Telecommunications Marketing Agreement - Tel-Save Inc., Tel-Save Holdings Inc. and America Online Inc.
TELECOMMUNICATIONS MARKETING AGREEMENT
by and among
TEL-SAVE, INC.
TEL-SAVE HOLDINGS, INC.
and
AMERICA ONLINE, INC.
February 22, 1997
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CONFIDENTIAL
TELECOMMUNICATIONS MARKETING AGREEMENT
This TELECOMMUNICATIONS MARKETING AGREEMENT, dated as of February 22,
1997, is made by and among: (i) America Online, Inc., a Delaware corporation
("AOL"), on the one hand, and (ii) Tel-Save, Inc., a Pennsylvania corporation
("TS"), and Tel-Save Holdings, Inc., a Delaware corporation ("Holdings"), on the
other hand (each, a "party" and, collectively, the "parties"), with respect to
the following:
WHEREAS, AOL is in the business of providing online services to
consumers in the United States;
WHEREAS, TS is in the business of providing telecommunications services
and is a wholly owned subsidiary of Holdings;
WHEREAS, AOL and TS wish to enter into this Agreement whereby AOL will
market telecommunications services to customers of AOL's online service under
one or more brand names to be owned by it and TS will provide such services on
the terms and subject to the conditions herein set forth; and
WHEREAS, Holdings has agreed to guarantee all of the obligations of TS
hereunder.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
A. Definitions.
For purposes of this Agreement and in addition to the terms defined
elsewhere in this Agreement, the following terms shall have the meanings set
forth below:
1. "Actual Services Costs" for any calendar quarter
means the aggregate of the respective costs set forth in, and calculated in
accordance with, Schedule A hereto in respect of the provision of Services
during such calendar quarter.
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CONFIDENTIAL
2. "Additional Warrant" shall have the meaning set
forth in Section X.B.2 hereof.
3. "Ad Values" at any time shall mean * * *
4. "affiliate" means, with respect to a specified
person, any other person that directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such specified person, provided that, for purposes of this Agreement,
"affiliate" shall not include natural persons.
5. "Agreement" means this Telecommunications
Marketing Agreement.
6. "AOL" has the meaning set forth in the preamble to
this Agreement.
7. "AOL Marks" means the service marks to be owned by
AOL under which the Services will be marketed, which are presently contemplated
by the parties to include a reference to AOL's name and shall be as mutually
agreed to in writing by the parties hereto.
8. "AOL Performance List" has the meaning set forth
in Section II.B.1.
9. "AOL Service" means AOL's online service provided
to subscribers (including, without limitation, individuals and businesses) in
the United States under the America Online(R) brand name, including, without
limitation, electronic mail, conferencing, news, sports, weather and stock
quotes, accessed by consumers through computers using AOL's proprietary
software, as it exists on the date hereof and any online service provided by AOL
or any of its affiliates that is a successor thereto or substitute therefor.
10. "Applicable Profit Percentage" for any calendar
quarter means the percentage of Pre-Tax Profit for such calendar quarter equal
to:
(a) for each quarter in which * * *, 50%; and
(b) for each quarter in which * * *, 50% plus
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an additional 2% for each * * *;
provided that in no event will the Applicable Profit Percentage exceed 70%.
11. "AT&T" means AT&T Corporation.
12. "Checklist Items" are the items set forth in the
list attached as Schedule B hereto.
13. "Commercial Launch Date" means the date upon
which AOL makes the Services generally available to subscribers of the AOL
Service (i.e., to at least * * * % of the subscribers to the AOL Service).
14. "Commercial Mobile Radio Services" means the
services defined as such, from time to time, by the Federal Communications
Commission, including related features, functions and services.
15. "Dedicated CIC" means the carrier identification
code (CIC) to be made available by TS for use in respect of the Services as
provided herein.
16. "Effective Date" has the meaning set forth in
Section IX.A.1. hereof.
17. "End User" means, during the Term, any customer
of the Services or any part thereof and, after the Term, any such customer as of
the last day of the Term so long as such customer continues as a customer of
such Services.
18. "Extension Period" shall have the meaning set
forth in Section X.B.1 hereof.
19. "Gross Revenues" for any calendar quarter shall
mean * * *.
20. "Holdings" has the meaning set forth in the first
paragraph of this Agreement.
21. "Initial Launch Period" means the period
beginning at the end of the Test Launch Period and ending on the Commercial
Launch Date.
22. "Initial Payment" has the meaning set forth in
Section V.A.1.
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23. "Internet Telephony" means voice service provided
or initiated over one or more data networks where the end user initiates a voice
call to, or receives a voice call from, another party over one or more data
networks using a modem or CODEC or over a data network interfacing with the
public switched telephone network using a modem or CODEC.
24. "Introductory Period" means the * * * period
starting a mutually agreed number of days prior to the anticipated Commercial
Launch Date. The parties currently anticipate that the Commercial Launch Date
will be no later than * * * , subject to adjustment from time to time upon the
mutual consent of the parties or as otherwise provided herein.
25. "Local Telecommunications Services" means the
provision of telephone exchange service or exchange access, including related
features, functions and services.
26. "Long Distance Telecommunications Services" means
intrastate telephone toll service, interstate telephone service and
international telephone service, including private line service, and including
related features, functions and services, as well as:
Calling Card calls, meaning those calls billed to the customer account
which has been established to allow for the use of an authorization
code for direct dialed calls using any toll free number, 0+ access, or
operator assisted calls using a service provider's calling card
authorization platform for billing to the customer account at a later
date.
Operator Handled calls, meaning all calls where an operator or
automated mechanized system provides the end user with the ability to
place collect calls, calls billed to a third party, person to person,
conference calling and operator assisted directory assistance, but not
including party lines and off-line chat.
Toll Free services, meaning inbound residential or business telephone
services where the subscriber/recipient pays for all calls placed by
callers dialing their subscribed number, and such calls are billed to
the subscribing customer.
Directory Assistance calls, meaning calls made by the customer to
obtain names, addresses or phone numbers from a long distance directory
assistance service.
27. "Marginable Revenues" means * * * .
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28. "Multiplier Adjustment Date" has the meaning set
forth in Section IV.E.1.
29. "OBN" means One Better Net or OBN, TS's long
distance telecommunications network based on telecommunications switches owned
or leased by TS or its affiliates.
30. "Performance Lists" has the meaning set forth in
Section II.B.I.
31. "Pop-Up Ads" means * * * .
32. "Pre-Launch Period" means the period beginning on
the Effective Date and ending on the date AOL and TS begin testing the Services
with approximately * * * testers.
33. "Pre-Tax Profit" for any calendar quarter means
* * * .
34. "Quarterly Payment Amount" as to any calendar
quarter means the Applicable Profit Percentage of the Pre-Tax Profit for such
quarter.
35. "Quarterly Shortfall Amount" has the meaning set
forth in Section V.B.1(b).
36. "Restricted Services" means, collectively, (a)
Long Distance Telecommunications Services, (b) Local Telecommunications Services
and (c) Commercial Mobile Radio Services, and, each, a "Restricted Service".
37. "RMG" means the remote managed gateway between TS
and AOL and related systems (or any similar system agreed to by the parties),
including a high speed dedicated telecommunications line, developed by the
parties pursuant to Section II.B hereof, for the purpose of providing End Users
the ability, through screens and/or other functionality on the AOL Service, to
access monthly and historical billing information and to transmit order
information to TS.
38. * * * .
39. "Services" means the telecommunications services,
including the Restricted Services, provided, from time to time,
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pursuant to this Agreement by TS, as the carrier, and marketed by AOL as herein
provided under the AOL Marks; * * * .
40. "Supplemental Warrant" has the meaning set forth
in Section VI.A. hereof.
41. "Term" means the period commencing on the date
hereof and ending on June 30, 2000, unless such period is extended or sooner
terminated pursuant to Article X, in which event such period shall end at the
termination date or the last day of the final extension, as the case may be.
42. "Test Launch Period" means the period beginning
at the end of the Pre-Launch Period and ending on the date AOL begins marketing
the Services to approximately * * * of its subscribers.
43. "TS" has the meaning set forth in the preamble of
this Agreement.
44. "TS Performance List" has the meaning set forth
in Section II.B.1.
45. "Unamortized Amount" as of any date means * *
* .
46. "Warrants" has the meaning set forth in Section
VI.A. hereof.
AI ROLLOUT SCHEDULE; PERFORMANCE LISTS
A. Description of Rollout.
This Article II sets out the process by which the parties will roll out
the Long Distance Telecommunications Services described on Schedule C. With
respect to such Long Distance Telecommunications Services, the parties will
proceed through the following sequence of periods, leading to an anticipated
Commercial Launch Date of * * * :
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1. Pre-Launch Period -- completion of initial
Checklist Item tasks and initial development of the Performance Lists (as
further described below).
2. Test Launch Period -- testing of the Long Distance
Telecommunications Services with approximately * * * testers.
3. Initial Launch Period -- marketing of the Long
Distance Telecommunications Services to approximately * * * % of AOL Service
subscribers (with incremental ramp-up to * * * % of AOL Service subscribers).
4. Commercial Launch Date -- general availability of
the Long Distance Telecommunications Services to AOL Service subscribers (i.e.,
to at least * * * % of the subscribers to the AOL Service).
In addition, prior to the Commercial Launch Date, the parties will
mutually establish the date for commencement of AOL's marketing obligations,
(i.e., the beginning of the Introductory Period), which are further described in
Article III.
B. Pre-Launch Period.
1. During the Pre-Launch Period, each of the parties
shall perform all of the Checklist Item tasks designated on Schedule B as being
its responsibility during the Pre-Launch Period with respect to the Long
Distance Telecommunications Services described in Schedule C. With respect to
each task involving the development of a definition, procedure or standard, the
responsible party shall generate a detailed written guideline that will be
applicable to the appropriate party and will be set forth in a list of
standards, procedures and/or obligations to be observed by such party (the "AOL
Performance List" and the "TS Performance List", respectively, and together, the
"Performance Lists"). Each such guideline set forth in the Performance Lists
shall be subject to the mutual agreement of the parties, not to be unreasonably
withheld. With respect to Checklist Item tasks that are designated on Schedule B
as the joint responsibility of TS and AOL during the Pre-Launch Period, TS and
AOL shall work jointly in good faith to develop the appropriate guidelines and
to allocate responsibilities thereunder to the appropriate Performance List.
2. The Pre-Launch Period shall commence promptly
following the Effective Date and shall not end until completion of all of the
Checklist Item tasks designated for completion during the Pre-Launch Period on
Schedule B. If any such Checklist Item task remains uncompleted or if any
guideline has not been agreed to as of * * * , the anticipated date therefor,
the period for such completion may be extended by up to * * * at the request of
either party.
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C. Test Launch Period.
1. During the Test Launch Period, each of the parties
shall perform all of the Checklist Item tasks designated on Schedule B as being
its responsibility during the Test Launch Period with respect to the Long
Distance Telecommunications Services described in Schedule C. With respect to
each task involving the development of a definition, procedure or standard, the
responsible party shall generate a detailed written guideline that will be
applicable to the appropriate party and will be added to its respective
Performance List. Each such guideline shall be subject to the mutual agreement
of the parties, not to be unreasonably withheld. With respect to Checklist Item
tasks that are designated on Schedule B as the joint responsibility of TS and
AOL during the Test Launch Period, TS and AOL shall work jointly in good faith
to develop the appropriate guidelines and to allocate responsibilities
thereunder to the appropriate Performance List.
2. The Test Launch Period shall commence upon
completion of the Pre-Launch Period and shall not end until completion of all of
the Checklist Item tasks designated for completion during the Test Launch Period
on Schedule B. If any such Checklist Item tasks remain uncompleted as of the
date that is * * * after the commencement of the Test Launch Period, the period
for such completion may be extended by up to * * * at the request of either
party.
D. Initial Launch Period.
1. During the Initial Launch Period, the parties will
commence marketing and make the Services available to approximately * * * % of
the AOL Service subscribers (or such higher number as AOL may determine, subject
to TS's reasonable capacity limitations) during * * * of the Initial Launch
Period; approximately * * * % of the AOL Service subscribers (or such higher
number as AOL may determine subject to TS's reasonable capacity limitations)
during * * * of the Initial Launch Period; and approximately * * * % of the AOL
Service subscribers (or such higher number as AOL may determine subject to TS's
reasonable capacity limitations) during the remainder of the Initial Launch
Period. AOL shall determine the specific roll-out plan for the Initial Launch
Period in consultation with TS in order to efficiently and effectively perform
the Initial Launch Period Checklist Item tasks listed on Schedule B.
Notwithstanding the anticipated * * * periods above, AOL may, in each such case,
delay marketing to a larger portion of the AOL Service subscriber base until AOL
is satisfied, in its reasonable discretion, that the guidelines included in the
parties' respective Performance Lists are met or are likely to be met during any
such period.
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2. During the Initial Launch Period, each of the
parties shall perform all of the Checklist Item tasks designated on Schedule B
as being its responsibility during the Initial Launch Period with respect to the
Long Distance Telecommunications Services described in Schedule C. With respect
to tasks involving the development of a definition, procedure or standard, the
responsible party shall generate a detailed written guideline that will be
applicable to the appropriate party and will be added to its respective
Performance List. Each such guideline shall be subject to the mutual agreement
of the parties, not to be unreasonably withheld. With respect to Checklist Item
tasks that are designated on Schedule B as the joint responsibility of TS and
AOL, TS and AOL shall work jointly in good faith to develop the appropriate
guidelines and to allocate responsibilities thereunder to the appropriate
Performance List.
3. The Initial Launch Period shall commence upon
completion of the Test Launch Period. The Initial Launch Period shall not end
until completion of all of the Checklist Item tasks designated for completion
during the Initial Launch Period on Schedule B. If any such Checklist Item task
remains uncompleted or if any guideline has not been agreed to as of the date
that is * * * after the commencement of the Initial Launch Period, the period
for such completion may be extended by up to * * * at the request of either
party.
E. Performance Lists.
1. The Performance Lists may be modified at any time
during the Term as mutually agreed by the parties.
2. The parties shall reasonably cooperate with one
another in facilitating the preparation of the Performance Lists and the
guidelines included therein and the completion of the Checklist Item tasks.
3. Each party shall be responsible for performing
substantially in accordance with the guidelines contained in its respective
Performance List from time to time.
F. New Services. As new Services are added under this
Agreement, the procedures set forth in this Article II, as may be reasonably
applicable to such new Services, shall be followed with respect to such
Services.
G. Failure to Agree on Guidelines. If the parties are unable
to reach agreement with respect to any guideline to be included in a party's
Performance List, the matter shall be submitted for resolution pursuant to XI.D.
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AI AOL MARKETING
A. Services Marketing.
On and after the first day of the Introductory Period, AOL shall have
the sole right to, and shall, market the Services generally across the AOL
Service in the United States, through online advertising and marketing on the
AOL Service and otherwise as the parties may agree, through mass media and
direct marketing media, as follows:
1. During each of the months during the Introductory
Period, AOL shall include for subscribers to the AOL Service on-screen
promotions and advertisements for the Long Distance Telecommunications Services,
including Pop-Up Ads, (a) in substance (the specific Long Distance
Telecommunications Services to be offered and the terms thereof and the terms on
which they are offered) developed and prepared by TS in consultation with AOL,
and (b) in form (how the offered Services are packaged and presented) developed
and prepared by AOL in consultation with TS and subject to the mutual agreement
of the parties, with an Ad Value of at least $ * * * . Such promotions and
advertisements shall include * * * . Such promotions and advertisements shall be
spaced as evenly as practicable over each such month, provided that TS and AOL
shall consult as to the manner in which such online advertising will be included
in such advertising opportunities. The parties recognize that in some months, a
$ * * * promotion and advertising campaign may not represent the best allocation
of promotion and advertising resources. Accordingly, the foregoing
notwithstanding, subject to the mutual agreement of the parties, some of the
promotional and advertising resources, * * *, allocated to the Introductory
Period may be reallocated among the months occurring during the Introductory
Period and among the * * * months following the Introductory Period and shall be
in addition to the resources required otherwise to be provided in such months.
2. During each of the months subsequent to the
Introductory Period and during the Term, AOL shall include for subscribers to
the AOL Service on-screen promotions and advertisements for the Long Distance
Telecommunications Services, including, at AOL's option (subject to the
requirements of
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Section III.A.4 hereof), Pop-Up Ads, (a) in substance (the specific Long
Distance Telecommunications Services to be offered and the terms thereof and the
terms on which they are offered) developed and prepared by TS in consultation
with AOL, and (b) in form (how the offered Services are packaged and presented)
developed and prepared by AOL in consultation with TS and subject to the mutual
agreement of the parties, with an Ad Value of at least $ * * * . Any Pop-Up Ads
included by AOL subsequent to the Introductory Period and during the Term in
excess of * * * per month shall not be counted toward meeting this $ * * *
requirement. AOL will work cooperatively with TS during this period to develop
strategies for targeting the Services to new subscribers to the AOL Service most
effectively. Such promotions and advertisements shall be spaced as evenly as
practicable over each such month, provided that TS and AOL shall consult as to
the manner in which such online advertising will be included in such advertising
opportunities.
3. During the Term, AOL may also include
advertisements and promotions for the Long Distance Telecommunications Services,
in substance (the specific Long Distance Telecommunications Services to be
offered and the terms thereof and the terms on which they are offered) developed
and prepared by TS in consultation with AOL, and form (how the offered Services
are packaged and presented) developed and prepared by AOL in consultation with
TS and subject to the mutual agreement of the parties, in or with any of AOL's
mass media advertising of any of its services or with any of AOL's direct
marketing efforts, including, without limitation, mail solicitations of
customers for any of its services and any joint advertising or marketing
programs with other companies and any other advertisements and solicitations
done in conjunction with other companies; provided that, unless TS shall have
specifically agreed with AOL to share responsibility for any such advertising
and promotions, TS shall have no responsibility for any part of the costs
thereof.
4. With respect to Pop-Up Ads:
(a) Any Pop-Up Ad * * * to be included or
provided by AOL shall contain * * * .
(b) * * * .
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(c) * * * .
5. During the Term, the parties shall also, in
consultation with each other, explore additional marketing and promotional
opportunities related to the Services, including utilizing new advertising
techniques and mechanisms, as they are developed by AOL and utilizing TS's
existing marketing channels. The parties also will, in good faith, explore the
following additional marketing opportunities (the more specific terms and
conditions of which to be as set forth in writing between the parties):
(a) Online marketing of bundled offerings of the
Services and the AOL Service by AOL, with mutually
agreed revenue sharing;
(b) Telemarketing and direct marketing by TS of
the AOL Service to TS's business customers, with a
mutually agreed bounty paid to TS; and
(c) Telemarketing and direct marketing by TS of
bundled offerings of the Services and the AOL
Service, with generally mutually agreed revenue
sharing.
6. AOL shall make available to End Users who obtain
services from TS other than the Services in accordance with this Agreement, a
hyper-text internet link in the Dedicated Area (as defined below) solely to a
billing area on a TS-hosted web site for billing of such services other than
Services, which such site shall not include any links or other traffic out to
other areas other than a return link to the AOL Service.
7. AOL commits to provide, in connection with its
activities described in Sections III.A.1, 2, 4, 5 and 6, III.C and III.D hereof,
in addition to AOL key words on the AOL Service and E-mail (including a monthly
reminder sent to End-Users concerning their statement and a hyperlink to the
Dedicated Area described below), links throughout the AOL Service, including the
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possibility of a small telephone icon that pervasively appears on the tool bar,
welcome screen, channel page or similarly-viewed pages, to a dedicated area on
the AOL Service (the "Dedicated Area") in order to facilitate ease of location
and access to this area for End Users and prospective customers.
B. AOL Reports.
1. During the Term, AOL shall provide summary monthly
reports to TS evidencing compliance with the foregoing advertising and marketing
requirements, including information concerning the type and volume of
advertising and marketing on the AOL Service, and concerning AOL's mass media
and direct marketing activities, if any, during such month.
2. AOL shall keep for two (2) years from the date of
each advertising and marketing expenditure made pursuant to Sections III.A.1 and
2 above complete and accurate records in sufficient detail to allow TS to
determine if AOL has made the expenditures required thereunder. TS shall have
the right for a period of two (2) years after receiving any report provided
pursuant to Section III.B.1 above to inspect such records. AOL shall make such
records available for inspection during regular business hours at its principal
place of business, upon reasonable notice from TS. Such inspection right shall
not be exercised more than once in any calendar year and shall not be exercised
more than once with respect to any particular records furnished by AOL to TS. TS
agrees to hold in strict confidence all information learned in the course of any
such inspection, except to the extent necessary for TS to reveal such
information in order to enforce its rights under this Agreement or if disclosure
is required by law. TS shall pay for such inspections, except that in the event
any such inspection reveals that AOL expended less than * * *% of what it was
required to expend in any quarter, AOL shall pay the reasonable costs of such
inspection. If AOL and TS are unable to agree on the amount AOL expended, then
the dispute shall be resolved by arbitration pursuant to Section XI.D hereof.
This Section shall survive expiration or termination of this Agreement.
3. Within one quarter after it has been determined as
a result of an inspection pursuant to Section III.B.2 above or otherwise that
AOL failed to expend the minimum commitment for advertising and marketing in a
given month, and such failure is not attributable to TS's unreasonable failure
to agree to the marketing program proposed by AOL, AOL shall, in addition to any
other advertising and marketing expenditure commitments it has under this
Agreement, expend an additional amount for advertising and marketing equal to
* * * % of the shortfall from such commitment.
4. AOL shall advise TS in writing or by electronic
means of any End User that ceases to be a subscriber of the AOL Service as
promptly as reasonably practicable after receiving notice thereof. TS shall
continue servicing each such End User
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according to a service plan that TS deems appropriate, subject to such End
User's continued credit-worthiness, in TS's sole discretion. To the extent that
TS incurs incremental costs associated with the billing of such End Users, TS
shall, at its sole discretion, either (i) pass such costs through to such End
Users or (ii) adjust payments to AOL under Section V.B or X.D.2, as the case may
be, to put AOL in the same economic position as if such incremental costs had
not been incurred.
C. Offering of Services.
1. AOL shall include on the AOL Service such
materials and opportunities as TS shall reasonably request to permit users of
the AOL Service who wish to become End Users to elect so to become End Users,
including, without limitation, any agreements by any such user to (i) switch
from their existing telecommunications carrier, (ii) charge their payments for
the Services to credit, charge or debit cards and/or (iii) verify such
arrangements.
D. Services Billings; Credit Card Agreements.
1. For so long as any End User is a customer of the
AOL Service (and notwithstanding the termination of this Agreement, it being
understood that this obligation shall survive such termination if AOL is
receiving payments pursuant to Section X.D.2), AOL shall provide for the
inclusion online in the AOL Service to such End User of such End User's billing
information provided by TS and any necessary opportunity for such End User to
authorize any payment and to dispute any charges for Services with TS (all as
mutually agreed to with respect to the RMG developed by TS and AOL hereunder);
provided that AOL shall not be required to incur material costs after
termination to alter its inclusion of such information due to material changes
made to the RMG by TS.
2. AOL shall use all reasonable efforts to cause the
credit, charge and debit card companies through which AOL bills its customers
for the AOL Service to charge the same rates for Services billings as they
charge for billings for the AOL Service.
3. AOL shall use all reasonable efforts to cause the
credit, charge and debit card companies through which AOL bills its customers
for the AOL Service to enter into direct arrangements with TS with respect to
the billing for the Services, including provision for continuation thereof with
respect to any End Users that cease to be subscribers of the AOL Service or any
other services billed to such End User by AOL.
4. With respect to any End Users who do not pay their
bills for the AOL Service through a credit, charge or debit card, AOL shall,
subject to applicable law and AOL's terms of service with its subscribers,
provide to TS all information available to
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AOL with respect to such End Users as TS may reasonably request to permit TS to
bill such End Users for the Services.
E. Use of AOL Marks.
1. AOL hereby grants to TS an exclusive license
(subject to the right of AOL and its affiliates to use the AOL Marks in
connection with the Services) for TS to use the AOL Marks solely in connection
with its operation of the Services for which TS is then the exclusive provider
under this Agreement; and AOL hereby grants to TS an exclusive license (subject
to the right of AOL and its affiliates to use the AOL Marks in connection with
the Services) for TS to use the AOL Marks solely in connection with its
operation of the Services for which TS is then the provider under this Agreement
on a non-exclusive basis, unless the parties mutually agree (such agreement not
to be unreasonably withheld) that the license with respect to those
non-exclusive Services should itself be non-exclusive; provided that in both
cases TS (i) does not create a unitary composite mark involving the AOL Marks
without the prior written approval of AOL and (ii) displays symbols and notices
clearly and sufficiently indicating the trademark status and ownership of the
AOL Marks in accordance with applicable trademark law and practice; and provided
further that AOL retains the right to use the AOL Marks in connection with the
services provided as part of the core business of ANS CO+RE Systems, Inc. as of
the date hereof. The foregoing license is personal to TS and may not be
sublicensed, assigned or otherwise transferred except as provided by Section
XII.F. TS acknowledges that: (i) the AOL Marks are and shall remain the sole
property of AOL; (ii) nothing in this Agreement shall confer in TS, and TS shall
not represent that it has, any right of ownership in the AOL Marks; and (iii) TS
shall not now or in the future contest the validity of the AOL Marks.
2. TS further acknowledges and agrees that no use of
the AOL Marks by TS shall impair the rights of AOL in the AOL Marks. TS agrees
to reasonably assist AOL, at AOL's expense, to the extent necessary in the
enforcement and protection of AOL's rights in the AOL Marks. If a senior
executive officer of TS learns of any infringements or uses of marks similar to
the AOL Marks, such officer shall inform AOL as soon as reasonably practicable
and TS shall cooperate with AOL as AOL reasonably requests, at AOL's expense, to
protect AOL's rights in the AOL Marks.
3. AOL agrees to take all reasonable steps necessary
to register and protect the AOL Marks.
4. Use by TS of the AOL Marks with respect to form
and appearance shall be subject to the prior written approval of AOL, not to be
unreasonably withheld.
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5. TS acknowledges that, except as provided herein,
it is not authorized hereunder to use the AOL name or logo. Any such use shall
require the prior written consent of AOL and shall be subject to such conditions
and restrictions as AOL deems appropriate.
F. TS Trademarks and Service Marks.
This Agreement shall not convey a license to AOL to use any trademarks,
service marks, trade names or logos owned or otherwise used by TS. Nothing
herein shall give AOL any right, title and interest in and to any such
trademarks, service marks, trade names or logos owned or otherwise used by TS,
other than the right to display such trademarks, service marks, trade names or
logos in connection with the marketing of the Services.
G. Expenses.
Except as otherwise provided herein or agreed by the parties
in writing, all costs and expenses of providing the marketing and advertising
services referred to in Section III.A. shall be borne exclusively by AOL.
H. Representatives. AOL shall appoint a technical
representative, a marketing representative, a billing and customer service
representative and a project manager to interface with their respective TS
counterparts. If TS is dissatisfied with any of the foregoing representatives or
manager, it shall so inform AOL and AOL shall replace him/her as soon as
reasonably practicable, consistent with a smooth transition and AOL's staffing
commitments. TS shall not be entitled to have more than one representative or
manager replaced in any six-month period. Except as may be the case pursuant to
Section XII.H, no AOL manager or representative appointed hereunder shall have
any right, power or authority to enter into any agreement for or on behalf of,
or incur any obligation or liability of, or to otherwise bind, AOL.
I. Limitation on AOL Authority. AOL shall have no right,
authority or power, and shall not hold itself out as having the right, power or
authority, to create any contract or obligation, express or implied, binding
upon TS, including, but not limited to, accepting orders for Services or
agreeing to or offering prices, terms or conditions of sale that are not in
compliance with the prices and terms and conditions that TS, or TS and AOL, as
the case may be, have developed and prepared as provided elsewhere herein.
J. Insurance. So long as AOL shall have executory obligations
under this Agreement, AOL shall maintain insurance in amounts and types
customary within its industry for companies of comparable size.
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ARTICLE IV
TS SERVICES
A. Services.
1. The telecommunications services to be provided by
TS hereunder initially shall be the Long Distance Telecommunications Services.
Such Long Distance Telecommunications Services initially will include the
services described in Schedule C. Subject to Article VII, the Services to be
provided by TS hereunder will be expanded to include Local Telecommunications
Services and Commercial Mobile Radio Services as and to the extent offered by
TS.
B. Provision of Services.
1. TS shall provide the Services to all subscribers
to the AOL Service that elect to become End Users, provided that the initial and
continued provisioning of any such customer will be subject to such credit
approvals as TS may, in its sole discretion, apply.
C. Terms of Services.
1. The Services will be offered by TS, as the
carrier, under the AOL Marks.
2. Notwithstanding anything to the contrary set forth
in this Agreement, the quality, timeliness and efficiency of Services provided
hereunder and the performance by TS of its other obligations hereunder shall, at
a minimum, be consistent with telecommunications common carrier industry
standards, government regulations and sound business practices and generally of
no lesser quality than the best comparable services provided by TS to other
customers.
3. The specific types of Services other than Long
Distance Telecommunications Services, Local Telecommunications Services and
Commercial Mobile Radio Services shall be determined from time to time by mutual
agreement of the parties.
4. The rates to be charged by TS for Services subject
to telecommunications regulation shall be determined from time to time by TS, in
its sole discretion. TS shall give AOL reasonable prior notice of prospective
rate changes and a reasonable opportunity to consult with respect to such
prospective rate changes. TS's current intention is that its initial rates for
Long Distance Telecommunications Services will be as set forth in Schedule D
hereto. To the extent the parties reasonably agree that it is legally
permissible to do so with respect to any
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specific Services, the rates for those Services shall be determined from time to
time by mutual agreement of the parties.
5. Customer Service.
a. TS shall provide customer service 24 hours per day, 7 days per
week.
b. TS shall comply with the applicable customer service
provisions of the TS Performance List developed pursuant to
Article II.
c. If TS fails to conform to the customer service standards set
forth in this Section IV.C.5. above within thirty (30) days
following notice of such non-conformance from AOL, AOL shall
have the right, at its discretion and as one of its available
remedies, either to assume the customer service function
itself or to outsource it to a third party provider. In that
event, (a) TS shall, at TS's expense, assist AOL in the
transition of the customer service function as AOL may
reasonably request, and (b) TS shall reimburse AOL for AOL's
reasonable costs and expenses associated with providing the
customer service function. Notwithstanding the foregoing, if,
at any time, AOL shall have assumed the customer service
function or outsourced it to a third party provider and TS
shall thereafter demonstrate to AOL's reasonable satisfaction
that it can conform to the applicable customer service
standards, TS shall have the right to resume the provision of
the customer service function and AOL shall cause the
transition of the customer service function back to TS.
6. AT&T Reseller Services. It is anticipated by the
parties that the Services will include initially, and TS initially shall provide
as part thereof, AT&T-based operator services, directory assistance, calling
card services and international. In the event TS replaces such AT&T-based
services, TS shall ensure that the replacement services are of substantially
equivalent or better quality and price.
7. Network Integrity. TS shall comply with the
applicable network integrity provisions of the TS Performance List developed
pursuant to Article II.
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8. Billing.
a. TS shall comply with the applicable billing provisions of the
TS Performance List developed pursuant to Article II.
b. If TS fails to conform to the billing services guidelines
developed as part of the applicable Performance List pursuant to Article II
within thirty (30) days following notice of such non-conformance from AOL, AOL
shall have the right, at its discretion and as one of its available remedies,
either to assume the billing services function itself or to outsource it to a
third provider. In that event, (a) TS shall, at TS's expense, assist AOL in the
transition of the billing service function as AOL may reasonably request, and
(b) TS shall reimburse AOL for AOL's reasonable costs and expenses associated
with providing the billing service function. Notwithstanding the foregoing, if,
at any time, AOL shall have assumed the billing services function or outsourced
it to a third party provider and TS shall thereafter demonstrate to AOL's
reasonable satisfaction that it can conform to the applicable billing services
standards, TS shall have the right to resume the provision of the billing
services function and AOL shall cause the transition of the billing services
function back to TS.
9. TS shall provide to AOL as promptly as reasonably
practicable after the end of each month an updated roster of End Users at such
month-end in order to facilitate performance by AOL of its obligations under
Section III.B.4.
10. TS shall, where possible, make available the
Dedicated CIC and shall route all Services to End Users thereunder and shall not
route any other customers of its telecommunications services based thereon
(excluding customers (i) in Alaska, Hawaii, Puerto Rico and the Virgin Islands,
(ii) in other areas in the 48 contiguous states of the United States where OBN
is not loaded and (iii) in overflow situations where required to manage
capacity). All non-OBN traffic shall be carried on the AT&T network. TS shall
use its best efforts to at all times have the capability to route the Dedicated
CIC over a redundant network.
D. Regulatory.
1. TS shall be responsible for obtaining and
maintaining all federal, state and local consents, approvals and licenses
required to be obtained or maintained by TS for TS's provision of the Services
hereunder other than any consents and approvals or licenses required by
applicable law to be obtained or maintained by AOL by reason of its performance
of its obligations hereunder or otherwise, for all of which AOL shall be
responsible, and all expenses of obtaining and maintaining such, including all
tariffs, taxes, filings and fees with respect thereto, shall be
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borne exclusively by the party so responsible for obtaining or maintaining such.
2. TS shall file any required state and federal
tariffs in accordance with applicable law and regulations.
3. TS shall pay all federal, state and local taxes
required by applicable law or tariff.
E. AT&T.
1. * * * .
2. TS shall notify AOL as promptly as reasonably
practicable of any changes in its relationship with AT&T that could have a
material adverse effect on the performance of the parties' obligations under
this Agreement and/or the provision of the Services to End Users.
F. LOAs.
1. TS shall be the contracting party to the
telecommunication letters of agency (and any other contracts and agreements with
the customers for the provision of telecommunications services to the End Users,
collectively, "LOAs") and thereby be entitled to all rights deriving therefrom.
Except in connection with an assignment of this Agreement permitted by Section
XII.F, TS shall not assign any of the LOAs, i.e., not sell any of the End Users.
G. Representatives.
1. TS shall appoint a technical representative, a
marketing representative, a billing and customer service representative and a
project manager to interface with their respective AOL counterparts. If AOL is
dissatisfied with any of the foregoing representatives or manager, it shall so
inform TS and TS shall replace him/her as soon as reasonably practicable,
consistent with a smooth transition and TS's staffing commitments. AOL shall not
be entitled to have more than one representative or manager replaced in any six
month period. Except as may be the
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case pursuant to Section XII.H, no TS manager or representative appointed
hereunder shall have any right, power or authority to enter into any agreement
for or on behalf of, or incur any obligation or liability of, or to otherwise
bind, TS.
H. Limitation on TS Authority. TS shall have no right,
authority or power, and shall not hold itself out as having the right, power or
authority, to create any contract or obligation, express or implied, binding
upon AOL.
I. Insurance. So long as TS shall have executory obligations
under this Agreement, TS shall maintain insurance in amounts and types customary
within its industry for companies of comparable size.
ARTICLE V
PAYMENTS TO AOL
A. Initial Payment to AOL.
1. On the date hereof, TS shall pay to AOL an initial
payment in the amount of $100,000,000 (the "Initial Payment"). Up to $57,000,000
of the Initial Payment shall be earned by AOL over time in increments in
accordance with the performance milestones set forth in Schedule E.
B. Marketing Payments to AOL.
1. In partial consideration of AOL providing
marketing services and exclusivity commitments hereunder, TS shall make the
following payments in immediately available funds wired to AOL's account
pursuant to the wiring instructions attached as Schedule F (which instructions
may be modified in writing by AOL on five (5) days notice):
a. For each calendar quarter ending on March
31, June 30, September 30 and December 31, commencing with the Effective Date
and so long as this Agreement shall not have terminated or been terminated, TS
shall pay to AOL, in accordance with the procedures set forth in Section V.B.3,
the Quarterly Payment Amount for such quarter.
b. Against the amount of each such payment
to be made to AOL for any calendar quarter after December 31, 1997 and through
(and including) the calendar quarter ending June 30, 2000, there shall be
credited to TS, as of the last day of such quarter, a portion of the Initial
Payment equal to the lesser of (a) the Quarterly Payment Amount for such quarter
and (b) $ * * *, and such amount so credited shall, for all purposes, be deemed
to have been paid by TS to AOL and to have satisfied TS's obligation to AOL in
such amount. The amount, if any, by which $ * * *
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exceeds the Quarterly Payment Amount in any such calendar quarter is called a
"Quarterly Shortfall Amount".
2. If this Agreement shall be terminated by either
party prior to the end of the Term, TS' only obligation to pay AOL hereunder
(exclusive of any damages to which AOL may be entitled as a result of such
termination) shall be as set forth in Articles X and XI hereof.
3. Within thirty (30) days after the end of any
period for which payment is to be made pursuant to Section V.B.1 or V.B.2
hereof, TS shall deliver to AOL a statement of the Applicable Profit Percentage
(for periods prior to any termination hereof) and Pre-Tax Profit for such period
and the amount, if any, payable to AOL with respect to such period, showing the
manner in which it was determined and certified as correct by the Chief
Financial Officer of TS. Such statement shall be accompanied by a payment of any
such amount. This Section V.B.3 shall survive the termination or expiration of
this Agreement.
4. TS shall keep for two (2) years from the date of
each payment to AOL pursuant to Section V.B.1 complete and accurate records in
sufficient detail to allow AOL to determine if TS has computed Gross Revenues,
Actual Services Costs and Pre-Tax Profit accurately. AOL shall have the right
for a period of two (2) years after receiving any report or statement with
respect to payment due to inspect such records. TS shall make such records
available for inspection during regular business hours at its principal place of
business, upon reasonable notice from AOL. Such inspection right shall not be
exercised more than once in any calendar year and shall not be exercised more
than once with respect to any particular records furnished by TS to AOL. AOL
agrees to hold in strict confidence all information learned in the course of any
such inspection, except to the extent necessary for AOL to reveal such
information in order to enforce its rights under this Agreement or if disclosure
is required by law. AOL shall pay for such inspections, except that in the event
there is any upward adjustment in payments owed for any quarter shown by such
inspection of more than two percent (2%) of the amount paid, TS shall pay the
reasonable costs of such inspection. If AOL and TS are unable to agree on the
amount owed, then the dispute shall be resolved by arbitration pursuant to
Section XI.D hereof. Payments not made within the time period set forth in
Section V.B.3 hereof shall bear interest at a rate of one percent (1%) per month
or the highest rate permitted by law, whichever is lower, from the due date
until paid in full. This Section V.B.4 shall survive the termination or
expiration of this Agreement.
5. It is understood and agreed that the foregoing
payment terms and conditions in this Section V.B. are in respect of the
provision of Long Distance Telecommunications Services only and that the parties
are to mutually agree as to payment terms and conditions in respect of the
provision of Services of any other
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nature at the time such other Services are to be offered hereunder.
ARTICLE VI
WARRANTS; WARRANT HOLDER AND STOCKHOLDERS AGREEMENT
A. Warrants. On the date hereof and to induce AOL to enter
into the ongoing business relationship represented by this Agreement and as
partial consideration therefor, Holdings is entering into two Warrant
Agreements, each dated as of the date hereof (collectively, the "Warrants"), one
giving AOL the right to acquire 5,000,000 shares of Holdings Common Stock (the
"Holdings Common Stock") on the terms and subject to the conditions thereof, and
the other (the "Supplemental Warrant") giving AOL the right to acquire up to
7,000,000 shares of Holdings Common Stock on the terms and subject to the
conditions thereof.
B. Warrantholder and Stockholders Agreement. On the date
hereof, AOL, TS and Holdings are entering into the Warrantholder and
Stockholders Agreement, dated as of the date hereof (the "Warrantholders and
Stockholders Agreement").
ARTICLE VII
EXCLUSIVITY; NON-COMPETITION
A. Exclusive Arrangement.
1. * * * .
2. * * * .
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3. * * * .
4. * * * .
5. * * * .
6. * * * .
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7. * * * .
8. * * * .
9. * * * .
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B. Confidentiality.
1. Each party hereto shall treat, and shall cause its
respective directors, officers, employees, agents, representatives and
consultants to treat, as the other party's confidential property and not use or
disclose to others or permit its directors, officers, employees, agents,
representatives and consultants to use or disclose to others, without the prior
written consent of such other party, any non-publicly available information or
data of such other party (including, but not limited to, the identity of End
Users or subscribers to the AOL Service from time to time hereunder or any
information with respect thereto or any technical information or data provided
by such other party) that may have heretofore or hereafter been provided or
disclosed by such other party in connection with this Agreement, any
negotiations pertaining thereto or to any of the transactions contemplated
hereby.
2. The foregoing Section VII.B.1 shall not prevent
any party hereto from using or disclosing to others information: (i) which such
party can show has become part of the public domain other than by acts or
omissions of such party, its directors, officers, employees, agents,
representatives and consultants; (ii) which has been furnished to such party by
third parties as a matter of right, without restriction on disclosure or use
known to such party; (iii) which was lawfully in such party's possession prior
to the time AOL and TS first entered into discussions relating to the subject
matter of this Agreement and that was not acquired by such party, its directors,
officers, employees, agents, representatives and consultants directly or
indirectly from the other party, its employees or agents; (iv) which a party can
prove was developed by it independently of any information received from such
other party, its directors, officers, employees, agents, representatives and
consultants, either directly or indirectly; (v) that such party is required to
disclose by applicable law or regulation, in which case the party so required to
disclose shall give the other party prompt notice of such requirement in all
cases with sufficient time for such other party to seek a protective order or
other limit on disclosure (unless the party subject to the disclosure
requirement would suffer penalties or sanctions for failure to immediately
disclose such information). It is further understood and agreed that specific
information shall not be deemed available to the public or in any party's prior
possession merely because it is embraced by more general information available
to the public or in such party's prior possession; or (vi) as necessary for the
enforcement of this Agreement. In addition, (1) either party may disclose the
terms of this Agreement to the extent it deems such disclosure reasonably
necessary under applicable federal and state securities laws, regulations and
policies in connection with its (or Holdings') status as a public company and
with transactions involving the offering of its (or Holdings') securities and
(2) either party may disclose the terms of this Agreement to third
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parties as necessary in connection with other financing or merger and
acquisition activities, provided that, in the case of clauses (1) and (2) above
it seeks to protect the confidentiality of such confidential information in the
same manner and to the same degree as its own confidential information, to the
full extent that such confidential treatment is consistent with the purpose of
the disclosure. If either party becomes aware of any motion or other regulatory
or court proceeding that might require it to disclose any of the terms of this
Agreement, that party will give immediate written notice of such motion or
proceeding to the other and both parties shall act cooperatively to retain the
confidentiality of the terms hereof. For purposes of this paragraph, "third
party", does not include a person (other than a direct competitor of AOL or TS
or their respective affiliates) retained by either party to provide advice,
consultation, analysis, legal counsel or any other services in connection with
this Agreement, if such person agrees to be bound by the confidentiality
obligations of this Agreement.
3. In the event that this Agreement is terminated,
any and all notes, memoranda, records, drawings, tracings, specifications,
sketches, reports or other documents, including, without implied limitation, all
copies, excerpts or reproductions thereof, furnished or made available by TS to
AOL, or AOL to TS, as the case may be, their respective directors, officers,
employees, agents, representatives and consultants or developed thereby (except,
in any case, for information necessary to complete the performance of such
party's obligations under this Agreement and, in the case of TS, for any
information relating to any End User hereunder with respect to the Services,
and, in the case of AOL, any information relating to any subscriber to the AOL
Service with respect to the AOL Service) shall be promptly destroyed by such
party at such other party's request and such party shall advise such other party
in writing that such destruction has been completed. This Section shall survive
any termination of this Agreement.
C. Public Announcement.
1. No press release, public announcement,
confirmation or other information regarding this Agreement or the Warrants or
the contents hereof or thereof shall be made by any party without the prior
written consent of the other party, which consent shall not be unreasonably
withheld. It is agreed and understood that the parties shall work together to
prepare any such press release or public announcement. The foregoing
notwithstanding, if a party is required pursuant to applicable securities laws
to make such a public announcement or press release, such party shall be
permitted to do so provided that such party has furnished the other party with
the text of such public announcement or press release sufficiently in advance of
such public announcement or press release as to afford the receiving party a
reasonable opportunity to review such public announcement or press release
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and such party, to the extent consistent with its legal disclosure obligations,
modifies such public announcement or press release as reasonably requested by
the other party.
ARTICLE VIII REPRESENTATIONS AND WARRANTIES
A. AOL Representations and Warranties. AOL hereby represents
and warrants to TS as follows:
1. Due Organization; Etc. AOL (a) is a corporation
duly organized, validly existing and in good standing under the laws of the
state of its organization; (b) is duly qualified or licensed to do business as a
foreign corporation and is in good standing in each jurisdiction in which its
ownership or lease of property or its conduct of business requires it so to be
qualified or licensed; (c) has all licenses, authorizations, consents, orders,
approvals and qualifications necessary to conduct its business; and (d) has the
corporate power and authority to own its properties and assets and to carry on
its business as now conducted.
2. Authorization. The execution, delivery and
performance by AOL of this Agreement are within its corporate powers and have
been duly authorized by all necessary corporate action.
3. No Conflict. The execution, delivery and
performance by AOL of this Agreement (i) do not contravene any provision of its
charter or by-laws; and (ii) do not violate or conflict with any law, regulation
or contractual restriction to which it is subject or result in a violation of or
conflict with any other agreement to which it is a party or by which it is
bound.
4. Enforceability. This Agreement is the legal, valid
and binding obligation of AOL, enforceable against AOL in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization, or other laws affecting creditors'
rights generally or by the availability of equitable remedies.
5. Acquisition for Investment. AOL is an "accredited
investor" within the meaning of Rule 501 of Regulation D promulgated under the
Securities Act. AOL is acquiring the Warrants and the Holdings Common Stock
issuable upon exercise thereof for its own account for investment and not for
the account of others or with a view to the distribution or resale of such
Warrants or Holdings Common Stock. AOL has such knowledge and experience in
financial and business matters generally that AOL is capable of evaluating the
merits and risks of an investment in the
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Warrants and Holdings Common Stock. AOL is aware that neither the Warrants nor
the Holdings Common Stock issuable upon exercise thereof may be sold or
otherwise transferred absent registration under the Securities Act or an
exemption therefrom. AOL acknowledges that it has received from Holdings all
financial and other information regarding its investment in the Warrants and the
Holdings Common Stock issuable upon exercise thereof that it has requested and
has been afforded the opportunity to discuss such investment with Holdings. The
only representations and warranties that have been made with respect to
Holdings, its subsidiaries, including TS, or their respective businesses and
assets or otherwise in connection with the transactions herein contemplated are
those contained in this Agreement and in the Warrants.
B. TS Representations and Warranties. TS hereby represents and
warrants to AOL as follows:
1. Due Organization; Etc. TS (a) is a corporation
duly organized, validly existing and in good standing under the laws of the
state of its organization; (b) is duly qualified or licensed to do business as a
foreign corporation and is in good standing in each jurisdiction in which its
ownership or lease of property or its conduct of business requires it so to be
qualified or licensed; (c) has all licenses, authorizations, consents, orders,
approvals and qualifications necessary to conduct its business; and (d) has the
corporate power and authority to own its properties and assets and to carry on
its business as now conducted.
2. Authorization. The execution, delivery and
performance by TS of this Agreement are within its corporate powers and have
been duly authorized by all necessary corporate action.
3. No Conflict. The execution, delivery and
performance by TS of this Agreement (i) do not contravene any provision of its
charter or by-laws; and (ii) do not violate or conflict with any law, regulation
or contractual restriction to which it is subject or result in a violation of or
conflict with any other agreement to which it is a party or by which it is
bound.
4. Enforceability. This Agreement is the legal, valid
and binding obligation of TS, enforceable against TS in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization, or other laws affecting creditors'
rights generally or by the availability of equitable remedies.
5. AOL Representations. The only representations and
warranties that have been made with respect to AOL, its subsidiaries or their
respective businesses and assets or
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otherwise in connection with the transactions herein contemplated are those
contained in this Agreement.
ARTICLE IX THE EFFECTIVE DATE
A. The Effective Date
1. * * * . This Agreement and the obligations of the parties
shall become effective for all purposes at 5:00 p.m., EST, on February 27, 1997
if, on or before such time on such date, AOL shall not have given written notice
to TS that it had elected not to proceed with this Agreement, accompanied by the
return of the full amount of the Initial Payment to TS and of the Warrants to
Holdings and (ii) TS has provided to AOL a legal opinion reasonably acceptable
to AOL with respect to the valid issuance and due authorization of the Warrants
and (iii) the check representing the Initial Payment delivered to AOL on the
date hereof shall have cleared so long as it was deposited in a bank on Monday,
February 24, 1997. Such time on such date that this Agreement so becomes
effective, or such earlier time as the parties shall agree in writing that this
Agreement shall be effective, is called the "Effective Date."
2. If AOL shall elect, as provided above, not to proceed and
shall, on or before 5:00 p.m., EST, on February 27, 1997, have returned the full
amount of the Initial Payment to TS and the Warrants to Holdings, this Agreement
and the Warrants shall be void and of no further force and effect, without any
further obligation on the part of any party hereto.
B. Announcement.
Immediately following the Effective Date, if it shall occur,
TS and AOL shall publicly announce the entering into the relationship
contemplated by this Agreement, subject to the parties' mutual agreements on the
content of such announcement and the procedures for the same pursuant to Section
VII.C.
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ARTICLE X TERM AND TERMINATION
A. Term of Agreement.
1. The term of this Agreement shall be for the Term;
provided that, notwithstanding anything set forth in this Agreement to the
contrary, so long as any End User shall be using any Service, each of TS and AOL
shall continue to perform its obligations under Article IV and Section III.D.1,
respectively, with respect to End Users post such Term as well as any other
obligations that survive termination or expiration of this Agreement pursuant to
Section XI.K.
B. Extension of the Term.
1. * * * .
2. In connection with each of the first two Extension
Periods, if any, elected by AOL, and in consideration thereof and to induce AOL
so to extend, Holdings shall deliver to AOL, on or before the first day of the
applicable Extension Period, a warrant (each, an "Additional Warrant" and the
Additional Warrant that is issued with respect to the first Extension Period,
the "First Additional Warrant" and the Additional Warrant that is issued with
respect to the second Extension Period, the "Second Additional Warrant") to
purchase up to 1,000,000 shares (as such number would have been adjusted after
the date hereof pursuant to the terms of the Supplemental Warrant, the
"Additional Warrant Number") of Holdings Common Stock, at an exercise price
equal to the average of the closing prices of such Common Stock for the ten (10)
consecutive business days before the issuance of such Additional Warrant, and
substantially in the form of the Supplemental Warrant,
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except that (a) the "Vesting Multiplier" thereunder shall be 1 (as such number
would have been adjusted after the date hereof pursuant to the terms of the
Supplemental Warrant), (b) the "Termination Date" shall be the fifth anniversary
of the issuance date of such Additional Warrant and (c) the "Warrant Shares"
thereunder shall mean at any time such number of shares of Common Stock as shall
have vested as of such time as follows:
(i) such number of shares of Common Stock as shall equal the
product of the "Vesting Multiplier" times the amount by which (x)
the number (the "First Quarter Number") of End Users for whom TS
is providing Services as of the last day of the first full
calendar quarter of such Extension Period (the "First Vesting
Date") exceeds (y) the number of End Users (the "Starting Number")
for whom TS was providing services as of the last day of the
calendar quarter next preceding such Extension Period, shall vest
and shall be Warrant Shares thereunder as of such First Vesting
Date; and
(ii) such number of shares of Common Stock as shall equal the
product of the "Vesting Multiplier" times the amount by which (x)
the number of End Users (each, a "Subsequent Quarter Number") for
whom TS is providing Services as of the last day of each full
calendar quarter (each, a "Subsequent Vesting Date") after the
First Vesting Date and on or before the last day of the full
calendar quarter in which this Agreement is terminated, exceeds
(y) the greatest of the Starting Number, the First Quarter Number
and any prior Subsequent Quarter Number, shall vest and shall be
Warrant Shares thereunder as of such Subsequent Vesting Date;
provided that in no event will the aggregate number of Warrant Shares exceed the
Additional Warrant Number, subject to further adjustment as provided in
Paragraph 6 of such Additional Warrant and to successive reduction upon any
exercise of such Additional Warrant as provided in such Additional Warrant and
provided, further, that no Warrant Shares under the Second Additional Warrant
shall vest until all Warrant Shares have vested under the First Additional
Warrant (and no Warrant Shares shall vest under any Additional Warrant on
account of any End User that was the basis of any Warrant Share vesting under
the other Additional Warrant).
C. Termination of Agreement.
1. This Agreement may be terminated as follows:
a. TS and AOL may terminate this Agreement at any time
by mutual written consent.
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b. Either TS or AOL may terminate this Agreement at any
time upon 30 days prior written notice to the other upon a material breach by
the other in the performance of its agreements and obligations hereunder and
such other party's failure to cure such breach within 30 days after written
notice thereof, provided that the party giving notice pursuant to this clause
(b) is not in such breach of this Agreement as would permit the other party to
give a notice pursuant to this clause (b).
c. * * * .
d. If, at any time during the Term, AT&T ceases to
provide long distance telecommunications services to TS, TS shall promptly
inform AOL in writing and AOL may, upon thirty (30) days written notice to TS
given within fourteen (14) days after AOL receives notice of such AT&T
termination from TS, plus payment by AOL to TS of an amount equal to the
aggregate of all amounts theretofore paid to AOL by TS pursuant to Section V.B.
hereof, if any (i.e., not including the Initial Payment), terminate this
Agreement; provided, however, that AOL shall have no obligation to make the
foregoing payment if TS shall not have contracted for viable substitute services
to replace those formerly provided by AT&T.
e. If, as the result, direct or indirect, of an event
described in Section XII.O, which event is either incurable or has continued for
at least 60 days, the performance of this Agreement substantially as
contemplated hereby is rendered impracticable, either AOL or TS may terminate
this Agreement by 30 days prior written notice to the other.
D. Effects of Termination.
1. Except as otherwise provided below, upon termination or
expiration of this Agreement, neither party shall have any further liability or
obligation to the other, other than for amounts accrued but unpaid as of the
date of expiration on termination, liabilities for any damages to which a party
may be entitled in connection with a termination pursuant to Section X.C.1(b),
obligations contemplated to be performed or observed subsequent to any
termination or expiration of this Agreement and obligations that are
specifically described herein as surviving termination of this Agreement.
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2. Upon the expiration or any termination of this Agreement after
the first day of the Test Launch Period, and provided that AOL elects to
continue to provide to TS online billing services of the types described in
Section III.D. hereof, TS shall pay to AOL, for each subsequent calendar
quarter, in arrears at the time and in accordance with the procedures set forth
in Section V.B.3 hereof, an amount equal to * * * % of the Pre-Tax Profit for
such quarter derived by TS, or any successor to TS, or any third party to which
TS may assign customers who were End Users as of the date of expiration or
termination of this Agreement, from telecommunication services in the nature of
the Services provided to customers who were End Users as of the date of
expiration or termination of this Agreement. Such election shall be made not
less than 30 days prior to expiration or 10 days prior to the effective date of
termination, as the case may be, by written notice to TS. Against the amount of
each payment to be made to AOL by TS pursuant to this Section for any calendar
quarter, there shall be credited to TS, as of the last day of such quarter, in
accordance with the terms of this Agreement, an amount equal to the lesser of
(a) * * * of the amount that, but for this provision, was to be paid to AOL in
respect of such quarter pursuant to this Section X.D.2 and (b) the amount of* *
* .
3. If this Agreement shall have been terminated by TS pursuant to
Section X.C.1(b) hereof by reason of a material breach by AOL or by AOL pursuant
to Section X.C.1(c) hereof or by either party pursuant to Section X.C.1(e)
hereof, AOL shall, within 10 days after such termination, pay to TS in
immediately available funds, the amount, if any, equal to the Unamortized Amount
at the time of such termination.
4. * * * .
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5. If at any time subsequent to the expiration or termination of
this Agreement, TS shall make or receive any offer to transfer or assign,
directly or indirectly, all or any portion of its rights to provide Services to
End Users, which shall in any event include assumption by the offeror of TS's
responsibilities to End Users and obligations to AOL hereunder, TS shall give
AOL written notice of such offer, stating the name of the third party and
describing the offer's material terms. If AOL shall not, within thirty (30) days
after receiving such notice, offer to acquire such rights on terms and
conditions substantially similar to those offered by or to such third party (it
being understood that if the offer to or from the third party includes
securities of such third party, AOL shall have no obligation to provide such
securities as part of its offer but shall be required to provide equivalent
value), TS shall be free to transfer or assign such
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rights to such third party, provided that any such transaction is completed
within a period of ninety (90) days after expiration of the foregoing thirty
(30) day period. Otherwise, AOL shall have the right, exercisable for thirty
(30) days, to acquire such rights upon the terms set forth in AOL's offer.
6. Termination without Cause. Notwithstanding anything
provided in this Section X.D.6 or otherwise in this Agreement, neither TS nor
AOL has the right to terminate this Agreement without cause.
a. If AOL should nonetheless terminate this Agreement
without cause, TS may elect as its sole remedy, in lieu
of its other remedies in law and equity, to be awarded
liquidated compensatory damages in an amount of
* * * less amounts previously credited to AOL pursuant
to Section V.B.1(b). The parties have agreed to this
liquidated damage clause because of the difficulty of
ascertaining with accuracy, in advance, the amount of
damages that TS would suffer if AOL were to terminate
this contract without cause. The parties further agree
that (i) these liquidated damage payments are wholly
compensatory in nature and constitute a reasonable
approximation of the damages TS would actually suffer in
the event of a termination by AOL, and (ii) as a result
of a termination by AOL, TS would lose funds that it had
invested in its arrangement with AOL and these
liquidated damages would provide the funds necessary for
TS to establish and finance a comparable arrangement
with another online service if it elects to do so.
b. If TS should nonetheless terminate this Agreement
without cause, AOL, as a remedy in addition to those it
already possesses in equity and in law, shall be able to
require TS to provide 180 days of Service under this
Agreement from the date of termination or notice of
termination, whichever is earlier. The purpose of this
180-day period is to provide AOL with the time necessary
reasonably to transfer End Users to other comparable
telecommunications carrier(s) with a minimum of
disruption.
c. For purposes of this Section X.D.6 only, the
parties further agree that a termination made by either
party with a good faith belief that such party has a
right to terminate pursuant to a provision of this
Agreement (a "Permitted Termination"), which is
ultimately determined not to have been effected pursuant
to a provision of this Agreement, will not constitute a
termination without cause for purposes of this Section.
A termination without cause shall be any termination
other than a Permitted Termination.
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ARTICLE XI
REMEDIES
A. Indemnification.
1. Subject to the terms and conditions of this
Article XI, AOL hereby indemnifies and agrees to defend and hold harmless TS
from and against all losses, costs, damages and expenses, including, without
limitation, reasonable attorneys' fees (collectively "Damages"), incurred by TS
resulting from or relating to (i) a breach of any representation or warranty of
AOL contained in this Agreement, (ii) the non-performance of any obligation to
be performed by AOL under this Agreement or (iii) any claim that the AOL Marks
that are authorized by this Agreement infringe the intellectual property rights
of any third party.
2. Subject to the terms and conditions of this
Article XI, TS hereby indemnifies and agrees to defend and hold harmless AOL
from and against all Damages incurred by AOL resulting from or relating to (i) a
breach of any representation or warranty of TS contained in this Agreement, (ii)
the non-performance of any covenant or obligation to be performed by TS under
this Agreement or (iii) any claim that any TS trademarks, service marks, trade
names or logos displayed in connection with the marketing of the Services
infringe the intellectual property rights of any third party.
B. Conditions of Indemnification.
1. The party seeking indemnification under this
Agreement (the "Indemnified Party") shall promptly notify the party expected to
provide indemnification under this Agreement (the "Indemnifying Party") of the
facts and circumstances upon which the Indemnified Party intends to base a claim
for indemnification hereunder ("Notice of Claim"). Notice shall in all events be
considered prompt if given (a) no later than thirty (30) days after the
Indemnified Party learns of such facts and circumstances, or (b) if later, in
sufficient time to allow the Indemnifying Party to exercise its rights pursuant
to this subpart 3 without any material impairment of, or prejudice to, the
Indemnifying Party in the exercise of such rights.
C. Defense of Third-Party Claims.
1. Subject to subsection (b) below, if Damages arise
out of a third party claim seeking recovery of money damages (a "Money Claim"),
the Indemnifying Party shall have the right and obligation, at its expense, to
assume sole control of the defense of such Money Claim with counsel reasonably
acceptable to the Indemnified Party. Notwithstanding the foregoing, the
Indemnified Party shall have the right to employ its own counsel in any such
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case, but the fees and expenses of such counsel shall be at the expense of the
Indemnified Party unless (x) the employment of such counsel shall have been
authorized in writing by the Indemnifying Party in connection with the defense
of such action at the expense of the Indemnifying Party, or (y) the Indemnifying
Party shall not have employed counsel to have charge of the defense of such
action within a reasonable time after the Notice of Claim is given, or having
assumed such defense, fails to pursue it within reasonable time, or (z) the
named parties to such claim include both the Indemnified and the Indemnifying
Parties and the Indemnified Party shall have been advised by counsel that
counsel employed by the Indemnifying Party would, under applicable professional
standards, have a conflict in representing both the Indemnifying Party and the
Indemnified Party, in any of which events such fees and expenses of one
additional counsel for the Indemnified Party shall be borne by the Indemnifying
Party. The Indemnified Party shall have the right to settle or compromise any
Money Claim and recover the amount paid in such settlement from the Indemnifying
Party without the consent of the Indemnifying Party if the Indemnified Party has
given written notice thereof to the Indemnifying Party and the Indemnifying
Party has failed to assume the defense of the Money Claim or, having assumed the
defense, has failed to pursue it diligently within a reasonable length of time.
The Indemnifying Party shall have the right to settle or compromise any Money
Claim against the Indemnified Party without the consent of the Indemnified Party
provided that the terms of such settlement or compromise provide for the
unconditional release of the Indemnified Party and require the payment of money
damages only by the Indemnifying Party.
2. If Damages arise out of a third party claim
seeking equitable relief alone or in addition to monetary damages and, if such
equitable relief, standing alone, if obtained, would materially and adversely
affect the business, operations, assets or financial condition of the
Indemnified Party (an "Equitable Claim"), the Indemnified Party shall be
entitled to defend such Equitable Claim with counsel reasonably acceptable to
the Indemnifying Party in a reasonable manner under the circumstances and at the
reasonable expense of the Indemnifying Party. The Indemnifying Party shall be
provided by counsel to the Indemnified Party with regular information regarding
the costs of such defense. The Indemnifying Party shall be entitled to
participate at its own expense in the defense of any such Equitable Claim. The
Indemnified Party shall make no settlement, compromise, admission, or
acknowledgment which would give rise to liability on the part of the
Indemnifying Party without the prior written consent of the Indemnifying Party,
which shall not be unreasonably withheld or delayed.
3. The parties shall extend reasonable cooperation to
one another in connection with the defense of any third-party claim pursuant to
this Article XI and, in connection therewith, shall furnish such records,
information, and testimony and attend
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such conferences, discovery proceedings, hearings, trials, and appeals as may be
reasonably requested.
4. Notwithstanding anything else in this Agreement or
elsewhere contained, IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT EXCEPT FOR
LIABILITY AMONG THE PARTIES HERETO ARISING UNDER SECTIONS IIIE, IIIF, VIIB AND
VIIC HEREOF, NO PARTY SHALL BE LIABLE TO ANY OTHER PARTY OR ANY OTHER PERSON FOR
ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL LOSSES OR DAMAGES, INCLUDING,
WITHOUT LIMITATION, LOSS OF GOODWILL OR LOSS OF PROFITS, ARISING IN ANY MANNER
FROM THIS AGREEMENT OR THE PERFORMANCE OR NONPERFORMANCE OF ITS OBLIGATIONS
HEREUNDER.
D. Arbitration.
1. If the parties are unable to resolve any dispute,
controversy or claim arising under this Agreement (excluding, any disputes
relating to intellectual property rights or confidentiality) (each a "Dispute"),
such Dispute will be submitted to senior executive officers of each of the
parties for resolution. If such officers are unable to resolve the Dispute
within ten (10) days after submission to them, the dispute shall be solely and
finally settled by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA") then obtaining; provided
that the Federal Rules of Evidence shall apply in toto to any such Dispute and,
subject to the arbitrators' limiting the time for and scope of discovery to
comply with the time limit set forth in Section XI.D.4, the Federal Rules of
Civil Procedure shall apply with respect to discovery.
2. The arbitration panel shall be composed of three
arbitrators, one of whom shall be chosen by AOL, one by TS and the third by the
two so chosen. If both or either of AOL or TS fails to choose an arbitrator or
arbitrators within seven (7) days after receiving notice of commencement of
arbitration or if the two arbitrators fail to choose a third arbitrator within
seven (7) days after their appointment, the then director of the office of the
American Arbitration Association in the District of Columbia shall, upon the
request of both or either of the parties to the arbitration, appoint the
arbitrator or arbitrators required to complete the board.
3. Unless the parties to the arbitration shall
otherwise agree to a place of arbitration, the place of arbitration shall be in
the District of Columbia.
4. The arbitration panel shall commence proceedings
no later than sixty (60) days after the appointment of the third arbitrator. All
discovery shall be completed prior to commencement of proceedings. Such
proceedings shall be conducted for no less than three (3) full days per week
until completed.
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5. The arbitration panel is empowered to render the
following awards in accordance with the terms and conditions of this Agreement:
(i) enjoining a party from performing any act prohibited, or compelling a party
to perform any act required, by the terms of this Agreement and any order
entered pursuant to this Agreement or deemed necessary by the arbitration panel
to resolve disputes arising under or relating to this Agreement or any order;
(ii) where, and only where, violations of this Agreement have been found,
shortening or lengthening any period established by this Agreement or any order;
(iii) monetary awards and (iv) ordering such other legal or equitable relief,
including any provisional legal or equitable relief, or specifying such
procedures as the arbitrators deem appropriate, to resolve any Dispute submitted
to it for arbitration. The arbitration panel shall not be empowered to award
consequential or punitive damages and shall not be empowered to award specific
performance in the event that such performance would have a materially
detrimental effect on aspects of the party's business that are not directly
related hereto.
6. When resolving a Dispute arising under Article II
hereof and resulting from the failure of the parties to mutually agree on a
guideline to be included on the Performance List of one of the parties, each
party shall submit to the arbitrators a form of the particular guideline
proposed by such party. The arbitrators' decision in any such instance shall be
limited to designating one of the proposals as being the most consistent with
generally accepted industry practice in the context of comparable business
arrangements. The proposed guideline so designated by the arbitrators shall be
included in the Performance List of the appropriate party.
7. The arbitrators shall render their decision within
thirty (30) days after submission of all evidence and the conclusion of all
testimony. The decision of the arbitrators shall be by majority vote and, at the
request of either party, the arbitration panel shall issue to both parties a
written explanation of the reasons for the award and a full statement of the
facts as found and the rules of law applied in reaching its decision.
8. Any monetary awards shall be made and shall be
payable in U.S. dollars free of any tax or any other deduction (except as may be
required by law). Monetary awards shall include interest from the date of breach
or other violation of this Agreement to the date when the award is paid in full.
The interest rate or rates applied during such period shall be the lower of 12%
per annum or the maximum rate permitted by applicable law (the "Interest Rate").
9. The award of the arbitration panel will be the
sole and exclusive remedy between the parties regarding any and all claims and
counterclaims with respect to the subject matter of the arbitrated dispute. An
award rendered in connection with an
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arbitration shall be final and binding upon the parties, and any judgment upon
such an award may be entered and enforced in any court of competent
jurisdiction. The parties hereby waive all jurisdictional defenses in connection
with any arbitration hereunder or the enforcement of an order or award rendered
pursuant thereto (assuming that the terms and conditions of this arbitration
clause have been complied with), defenses based on the general invalidity of
this Agreement or this arbitration clause. With respect to any order issued by
the arbitration panel pursuant to this Agreement, the parties expressly agree
and consent (i) to the bringing of an action by one party against the other in
the federal courts of the forum state agreed to above to enforce and confirm
such order; and (ii) that any federal court sitting in such state may enter
judgment and enforce such order, whether pursuant to the U.S. Arbitration Act or
otherwise.
10. Neither party shall be excused from performing
its obligations hereunder during the pendency of such arbitration.
E. Reservation of Remedies. Except where otherwise expressly
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.
F. Survival. This Article XI shall survive termination of this
Agreement.
ARTICLE XII
GENERAL
A. Regulatory Filings. Each of TS and AOL will cooperate to
the extent reasonably practicable in the preparation and filing of any other
regulatory filings necessary or advisable to permit the proposed transactions
and the provision of the Services hereunder, including, without limitation, the
provision of any information as may reasonably be necessary therefor.
B. Notices. All notices and other communications hereunder
shall be given by telephone and immediately confirmed in writing and shall be
deemed given if delivered personally or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
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1. if to TS or Holdings:
Tel-Save Holdings, Inc.
Law Department
6805 Route 202
New Hope, Pennsylvania 18938
Attention: General Counsel
Telephone Number: (215) 862-1500
Facsimile Number: (215) 862-1515
2. if to AOL:
America Online Inc.
22000 AOL Way
Dulles, Virginia 20166-9323
Attention: General Counsel
Telephone Number: (703) 265-2739
Facsimile Number: (703) 265-2208
with a copy to:
Head of Business Affairs
AOL Networks
22000 AOL Way
Dulles, Virginia 20166-9323
Telephone Number: (703) 265-2365
Facsimile Number: (703) 265-1206
C. Interpretation. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. References to Sections, Articles and Schedules
refer to sections, articles and exhibits of this Agreement unless otherwise
stated.
D. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants, and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated and the parties
shall negotiate in good faith to modify this Agreement to preserve, to the
fullest extent legally permitted, each party's anticipated benefits and
obligations under this Agreement. If the parties are unable to so agree, the
matter shall be resolved pursuant to Article XI.D hereof.
E. Entire Agreement. This Agreement, together with the other
agreements referred to herein and the schedules attached hereto, constitutes the
entire agreement, and supersedes all other prior agreements and undertakings,
both written and oral, among the parties with respect to the subject matter
hereof.
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F. Assignments. This Agreement (i) is not intended to confer
upon any other person any rights or remedies hereunder; and (ii) shall not be
assigned by operation of law or otherwise except (a) to a wholly owned
subsidiary (provided such subsidiary becomes a party to this Agreement and that
the transferring party agrees and acknowledges that it is not released from its
obligations hereunder), or (b) to any entity that may acquire all or
substantially all of the assets of a party hereto. This Agreement, together with
the other agreements referred to herein and the schedules attached hereto, shall
inure to the benefit of and be binding upon the parties' respective successors
and permitted assigns.
G. Governing Law. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the internal laws of
the State of New York, without giving effect to the principles of conflict of
laws thereof.
H. Amendments. No provision of this Agreement may be amended,
modified or waived except by written agreement duly executed by each of the
parties, by, in the case of AOL, an officer of at least equal standing to that
officer who signed this Agreement on behalf of AOL.
I. Independent Contractors. The parties to this Agreement are
independent contractors. Neither party is an agent, representative, or partner
of the other party. Neither party shall have any right, power or authority to
enter into any agreement for or on behalf of, or incur any obligation or
liability of, or to otherwise bind, the other party. This Agreement shall not be
interpreted or construed to create an association, agency, joint venture or
partnership between the parties or to impose any liability attributable to such
a relationship upon either party.
J. No Waiver. The failure of either party to insist upon or
enforce strict performance by the other party of any provision of this Agreement
or to exercise any right under this Agreement shall not be construed as a waiver
or relinquishment to any extent of such part's right to assert or rely upon any
such provision or right in that or any other instance; rather, the same shall be
and remain in full force and effect.
K. Survival. Any provision of this Agreement which
contemplates performance or observance subsequent to, or otherwise states that
it would survive, any termination or expiration of this Agreement will survive
the termination or expiration of this Agreement. This Article XII shall survive
termination of this Agreement.
L. Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and thereto, as the case may be, and their
respective successors and permitted assigns, and are
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not for the benefit of nor may any provision hereof be enforced by, any other
person, including, without limitation, any End User (such End Users having no
rights whatsoever herein).
M. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall constitute an original, but together shall
be construed as one document.
N. Nonsolicitation. Neither party, for itself, or through any
third party shall, directly or indirectly, solicit or attempt to solicit, entice
or persuade any employee of or consultant to the other party to leave the
services of such other party.
O. Force Majeure. Neither Party shall be held liable for
failure to perform any of its obligations hereunder if such failure is (i) due
to an Act of God, fire, explosion, accident, flood, landslide, lightning,
earthquake, storm, civil disturbance, power failure, strike or other labor
disturbance affecting a party other than TS or AOL, act of war (whether war be
declared or not), national defense requirement, failure of a non-party
telecommunications carrier, failure or disruption of machinery, apparatus or
systems; acts, injunction, or restraint of government (whether or not now
threatened) and (ii) beyond the reasonable control of such party. For purposes
of this Section XII.O, a failure shall not be deemed to be beyond the reasonable
control of the party affected if
(i) such failure would not have occurred had
the affected party been performing in accordance with the provisions of this
Agreement, including its Performance List, or in accordance with generally
accepted industry practice; or
(ii) with respect to acts, injunctions or
restraints of governments, such failure results from the unlawful act or
omission of the affected party (other than actions contemplated by the parties
in furtherance of this Agreement).
Upon such an occurrence, the party whose performance is affected shall
immediately give written notice of the occurrence to the other party, and shall
thereafter exert all reasonable efforts to overcome the occurrence and resume
performance of this Agreement. If, despite such efforts, the affected party
cannot overcome the occurrence and resume performance within 90 days following
notification given hereunder, then unless either party has terminated this
Agreement in accordance with Section X.C.1(e), the parties shall mutually agree
on an equitable resolution. If the parties are unable to reach mutual agreement,
the matter shall be submitted for resolution in accordance with Section XI.D.
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ARTICLE XIII
HOLDINGS GUARANTEE
Holdings hereby unconditionally guarantees to AOL (i) the full
and prompt payment of all amounts which may become due and owing to AOL from TS
pursuant to this Agreement and (ii) the due performance by TS of all of its
obligations under this Agreement, (all of the foregoing, collectively, are
hereinafter referred to as the "Guaranteed Obligations"). The obligations of
Holdings under this Article shall not be impaired by any modification,
supplement, extension or amendment of any contract or agreement between AOL and
TS, whether now existing or hereafter arising, including, without limitation,
this Agreement, nor by any modification, release or other alteration of any of
the Guaranteed Obligations or of any security therefor, and the liability of
Holdings shall apply to the Guaranteed Obligations as so altered, modified,
supplemented, extended or amended. No invalidity, irregularity or
unenforceability of all or any part of the Guaranteed Obligations or of any
security therefor (including, without limitation, as a result of the bankruptcy,
reorganization or insolvency of the TS, or pursuant to any assignment for the
benefit of creditors, receivership, or similar proceeding) shall affect, impair
or be a defense to the obligations of Holdings under this Article XIII which are
a primary obligations of Holdings, and nothing shall discharge or satisfy the
liability of Holdings hereunder except the full payment and performance of the
Guaranteed Obligations. This Article XIII shall survive termination of this
Agreement.
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
signed on their behalf as of the day and year first written above.
AMERICA ONLINE INC.
By
------------------------
Name: David M. Colburn
Title: Senior Vice-President
TEL-SAVE, INC.
By
------------------------
Name: Daniel Borislow
Title: Chairman & CEO
TEL-SAVE HOLDINGS, INC.
By
------------------------
Name: Daniel Borislow
Title: Chairman & CEO
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CONFIDENTIAL
Schedule A
Services Costs
* * *
<PAGE>
CONFIDENTIAL
Schedule B
Checklist Items Schedule
* * *
<PAGE>
CONFIDENTIAL
SCHEDULE C
Initial Long Distance Services
1. Outbound and inbound long distance, including but
not limited to interlata, intralata, intrastate, international and toll-free
services.
2. Calling cards, including but not limited to
domestic and international, credit and debit cards
3. Operator services, including but not limited to,
collect calling, etc.
4. Directory assistance.
5. Conference calling.
6. Private line and dedicated services.
7. Online Billing and paper Billing Services for all
telecom services.
<PAGE>
CONFIDENTIAL
Schedule D
Rate Schedule
* * *
<PAGE>
CONFIDENTIAL
Schedule E
Performance Milestones
* * *