall be determined by mutual agreement of the
Lead Executive and Deputy Lead Executive for marketing and sales, and
each party shall have the right to use such marks in connection with the
Product Suites and related sales and marketing materials during the term
of this Agreement. Following any expiration or termination of this
Agreement, Sun shall retain ownership of any trademark by which the
entire Product Suites are identified, subject to transition or phase-out
terms permitting continued use by AOL for a reasonable transition period
(not to exceed fifteen (15) months), which terms and conditions shall be
negotiated in good faith and embodied in a written trademark license
agreement. Following any expiration or termination of the Agreement, Sun
and AOL shall each have the non-exclusive right to use any titles by
which the individual Network Application and Server Products in the
Product Suites were identified during the term of this Agreement,
provided that AOL and Sun shall differentiate their uses of such marks
following any expiration or termination of this Agreement by always
using any such mark in connection with a name or trademark prominently
identifying AOL or Sun as the source of such goods or services (for
example, AOL Commerce Server and Sun Commerce Server).
13.0 EMPLOYEE INCENTIVES.
13.1 INCENTIVE PLAN. The parties recognize and agree that proper
motivation and economic incentives for their respective employees
engaged in the Collaborative Development Activity and collaborative
marketing and sales is essential to its success and shall create and
operate an Incentive Plan ("Incentive Plan") for all employees
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
engaged full-time in the Collaborative Development Activity or in
collaborative marketing and sales. Each party shall bear its own
expenses in connection with its respective Incentive Plans. Compensation
for the collaborative marketing and sales force will consist of base
salary with an additional commission/incentive opportunity, and the
commission incentive plan will (i) represent a significant part of each
individual's total annual compensation (base salary plus
commission/incentive plan) and (ii) support the metrics included in the
Marketing and Sales Plan. The parties commit to cooperate with one
another to complete the Incentive Plan as soon as practicable and
commercially reasonable and prior to the Closing.
13.2 SENIOR MANAGERS. All senior managers and above shall receive a
significant portion of their compensation through an annual bonus
program, tied to performance under the Collaborative Development Work
Plans and/or Marketing and Sales Plans, and paid annually to those
employees still employed by either party as of the date of payment of
the bonus.
13.3 SALES REPRESENTATIVES. All sales representatives shall receive a
significant portion of their compensation through an incentive bonus
program tied to meeting objectives under the Marketing and Sales Plans.
13.4 POOL FOR ALL PERSONNEL. The Lead Executives and Deputy Lead
Executive from each party, respectively, may make periodic project and
spot bonus payments tied to performance under the Collaborative
Development Work Plans and/or Marketing and Sales Plans, to employees of
such party from a pool of funds of up to*** of total salaried
compensation for all personnel employed by such party in such
activities.
13.5 LEAD EXECUTIVES AND DEPUTY LEAD EXECUTIVES. At least one-half of
the total incentive compensation by MC for any Lead Executives or Deputy
Lead Executives (other than an Executive Officer of Sun or AOL, if a
Lead Executive or Deputy Lead Executive is an Executive Officer) must be
provided under the IP.
14.0 TERMINATION.
14.1 TERM. This Agreement shall terminate at midnight Pacific Daylight
Time on the date three (3) years following the Closing Date.
14.2 EARLY TERMINATION. This Agreement assumes the intended merger of
Netscape and AOL. If the Closing Date does not occur on or before June
30, 1999, the parties agree to negotiate in good faith for a period of
thirty (30) days thereafter in an effort to
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<PAGE> 30
agree on alternative terms to achieve as much as possible the same
effect as this Agreement using solely Sun technology, provided that if
the parties fail to agree on such alternative terms within such thirty
(30) day period, either party may elect to terminate this Agreement by
giving written notice to the other party.
14.3 TERMINATION FOR BREACH. Subject to Section 7.2 of this Agreement,
either party may terminate this Agreement for a material breach of its
terms by the other party by giving the other party written notice at
least ninety (90) days in advance of such termination date, and the
Agreement shall terminate on that date unless the breaching party has
cured or corrected such breach prior to that time, provided that such
ninety (90) day period shall be shortened to a ten (10) business day
cure period following written notice in the event of a failure to pay
amounts due pursuant to this Agreement. Without limiting the foregoing,
in the event Sun fails to pay any amounts due to AOL pursuant to this
Agreement, including without limitation minimum fees or revenues
provided for in Sections 4.1.5, 4.5 and 9.8.2, and fails to cure such
breach within the ten (10) business day cure period provided for in this
Section, AOL shall have the right, exercisable upon written notice to
Sun, without limiting any of AOL's other rights or remedies, to
terminate this Agreement and all licenses granted to Sun by AOL,
including all licenses granted to Sun by AOL pursuant to Sections 9.3,
9.6 and 12 (in which event Sun will have no license rights pursuant to
Section 14.7.1 or 14.7.2). In the event of a termination of this
Agreement and all licenses granted to Sun by AOL as a result of Sun's
failure to pay any minimum fees and revenues in a timely manner, Sun's
obligation to pay all minimum fees and revenues provided for in Sections
4.1.5, 4.5 and 9.8.2 shall be accelerated so as to make all such fees
and revenues be due and payable immediately. Notwithstanding anything to
the contrary set forth in this Agreement, AOL shall have no right to
terminate the licenses granted to Sun by AOL pursuant to Sections 9.3,
9.6 and 12, except for a failure by Sun to pay any fees and revenues due
pursuant to this Agreement and a failure to cure such breach in a timely
manner as provided in this Section 14.3.
14.4 LIMITATION ON AOL RIGHT TO TERMINATE LICENSES. Except in the event
Sun fails to pay the fees payable under Sections 4.1.5, 4.5 and 9.8.2 as
required in Section 8 (the "Specified Payment Obligations"), AOL shall
have no right whatsoever to terminate or reduce Sun's license rights set
forth in Sections 9.4, 9.6.1, 9.6.2, 12.2, 12.3, 14.7.1 or 14.7.2 (the
"Licenses") on the basis of any alleged breach by Sun of any of its
obligations pursuant to this Agreement or for any other reasons, except
to the extent permitted pursuant to a final, non-appealable judgment
obtained from a court of competent jurisdiction in litigation between
AOL and Sun. Notwithstanding anything to the contrary set forth in this
Agreement, in the event AOL believes that Sun has breached any
obligations under this Agreement, other than the Specified Payment
Obligations, AOL shall have no right to terminate or reduce such
licenses, even if AOL has terminated or purported to terminate this
Agreement, and AOL's sole and exclusive remedy shall be to litigate the
dispute, provided that nothing contained herein shall be deemed to limit
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AOL's right to enforce the limitations set forth in this Agreement on
the scope or duration of such licenses. Sun shall be entitled to
injunctive relief to prevent AOL from terminating or limiting such
licenses in any way other than as expressly allowed in this Section.
14.5 TERMINATION ON A CHANGE IN CONTROL. During the term of this
Agreement, if either party is acquired or if any third-party acquires
effective voting control of either party, such party shall promptly
notify the other party in writing, and the other party may terminate
this Agreement effective six (6) months after receipt of such notice;
provided that if Sun terminates this Agreement pursuant to this Section
14.4, it shall be obligated to continue to pay all then remaining
minimum payments and fees that would have been due if this Agreement had
expired on the date set forth in Section 14.1, when and as such minimum
payments and fees would otherwise be payable pursuant to this Agreement.
14.6 AOL POST TERMINATION LICENSE RIGHTS. Following any expiration or
termination of this Agreement, AOL shall be free to further develop and
enhance the Designated Collaborative Software for its own account in all
respects, shall be entitled to full ownership of any AOL separately
developed code based on or derived from the Designated Collaborative
Software, including without limitation any AOL separately developed
modifications and enhancements to the Designated Collaborative Software
(such as, by way of example, the Third Party Communicator Client and AOL
Distributed Communicator Client), shall have no duty to account to or
pay Sun with respect to any use or exploitation of the Designated
Collaborative Software, and shall not be subject to any limitations on
field of use with respect to the Designated Collaborative Software.
Following any expiration or termination of this Agreement, AOL shall
have no rights of any kind to any software developed by Sun, which does
not constitute Collaborative Software or Designated Collaborative
Software.
14.7 SUN POST TERMINATION LICENSE RIGHTS.
14.7.1 DESIGNATED PRODUCTS. As used in this Agreement,
"Designated Products" means (a) any network applications
and server software included in the Product Suites or
marketed and sold through Collaborative Marketing and
Sales Activities pursuant to the Marketing and Sales
Plan at any time during the term of this Agreement, and
(b) the Designated Collaborative Software. Except as
provided in Section 14.3, Sun and Sun International B.V.
shall be granted effective upon expiration or
termination of this Agreement a Software License to the
Designated Products and shall be free following any
expiration or termination of this Agreement to further
develop and enhance any Designated Products for their
own respective accounts in all respects, shall be
entitled to full ownership of any Sun and Sun
International B.V. separately developed code based on or
derived from the Designated Products, including without
limitation any Sun
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
separately developed modifications and enhancements to
the Designated Products, shall have no duty to account
to or pay AOL with respect to any use or exploitation of
the Designated Products, and shall not be subject to any
limitations on field of use with respect to the
Designated Products (including without limitation those
limitations set forth in Sections 6.3, 6.6 and 6.7 of
this Agreement), provided that (a) AOL may elect to
require that, within one hundred eighty (180) days
following any expiration or termination of this
Agreement, Sun cease to distribute and remove from any
Designated Products and derivative works thereafter
marketed or distributed by Sun and Sun International
B.V. any or all AOL Service Components, as specified by
AOL, and (b) such license shall be subject to any
contractual restrictions with third-parties for the
duration of such contractual restrictions.
14.7.2 THIRD PARTY COMMUNICATOR CLIENT AND AOL DISTRIBUTED
COMMUNICATOR CLIENT. Following any expiration or
termination of this Agreement, Sun shall have no rights
of any kind to the Third Party Communicator Client or
the AOL Distributed Communicator Client or any software
developed by AOL which does not constitute Designated
Software, other than a limited source code license to
retain and use such software solely for the support of
existing customers as of such expiration or termination.
14.7.3 DELIVERY. Promptly following expiration or termination
of this Agreement, AOL shall deliver to Sun a copy of
all source code and binary code comprising the
Designated Products to the extent Sun does not already
have such code in its possession.
14.8 PURCHASE OF SUN PRODUCTS AND SERVICES POST-TERMINATION.
14.8.1 EC(2) PRODUCTS AND SERVICES. For seven years after the
expiration or termination of this Agreement for any
reason other than (a) a termination by Sun arising from
a material breach by AOL or (b) a termination pursuant
to Section 14.2 resulting from a failure of the Closing
Date to occur, AOL will be entitled to purchase Sun ***
14.8.2 OTHER PRODUCTS AND SERVICES. For seven years after the
expiration or termination of this Agreement for any
reason other than (a) a termination
by Sun arising from a material breach by AOL or (b) a
termination
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
pursuant to Section 14.2 resulting from a failure of the
Closing Date to occur, AOL will be entitled to purchase
***
14.9 POST TERMINATION LIMITATIONS. For a period of eighteen (18) months
following any termination or expiration of this Agreement (other than a
termination arising from a material breach by the other party), each
party agrees to continue to market and distribute the Network
Applications and Server Software in a manner generally consistent with
the manner in which such Network Applications and Server Software were
marketed and distributed by such party during the term of this
Agreement, and each party agrees not to sell or dispose of all or
substantially all of its respective rights in such software during such
eighteen (18) month period, provided that this Section shall not be
deemed to limit or prohibit either party from selling or disposing of
such rights in connection with a merger or sale of assets in which a
third party acquires or succeeds to all or substantially all of such
party's assets, including such rights.
15.0 GENERAL REPRESENTATIONS AND WARRANTIES.
15.1 AOL REPRESENTATIONS AND WARRANTIES. AOL warrants, covenants and
represents to Sun that:
15.1.1 AOL has the full corporate right, power and authority to
enter into this Agreement and to perform the acts
required of it pursuant to this Agreement;
15.1.2 the execution of this Agreement and the performance by
AOL of its obligations and duties under this Agreement
shall not violate any agreement to which AOL is a party
or the rights of any other party; and
15.1.3 AOL is not relying on nor does Sun make any
representations, warranties or agreements not expressly
provided for in this Agreement.
15.2 SUN REPRESENTATIONS AND WARRANTIES. Sun warrants, covenants and
represents to AOL that:
15.2.1 Sun has the full corporate right, power and authority to
enter into this Agreement, to perform the acts required
of it;
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15.2.2 the execution of this Agreement and the performance by
Sun of its obligations and duties under this Agreement
shall not violate any agreement to which Sun is a party
or the rights of any other party; and
15.2.3 Sun is not relying on nor does AOL make any
representations, warranties or agreements not expressly
provided for in this Agreement; and
16.0 NO PROPRIETARY RIGHTS INDEMNITY. Neither AOL nor Sun makes any warranties
with respect to noninfringement and expressly disclaim all implied warranties of
title and against infringement. Neither AOL nor Sun shall have any obligation to
defend or indemnify the other against any third party claims of infringement or
misappropriation of any proprietary rights in any materials or technology
provided by either party to the other or developed pursuant to this Agreement.
17.0 OTHER REMEDIES CUMULATIVE. Except where otherwise specified, the rights and
remedies granted to a party under this Agreement are cumulative and in addition
to, and not in lieu of, any other rights or remedies which the party may possess
at law or in equity, including, without limitation, rights or remedies under
applicable patent, copyright, trade secret or proprietary rights laws, rules or
regulations.
18.0 AUDIT RIGHTS. AOL and Sun agree to allow mutually acceptable independent
CPA auditors, which auditors shall not be compensated on a contingency basis and
shall be bound to keep all information confidential except as necessary to
disclose discrepancies to the other party, to audit and analyze relevant
accounting records of each other to ensure compliance with all terms of this
Agreement. Any such audit shall be permitted within thirty (30) days of one
party's receipt from the other of a written request to audit, during normal
business hours, at a time mutually agreed upon. The cost of such an audit shall
be borne by the requesting party unless a material discrepancy is found, in
which case the cost of the audit shall be borne by the other party. A
discrepancy shall be deemed material if it involves a payment or adjustment of
more than five percent (5%) of the amount actually due from the paying party in
any given quarter. Audits shall occur no more frequently than once per calendar
year and shall not interfere unreasonably with the audited party's business
activities and shall be conducted in the audited party's facilities during
normal business hours on reasonable notice. An audit may cover any period;
provided that: (i) the period has not been previously audited; and (ii) the
period under audit is within a three year period immediately preceding the
commencement of the audit. A party shall promptly reimburse the other for the
amount of any discrepancy arising out of such audit which indicates that such
party is owed amounts hereunder as well as the costs of the audit, if
applicable, as provided above.
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19.0 LIMITATION OF LIABILITY; EXCLUSION OF DAMAGES; DISCLAIMER OF WARRANTIES.
19.1 EXCLUSION OF DAMAGES. NEITHER PARTY HERETO SHALL, UNDER ANY
CIRCUMSTANCES, BE LIABLE TO THE OTHER FOR CONSEQUENTIAL, INCIDENTAL,
SPECIAL OR EXEMPLARY DAMAGES, EVEN IF APPRISED OF THE LIKELIHOOD OF SUCH
DAMAGES OCCURRING.
19.2 LIMITATION OF LIABILITY. UNDER NO CIRCUMSTANCES SHALL EITHER
PARTY'S TOTAL LIABILITY OF ALL KINDS ARISING OUT OF OR RELATED TO THIS
AGREEMENT REGARDLESS OF THE FORUM AND REGARDLESS OF WHETHER ANY ACTION
OR CLAIM IS BASED IN CONTRACT, TORT NEGLIGENCE OR OTHERWISE, EXCEED THE
SUM OF (a) FIFTY MILLION DOLLARS; PLUS (b) ALL AGGREGATE AMOUNTS PAID BY
SUCH PARTY TO THE OTHER FOLLOWING NOTIFICATION TO THE OTHER PARTY OF AN
ALLEGED MATERIAL BREACH GIVING RISE TO AN ALLEGED RIGHT OF TERMINATION.
19.3 EXCEPTIONS. THE EXCLUSIONS OF DAMAGES AND LIMITATIONS OF LIABILITY
SET FORTH IN SECTIONS 19.1 AND 19.2 SHALL NOT OPERATE TO LIMIT (a)
AMOUNTS ACTUALLY DUE AND PAYABLE PURSUANT TO THE EXPRESS TERMS OF THIS
AGREEMENT, OR (b) AMOUNTS OTHERWISE RECOVERABLE BY ONE PARTY FROM THE
OTHER IN AN ACTION AT LAW OR IN EQUITY ARISING FROM THE OTHER PARTY'S
INFRINGEMENT OR MISAPPROPRIATION OF ANY PATENTS, COPYRIGHTS, TRADE
SECRETS OR OTHER PROPRIETARY RIGHTS DURING OR AFTER THE TERM OF THIS
AGREEMENT, INCLUDING WITHOUT LIMITATION INFRINGEMENT OR MISAPPROPRIATION
CLAIMS ARISING FROM THE OTHER PARTY'S BREACH OF THIS AGREEMENT.
19.4 DISCLAIMER OF WARRANTIES. NEITHER SUN NOR AOL MAKES ANY WARRANTIES
TO THE OTHER WITH RESPECT TO THE OPERATION OR PERFORMANCE OF ANY OF THE
SOFTWARE DEVELOPED OR LICENSED BY EITHER PARTY TO THE OTHER PURSUANT TO
THIS AGREEMENT, AND SUN AND AOL EACH HEREBY DISCLAIMS ALL SUCH
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
20.0 MISCELLANEOUS PROVISIONS
20.1 NOTICES. Any notice, consent, approval, request, authorization,
direction or other communication under this Agreement ("Notice") that is
required to be given in writing will be deemed to have been delivered
and given for all purposes (i) on the delivery date if delivered by
confirmed facsimile; (ii) on the delivery date if delivered personally
to the
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party to whom the same is directed; (iii) one business day after deposit
with a commercial overnight carrier, with written verification of
receipt; or (iv) five business days after the mailing date, whether or
not actually received, if sent by U.S. mail, return receipt requested,
postage and charges prepaid, or any other means of rapid mail delivery
for which a receipt is available. In the case of AOL, such notice will
also be deemed to have been delivered and given for all purposes on the
delivery date if delivered by electronic mail from an AOL.com email
address via the U.S. America Online brand service to screenname
"[email protected]." Notices shall be addressed as follows:
To Sun:
In the case of Sun, such notice will be provided to
both:
Chief Strategy Officer
Sun Microsystems, Inc.
901 San Antonio Road
MS CUP-01
Palo Alto, California 94033
Fax no.
And
Vice President and General Counsel
Sun Software and Technology
901 San Antonio Road
MS CUP-01
Palo Alto, California 94033
Fax No. (408) 517-1757
To AOL:
In the case of AOL, such notice will be provided to
both:
Senior Vice President for Business Affairs
America Online, Inc.
22000 AOL Way
Dulles, Virginia 20166
Fax no. 703-265-1206
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And
Deputy General Counsel
American Online, Inc.
22000 AOL Way
Dulles, Virginia 20166
Fax no. 703-265-1105
20.2 SECTION 365(n) OF BANKRUPTCY CODE. All rights and licenses granted
under or pursuant to this Agreement by Sun to AOL or by AOL to Sun are,
and shall otherwise be deemed to be, for purposes of Section 365(n) of
the United States Bankruptcy Code, 11 U.S.C. Section 101, et seq. (the
"Bankruptcy Code"), licenses of rights to "intellectual property" as
defined under Section 101(56) of the Bankruptcy Code. The parties agree
that AOL and Sun, as licensees of such rights and licenses, shall retain
and may fully exercise all of their respective rights and elections
under the Bankruptcy Code; provided such licensee party abides by the
terms of this Agreement.
20.3 DUE DILIGENCE. In connection with the intended merger of AOL and
Netscape, AOL and Sun has each conducted certain due diligence with
respect to Netscape and its products, services, business and technology.
At Sun's request, AOL has made available to Sun certain information and
analysis learned or developed by AOL in the course of its due diligence.
Neither Sun nor AOL makes any representations or warranties to the other
regarding Netscape or any aspect of its business, products, services or
technology, and Sun and AOL each understands, acknowledges and agrees
that it is responsible for conducting whatever due diligence it may
desire to conduct. Neither AOL nor Sun makes any representations or
warranties to the other regarding the accuracy of any materials provided
to either party by Netscape or the accuracy of any analysis or
conclusions which either party may have made based on any such
information provided by Netscape or the accuracy of any such
information, materials, analysis or conclusions which AOL and Sun may
have provided to the other party.
20.4 EMPLOYEES. Each party shall be responsible for paying all salaries,
wages, employee benefits and associated expenses for which its own
employees are eligible under such party's employment policies, any
legally required benefits or insurance, any taxes or governmental
charges payable or subject to withholding in connection with the
employment of such party, and any expenses associated with such
employees activities under this Agreement. Each party shall have
exclusive supervision and control with respect to its own respective
employees and shall have no right to supervise, control, discipline,
terminate or reassign any employees of the other party. In the event
that either party makes a reasonable and good faith determination that
an employee of the other party working on Collaborative Development
Activities or Collaborative Marketing and Sales Activities lacks
requisite skills or experience, does not work well with other project
team members, or is otherwise unsatisfactory, the parties will consult
with one another in
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good faith regarding whether such employee should be replaced, provided
that the final determination as to whether to retain, reassign or
terminate any employee shall be made solely by the party employing such
individual.
20.5 NON-EXCLUSIVITY. Sun and AOL agree except for any express
obligations of AOL and Sun as set forth in this Agreement, nothing in
this Agreement is intended or shall be construed to prohibit or restrict
either AOL or Sun from developing or acquiring products or services
similar to or competitive with products or services of the other party.
20.6 WAIVER. The waiver by either party of a breach of or a default
under any provision of this Agreement, shall not be construed as a
waiver of any subsequent breach of the same or any other provision of
the Agreement, nor shall any delay or omission on the part of either
party to exercise or avail itself of any right or remedy that it has or
may have hereunder operate as a waiver of any right or remedy. Except as
expressly provided herein to the contrary, no amendment or modification
of any provision of this Agreement shall be effective unless in writing
and signed by a duly authorized signatory of Sun and AOL.
20.7 COSTS AND EXPENSES. Except as expressly provided herein to the
contrary, each party shall be responsible for its costs and expenses
incurred in connection with the negotiation and execution of this
Agreement and its performance hereunder.
20.8 NO PARTNERSHIP. No agency, partnership, joint venture, or
employment is created as a result of this Agreement and neither AOL nor
AOL's agents shall have any authority of any kind to bind Sun in any
respect whatsoever, nor shall Sun or Sun's agents have any authority of
any kind to bind AOL.
20.9 HEADINGS. The captions and section and paragraph headings used in
this Agreement are inserted for convenience only and shall not affect
the meaning or interpretation of this Agreement.
20.10 ATTORNEYS' FEES. If any party to this Agreement brings an action
against the other party to enforce its rights under this Agreement, the
prevailing party shall be entitled to recover its costs and expenses,
including without limitation, attorneys' fees and costs incurred in
connection with such action, including any appeal of such action.
20.11 SEVERABILITY. If the application of any provision or provisions of
this Agreement to any particular facts of circumstances shall be held to
be invalid or unenforceable by any court of competent jurisdiction,
then: (i) the validity and enforceability of such provision or
provisions as applied to any other particular facts or circumstances and
the validity of other provisions of this Agreement shall not in any way
be affected or impaired thereby, and (ii) such provision or provisions
shall be reformed without further
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action by the parties hereto and only to the extent necessary to make
such provision or provisions valid and enforceable when applied to such
particular facts and circumstances.
20.12 ENTIRE AGREEMENT. This Agreement, including the attachments
hereto, constitute the entire agreement between the parties concerning
the subject matter hereof and supersedes all proposals or prior
agreements whether oral or written, and all communications between the
parties relating to the subject matter of this Agreement and all past
courses of dealing or industry custom.
20.13 NO PRESUMPTIONS. No presumption shall arise in interpreting the
provisions of this Agreement by virtue of the role a party or its
counsel played in drafting this Agreement or any provision hereof.
20.14 ASSIGNMENT AND SUBLICENSES. This Agreement may not be assigned by
either party without the prior written consent of the other party,
except that subject to the provisions of Section 14.4 of this Agreement
permitting termination of this Agreement by either party in the event of
an acquisition or change of control of the other party during the term
of this Agreement: (a) either party shall have the right, without the
other party's consent, to assign this Agreement and its rights and
obligations thereunder to any successor of such party by way of merger
or consolidation or the acquisition of substantially all or a material
portion of the business and assets of the assigning party relating to
this Agreement or the licenses granted pursuant to the definitive
Agreement (a "Successor"); and (b) either party shall have the right,
without the other party's consent, and without limiting any of its other
rights under the licenses, to sublicense any and all licenses granted
pursuant to this Agreement to any Successor. These rights shall be
retained provided that such Successor or sublicensee shall expressly
assume all of the obligations and liabilities of the assigning or
sublicensing party to the other party relating to such definitive
agreement or licenses.
20.15 APPLICABLE LAW. This Agreement shall be governed by the laws of
the State of California.
21.0 DEFINITIONS. As used in this Agreement, the following terms have the
indicated meanings:
21.1 AOL EC SERVICE OPPORTUNITIES are sales opportunities to sell to a
specific business opportunity within a commercial customer, including
both new commerce startup companies and major established companies,
looking to establish EC(2) relationships with AOL, where the essence of
the sale and relationship with AOL is the provision of EC2 services
(including, for example, providing Netcenter services, Netcenter
offerings and/or consumer traffic) and the sale of the Product Suites is
secondary to the transaction.
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
21.2 AOL DISTRIBUTED COMMUNICATOR CLIENT or AOL DISTRIBUTED COMMUNICATOR
CLIENT shall have the meaning specified in Section 2.1.
21.3 AOL SERVICE COMPONENTS are software, services or linkages to AOL
Service Offerings, such as, without limitation,***, built-in software
links to AOL default home page, etc.
21.4 AOL SERVICE OFFERINGS means AOL service offerings providing
customers with content, electronic commerce, communication and other
services, such as, without limitation, service portions of AOL services
such***, default home page,***, remote dial-up access, AOL calendar,
etc.
21.5 ASSOCIATED SERVICES means with respect to any software or hardware,
any support, maintenance, training, installation, and other professional
services associated with the applicable software or hardware and any
development and customization services associated with the applicable
software.
21.6 CLIENT SOFTWARE means the New Browser, the OEM Communicator Client,
the Third Party Communicator Client and the AOL Distributed Communicator
Client.
21.7 CLOSING DATE means the date on which the intended merger of AOL and
Odyssey closes in accordance with the Agreement and Plan of Merger
between AOL and Odyssey.
21.8 COLLABORATIVE DEVELOPMENT ACTIVITY means all activities
contemplated under this Agreement to be conducted under Collaborative
Development Work Plans relating to the development of certain software
packages comprising those components of the Product Suites that are to
be developed collaboratively by the parties.
21.9 COLLABORATIVE DEVELOPMENT WORK PLANS shall have the meaning
specified in Section 5.3.5.
21.10 COLLABORATIVE MARKETING AND SALES ACTIVITY means all activities
contemplated under this Agreement related to collaborative marketing and
sales of the Product Suites, including all activities under the
Marketing and Sales Plans
21.11 COLLABORATIVE SOFTWARE means all software developed through
Collaborative Development Activity, including without limitation the OEM
Communicator Client, the Third Party Communicator Client, the New
Browser and the Network Application and Server Software. Collaborative
Software does not include the Netcenter, the AOL
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Distributed Communicator Client, the AOL Service Components, the AOL
Service Offerings, or the Sun Systems Platform. Collaborative Software
does not include the Existing Netscape Software except to the extent
that such Existing Netscape Software is modified or enhanced through
Collaborative Development Activity to create a derivative work based on
such Existing Netscape Software.
21.12 DESIGNATED COLLABORATIVE SOFTWARE means the Collaborative Software
other than the Third Party Communicator Client.
21.13 DESIGNATED PRODUCTS shall have the meaning specified in Section
14.7.1.
21.14 DEPUTY LEAD EXECUTIVES for collaborative development activity
shall have the meaning specified in Section 5.3.
21.15 DEPUTY LEAD EXECUTIVE for collaborative marketing and sales
activity shall have the meaning specified in Section 5.4.
21.16 EC(2) shall have the meaning specified in Section 1.0.
21.17 EXECUTIVE REPRESENTATIVE shall have the meaning specified in
Section 5.1.
21.18 EXISTING NETSCAPE SOFTWARE means all Netscape client and server
software (including without limitation development tools, tests and
other development components) in existence as of the Closing Date, and
any maintenance upgrades and new releases of such software, if any,
which were already in progress at Netscape, provided such upgrades or
releases are completed and either scheduled to be commercially released
by AOL or actually released by AOL within a period of three (3) months
following the Closing Date. Existing Netscape Software does not include
any software developed pursuant to Collaborative Development Activity
contemplated under this Agreement and does not include the Third Party
Communicator Client or AOL Distributed Communicator Client.
21.19 EXISTING NETSCAPE SOFTWARE UPGRADES means all updates,
modifications, enhancements and new releases of the Existing Netscape
Software, if any, which AOL elects to develop based on the Existing
Netscape Software, which AOL develops outside of Collaborative
Development Activities and that therefore do not constitute
Collaborative Software pursuant to this Agreement.
21.20 GROSS MARGIN means gross revenues booked by a party in connection
with the sale and or licensing of software and/or Associated Services
less (a) such party's Cost of Goods associated with such software and/or
Associated Services and (b) sales commissions paid by such party in
connection with the sale or licensing of such software and/or Associated
Services. For purposes of this definition, "Cost of Goods" means, with
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respect to software, costs of goods calculated in accordance with
Generally Accepted Accounting Principles. For purposes of this
definition, "Cost of Goods" means, with respect to Associated Services,
all personnel and associated costs of providing such services,
calculated in accordance with generally accepted accounting principles.
21.21 JAVA PLATFORM means the Java Virtual Machine and, with respect to
any particular level or implementation of Java technology, such as, by
way of example, the Java Development Kit or Personal Java, those Java
classes required in the Sun specification for such level or
implementation of the Java Platform technology.
21.22 JRE shall have the meaning specified in Section 3.6.
21.23 LEAD EXECUTIVES for collaborative development shall have the
meaning specified in Section 5.3.
21.24 LEAD EXECUTIVE for collaborative marketing and sales shall have
the meaning specified in Section 5.4.
21.25 MARKETING AND SALES PLAN shall have the meaning specified in
Section 5.4.1.
21.26 MC shall have the meaning specified in Section 5.3.1.
21.27 MINIMUM COMMITMENT shall have the meaning specified in Section
4.5.
21.28 NEW BROWSER shall have the meaning specified in Section 2.4.
21.29 NETCENTER means the web site(s) operated and branded by Netscape
as it may change from time to time, but which currently includes web
site hosting, search engine capabilities, free email, and a variety of
content channels covering sports, finance, entertainment and other
topics and service offerings.
21.30 OEM COMMUNICATOR CLIENT shall have the meaning specified in
Section 2.3.
21.31 PRODUCT SUITES means suites of products and services assembled and
marketed pursuant to the Marketing and Sales Plan, which may include the
Third Party Communicator Client, the OEM Communicator Client, the New
Browser, the Network Application and Server Software, and any other
software assembled and marketed pursuant to the Marketing and Sales
Plan, as well as communication services, directory services, commerce
servers, application servers, electronic mail, electronic collaboration
software, web servers, proxy servers and other related software.
21.32 RELEASE means, with respect to any software product, the first
commercially released version of such product and any subsequent
commercially released versions of
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such product incorporating modifications, updates, enhancements,
corrections, patches and/or improvements.
21.33 SDK shall have the meaning specified in Section 2.4.
21.34 SE shall have the meaning specified in Section 5.4.2.
21.35 SOFTWARE LICENSE means a non-exclusive, irrevocable, perpetual,
worldwide, royalty-free license, which (except as otherwise specified in
this Agreement) survives termination of this Agreement, to use, modify,
publish, reproduce, distribute, transmit, display and perform, through
any and all methods and technologies now known or hereafter invented, in
source or binary form, in whole or in part, alone or with other software
or technology including the right to sublicense such rights through
multiple tiers of distribution and being subject only to the provisions
specifically contained in this Agreement on license fees during the term
of this Agreement and permitted fields of use during and after the term
of this Agreement, as applicable.
21.36 SYSTEMS PLATFORM means those platforms comprising software and
hardware on which the Product Suites operate, whether Sun's or a third
party's and shall include, as applicable, Microsoft Windows NT, HP-UX,
IBM AIX and Linux in addition to Sun's software and hardware.
21.37 THIRD PARTY COMMUNICATOR CLIENT shall have the meaning specified
in Section 2.2.
21.38 TLDA means the Technology License and Distribution Agreement
entered into between Sun and AOL concurrently herewith.
21.39 SUN SYSTEMS PLATFORM means the Sun software and Sun hardware on
which the Product Suites operate.
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IN WITNESS WHEREOF, the parties have executed this Strategic Development and
Marketing Agreement this 23rd day of November, 1998.
AMERICA ONLINE, INC. SUN MICROSYSTEMS, INC.
By: /s/ DAVID M. COLBURN By: /s/ WILLIAM J. RADUCHEL
-------------------------------- --------------------------------------
David M. Colburn William J. Raduchel
Senior Vice President, Chief Strategy Officer
Business Affairs
44