SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a)
AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a)
(Amendment No. 1)1
Prodigy Communications Corporation
- -------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, $.01 par value per share
- -------------------------------------------------------------------------------
(Title of Class of Securities)
74283P107
- -------------------------------------------------------------------------------
(CUSIP Number)
Rafael Robles Miaja
Franck, Galicia, Duclaud y Robles, S.C.
Torre Optima
Tercer Piso
Avenida Paseo de las Palmas 405
Colonia: Lomas de Chapultepec
Mexico, D.F. 11000, Mexico
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
January 7, 2000
- -------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following
box. |_|
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies
are to be sent.
(Continued on the following pages)
- --------
1 The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page. The information required on the
remainder of this cover page shall not be deemed to be "filed" for the purpose
of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise
subject to the liabilities of that section of the Act but shall be subject to
all other provisions of the Act (however, see the Notes).
<PAGE>
- --------------------------------------------------------------------------------
1
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Carlos Slim Helu
- --------------------------------------------------------------------------------
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)|_|
(b)|X|
- --------------------------------------------------------------------------------
3
SEC USE ONLY
- --------------------------------------------------------------------------------
4
SOURCE OF FUNDS*
WC (See Item 3)
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6
CITIZENSHIP OR PLACE OF ORGANIZATION
Mexico
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
-0-
------------------------------------------------
NUMBER OF SHARES 8 SHARED VOTING POWER
BENEFICIALLY 41,413,111 Shares (See Item 5(a) and 5(b))
OWNED BY ------------------------------------------------
EACH REPORTING 9 SOLE DISPOSITIVE POWER
PERSON -0-
WITH ------------------------------------------------
10 SHARED DISPOSITIVE POWER
41,413,111 Shares (See Item 5(a) and 5(d))
- --------------------------------------------------------------------------------
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
41,413,111 Shares (See Item 5(a))
- --------------------------------------------------------------------------------
12
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* |_|
- --------------------------------------------------------------------------------
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
64.6% (See Item 5(a))
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
- --------------------------------------------------------------------------------
1
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Carlos Slim Domit
- --------------------------------------------------------------------------------
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)|_|
(b)|X|
- --------------------------------------------------------------------------------
3
SEC USE ONLY
- --------------------------------------------------------------------------------
4
SOURCE OF FUNDS*
WC (See Item 3)
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6
CITIZENSHIP OR PLACE OF ORGANIZATION
Mexico
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
-0-
------------------------------------------------
NUMBER OF SHARES 8 SHARED VOTING POWER
BENEFICIALLY 41,413,111 Shares (See Item 5(a) and 5(b))
OWNED BY ------------------------------------------------
EACH REPORTING 9 SOLE DISPOSITIVE POWER
PERSON -0-
WITH ------------------------------------------------
10 SHARED DISPOSITIVE POWER
41,413,111 Shares (See Item 5(a) and 5(d))
- --------------------------------------------------------------------------------
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
41,413,111 Shares (See Item 5(a))
- --------------------------------------------------------------------------------
12
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* |_|
- --------------------------------------------------------------------------------
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
64.6% (See Item 5(a))
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
- --------------------------------------------------------------------------------
1
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Marco Antonio Slim Domit
- --------------------------------------------------------------------------------
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)|_|
(b)|X|
- --------------------------------------------------------------------------------
3
SEC USE ONLY
- --------------------------------------------------------------------------------
4
SOURCE OF FUNDS*
WC (See Item 3)
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6
CITIZENSHIP OR PLACE OF ORGANIZATION
Mexico
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
-0-
------------------------------------------------
NUMBER OF SHARES 8 SHARED VOTING POWER
BENEFICIALLY 41,413,111 Shares (See Item 5(a) and 5(b))
OWNED BY ------------------------------------------------
EACH REPORTING 9 SOLE DISPOSITIVE POWER
PERSON -0-
WITH ------------------------------------------------
10 SHARED DISPOSITIVE POWER
41,413,111 Shares (See Item 5(a) and 5(d))
- --------------------------------------------------------------------------------
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
41,413,111 Shares (See Item 5(a))
- --------------------------------------------------------------------------------
12
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* |_|
- --------------------------------------------------------------------------------
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
64.6% (See Item 5(a))
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
- --------------------------------------------------------------------------------
1
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Patrick Slim Domit
- --------------------------------------------------------------------------------
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)|_|
(b)|X|
- --------------------------------------------------------------------------------
3
SEC USE ONLY
- --------------------------------------------------------------------------------
4
SOURCE OF FUNDS*
WC (See Item 3)
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6
CITIZENSHIP OR PLACE OF ORGANIZATION
Mexico
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
-0-
------------------------------------------------
NUMBER OF SHARES 8 SHARED VOTING POWER
BENEFICIALLY 41,413,111 Shares (See Item 5(a) and 5(b))
OWNED BY ------------------------------------------------
EACH REPORTING 9 SOLE DISPOSITIVE POWER
PERSON -0-
WITH ------------------------------------------------
10 SHARED DISPOSITIVE POWER
41,413,111 Shares (See Item 5(a) and 5(d))
- --------------------------------------------------------------------------------
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
41,413,111 Shares (See Item 5(a))
- --------------------------------------------------------------------------------
12
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* |_|
- --------------------------------------------------------------------------------
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
64.6% (See Item 5(a))
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
- --------------------------------------------------------------------------------
1
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Maria Soumaya Slim Domit
- --------------------------------------------------------------------------------
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)|_|
(b)|X|
- --------------------------------------------------------------------------------
3
SEC USE ONLY
- --------------------------------------------------------------------------------
4
SOURCE OF FUNDS*
WC (See Item 3)
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6
CITIZENSHIP OR PLACE OF ORGANIZATION
Mexico
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
-0-
------------------------------------------------
NUMBER OF SHARES 8 SHARED VOTING POWER
BENEFICIALLY 41,413,111 Shares (See Item 5(a) and 5(b))
OWNED BY ------------------------------------------------
EACH REPORTING 9 SOLE DISPOSITIVE POWER
PERSON -0-
WITH ------------------------------------------------
10 SHARED DISPOSITIVE POWER
41,413,111 Shares (See Item 5(a) and 5(d))
- --------------------------------------------------------------------------------
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
41,413,111 Shares (See Item 5(a))
- --------------------------------------------------------------------------------
12
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* |_|
- --------------------------------------------------------------------------------
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
64.6% (See Item 5(a))
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
- --------------------------------------------------------------------------------
1
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Vanessa Paola Slim Domit
- --------------------------------------------------------------------------------
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)|_|
(b)|X|
- --------------------------------------------------------------------------------
3
SEC USE ONLY
- --------------------------------------------------------------------------------
4
SOURCE OF FUNDS*
WC (See Item 3)
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6
CITIZENSHIP OR PLACE OF ORGANIZATION
Mexico
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
-0-
------------------------------------------------
NUMBER OF SHARES 8 SHARED VOTING POWER
BENEFICIALLY 41,413,111 Shares (See Item 5(a) and 5(b))
OWNED BY ------------------------------------------------
EACH REPORTING 9 SOLE DISPOSITIVE POWER
PERSON -0-
WITH ------------------------------------------------
10 SHARED DISPOSITIVE POWER
41,413,111 Shares (See Item 5(a) and 5(d))
- --------------------------------------------------------------------------------
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
41,413,111 Shares (See Item 5(a))
- --------------------------------------------------------------------------------
12
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* |_|
- --------------------------------------------------------------------------------
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
64.6% (See Item 5(a))
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
- --------------------------------------------------------------------------------
1
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Johanna Monique Slim Domit
- --------------------------------------------------------------------------------
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)|_|
(b)|X|
- --------------------------------------------------------------------------------
3
SEC USE ONLY
- --------------------------------------------------------------------------------
4
SOURCE OF FUNDS*
WC (See Item 3)
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6
CITIZENSHIP OR PLACE OF ORGANIZATION
Mexico
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
-0-
------------------------------------------------
NUMBER OF SHARES 8 SHARED VOTING POWER
BENEFICIALLY 41,413,111 Shares (See Item 5(a) and 5(b))
OWNED BY ------------------------------------------------
EACH REPORTING 9 SOLE DISPOSITIVE POWER
PERSON -0-
WITH ------------------------------------------------
10 SHARED DISPOSITIVE POWER
41,413,111 Shares (See Item 5(a) and 5(d))
- --------------------------------------------------------------------------------
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
41,413,111 Shares (See Item 5(a))
- --------------------------------------------------------------------------------
12
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* |_|
- --------------------------------------------------------------------------------
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
64.6% (See Item 5(a))
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
- --------------------------------------------------------------------------------
1
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Carso Global Telecom, S.A. de C.V.
- --------------------------------------------------------------------------------
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)|_|
(b)|X|
- --------------------------------------------------------------------------------
3
SEC USE ONLY
- --------------------------------------------------------------------------------
4
SOURCE OF FUNDS*
WC (See Item 3)
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6
CITIZENSHIP OR PLACE OF ORGANIZATION
Mexico
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
-0-
------------------------------------------------
NUMBER OF SHARES 8 SHARED VOTING POWER
BENEFICIALLY 41,413,111 Shares (See Item 5(a) and 5(b))
OWNED BY ------------------------------------------------
EACH REPORTING 9 SOLE DISPOSITIVE POWER
PERSON -0-
WITH ------------------------------------------------
10 SHARED DISPOSITIVE POWER
41,413,111 Shares (See Item 5(a) and 5(d))
- --------------------------------------------------------------------------------
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
41,413,111 Shares (See Item 5(a))
- --------------------------------------------------------------------------------
12
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* |_|
- --------------------------------------------------------------------------------
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
64.6% (See Item 5(a))
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO, HC
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
- --------------------------------------------------------------------------------
1
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Telefonos de Mexico, S.A. de C.V.
- --------------------------------------------------------------------------------
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)|_|
(b)|X|
- --------------------------------------------------------------------------------
3
SEC USE ONLY
- --------------------------------------------------------------------------------
4
SOURCE OF FUNDS*
WC (See Item 3)
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6
CITIZENSHIP OR PLACE OF ORGANIZATION
Mexico
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
-0-
------------------------------------------------
NUMBER OF SHARES 8 SHARED VOTING POWER
BENEFICIALLY 12,016,200 See Item 5(a) and 5(b))
OWNED BY ------------------------------------------------
EACH REPORTING 9 SOLE DISPOSITIVE POWER
PERSON -0-
WITH ------------------------------------------------
10 SHARED DISPOSITIVE POWER
12,016,200 Shares (See Item 5(a) and 5(d))
- --------------------------------------------------------------------------------
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
12,016,200 Shares (See Item 5(a))
- --------------------------------------------------------------------------------
12
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* |_|
- --------------------------------------------------------------------------------
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
18.7% (See Item 5(a))
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Items 1 and 7: No material changes.
Item 2. Identity and Background
This Statement is filed, pursuant to Rule 13d-2(a) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), by the persons
listed below (the "Reporting Persons").
(1) Mr. Carlos Slim Helu, Mr. Carlos Slim Domit, Mr. Marco
Antonio Slim Domit, Mr. Patrick Slim Domit, Ms. Maria
Soumaya Slim Domit, Ms. Vanessa Paola Slim Domit and Ms.
Johanna Monique Slim Domit (collectively, the "Slim
Family"), directly and indirectly own a majority of the
outstanding voting securities of Carso Global Telecom, S.A.
de C.V. ("CGT"). As a result, ownership of all Shares of the
Company owned directly, and deemed owned indirectly, by CGT
is deemed to be shared among each member of the Slim Family.
(2) CGT, a corporation organized under the laws of the Mexican
States, is a holding company with interests in the Company
and other telecommunications and media companies.
CGT may be deemed to control Telefonos de Mexico, S.A. de
C.V. ("Telmex") through the regular-voting shares of Telmex
that it owns directly as well as through its interest in a
trust (the "Control Trust") that owns all of the outstanding
Series AA shares, without par value ("AA Shares"), of
Telmex. The principal beneficiaries of the Control Trust are
CGT, which owns a 45.0% economic and voting interest in the
trust, SBC Communications, Inc. ("SBC"), which owns a 24.5%
economic and voting interest in the trust, and France
Telecom, which owns a 24.5% economic and voting interest in
the trust. Under the terms of the Control Trust, the trustee
must vote all shares held in the Control Trust as instructed
by a simple majority of the members of a technical committee
appointed by the trust's beneficiaries (except in the case
of certain significant corporate matters). The Control Trust
entitles CGT to appoint a majority of the members of such
technical committee; therefore, CGT may be deemed to control
the Control Trust.
Through its ownership of all the outstanding AA Shares, the
Control Trust owns a majority of Telmex's outstanding
regular voting equity securities. Therefore, through the
Control Trust, CGT may be deemed to control Telmex.
(3) Telmex, a corporation organized under the laws of the
Mexican States, is the leading provider of local and long
distance telephone services in Mexico. The Shares
beneficially owned by Telmex are owned directly and
indirectly through Telmex Internet, LLC, a Delaware limited
liability company and wholly-owned subsidiary of Telmex. By
virtue of this relationship, ownership of all Shares of the
Company beneficially owned by Telmex is deemed to be shared
among CGT and each member of the Slim Family.
<PAGE>
The names, addresses, occupations and citizenship of each member
of the Slim Family, and the executive officers and directors of each of CGT and
Telmex are set forth in Schedule I hereto. Neither any member of the Slim Family
nor any executive officer or director set forth in Schedule I hereto has been,
during the last five years, (i) convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (ii) party to a civil proceeding
of a judicial or administrative body of competent jurisdiction, which as a
result of such proceeding, was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, Federal or State securities laws or finding any violation with
respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration
The aggregate amount of funds required to purchase the Shares
described in Item 5(a) as beneficially owned by each member of the Slim Family,
CGT and Telmex was approximately $336.8 million, in the case of Shares owned
directly by CGT, and approximately $114.7 million, in the case of Shares owned
by Telmex directly and indirectly through its wholly-owned subsidiary. The funds
used to purchase these Shares were obtained from the respective working capital
of CGT and Telmex.
Item 4. Purpose of Transaction
On November 19, 1999, in order to facilitate the consummation of
the transactions contemplated by an Investment, Issuance, Contribution and
Assumption Agreement among SBC, SBC Internet Communications, Inc. ("SBC Sub"),
the Company, Prodigy Transitions Corporation, a wholly-owed subsidiary of the
Company ("Prodigy Sub"), and Prodigy Communications Limited Partnership
("Operating Partnership"), and a Strategic Agreement among SBC, SBC Sub, the
Company and Operating Partnership, each dated November 19, 1999, each of Telmex
and CGT entered into a Voting Agreement with SBC (the "Voting Agreement") and
pursuant thereto delivered to SBC an irrevocable proxy to Vote (as defined in
the Voting Agreement) their Shares and any other shares of capital stock of the
Company acquired by them after the date of the Voting Agreement and prior to the
termination of the Voting Agreement (i) in favor of adoption and approval of the
Investment Agreement, the Strategic Agreement and the transactions contemplated
thereby, the Transactions (as defined in the Voting Agreement) and the Charter
and By-Law Amendments (as defined in the Voting Agreement), (ii) against any
action or agreement that would compete with, impede, interfere with or tend to
discourage the Transactions or inhibit the timely consummation of the
Transactions, (iii) against any action that would result in a breach in any
material respect of any covenant, representation or warranty, or any other
obligation of the Company or Operating Partnership under the Investment
Agreement or the Strategic Agreement, and (iv) except for the Transactions and
the Investment Agreement, against any merger, consolidation, business
combination, reorganization, recapitalization, liquidation, sale or transfer of
any material assets of the Company or its subsidiaries (respectively, the
"Telmex Proxy" and "CGT Proxy").
<PAGE>
In addition, each of CGT and Telmex agreed not to transfer or
otherwise dispose of any of their Shares, or any other shares of capital stock
of the Company acquired by them after the date of the Voting Agreement and prior
to the termination of the Voting Agreement. Additionally, SBC agreed to vote or
cause any of its subsidiaries to vote all shares of Class A Common Stock and
Class B Common Stock owned or held of record by SBC or any of its subsidiaries
at any meeting of the Company's stockholders held for such purpose in favor of
electing up to three persons (subject to the provisions of the Voting Agreement)
designated by CGT and Telmex as Class A Directors (as defined in the Restated
Certificate of Incorporation) to the Company's board of directors.
The transactions contemplated by the Investment Agreement and the
Strategic Agreement are summarized as follows: On November 19, 1999, the Company
and Prodigy Sub, formed an operating partnership, a new limited partnership of
which the Company is the sole general partner. At the Closing (as defined in the
Investment Agreement), (i) the Company will contribute substantially all of its
operating assets and transfer its employees to the operating partnership and
(ii) SBC Sub, a wholly-owned subsidiary of SBC, will contribute certain assets
to the operating partnership in exchange for a number of Units of the operating
partnership equal to approximately 43% of the total number of Units in the
operating partnership issued and outstanding immediately following the issuance
to SBC Sub. The Company will retain an approximate 57% interest in the operating
partnership. Additionally, the Company will also issue to SBC Sub one share of
Class B Common Stock in consideration of $100. Class B Common Stock will not be
listed on the Nasdaq National Market or any other exchange and will be
convertible at any time, on a one-for-one basis, into the same number of shares
of Class A Common Stock. When transferred by SBC to any person or entity not
affiliated with SBC, Class B Common Stock will automatically convert into Class
A Common Stock. SBC will also have the right to exchange its Units in the
operating partnership for shares of Class A Common Stock. Pursuant to the
Amended and Restated Limited Partnership Agreement (as defined below) of the
operating partnership, SBC will be permitted to transfer its Units to any person
as long as such person agrees to be bound by such partnership agreement.
The Company's current stockholders will exchange their Shares for
Class A Common Stock. The Company will be a holding company whose sole assets
will consist of rights under certain stock-related agreements and plans and the
approximate 57% interest in the operating partnership and whose sole business
will be to act as the sole general partner of the operating partnership. Holders
of the Company's Class A Common Stock will generally have rights identical to
holders of the Company's Class B Common Stock, except that each holder of Class
A Common Stock will be entitled to one vote per share and SBC Sub, the holder of
Class B Common Stock, will be entitled to one vote for the share of Class B
Common Stock held by it and one vote for each Unit held by it. Pursuant to the
Company's Restated Certificate of Incorporation, SBC, as the sole holder of
Class B Common Stock, will have the right to directly elect three of the
Company's nine directors. Otherwise, holders of Class A Common Stock and Class B
Common Stock generally will vote together as a single class on all matters
(including the election of the directors who are not elected directly by SBC)
presented to the stockholders for their vote or approval except as otherwise
required by applicable Delaware law or the Restated Certificate of
Incorporation. Pursuant to the Company's Restated Certificate of Incorporation,
SBC, by a vote of at least 75% of the Class B Common Stock, may, among other
things, without a vote of the holders of the Class A Common Stock, approve a
merger of the operating partnership into the Company.
<PAGE>
Upon issuance of the Units and the Class B Common Stock to SBC
Sub at the Closing, the number of Units owned by the Company will equal the
number of shares of outstanding Common Stock (as defined in the Restated
Certificate of Incorporation) of the Company. After the Closing, the number of
Units owned by the Company is intended to be at all times equal to the number of
shares of outstanding Common Stock (as defined in the Restated Certificate of
Incorporation) of the Company. The net cash proceeds received by Company from
any issuance of shares of Common Stock (as defined in the Restated Certificate
of Incorporation), including with regard to the exercise of options warrants and
other rights, shall be concurrently transferred to the operating partnership in
exchange for Units equal in number to such number of shares of Common Stock (as
defined in the Restated Certificate of Incorporation) issued by the Company.
Pursuant to the Registration Rights Agreement, each of SBC and SBC Sub will be
granted registration rights in respect of shares of Class A Common Stock issued
or to be issued upon conversion of the share of Class B Common Stock and/or upon
the exchange of Units.
Prior to or immediately following the Closing, the Company will
establish an Executive Steering Committee (as defined in the Restated
Certificate of Incorporation) of the board of directors of the Company. The
Executive Steering Committee will consist of four members, two of whom will be
selected by the Class B Directors (as defined in the Restated Certificate of
Incorporation) elected by SBC and two of whom will be selected by the Class A
Directors (as defined in the Restated Certificate of Incorporation) designated
by Telmex and CGT. The purpose of the Executive Steering Committee will be to
evaluate all major corporate actions of the Company and the operating
partnership, such as mergers, acquisitions, capital expenditures or borrowings
in excess of $20 million (each a "Major Action"). Each Major Action will require
the approval of the Executive Steering Committee prior to being submitted for
the approval of the board of directors of the Company. The Restated Certificate
of Incorporation will also provide that major events, including the Major
Actions, require the approval of the full board of directors of the Company,
which must first be unanimously approved by the Executive Steering Committee
prior to being submitted to the Company's Board. As sole general partner of the
operating partnership, the Company will have unilateral control over all of the
affairs and decision making of the operating partnership (subject to the
approval of SBC Sub, as limited partner, as to certain matters). As such, the
Company, through the Executive Steering Committee, the board of directors of the
Company and the Company's officers, will be responsible for nearly all
operational and administrative decisions of the operating partnership and the
day-to-day management of the operating partnership's business. Furthermore, the
Company cannot be removed as the sole general partner of the operating
partnership without its approval, nor can the operating partnership be dissolved
without the Company's approval (subject to certain exceptions described in the
Amended and Restated Limited Partnership Agreement).
<PAGE>
The transactions outlined above will be submitted for approval by
the Company's stockholders and will be subject to regulatory approval and other
customary conditions. Upon consummation of the transactions outlined above, SBC
will initially hold an approximate 43% voting interest in the Company, and will
have the right at any time to "collapse" the structure described above or
exchange its Units in the operating partnership for shares of Class A Common
Stock, in order to hold a direct equity interest in the Company. The foregoing
descriptions of the Voting Agreement, the CGT Proxy, the Telmex Proxy, the
Investment Agreement, including the forms of the Amended and Restated Limited
Partnership Agreement, the Restated Certificate of Incorporation, the Amended
and Restated By-Laws and the Registration Rights Agreement, each such form being
attached as an exhibit to the Investment Agreement, and the Strategic Agreement
are qualified in their entirety by reference to the respective agreements and
documents, as the case may be, copies of which are filed hereto as Exhibits 3
through 7, respectively, and are specifically incorporated herein by reference
in response to this Item 4.
Item 5. Interest in Securities of the Issuer
This is filed to show an increase in the number of Shares
beneficially owned by the Slim Family, CGT and Telmex.
(a) The Reporting Persons have, as of the date hereof, the
following interests in the Shares of the Company:
Shares
---------------------------------------
Number % of Class
---------------------------------------
Carlos Slim Helu(1)................ 41,413,111 64.6%
Carlos Slim Domit(2)............... 41,413,111 64.6%
Marco Antonio Slim Domit(3)........ 41,413,111 64.6%
Patrick Slim Domit(4).............. 41,413,111 64.6%
Maria Soumaya Slim Domit(5)........ 41,413,111 64.6%
Vanessa Paola Slim Domit(6)........ 41,413,111 64.6%
Johanna Monique Domit(7)........... 41,413,111 64.6%
CGT(8)............................. 41,413,111 64.6%
Telmex............................. 12,016,200 18.7%
(1) These Shares are beneficially owned through CGT and Telmex.
(2) These Shares are beneficially owned through CGT and Telmex.
(3) These Shares are beneficially owned through CGT and Telmex.
(4) These Shares are beneficially owned through CGT and Telmex.
(5) These Shares are beneficially owned through CGT and Telmex.
(6) These Shares are beneficially owned through CGT and Telmex.
(7) These Shares are beneficially owned through CGT and Telmex.
(8) Includes Shares beneficially owned through Telmex.
<PAGE>
(b) Because the Slim Family beneficially owns a majority of the
outstanding voting equity securities of CGT, which has the power to control
Telmex, the Slim Family may be deemed to have the power to vote, or to direct
the voting of, any Shares of the Company owned by CGT or Telmex, and CGT may be
deemed to have the power to vote, or to direct the voting of any Shares of the
Company owned by Telmex. Except as otherwise disclosed herein, none of the
Reporting Persons shares voting power with respect to any of the Shares.
(c) All transactions in the Shares effected by the Reporting Persons
for the period beginning 60 days prior to the event which requires the filing of
this Statement and ending on the date of this filing, are listed in Schedule II
hereto.
(d) Because the Slim Family beneficially owns a majority of the
outstanding voting equity securities of CGT, which has the power to control
Telmex, the Slim Family may be deemed to have the right to receive, or the power
to direct the receipt of dividends from, or the proceeds of the sale of, any
Shares of the Company owned by CGT or Telmex, and CGT may be deemed to have the
right to receive, or the power to direct the receipt of dividends from, or the
proceeds of the sale of, any Shares of the Company owned by Telmex. Except as
disclosed herein, no person other than the Reporting Persons has or will have
any right to receive or the power to direct the receipt of dividends from, or
the proceeds of the sale of Shares owned by the Reporting Persons.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to the Securities of the Issuer
See "Item 4. Purpose of Transaction" for a description of the
Voting Agreement, the CGT Proxy, the Telmex Proxy, the Investment Agreement,
including the forms of the Amended and Restated Limited Partnership Agreement,
the Restated Certificate of Incorporation, the Amended and Restated By-Laws and
the Registration Rights Agreement, each such form being attached as an exhibit
to the Investment Agreement, and the Strategic Agreement, which are qualified in
their entirety by reference to the respective agreements and documents, as the
case may be, copies of which are filed hereto as Exhibits 3 through 7,
respectively, and are specifically incorporated herein by reference in answer to
this Item 6.
<PAGE>
SIGNATURE
After reasonable inquiry, and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Carlos Slim Helu
- ---------------------------------
Carlos Slim Domit By: /s/ ADOLFO CEREZO
------------------
- --------------------------------- Adolfo Cerezo
Marco Antonio Slim Domit Attorney-in-Fact
March 8, 2000
- ---------------------------------
Patrick Slim Domit
- ---------------------------------
Maria Soumaya Slim Domit
- ---------------------------------
Vanessa Paola Slim Domit
- ---------------------------------
Johanna Monique Slim Domit
- ---------------------------------
CARSO GLOBAL
TELECOM, S.A. DE C.V.
- ---------------------------------
By:Eduardo Valdes Acra
Title:Attorney-in-Fact
TELEFONOS DE MEXICO, S.A. DE C.V.
- ---------------------------------
By: Jaime Chico Pardo
Title: General Manager and Chief
Executive Officer
<PAGE>
SCHEDULE I
All of the individuals listed below are citizens of Mexico, unless
otherwise indicated. An asterisk (* ) indicates citizens of the United States, a
cross (+) indicates citizens of France.
THE SLIM FAMILY
Paseo de las Palmas 736, Colonia Lomas de Chapultepec, Mexico, D.F., Mexico
11000
Name and Position Principal Occupation
- ----------------- --------------------
Carlos Slim Helu Chairman of the Board of Telefonos de Mexico, S.A.
de C.V. and Carso Global Telecom, S.A. de C.V.
Carlos Slim Domit President of Grupo Sanborns, S.A. de C.V.
Marco Antonio Slim Domit President of Grupo Financiero Inbursa, S.A. de C.V.
and Banco Inbursa, S.A. de C.V.
Patrick Slim Domit President of Grupo Carso, S.A. de C.V. and
Industrias Nacobre, S.A. de C.V.
Maria Soumaya Slim Domit President of Asociacion Carso AC
Vanessa Paola Slim Domit Private Investor
Johanna Monique Slim Domit Private Investor
<PAGE>
<TABLE>
<CAPTION>
CARSO GLOBAL TELECOM, S.A. de C.V.
Insurgentes Sur 1500 Col. Pena Pobre Tlalpan, Mexico, D.F., 14060
Name and Position Principal Occupation
- ----------------- --------------------
<S> <C>
Carlos Slim Helu (Director and Chairman of the Board) Chairman of the Board of Telefonos de Mexico, S.A.
de C.V.
Jaime Chico Pardo (Director and Vice Chairman of the Board) CEO of Telefonos de Mexico, S.A. de C.V.
Isidoro Ambe Attar (Director) Corporate Director of Telefonos de Mexico, S.A. de
C.V.
Fernando G. Chico Pardo (Director) President of Promecap
Arturo Elias Ayub (Director) Corporate Director of Telefonos de Mexico, S.A. de
C.V.
Claudio X. Gonzalez Laporte (Director) Chairman of the Board of Kimberly Clark de Mexico
Humberto Gutierrez-Olvera Zubizarreta (Director) President of Condumex
Daniel Hajj Aboumrad (Director) President of Radio Movil Dipsa (Telcel)
Alfredo Sanchez Alcantara (Director) President of QOS Lab
Gerardo Sanchez Alcantara (Director) Private Investor
Carlos Slim Domit (Director) President of Grupo Sanborns, S.A. de C.V.
Marco A. Slim Domit (Director) President of Grupo Financiero Inbursa, S.A. de C.V.
and Banco Inbursa, S.A. de C.V.
Patrick Slim Domit (Director) President of Grupo Carso, S.A. de C.V. and
Industrias Nacobre, S.A. de C.V.
Eduardo Valdes Acra (Director) President of Grupo Carso and Inversora Bursatil
Andres Vasquez del Mercado (Director) Corporate Director of Telefonos de Mexico, S.A. de
C.V.
</TABLE>
<PAGE>
EXECUTIVE OFFICERS
Name Position
- ---- --------
Roberto Isaac Rodriguez Galvez President
Alejandro Escoto Cano Vice President of Finance
<PAGE>
<TABLE>
<CAPTION>
TELEFONOS DE MEXICO, S.A. DE C.V.
Parque Via 190, Oficina 1016, Colonia Cuauhtemoc, 06599 Mexico, D.F. Mexico
Name and Position Principal Occupation
- ----------------- --------------------
<S> <C>
Carlos Slim Helu (Director and Chairman of the Board) Chairman of the Board of the Company, CGT and
Telmex
David Ibarra Munoz (Director) Consultant
Claudio X. Gonzalez Laporte (Director) President and Chairman of the Board of Kimberly
Clark de Mexico
Jaime Chico Pardo (Director) CEO of Telmex
Antonio Coslo Arino (Director) President, Compania Industrial Tepeji Del Rio,
S.A. de C.V.
Amparo Espinosa Rugarcia (Director) President, Documentacion y Estudio de Mujeres,
A.C.
Elmer Franco Macias (Director) President, Grupo Infra, S.A. de C.V.
Angel Losada Moreno (Director) Executive Vice-President, Gigante, S.A. de C.V.
Romulo O'Farrill Jr. (Director) Chairman of the Board and President, Novedades
Editores, S.A. de C.V.
Juan Antonio Perez Simon (Director) Vice Chairman of the Board of Telmex
Bernardo Quintana Isaac (Director) President, Grupo ICA, S.A. de C.V.
Carlos Slim Domit (Director) President, Grupo Carso, S.A. de C.V.
Richard C. Dietz (Director)* President, SBC Global Markets
Pierre Fortin (Director)+ Consultant
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS
Name Position
- ---- --------
<S> <C>
Pedro Cerisola y Weber Divisional Director, West Metro
Jesus Rafael Mendoza Ortiz Divisional Director, East Metro
Gerardo Leal Garza Divisional Director, South Metro
Jorge L. Suategui Esquivel Divisional Director, Center
Jose M. Pacheco Gamboa Divisional Director, Southeast
Javier Coca Muniz Divisional Director, Gulf-Pacific
Leopoldo Muro Pico Divisional Director, West
Facundo Alonso Garcia Divisional Director, Northeast
Raymundo Paulin Velasco Divisional Director, Northwest
Miguel Angel Vera Garcia Divisional Director, North
Isidoro Ambe Attar Corporate Director, Corporate Market
B. Andres Vazquez del Mercado Corporate Director, Mass Market
Daniel Hajj Aboumrad Corporate Director, Subsidiaries
Arturo Elias Ayub Corporate Director, Services, Regulation and
Communication
Roberto Isaac Rodiguez Galvez Corporate Director, International Ventures
Eduardo Gomez Chibli Corporate Director, Technical and Long Distance
Hector Slim Seade Corporate Director, Operational Support
Oscar von Hauske Solis Corporate Director, Systems and Processes
Adolfo Cerezo Perez Corporate Director, Finance and Administration
Javier Elguea Solis Corporate Director, Human Resources
</TABLE>
<PAGE>
SCHEDULE II
For the period beginning 60 days prior to the event which requires the
filing of this Statement and ending on the date of this filing, Telmex Internet,
LLC effected the following purchases of Shares of the Company on the NASDAQ.
Trade Date Number of Shares Price Per Share
- ---------- ---------------- ---------------
December 27, 1999 18,800 $21.0000
December 28, 1999 101,300 $20.2523
December 29, 1999 100,900 $20.7481
December 30, 1999 143,400 $20.3825
December 31, 1999 68,200 $19.5009
January 3, 2000 35,000 $20.2407
January 4, 2000 50,000 $20.7963
January 5, 2000 35,300 $20.4281
January 6, 2000 20,000 $20.4575
January 7, 2000 30,800 $22.0908
TOTAL 603,799
<PAGE>
EXHIBIT INDEX
Exhibit Number Description Page Number
- -------------- ----------- -----------
1 Powers of Attorney 26
2 Joint Filing Agreement 35
3 Voting Agreement 36
4 CGT Proxy 45
5 Telmex Proxy 46
6 Investment Agreement 47
7 Strategic Agreement 157
<PAGE>
POWER OF ATTORNEY
I, a beneficial holder of shares of common stock, $.01 par value per
share (the "Securities"), of Prodigy Communications Corp., a Delaware
corporation, which Securities are registered pursuant to Section 12 of the
United States Securities Exchange Act of 1934, as amended (the "Exchange Act"),
hereby constitute and appoint Adolfo Cerezo, my true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, to act, for me
and in my name, place and stead and on my behalf, in any and all capacities, to
sign any Form 3, 4 or 5 or Schedules 13D or 13G (the "Filings") and any and all
amendments thereto and any other document relating thereto, and to file on my
behalf any such Filings required to be filed pursuant to the Exchange Act, any
amendment thereto and other document relating thereto and any exhibit thereto
with the United States Securities and Exchange Commission, hereby granting unto
said attorney-in-fact and agent, full power and authority to do and perform any
and all acts and things requisite as fully to all intents and purposes as I
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof,
and this power of attorney shall be irrevocable until December 31, 2004.
January 10, 2000 /s/ CARLOS SLIM HELU
--------------------
Carlos Slim Helu
<PAGE>
POWER OF ATTORNEY
I, a beneficial holder of shares of common stock, $.01 par value per
share (the "Securities"), of Prodigy Communications Corp., a Delaware
corporation, which Securities are registered pursuant to Section 12 of the
United States Securities Exchange Act of 1934, as amended (the "Exchange Act"),
hereby constitute and appoint Adolfo Cerezo, my true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, to act, for me
and in my name, place and stead and on my behalf, in any and all capacities, to
sign any Form 3, 4 or 5 or Schedules 13D or 13G (the "Filings") and any and all
amendments thereto and any other document relating thereto, and to file on my
behalf any such Filings required to be filed pursuant to the Exchange Act, any
amendment thereto and other document relating thereto and any exhibit thereto
with the United States Securities and Exchange Commission, hereby granting unto
said attorney-in-fact and agent, full power and authority to do and perform any
and all acts and things requisite as fully to all intents and purposes as I
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof,
and this power of attorney shall be irrevocable until December 31, 2004.
January 10, 2000 /s/ CARLOS SLIM DOMIT
---------------------
Carlos Slim Domit
<PAGE>
POWER OF ATTORNEY
I, a beneficial holder of shares of common stock, $.01 par value per
share (the "Securities"), of Prodigy Communications Corp., a Delaware
corporation, which Securities are registered pursuant to Section 12 of the
United States Securities Exchange Act of 1934, as amended (the "Exchange Act"),
hereby constitute and appoint Adolfo Cerezo, my true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, to act, for me
and in my name, place and stead and on my behalf, in any and all capacities, to
sign any Form 3, 4 or 5 or Schedules 13D or 13G (the "Filings") and any and all
amendments thereto and any other document relating thereto, and to file on my
behalf any such Filings required to be filed pursuant to the Exchange Act, any
amendment thereto and other document relating thereto and any exhibit thereto
with the United States Securities and Exchange Commission, hereby granting unto
said attorney-in-fact and agent, full power and authority to do and perform any
and all acts and things requisite as fully to all intents and purposes as I
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof,
and this power of attorney shall be irrevocable until December 31, 2004.
January 10, 2000 /s/ MARCO ANTONIO SLIM DOMIT
----------------------------
Marco Antonio Slim Domit
<PAGE>
POWER OF ATTORNEY
I, a beneficial holder of shares of common stock, $.01 par value per
share (the "Securities"), of Prodigy Communications Corp., a Delaware
corporation, which Securities are registered pursuant to Section 12 of the
United States Securities Exchange Act of 1934, as amended (the "Exchange Act"),
hereby constitute and appoint Adolfo Cerezo, my true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, to act, for me
and in my name, place and stead and on my behalf, in any and all capacities, to
sign any Form 3, 4 or 5 or Schedules 13D or 13G (the "Filings") and any and all
amendments thereto and any other document relating thereto, and to file on my
behalf any such Filings required to be filed pursuant to the Exchange Act, any
amendment thereto and other document relating thereto and any exhibit thereto
with the United States Securities and Exchange Commission, hereby granting unto
said attorney-in-fact and agent, full power and authority to do and perform any
and all acts and things requisite as fully to all intents and purposes as I
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof,
and this power of attorney shall be irrevocable until December 31, 2004.
January 10, 2000 /s/ PATRICK SLIM DOMIT
----------------------
Patrick Slim Domit
<PAGE>
POWER OF ATTORNEY
I, a beneficial holder of shares of common stock, $.01 par value per
share (the "Securities"), of Prodigy Communications Corp., a Delaware
corporation, which Securities are registered pursuant to Section 12 of the
United States Securities Exchange Act of 1934, as amended (the "Exchange Act"),
hereby constitute and appoint Adolfo Cerezo, my true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, to act, for me
and in my name, place and stead and on my behalf, in any and all capacities, to
sign any Form 3, 4 or 5 or Schedules 13D or 13G (the "Filings") and any and all
amendments thereto and any other document relating thereto, and to file on my
behalf any such Filings required to be filed pursuant to the Exchange Act, any
amendment thereto and other document relating thereto and any exhibit thereto
with the United States Securities and Exchange Commission, hereby granting unto
said attorney-in-fact and agent, full power and authority to do and perform any
and all acts and things requisite as fully to all intents and purposes as I
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof,
and this power of attorney shall be irrevocable until December 31, 2004.
January 10, 2000 /s/ MARIA SOUMAYA SLIM DOMIT
----------------------------
Maria Soumaya Slim Domit
<PAGE>
POWER OF ATTORNEY
I, a beneficial holder of shares of common stock, $.01 par value per
share (the "Securities"), of Prodigy Communications Corp., a Delaware
corporation, which Securities are registered pursuant to Section 12 of the
United States Securities Exchange Act of 1934, as amended (the "Exchange Act"),
hereby constitute and appoint Adolfo Cerezo, my true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, to act, for me
and in my name, place and stead and on my behalf, in any and all capacities, to
sign any Form 3, 4 or 5 or Schedules 13D or 13G (the "Filings") and any and all
amendments thereto and any other document relating thereto, and to file on my
behalf any such Filings required to be filed pursuant to the Exchange Act, any
amendment thereto and other document relating thereto and any exhibit thereto
with the United States Securities and Exchange Commission, hereby granting unto
said attorney-in-fact and agent, full power and authority to do and perform any
and all acts and things requisite as fully to all intents and purposes as I
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof,
and this power of attorney shall be irrevocable until December 31, 2004.
January 10, 2000 /s/ VANESSA PAOLA SLIM DOMIT
----------------------------
Vanessa Paola Slim Domit
<PAGE>
POWER OF ATTORNEY
I, a beneficial holder of shares of common stock, $.01 par value per
share (the "Securities"), of Prodigy Communications Corp., a Delaware
corporation, which Securities are registered pursuant to Section 12 of the
United States Securities Exchange Act of 1934, as amended (the "Exchange Act"),
hereby constitute and appoint Adolfo Cerezo, my true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, to act, for me
and in my name, place and stead and on my behalf, in any and all capacities, to
sign any Form 3, 4 or 5 or Schedules 13D or 13G (the "Filings") and any and all
amendments thereto and any other document relating thereto, and to file on my
behalf any such Filings required to be filed pursuant to the Exchange Act, any
amendment thereto and other document relating thereto and any exhibit thereto
with the United States Securities and Exchange Commission, hereby granting unto
said attorney-in-fact and agent, full power and authority to do and perform any
and all acts and things requisite as fully to all intents and purposes as I
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof,
and this power of attorney shall be irrevocable until December 31, 2004.
January 10, 2000 /s/ JOHANNA MONIQUE SLIM DOMIT
------------------------------
Johanna Monique Slim Domit
<PAGE>
POWER OF ATTORNEY
I, a beneficial holder of shares of common stock, $.01 par value per
share (the "Securities"), of Prodigy Communications Corp., a Delaware
corporation, which Securities are registered pursuant to Section 12 of the
United States Securities Exchange Act of 1934, as amended (the "Exchange Act"),
hereby constitute and appoint Adolfo Cerezo, my true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, to act, for me
and in my name, place and stead and on my behalf, in any and all capacities, to
sign any Form 3, 4 or 5 or Schedules 13D or 13G (the "Filings") and any and all
amendments thereto and any other document relating thereto, and to file on my
behalf any such Filings required to be filed pursuant to the Exchange Act, any
amendment thereto and other document relating thereto and any exhibit thereto
with the United States Securities and Exchange Commission, hereby granting unto
said attorney-in-fact and agent, full power and authority to do and perform any
and all acts and things requisite as fully to all intents and purposes as I
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof,
and this power of attorney shall be irrevocable until December 31, 2004.
CARSO GLOBAL TELECOM, S.A. DE C.V.
January 10, 2000 /s/ EDUARDO VALDES ACRA
-----------------------
By: Eduardo Valdes Acra
Title: Attorney-in-Fact
<PAGE>
POWER OF ATTORNEY
I, a beneficial holder of shares of common stock, $.01 par value per
share (the "Securities"), of Prodigy Communications Corp., a Delaware
corporation, which Securities are registered pursuant to Section 12 of the
United States Securities Exchange Act of 1934, as amended (the "Exchange Act"),
hereby constitute and appoint Adolfo Cerezo, my true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, to act, for me
and in my name, place and stead and on my behalf, in any and all capacities, to
sign any Form 3, 4 or 5 or Schedules 13D or 13G (the "Filings") and any and all
amendments thereto and any other document relating thereto, and to file on my
behalf any such Filings required to be filed pursuant to the Exchange Act, any
amendment thereto and other document relating thereto and any exhibit thereto
with the United States Securities and Exchange Commission, hereby granting unto
said attorney-in-fact and agent, full power and authority to do and perform any
and all acts and things requisite as fully to all intents and purposes as I
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof,
and this power of attorney shall be irrevocable until December 31, 2004.
TELEFONOS DE MEXICO, S.A. DE C.V.
January 10, 2000 /s/ JAIME CHICO PARDO
---------------------
By: Jaime Chico Pardo
Title: General Manager and
Chief Executive Officer
<PAGE>
JOINT FILING AGREEMENT
THIS JOINT FILING AGREEMENT (this "Agreement") is made and entered into
as of this 8th day of March, 2000, by and between Mr. Carlos Slim Helu,
Carlos Slim Domit, Marco Antonio Slim Domit, Patrick Slim Domit, Maria Soumaya
Slim Domit, Vanessa Paola Slim Domit, Johanna Monique Slim Domit, Carso Global
Telecom, S.A. de C.V., and Telefonos de Mexico, S.A. de C.V.
The parties to this Agreement hereby agree to prepare jointly and file
timely (or otherwise to deliver as appropriate) all filings on Schedule 13D and
Schedule 13G ("Filings") required to be filed by them pursuant to Section 13(d)
or 13(g) under the Securities Exchange Act of 1934, as amended, with respect to
their respective ownership of any securities of Prodigy Communications
Corporation that are required to be reported on any Filings. Each party to this
Agreement further agrees and covenants to the other parties that it will fully
cooperate with such other parties in the preparation and timely filing (and
other delivery) of all such Filings.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
Carlos Slim Helu
- ---------------------------------
Carlos Slim Domit By: /s/ ALDOLFO CEREZO
------------------
- --------------------------------- Aldolfo Cerezo
Marco Antonio Slim Domit Attorney-in-Fact
March 8, 2000
- ---------------------------------
Patrick Slim Domit
- ---------------------------------
Maria Soumaya Slim Domit
- ---------------------------------
Vanessa Paola Slim Domit
- ---------------------------------
Johanna Monique Slim Domit
- ---------------------------------
CARSO GLOBAL
TELECOM, S.A. DE C.V.
- ---------------------------------
By: Eduardo Valdes Acra
Title: Attorney-in-Fact
TELEFONOS DE MEXICO, S.A. DE C.V.
- ---------------------------------
By: Jaime Chico Pardo
Title: General Manager and Chief
Executive Officer
Exhibit 3
VOTING AGREEMENT
----------------
VOTING AGREEMENT (the "Agreement"), dated as of November 19, 1999, among
the undersigned stockholders (the "Stockholders") of Prodigy Communications
Corporation, a Delaware corporation ("Prodigy"), and SBC Communications Inc., a
Delaware corporation ("SBC"). Except as otherwise provided herein, capitalized
terms that are used but not otherwise defined herein shall have the meaning
assigned to such terms in the Investment Agreement (as defined below).
WHEREAS, contemporaneously with the execution of this Agreement, Prodigy,
Prodigy Sub, Operating Partnership, SBC, and SBC Sub have entered into an
Investment, Issuance, Contribution and Assumption Agreement (the "Investment
Agreement"), providing for, among other things, the approval and adoption of the
Restated Certificate of Incorporation and the Amended and Restated By-Laws
(collectively, the "Charter and By-Law Amendments") and the approval of the
Investment Share Issuance, the Prodigy Contribution, the Unit Issuance and SBC
Contribution and the other transactions contemplated thereby (collectively, the
"Transactions") upon the terms and subject to the conditions set forth in the
Investment Agreement, and setting forth certain representations, warranties,
covenants and agreements of the parties thereto in connection with the
Transactions and the Charter and By-Law Amendments;
WHEREAS, contemporaneously with the execution of this Agreement, Prodigy,
Operating Partnership, SBC and SBC Sub have entered into a Strategic and
Marketing Agreement (the "Strategic Agreement"), providing for the transactions
contemplated thereby upon the terms and subject to the conditions set forth in
the Strategic Agreement;
WHEREAS, the Investment Agreement contemplates the execution and delivery
of this Agreement;
WHEREAS, in order to induce SBC and SBC Sub to enter into the Investment
Agreement and the Strategic Agreement, the Stockholders wish to agree (i) to
deliver to SBC an irrevocable proxy to Vote (as defined in Section 2 hereof) the
Shares (as defined in Section 1 hereof) and any other such shares of capital
stock of Prodigy so as to approve and adopt the Investment Agreement, the
Strategic Agreement and the transactions contemplated thereby, the Transactions
and the Charter and By-Law Amendments and (ii) not to transfer or otherwise
dispose of any of the Shares, or any other shares of capital stock of Prodigy
acquired hereafter and prior to the termination of the Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
1. Representations of Stockholders. Each of the Stockholders represents and
warrants to SBC and SBC Sub that (a) such Stockholder lawfully owns beneficially
(as such term is defined in Rule 13d-3 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) and of record each of the shares of Common
Stock, par value $0.01 per share (the "Prodigy Common Stock"), of Prodigy set
forth opposite such Stockholder's name on Exhibit A hereto (such Stockholder's
"Shares") free and clear of all Liens, claims, charges, security interests or
other encumbrances and, except for this Agreement and the Investment Agreement,
there are no options, warrants or other rights, agreements, arrangements or
commitments of any character to which such Stockholder is a party relating to
the pledge, disposition or Voting of any shares of capital stock of Prodigy and
there are no Voting trusts or Voting agreements with respect to such Shares, (b)
such Stockholder does not beneficially own (as such term is used in Rule 13d-3
of the Exchange Act) any shares of Prodigy Common Stock other than such Shares
and does not have any options, warrants or other rights to acquire any
additional shares of capital stock of Prodigy or any security exercisable for or
convertible into shares of capital stock of Prodigy, (c) such Stockholder has
full power and authority and has taken all actions necessary to enter into,
execute and deliver this Agreement and to perform fully such Stockholder's
obligations hereunder. This Agreement has been duly executed and delivered and
constitutes the legal, valid and binding obligation of such Stockholder
enforceable against such Stockholder in accordance with its terms, subject to
the Bankruptcy and Equity Exception, (d) other than filings under the Exchange
Act, no notices, reports or other filings are required to be made by such
Stockholder with, nor are any consents, registrations, approvals, permits or
authorizations required to be obtained by such Stockholder from, any
Governmental Entity, in connection with the execution and delivery of this
Agreement by such Stockholder, and (e) the execution, delivery and performance
of this Agreement by such Stockholder does not, and the consummation by such
Stockholder of the transactions contemplated hereby will not, violate, conflict
with or constitute a breach of, or a default under, the certificate of
incorporation or by-laws of such Stockholder or any or their comparable
governing instruments or result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation, modification or acceleration) (whether after
the giving of or the passage of time of both) under any Contract to which such
Stockholder is a party or which is binding on it or its assets and will not
result in the creation of any Lien on, or security interest in, any of the
assets on properties of such Stockholder.
2. Agreement to Deliver Proxy. Each of the Stockholders agrees to deliver
to SBC on the date hereof an irrevocable proxy substantially in the form
attached hereto as Exhibit B to Vote such Stockholder's Shares (a) in favor of
adoption and approval of the Investment Agreement, the Strategic Agreement and
the transactions contemplated thereby, the Transactions and the Charter and
By-Law Amendments at every meeting of the stockholders of Prodigy at which such
matters are considered and at every adjournment or postponement thereof, (b)
against any action or agreement that would compete with, impede, interfere with
or tend to discourage the Transactions or inhibit the timely consummation of the
Transactions, (c) against any action or agreement that would result in a breach
in any material respect of any covenant, representation or warranty or any other
obligation of Prodigy or Operating Partnership under the Investment Agreement or
the Strategic Agreement and (d) except for the Transactions and the Investment
Agreement, against any merger, consolidation, business combination,
reorganization, recapitalization, liquidation or sale or transfer of any
material assets of Prodigy or its Subsidiaries. The proxy delivered by each of
the Stockholders pursuant to this Section 2 shall be irrevocable during the term
of this Agreement to the extent permitted under Delaware law. For purposes of
this Agreement, "Vote" shall include voting in person or by proxy in favor of or
against any action, otherwise consenting or withholding consent in respect of
any action (including, but not limited to, consenting in accordance with Section
228 of the Delaware General Corporation Law) or taking other action in favor of
or against any action. "Voting" shall have a correlative meaning.
3. No Voting Trusts. Each of the Stockholders agrees that they will not,
nor will they permit any entity under their control to, deposit any of its
Shares or New Shares (as defined in Section 6 hereof) in a Voting trust or
subject any of their Shares or New Shares to any arrangement with respect to the
Voting of such Shares or New Shares other than agreements entered into with SBC
or SBC Sub.
4. No Proxy Solicitations. Each of the Stockholders agrees that such
Stockholder will not, nor will such Stockholder permit any entity under such
Stockholder's control, (a) to solicit proxies or become a "participant" in a
"solicitation" (as such terms are defined in Regulation 14A under the Exchange
Act) in opposition to or competition with the consummation of the Transactions
or otherwise encourage or assist any party in taking or planning any action
which would compete with, impede, interfere with or tend to discourage the
Transactions or inhibit the timely consummation of the Transactions in
accordance with the terms of the Investment Agreement, (b) to directly or
indirectly encourage, initiate or cooperate in a stockholders' Vote or action by
consent of Prodigy's stockholders in opposition to or in competition with the
consummation of the Transactions, or (c) to become a member of a "group" (as
such term is used in Section 13(d) of the Exchange Act) with respect to any
voting securities of Prodigy for the purpose of opposing or competing with the
consummation of the Transactions; provided, that the foregoing shall not
restrict any director of Prodigy from taking any action such director
reasonably believes after consultation with outside counsel is necessary to
satisfy such director's fiduciary duty to stockholders of Prodigy.
5. Transfer and Encumbrance. On or after the date hereof and during the
term of this Agreement, each of the Stockholders agrees not to transfer, sell,
offer, exchange, pledge or otherwise dispose of or encumber any of such
Stockholder's Shares or New Shares.
6. Additional Purchases. Each of the Stockholders agrees that such
Stockholder will not purchase or otherwise acquire beneficial ownership (as such
term is used in Rule 13d-3 of the Exchange Act) of any shares of Prodigy Common
Stock after the execution of this Agreement ("New Shares"), nor will any
Stockholder voluntarily acquire the right to Vote or share in the Voting of any
shares of Prodigy Common Stock other than the Shares, unless such Stockholder
agrees to deliver to SBC immediately after such purchase or acquisition an
irrevocable proxy substantially in the form attached hereto as Exhibit C with
respect to such New Shares. Each of the Stockholders also severally agrees that
any New Shares acquired or purchased by him or her shall be subject to the terms
of this Agreement to the same extent as if they constituted Shares.
7. Agreement to Vote Shares. (i) SBC shall vote or cause any of its
Subsidiaries to vote all shares of Class A Common Stock and Class B Common Stock
owned or held of record by SBC or any of its Subsidiaries at any meeting of
Prodigy stockholders held for such purpose in favor of electing three persons
designated by the Stockholders in writing to SBC prior to such meeting (each
such person, a "Stockholder Designee") as Class A Directors (as defined in the
Restated Certificate of Incorporation) to the board of directors of Prodigy;
provided, however, that at any time that a First Telmex/Carso Triggering Event
(as defined in the Restated Certificate of Incorporation) occurs, SBC shall vote
or cause any of its Subsidiaries to vote such shares in favor of electing two
Stockholder Designees as Class A Directors to the board of directors of Prodigy;
provided, further, that at any time a Second Telmex/Carso Triggering Event (as
defined in the Restated Certificate of Incorporation) occurs, SBC shall vote or
cause any of its Subsidiaries to vote such shares in favor of electing one
Stockholder Designee as a Class A Director to the board of directors of Prodigy;
provided, further, that at any time that a Third Telmex/Carso Triggering Event
(as defined below) occurs, SBC's obligation to vote or cause any of its
Subsidiaries to vote such shares in favor of electing any Stockholder Designees
as Class A Directors to the board of directors of Prodigy shall terminate. For
purposes of this Agreement, "Third Telmex/Carso Triggering Event" means any time
that Telefonos de Mexico, S.A. de C.V. ("Telmex") and Carso Global Telecom, S.A.
de C.V. ("Carso"), acting separately or jointly, shall have transferred (other
than to an Affiliate within the same corporate group) in the aggregate (i.e.,
together with all other shares of Prodigy Common Stock previously transferred by
Telmex or Carso other than to an Affiliate within the same corporate group) a
number of shares of Prodigy Common Stock constituting an aggregate of one
hundred percent (100%) of the number of shares of Prodigy Common Stock owned or
held of record by Telmex and Carso as of the date hereof (subject to adjustment
in accordance with Article FOURTH, Clause (b)(iv) of the Restated Certificate of
Incorporation); provided, that calculations of whether the Third Telmex/Carso
Triggering Event has occurred shall be made on the same basis as the
calculations of whether First or Second Telmex/Carso Triggering Events have
occurred in accordance with the Restated Certificate of Incorporation.
(ii) If at any time there shall be a vacancy with respect to a Class A
Director on the board of directors of Prodigy such that the number of Class A
Directors on the board of directors of Prodigy does not include the number of
Stockholder Designees provided for in Section 7(i) above, the Class B Directors
shall vote to fill such vacancy with a Stockholder Designee in order to give
effect to Section 7(i) above; provided that at any time that a Third
Telmex/Carso Triggering Event occurs, the Class B Directors' obligation to vote
to fill any such vacancies with a Stockholder Designee shall terminate.
8. Specific Performance. Each party hereto acknowledges that it will be
impossible to measure in money the damage to the other party if a party hereto
fails to comply with any of the obligations imposed by this Agreement, that
every such obligation is material and that, in the event of any such failure,
the other party will not have an adequate remedy at law or damages. Accordingly,
each party hereto agrees that injunctive relief or other equitable remedy, in
addition to remedies at law or damages, is the appropriate remedy for any such
failure and will not oppose the granting of such relief on the basis that the
other party has an adequate remedy at law. Each party hereto agrees that it will
not seek, and agrees to waive any requirement for, the securing or posting of a
bond in connection with any other party's seeking or obtaining such equitable
relief.
9. Entire Agreement; Amendment; Waiver. This Agreement (including the
exhibits hereto) supersedes all prior agreements, written or oral, among the
parties hereto with respect to the subject matter hereof and contains the entire
agreement among the parties with respect to the subject matter hereof. This
Agreement may not be amended, supplemented or modified, and no provisions hereof
may be modified or waived, except by an instrument in writing signed by all the
parties hereto. No waiver of any provisions hereof by any party shall be deemed
a waiver of any other provisions hereof by any such party, nor shall any such
waiver be deemed a continuing waiver of any provision hereof by such party.
10. Notices. All notices, requests, claims, demands or other communications
hereunder shall be in writing and shall be deemed given when delivered
personally, upon receipt of a transmission confirmation if sent by telecopy or
like transmission and on the next business day when sent by Federal Express,
Express Mail or other reputable overnight courier service to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
If to SBC:
SBC Communications Inc.
175 East Houston Street
San Antonio, Texas 78205
Attention: James S. Kahan
Senior Vice President
Corporate Development
Telecopy: 210-351-5034
With copies, which shall not constitute notice, to:
SBC Communications Inc.
175 East Houston Street
San Antonio, Texas 78705
Attention: Senior Counsel - M&A
Telecopy: 210-351-3488
and
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Joseph B. Frumkin
Keith A. Pagnani
Telecopy: (212) 558-3588
If to a Stockholder, to the address or telecopy number set forth for such
Stockholder on the signature page hereof:
With a copy to:
Prodigy Communications Corporation
44 South Broadway
White Plains, New York 10601
Attention: Andrea S. Hirsch
Telecopy: 914-448-8198
or to such other Persons on addresses as may be designated in writing by the
party to receive such notice as provided above.
11. Miscellaneous.
(a) Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH AND SUBJECT
TO THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO CONFLICTS OF LAWS
PRINCIPLES.
(b) Venue; WAIVER OF JURY TRIAL. The parties hereby irrevocably submit to
the jurisdiction of the courts of the State of Delaware and the Federal court of
the United States of America located in the State of Delaware solely in respect
of the interpretation and enforcement of the provisions of this Agreement and of
the documents governed by Delaware law referred to in this Agreement, and in
respect of the transactions contemplated hereby, and hereby waive, and agree not
to assert, as a defense in any action, suit or proceeding for the interpretation
or enforcement hereof or of any such document, that it is not subject thereto or
that such action, suit or proceeding may not be brought or is not maintainable
in said courts or that the venue thereof may not be appropriate or that this
Agreement or any such document may not be enforced in or by such courts, and the
parties hereto irrevocably agree that all claims with respect to such action or
proceeding shall be heard and determined in such a Delaware State or Federal
court. The parties hereby consent to and grant any such court jurisdiction over
the person of such parties and over the subject matter of such dispute and agree
that mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 10 of this Agreement or in such
other manner as may be permitted by law shall be valid and sufficient service
thereof.
EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 11 (b).
(c) Severability. In the event that any provision of the Agreement is held
to be illegal, invalid or unenforceable in a final, unappealable order or
judgment (each such provision, an "invalid provision"), then such provision
shall be severed from this Agreement and shall be inoperative and the parties
promptly shall negotiate in good faith a lawful, valid and enforceable provision
that is as similar to the invalid provision as may be possible and that
preserves the original intentions and economic positions of the parties as set
forth herein to the maximum extent feasible, while the remaining provisions of
this Agreement shall remain binding on the parties hereto. Without limiting the
generality of the foregoing sentence, in the event a change in any applicable
law, rule or regulation makes it unlawful for a party to comply with any of its
obligations hereunder, the parties shall negotiate in good faith a modification
to such obligation to the extent necessary to comply with such law, rule or
regulation that is as similar in terms to the original obligation as may be
possible while preserving the original intentions and economic positions of the
as set forth herein to the maximum extent feasible.
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
(e) Termination. Except for Section 7, this Agreement shall terminate upon
the earliest to occur of (i) the Closing, (ii) the date eighteen months after
termination of the Investment Agreement unless the Investment Agreement is
properly terminated by Prodigy pursuant to Section 7.4(b) thereof, in which case
this Agreement shall terminate upon termination of the Investment Agreement and
(iii) the date specified in a written agreement duly executed and delivered by
SBC and each of the Stockholders. Section 7 of this Agreement shall terminate
upon the earliest to occur of (i) the termination of the Investment Agreement,
(ii) the date that a Third Telmex/Carso Triggering Event occurs, (iii) the date
that a Third Class B Triggering Event (as defined in the Restated Certificate of
Incorporation) occurs and (iv) the date specified in a written agreement duly
executed and delivered by SBC and each of the Stockholders.
(f) Further Assurances. Each party hereto shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or desirable to effectuate, carry out and comply with all of
the terms of this Agreement and the transactions contemplated hereby.
(g) Headings; Recitals. All Section headings and the recitals herein are
for convenience of reference only and are not part of this Agreement, and no
construction or reference shall be derived therefrom.
(h) THIRD PARTY BENEFICIARIES. NOTHING IN THIS AGREEMENT, EXPRESS OR
IMPLIED, IS INTENDED TO CONFER UPON ANY THIRD PARTY ANY RIGHTS OR REMEDIES OF
ANY NATURE WHATSOEVER UNDER OR BY REASON OF THIS AGREEMENT.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
SBC Communications Inc.
By: /s/ James S. Kahan
----------------------------
Name: James S. Kahan
Title: Senior Executive Vice
President - Corporate Development
THE STOCKHOLDERS:
Carso Global Telecom, S.A. de C.V.
By: /s/ Eduardo Valdes Acra
-------------------------
Name: Eduardo Valdes Acra
Title: Attorney-in-Fact
Address: Insurgentes Sur 1500
Col. Pena Pobre Tlalpan
Mexico, D.F. 14060
Telecopy: 011-525-520-1510
Telefonos de Mexico, S.A. de C.V.
By: /s/ Adolfo Cerezo Perez
-------------------------
Name: Adolfo Cerezo Perez
Title: Chief Financial Officer
Address: Parque Via 190
Col. Cuauhtemoc,
06599 Mexico,
D.F., Mexico
Telecopy: 011-525-255-1011
<PAGE>
(EXHIBIT A)
THE COMPANY
LIST OF STOCKHOLDERS
NAME # SHARES
- ---- --------
Carso Global Telecom, S.A. de C.V. 29,396,911
Telefonos de Mexico, S.A. de C.V. 11,412,500
<PAGE>
(EXHIBIT B)
FORM OF PROXY
The undersigned, for consideration received, hereby appoints James S. Kahan
or another representative of SBC Communications Inc. designated by him and each
of them my proxies, with power of substitution and resubstitution, (i) to vote
all shares of Common Stock, par value $0.01 per share, of Prodigy Communications
Corporation, a Delaware corporation ("Prodigy"), owned by the undersigned (the
"Shares") as of the date hereof at the Special Meeting of Stockholders of
Prodigy to be held as soon as practicable after the date hereof and at any
adjournment or postponement thereof (the "Special Meeting") FOR approval and
adoption of (a) the Investment, Issuance, Contribution and Assumption Agreement,
dated as of November 19, 1999 (the "Investment Agreement"), by and among
Prodigy, Prodigy Transition Corporation, a Delaware corporation and a wholly
owned subsidiary of Prodigy ("Prodigy Sub"), Prodigy Communications Limited
Partnership, a Delaware limited partnership ("Operating Partnership"), SBC
Communications Inc., a Delaware corporation ("SBC"), and SBC Internet
Communications, Inc., a Delaware corporation and an indirect wholly owned
subsidiary of SBC ("SBC Sub"), (b) the Strategic and Marketing Agreement, dated
as of November 19, 1999 (the "Strategic Agreement"), by and among, Prodigy,
Operating Partnership, SBC and SBC Sub, and the transactions contemplated
thereby, (c) the Restated Certificate of Incorporation and the Amended and
Restated By-Laws (collectively, the "Charter and By-Law Amendments") and (d) the
approval of the Investment Share Issuance, the Prodigy Contribution, the Unit
Issuance and SBC Contribution and the other transactions contemplated by the
Investment Agreement (collectively, the "Transactions"), and AGAINST (a) any
action or agreement that would compete with, impede, interfere with or tend to
discourage the Transactions or inhibit the timely consummation of the
Transactions or (b) any action or agreement that would result in a breach in any
material respect of any covenant, representation or warranty or any other
obligation of Prodigy or Operating Partnership under the Investment Agreement or
the Strategic Agreement or, (c) except for the Transactions and the Investment
Agreement, any merger, consolidation, business combination, reorganization,
recapitalization, liquidation or sale or transfer of any material assets of
Prodigy or its Subsidiaries, (ii) if the Special Meeting is not held within five
months of the date hereof, to consent with respect to such Shares in favor of
adoption and approval of (a) the Investment Agreement, (b) the Strategic
Agreement and the transactions contemplated thereby, (c) the Transactions and
(d) the Charter and By-Law Amendments and (iii) to withhold consents with
respect to such Shares for (a) any action or agreement that would compete with,
impede, interfere with or tend to discourage the Transactions or inhibit the
timely consummation of the Transactions or (b) any action or agreement that
would result in a breach in any material respect of any covenant, representation
or warranty or any other obligation of Prodigy or Operating Partnership under
the Investment Agreement or the Strategic Agreement or, (c) except for the
Transactions and the Investment Agreement, any merger, consolidation, business
combination, reorganization, recapitalization, liquidation or sale or transfer
of any material assets of Prodigy or its Subsidiaries. This proxy is coupled
with an interest, revokes all prior proxies granted by the undersigned and is
irrevocable until such time as the Voting Agreement, dated as of November 19,
1999, among certain stockholders of Prodigy, including the undersigned, and SBC,
terminates in accordance with its terms, at which time this proxy shall expire.
Dated November 19, 1999
--------------------------------
(Signature of Stockholder)
--------------------------------
(Signature of Stockholder)
<PAGE>
(EXHIBIT C)
FORM OF PROXY
The undersigned, for consideration received, hereby appoints [insert names
of SBC designees] and each of them my proxies, with power of substitution and
resubstitution, (i) to vote the [insert number of shares] shares of Common
Stock, par value $0.01 per share (the "New Shares"), of Prodigy Communications
Corporation, a Delaware corporation ("Prodigy"), purchased or otherwise acquired
by the undersigned, or for which the undersigned has voluntarily acquired the
right to vote or share in the voting of such shares, since the execution of the
Voting Agreement, dated as of November 19, 1999 (the "Voting Agreement"), by and
among certain stockholders of Prodigy, including the undersigned, and SBC, at
the Special Meeting of Stockholders of Prodigy to be held [insert date, time and
place] and at any adjournment or postponement thereof (the "Special Meeting")
FOR approval and adoption of (a) the Investment, Issuance, Contribution and
Assumption Agreement, dated as of November 19, 1999 (the "Investment
Agreement"), by and among Prodigy, Prodigy Transition Corporation, a Delaware
corporation and a wholly owned subsidiary of Prodigy ("Prodigy Sub"), Prodigy
Communications Limited Partnership, a Delaware limited partnership ("Operating
Partnership"), SBC Communications Inc., a Delaware corporation ("SBC"), and SBC
Internet Communications, Inc., a Delaware corporation and an indirect wholly
owned subsidiary of SBC ("SBC Sub"), (b) the Strategic and Marketing Agreement,
dated as of November 19, 1999 (the "Strategic Agreement"), by and among,
Prodigy, Operating Partnership, SBC and SBC Sub, and the transactions
contemplated thereby, (c) the Restated Certificate of Incorporation and the
Amended and Restated By-Laws (collectively, the "Charter and By-Law Amendments")
and (d) the approval of the Investment Share Issuance, the Prodigy Contribution,
the Unit Issuance and SBC Contribution and the other transactions contemplated
by the Investment Agreement (collectively, the "Transactions"), and AGAINST (a)
any action or agreement that would compete with, impede, interfere with or tend
to discourage the Transactions or inhibit the timely consummation of the
Transactions or (b) any action or agreement that would result in a breach in any
material respect of any covenant, representation or warranty or any other
obligation of Prodigy or Operating Partnership under the Investment Agreement or
the Strategic Agreement or, (c) except for the Transactions and the Investment
Agreement, any merger, consolidation, business combination, reorganization,
recapitalization, liquidation or sale or transfer of any material assets of
Prodigy or its Subsidiaries, (ii) if the Special Meeting is not held within five
months of the date hereof, to consent with respect to such New Shares in favor
of adoption and approval of (a) the Investment Agreement, (b) the Strategic
Agreement and the transactions contemplated thereby, (c) the Transactions and
(d) the Charter and By-Law Amendments and (iii) to withhold consents with
respect to such Shares for (a) any action or agreement that would compete with,
impede, interfere with or tend to discourage the Transactions or inhibit the
timely consummation of the Transactions or (b) any action or agreement that
would result in a breach in any material respect of any covenant, representation
or warranty or any other obligation of Prodigy or Operating Partnership under
the Investment Agreement or the Strategic Agreement or, (c) except for the
Transactions and the Investment Agreement, any merger, consolidation, business
combination, reorganization, recapitalization, liquidation or sale or transfer
of any material assets of Prodigy or its Subsidiaries. This proxy is coupled
with an interest, revokes all prior proxies granted by the undersigned and is
irrevocable until such time as the Voting Agreement terminates in accordance
with its terms.
Dated ____________________, 199_
--------------------------------
(Signature of Stockholder)
--------------------------------
(Signature of Stockholder)
EXHIBIT 4
PROXY
The undersigned, for consideration received, hereby appoints James S. Kahan
or another representative of SBC Communications Inc. designated by him and each
of them my proxies, with power of substitution and resubstitution, (i) to vote
all shares of Common Stock, par value $0.01 per share, of Prodigy Communications
Corporation, a Delaware corporation ("Prodigy"), owned by the undersigned (the
"Shares") as of the date hereof at the Special Meeting of Stockholders of
Prodigy to be held as soon as practicable after the date hereof and at any
adjournment or postponement thereof (the "Special Meeting") FOR approval and
adoption of (a) the Investment, Issuance, Contribution and Assumption Agreement,
dated as of November 19, 1999 (the "Investment Agreement"), by and among
Prodigy, Prodigy Transition Corporation, a Delaware corporation and a wholly
owned subsidiary of Prodigy ("Prodigy Sub"), Prodigy Communications Limited
Partnership, a Delaware limited partnership ("Operating Partnership"), SBC
Communications Inc., a Delaware corporation ("SBC"), and SBC Internet
Communications, Inc., a Delaware corporation and an indirect wholly owned
subsidiary of SBC ("SBC Sub"), (b) the Strategic and Marketing Agreement, dated
as of November 19, 1999 (the "Strategic Agreement"), by and among, Prodigy,
Operating Partnership, SBC and SBC Sub, and the transactions contemplated
thereby, (c) the Restated Certificate of Incorporation and the Amended and
Restated By-Laws (collectively, the "Charter and By-Law Amendments") and (d) the
approval of the Investment Share Issuance, the Prodigy Contribution, the Unit
Issuance and SBC Contribution and the other transactions contemplated by the
Investment Agreement (collectively, the "Transactions"), and AGAINST (a) any
action or agreement that would compete with, impede, interfere with or tend to
discourage the Transactions or inhibit the timely consummation of the
Transactions or (b) any action or agreement that would result in a breach in any
material respect of any covenant, representation or warranty or any other
obligation of Prodigy or Operating Partnership under the Investment Agreement or
the Strategic Agreement or, (c) except for the Transactions and the Investment
Agreement, any merger, consolidation, business combination, reorganization,
recapitalization, liquidation or sale or transfer of any material assets of
Prodigy or its Subsidiaries, (ii) if the Special Meeting is not held within five
months of the date hereof, to consent with respect to such Shares in favor of
adoption and approval of (a) the Investment Agreement, (b) the Strategic
Agreement and the transactions contemplated thereby, (c) the Transactions and
(d) the Charter and By-Law Amendments and (iii) to withhold consents with
respect to such Shares for (a) any action or agreement that would compete with,
impede, interfere with or tend to discourage the Transactions or inhibit the
timely consummation of the Transactions or (b) any action or agreement that
would result in a breach in any material respect of any covenant, representation
or warranty or any other obligation of Prodigy or Operating Partnership under
the Investment Agreement or the Strategic Agreement or, (c) except for the
Transactions and the Investment Agreement, any merger, consolidation, business
combination, reorganization, recapitalization, liquidation or sale or transfer
of any material assets of Prodigy or its Subsidiaries.
This proxy is coupled with an interest, revokes all prior proxies granted
by the undersigned and is irrevocable until such time as the Voting Agreement,
dated as of November 19, 1999, among certain stockholders of Prodigy, including
the undersigned, and SBC, terminates in accordance with its terms, at which time
this proxy shall expire.
Dated November 19, 1999
Carso Global Telecom, S.A. de C.V.
By: /s/ Eduardo Valdes Acra
--------------------------
Name: Eduardo Valdes Acra
Title: Attorney-in-Fact
EXHIBIT 5
PROXY
The undersigned, for consideration received, hereby appoints James S. Kahan
or another representative of SBC Communications Inc. designated by him and each
of them my proxies, with power of substitution and resubstitution, (i) to vote
all shares of Common Stock, par value $0.01 per share, of Prodigy Communications
Corporation, a Delaware corporation ("Prodigy"), owned by the undersigned (the
"Shares") as of the date hereof at the Special Meeting of Stockholders of
Prodigy to be held as soon as practicable after the date hereof and at any
adjournment or postponement thereof (the "Special Meeting") FOR approval and
adoption of (a) the Investment, Issuance, Contribution and Assumption Agreement,
dated as of November 19, 1999 (the "Investment Agreement"), by and among
Prodigy, Prodigy Transition Corporation, a Delaware corporation and a wholly
owned subsidiary of Prodigy ("Prodigy Sub"), Prodigy Communications Limited
Partnership, a Delaware limited partnership ("Operating Partnership"), SBC
Communications Inc., a Delaware corporation ("SBC"), and SBC Internet
Communications, Inc., a Delaware corporation and an indirect wholly owned
subsidiary of SBC ("SBC Sub"), (b) the Strategic and Marketing Agreement, dated
as of November 19, 1999 (the "Strategic Agreement"), by and among, Prodigy,
Operating Partnership, SBC and SBC Sub, and the transactions contemplated
thereby, (c) the Restated Certificate of Incorporation and the Amended and
Restated By-Laws (collectively, the "Charter and By-Law Amendments") and (d) the
approval of the Investment Share Issuance, the Prodigy Contribution, the Unit
Issuance and SBC Contribution and the other transactions contemplated by the
Investment Agreement (collectively, the "Transactions"), and AGAINST (a) any
action or agreement that would compete with, impede, interfere with or tend to
discourage the Transactions or inhibit the timely consummation of the
Transactions or (b) any action or agreement that would result in a breach in any
material respect of any covenant, representation or warranty or any other
obligation of Prodigy or Operating Partnership under the Investment Agreement or
the Strategic Agreement or, (c) except for the Transactions and the Investment
Agreement, any merger, consolidation, business combination, reorganization,
recapitalization, liquidation or sale or transfer of any material assets of
Prodigy or its Subsidiaries, (ii) if the Special Meeting is not held within five
months of the date hereof, to consent with respect to such Shares in favor of
adoption and approval of (a) the Investment Agreement, (b) the Strategic
Agreement and the transactions contemplated thereby, (c) the Transactions and
(d) the Charter and By-Law Amendments and (iii) to withhold consents with
respect to such Shares for (a) any action or agreement that would compete with,
impede, interfere with or tend to discourage the Transactions or inhibit the
timely consummation of the Transactions or (b) any action or agreement that
would result in a breach in any material respect of any covenant, representation
or warranty or any other obligation of Prodigy or Operating Partnership under
the Investment Agreement or the Strategic Agreement or, (c) except for the
Transactions and the Investment Agreement, any merger, consolidation, business
combination, reorganization, recapitalization, liquidation or sale or transfer
of any material assets of Prodigy or its Subsidiaries.
This proxy is coupled with an interest, revokes all prior proxies granted
by the undersigned and is irrevocable until such time as the Voting Agreement,
dated as of November 19, 1999, among certain stockholders of Prodigy, including
the undersigned, and SBC, terminates in accordance with its terms, at which time
this proxy shall expire.
Dated November 19, 1999
Telefonos de Mexico, S.A. de C.V.
By: /s/ Adolfo Cerezo Perez
--------------------------
Name: Adolfo Cerezo Perez
Title: Chief Financial Officer
EXHIBIT 6
Execution Copy
- --------------------------------------------------------------------------------
INVESTMENT, ISSUANCE,
CONTRIBUTION AND ASSUMPTION AGREEMENT
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
-----------------
Page
----
RECITALS
ARTICLE I
CERTAIN DEFINITIONS
ARTICLE II
INVESTMENT AND ISSUANCE; CONTRIBUTION AND ASSUMPTION
2.1 Prodigy Contribution................................................. 10
2.2 Unit Issuance and SBC Contribution................................... 10
2.3 Issuance of Investment Share......................................... 11
ARTICLE III
CLOSING; CONDITIONS
3.1 Closing.............................................................. 11
3.2 Conditions to Obligations of SBC and SBC Sub......................... 12
3.3 Conditions to Obligations of Prodigy, Prodigy Sub
and Operating Partnership ........................................... 15
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Prodigy, Prodigy Sub and
Operating Partnership................................................ 17
4.2 Representations and Warranties of SBC and SBC Sub.................... 36
ARTICLE V
COVENANTS
5.1 Covenants of Prodigy, Prodigy Sub and Operating Partnership.......... 40
5.2 Covenants of SBC and SBC Sub......................................... 44
5.3 Provisions Regarding Third Party Acquisitions........................ 46
5.4 Provisions Regarding Prodigy Stockholder Approval.................... 47
5.5 Additional Covenants................................................. 49
ARTICLE VI
FURTHER AGREEMENTS
6.1 Directors of Prodigy................................................. 51
6.2 Assignments and Officers............................................. 52
6.3 Company Headquarters................................................. 52
6.4 Cooperation.......................................................... 52
6.5 Publicity............................................................ 53
6.6 Registration Rights.................................................. 53
6.7 Expenses............................................................. 53
ARTICLE VII
TERMINATION
7.1 Termination by Mutual Consent........................................ 53
7.2 Termination by Either Prodigy or SBC................................. 53
7.3 Termination by SBC................................................... 54
7.4 Termination by Prodigy............................................... 55
7.5 Effect of Termination and Abandonment................................ 55
ARTICLE VIII
SURVIVAL AND INDEMNIFICATION
8.1 Survival............................................................. 56
8.2 Indemnification and Reimbursement by Prodigy......................... 56
8.3 Indemnification and Reimbursement by SBC............................. 57
8.4 Limitations on Amount - Prodigy...................................... 58
8.5 Limitations on Amount - SBC.......................................... 58
8.6 Notice and Payment of Claims......................................... 59
8.7 Procedure for Indemnification - Third Party Claims................... 59
8.8 Other Indemnification Provisions..................................... 61
ARTICLE IX
MISCELLANEOUS
9.1 Assignment.......................................................... 61
9.2 Governing Law....................................................... 61
9.3 Venue; WAIVER OF JURY TRIAL......................................... 61
9.4 Counterparts........................................................ 62
9.5 Notices............................................................. 62
9.6 Entire Agreement.................................................... 64
9.7 Amendment........................................................... 64
9.8 Severability........................................................ 64
9.9 Headings; Recitals.................................................. 64
9.10 No Waiver of Rights................................................. 64
9.11 Remedies Cumulative................................................. 65
9.12 No Agency........................................................... 65
9.13 No Third Party Beneficiaries........................................ 65
9.14 Force Majeure....................................................... 65
9.15 Further Assurances; Affiliates...................................... 66
9.16 Export Controls..................................................... 66
9.17 Negotiated Terms.................................................... 66
9.18 Principles of Construction.......................................... 66
9.19 Confidentiality..................................................... 67
9.20 Transfer Taxes...................................................... 67
9.21 Legend.............................................................. 67
EXHIBIT A SBC MANDATORY CONTRIBUTED ASSETS
EXHIBIT B SBC DISCRETIONARY CONTRIBUTED ASSETS
EXHIBIT C FORM OF AMENDED AND RESTATED LIMITED
PARTNERSHIP AGREEMENT
EXHIBIT D FORM OF RESTATED CERTIFICATE
OF INCORPORATION
EXHIBIT E FORM OF AMENDED AND RESTATED BY-LAWS
EXHIBIT F FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT G PRODIGY NON-CONTRIBUTED ASSETS
EXHIBIT H PRODIGY NON-CONTRIBUTED LIABILITIES
<PAGE>
INVESTMENT, ISSUANCE, CONTRIBUTION AND ASSUMPTION AGREEMENT (hereinafter
called this "Agreement"), dated as of November 19, 1999, by and among SBC
Communications Inc., a Delaware corporation ("SBC"), SBC Internet
Communications, Inc., a Delaware corporation and an indirect wholly owned
subsidiary of SBC ("SBC Sub"), Prodigy Communications Corporation, a Delaware
corporation ("Prodigy"), Prodigy Transition Corporation, a Delaware corporation
and a wholly owned subsidiary of Prodigy ("Prodigy Sub"), and Prodigy
Communications Limited Partnership, a Delaware limited partnership ("Operating
Partnership") (each of SBC, SBC Sub, Prodigy, Prodigy Sub and Operating
Partnership, a "Party" and collectively, the "Parties"). Capitalized terms used
but not defined herein shall have the meaning assigned to them in the Strategic
and Marketing Agreement (as defined below).
RECITALS
WHEREAS, Prodigy and Prodigy Sub have formed Operating Partnership and
Prodigy and Prodigy Sub own a combined 100% interest in Operating Partnership;
WHEREAS, the respective boards of directors of each of Prodigy and Prodigy
Sub have approved the Contribution of all of the Prodigy Assets and Prodigy
Liabilities to the Operating Partnership and the acceptance of all of the
Prodigy Contributed Assets by Operating Partnership and the Assumption of all of
the Prodigy Liabilities by Operating Partnership (the "Prodigy Contribution")
upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, the respective boards of directors of each of Prodigy, SBC and SBC
Sub have approved the issuance of the SBC Units in exchange for the Contribution
to Operating Partnership of all of the SBC Mandatory Contributed Assets and SBC
Mandatory Liabilities associated with such SBC Mandatory Contributed Assets, the
Contribution to Operating Partnership of all of the SBC Discretionary
Contributed Assets and SBC Discretionary Liabilities associated with such SBC
Discretionary Contributed Assets, the acceptance by Operating Partnership of all
of the SBC Mandatory Contributed Assets and SBC Discretionary Contributed Assets
and the Assumption by Operating Partnership of all of the SBC Mandatory
Liabilities associated with such SBC Mandatory Contributed Assets and SBC
Discretionary Liabilities associated with such SBC Discretionary Contributed
Assets upon the terms and subject to the conditions set forth in this Agreement
(the "Unit Issuance and SBC Contribution");
WHEREAS, the respective boards of directors of each of Prodigy, SBC and SBC
Sub have approved the issuance of the Investment Share to SBC Sub in
consideration of $100 upon the terms and subject to the conditions set forth in
this Agreement (the "Investment Share Issuance");
WHEREAS, contemporaneously with the execution of this Agreement, Prodigy,
Operating Partnership, SBC and SBC Sub have entered into a Strategic and
Marketing Agreement (the "Strategic Agreement"), providing for the transactions
contemplated thereby upon the terms and subject to the conditions set forth in
the Strategic Agreement;
WHEREAS, the respective boards of directors of each of Prodigy, Prodigy
Sub, SBC and SBC Sub have approved the Amended and Restated Limited Partnership
Agreement substantially in the form attached as Exhibit C hereto upon the terms
and subject to the conditions set forth in this Agreement;
WHEREAS, the board of directors of Prodigy has approved the Restated
Certificate of Incorporation substantially in the form attached as Exhibit D
hereto upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, the board of directors of Prodigy has approved the Amended and
Restated By-Laws substantially in the form attached as Exhibit E hereto upon the
terms and subject to the conditions set forth in this Agreement;
WHEREAS, the respective boards of directors of each of Prodigy, SBC and SBC
Sub have approved the Registration Rights Agreement substantially in the form
attached as Exhibit F hereto upon the terms and subject to the conditions set
forth in this Agreement;
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, as a condition and inducement to SBC's and SBC Sub's willingness to
enter into this Agreement and the Strategic Agreement, the Stockholders (as
defined in the Voting Agreement) and SBC are entering into a Voting Agreement
(the "Voting Agreement") pursuant to which, among other things, the Stockholders
shall agree to deliver to SBC an irrevocable proxy to vote all shares of Prodigy
Common Stock owned by them on the date hereof and any other such shares of
capital stock of Prodigy acquired by them prior to the Closing Date or, under
certain circumstances, to consent with respect to any such shares in favor of
the approval and adoption of this Agreement, the Strategic Agreement and the
transactions contemplated thereby, the Restated Certificate of Incorporation and
the Amended and Restated By-Laws and the approval of the Investment Share
Issuance, the Prodigy Contribution, the Unit Issuance and SBC Contribution and
any and all of the other transactions contemplated hereby;
WHEREAS, it is intended that, for federal income tax purposes, the Unit
Issuance and SBC Contribution shall qualify as an exchange governed by Section
721 of the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder (the "Code"); and
WHEREAS, Prodigy, Prodigy Sub, Operating Partnership, SBC and SBC Sub
desire to make certain representations, warranties, covenants and agreements in
connection with this Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the meaning
ascribed to them below:
"Affiliate" has the meaning assigned to such term in the Amended and
Restated Limited Partnership Agreement.
"Agreement" has the meaning assigned to such term in the Preamble.
"Amended and Restated By-Laws" means the Amended and Restated By-Laws of
Prodigy in the form attached hereto as Exhibit E, with such changes as Prodigy
and SBC shall approve.
"Amended and Restated Limited Partnership Agreement" means that certain
Amended and Restated Limited Partnership Agreement for Operating Partnership, to
be entered into as of the Closing Date, by and among SBC Sub, Prodigy and
Prodigy Sub in the form attached hereto as Exhibit C, with such changes as
Prodigy and SBC shall approve.
"Assume" means to pay, perform and otherwise discharge Liabilities of SBC
or Prodigy, as the case may be, and indemnify and hold harmless SBC or Prodigy,
as the case may be, against any such Liabilities. "Assumption" shall have a
correlative meaning.
"Bankruptcy and Equity Exception" has the meaning assigned to such term in
Section 4.1(b).
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
"Certificate of Limited Partnership" means the certificate of limited
partnership of Operating Partnership, as duly filed with the Secretary of State
of the State of Delaware on November 19, 1999.
"Class A Common Stock" has the meaning assigned to such term in the
Restated Certificate of Incorporation.
"Class B Common Stock" has the meaning assigned to such term in Section
2.3.
"Closing" has the meaning assigned to such term in Section 3.1.
"Closing Date" has the meaning assigned to such term in Section 3.1.
"Code" has the meaning assigned to such term in the Recitals.
"Common Stock" has the meaning assigned to such term in the Restated
Certificate of Incorporation.
"Competing Transaction" has the meaning assigned to such term in Section
5.3(a).
"Contract" means any agreement, lease, license, contract, note, mortgage,
indenture, arrangement or other obligation.
"Contribute" means the conveyance of all right, title, proprietary or other
interest of SBC Sub, Prodigy or Prodigy Sub, as the case may be.
"Contribution" shall have correlative meaning.
"Damages" means direct losses, liabilities, suits, actions, claims,
deficiencies, diminution of value, costs, expenses (including disbursements and
costs of investigation, litigation, settlement, judgment, interest and defense
and reasonable attorneys' and accountants' fees), penalties, fines, judgments
and/or damages of any kind or nature whatsoever, whether or not involving a
third-party claim, and in no event shall include any indirect, consequential or
special damages.
"Employee Benefit Plan" has the meaning assigned to such term in Section
4.1(r).
"ERISA" has the meaning assigned to such term in Section 4.1(r).
"ERISA Affiliate" has the meaning assigned to such term in Section 4.1(r).
"Environmental Law" means any Law or the common law relating to the
environment or occupational health and safety, including without limitation any
statute, regulation, administrative decision or Order pertaining to (i)
treatment, storage, disposal, generation and transportation of, or exposure to,
industrial, toxic or hazardous materials or substances or solid or hazardous
waste; (ii) air, water and noise pollution; (iii) groundwater and soil
contamination; (iv) the release or threatened release into the environment of
industrial, toxic or hazardous materials or substances, or solid or hazardous
waste, including without limitation emissions, discharges, injections, spills,
escapes or dumping of pollutants, contaminants or chemicals; (v) the protection
of wild life, marine life and wetlands, including without limitation all
endangered and threatened species; (vi) storage tanks, vessels, containers,
abandoned or discarded barrels, and other closed receptacles; (vii) health and
safety of employees and other persons; and (viii) manufacturing, processing,
using, distributing, treating, storing, disposing, transporting or handling of
materials regulated under any Law as pollutants, contaminants, toxic or
hazardous materials or substances or oil or petroleum products or solid or
hazardous waste. As used above, the terms "release" and "environment" shall have
the meaning set forth in CERCLA.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles as practiced in the
United States.
"Governmental Entity" means a court of competent jurisdiction or any
governmental, regulatory, self-regulatory or administrative authority, agency,
commission, body or other governmental entity.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Indemnified Party" has the meaning assigned to such term in Section 8.6.
"Indemnifying Party" has the meaning assigned to such term in Section 8.6.
"Intellectual Property" means all (i) patents and patent applications, (ii)
copyrights and registrations thereof, (iii) mask works and registrations and
applications for registration thereof, (iv) computer software, data and
documentation, (v) know-how, manufacturing and production processes and
techniques, research and development information, copyrightable works, trade
secrets, tangible or intangible proprietary information or materials, (vi)
trademarks, service marks, trade names and applications and registrations
therefor and (vii) other proprietary rights relating to any of the foregoing.
"Investment Share" has the meaning assigned to such term in Section 2.3.
"Investment Share Issuance" has the meaning set forth in the Recitals.
"Law" means any federal, state, local or foreign law, statute, ordinance,
rule, regulation, judgment, Order, injunction, decree, arbitration award, agency
requirement, franchise, license or permit of any Governmental Entity.
"Lien" shall mean any mortgage, pledge, lien, deed of trust, hypothecation,
claim, security interest, title defect, encumbrance, burden, tax lien (as used
in Section 6321 of the Code or similarly by any state, local, or foreign tax
authority), charge, or other similar restriction, title retention agreement,
option, easement, covenant, encroachment or other adverse claim.
"Limited Partnership Agreement" means that certain Limited Partnership
Agreement for Operating Partnership, dated as of November 19, 1999, by and
between Prodigy and Prodigy Sub.
"Materials of Environmental Concern" means any chemicals, pollutants or
contaminants, hazardous substances (as such term is defined under CERCLA), solid
wastes and hazardous wastes (as such terms are defined under the Resource
Conservation and Recovery Act), toxic materials, oil or petroleum and petroleum
products or any other material subject to regulation under any Environmental
Law.
"Merger Agreement" has the meaning assigned to such term in Section 2.2.
"Nasdaq" means The Nasdaq Stock Market.
"Operating Employees" means all employees of SBC or SBC Sub who are
involved in operating and managing the SBC Contributed Assets.
"Operating Partnership" has the meaning assigned to such term in the
Preamble.
"Order" means any Law, statute, ordinance, rule, regulation, judgment,
decree, injunction or other order (whether temporary, preliminary or permanent).
"Party" and "Parties" have the meanings assigned to such terms in the
Preamble.
"Permits" means all permits, licenses, franchises, concessions, variances,
certificates, exemptions, Orders and other authorizations, consents and
approvals from any Governmental Entity.
"Permitted Encumbrances" means such pledges, Liens or similar encumbrances
as do not materially detract from or interfere with the assets to which such
pledges, Liens or similar encumbrances relate.
"Prodigy" has the meaning assigned to such term in the Preamble.
"Prodigy Advisors" has the meaning assigned to such term in Section 5.3(a).
"Prodigy Assets" or "Prodigy Contributed Assets" means all assets of
Prodigy and Prodigy Sub (except for those assets listed on Exhibit G), all of
which shall be Contributed to Operating Partnership at the Closing.
"Prodigy Common Stock" means shares of the common stock, par value $0.01
per share, of Prodigy.
"Prodigy Contribution" has the meaning assigned to such term in the
Recitals.
"Prodigy Financial Advisor" has the meaning assigned to such term in
Section 5.3(a).
"Prodigy Indemnified Persons" has the meaning assigned to such term in
Section 8.3.
"Prodigy Intellectual Property" has the meaning assigned to such term in
Section 4.1(o).
"Prodigy Liabilities" means all of the liabilities, obligations and
expenses of Prodigy and Prodigy Sub (except for those listed on Exhibit H), all
of which shall be Assumed by Operating Partnership at the Closing.
"Prodigy Material Adverse Effect" means a change or effect on Prodigy,
Operating Partnership or any Subsidiary of Prodigy that is materially adverse to
the assets, business, financial condition, or results of operations of Prodigy,
Prodigy Sub, Operating Partnership and any other Subsidiary of Prodigy, taken as
a whole, but shall not include any changes or effects (x) relating to or
resulting from general economic, political or market conditions, including (i)
changes after the date of this Agreement in any Law or in the interpretation of
any Law by any Governmental Entity and (ii) changes in GAAP, (y) generally
affecting the retail Internet service provider industry or (z) attributable to
the public announcement of this Agreement or any of the transactions
contemplated hereby, or any legal proceeding brought by or on behalf of
stockholders of Prodigy alleging that the Board of Directors of Prodigy breached
its fiduciary duties in connection with its approval of this Agreement, or the
expiration of Prodigy's agreement with Best Buy on or after November 30, 1999.
"Prodigy Most Recent Balance Sheet Date" has the meaning assigned to such
term in Section 4.1(h).
"Prodigy Preferred Stock" has the meaning assigned to such term in Section
4.1(k).
"Prodigy Reports" has the meaning assigned to such term in Section 4.1(h).
"Prodigy Stockholder Approval" means the approval by the stockholders of
Prodigy of each of this Agreement, the Strategic Agreement and the transactions
contemplated thereby, the Prodigy Contribution, the Restated Certificate of
Incorporation, the Amended and Restated By-Laws, the Unit Issuance and SBC
Contribution, the Investment Share Issuance, and the other transactions
contemplated by this Agreement (including the issuance of Class A Common Stock
upon conversion of Class B Common Stock or exchange of Units), obtained in
accordance with Prodigy's certificate of incorporation and by-laws and the
Delaware General Corporation Law.
"Prodigy Sub" has the meaning assigned to such term in the Preamble.
"Prodigy 10-K" has the meaning assigned to such term in Section 4.1(h).
"Prodigy Third Party Acquisition" has the meaning assigned to such term in
Section 5.3(b).
"Proxy Statement" has the meaning assigned to such term in Section 5.4(a).
"Registration Rights Agreement" means that certain Registration Rights
Agreement, to be entered into as of the Closing Date, among SBC, SBC Sub and
Prodigy, substantially in the form attached hereto as Exhibit F, with such
changes as Prodigy and SBC shall approve.
"Restated Certificate of Incorporation" means the Restated Certificate of
Incorporation of Prodigy in the form attached hereto as Exhibit D, with such
changes as Prodigy and SBC shall approve.
"SBC" has the meaning assigned to such term in the Preamble.
"SBC Contributed Assets" means the SBC Mandatory Contributed Assets and the
SBC Discretionary Contributed Assets.
"SBC Discretionary Contributed Assets" has the meaning assigned to such
term in Section 2.2.
"SBC Discretionary Liabilities" means the liabilities, obligations and
expenses associated with the SBC Discretionary Contributed Assets, which SBC
Discretionary Liabilities shall be Assumed by Operating Partnership at the
Closing.
"SBC Indemnified Persons" has the meaning assigned to such term in Section
8.2.
"SBC Internet Businesses" means the analog dial-up, ISDN and DSL consumer
and small business Retail ISP Services provided by SBC Sub.
"SBC Mandatory Contributed Assets" means those assets listed on Exhibit A.
"SBC Mandatory Liabilities" means the liabilities, obligations and expenses
associated with the SBC Mandatory Contributed Assets, which SBC Mandatory
Liabilities shall be Assumed by Operating Partnership at the Closing.
"SBC Sub" has the meaning assigned to such term in the Preamble.
"SBC Units" has the meaning assigned to such term in Section 2.2.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Strategic Agreement" has the meaning assigned to such term in the
Recitals.
"Subsidiary" of an entity means any entity in which the specified entity
directly or indirectly owns at least a majority of the outstanding stock or
other equity or general voting interest and for purposes of this Agreement, each
of Operating Partnership and Prodigy Sub is a Subsidiary of Prodigy.
"Taxes" has the meaning assigned to such term in Section 4.1(l)(i).
"Tax Returns" has the meaning assigned to such term in Section 4.1(l)(i).
"Termination Date" has the meaning assigned to such term in Section 7.2.
"Third Party" has the meaning assigned to such term in Section 5.3(b).
"Third Party Claim" has the meaning assigned to such term in Section 8.7.
"Transfer Taxes" means all federal, state, local or foreign sales, use or
value-added taxes that may be imposed in connection with the transfer of assets,
together with any interest, additions or penalties with respect thereto and any
interest in respect of such additions or penalties.
"Unit Issuance and SBC Contribution" has the meaning assigned to such term
in the Recitals.
"Units" has the meaning assigned to such term in the Amended and Restated
Limited Partnership Agreement.
"Voting Agreement" has the meaning assigned to such term in the Recitals.
"Voting Debt" means any outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or to convert into or
be exercised or exchanged for securities having the right to vote) with the
stockholders of Prodigy on any matter.
"Year 2000 Compliant" means that the applicable system or item, in each
case without human intervention, other than original data entry (i) will
accurately receive, record, store, provide, recognize and process all date and
time data from, during, into and between the years 1999 and 2000; (ii) will
accurately perform all date-dependent calculations and operations (including,
without limitation, mathematical operations, sorting, comparing and reporting)
from, during, into and between the years 1999 and 2000; and (iii) will not
malfunction, cease to function or provide invalid or incorrect results as a
result of (x) the change from December 31, 1999 to January 1, 2000, (y) date
data, including date data which represents or references different centuries or
more than one century or (z) the occurrence of any particular date, including
without limitation January 1, 2000 and February 29, 2000.
ARTICLE II
INVESTMENT AND ISSUANCE;
CONTRIBUTION AND ASSUMPTION
2.1 Prodigy Contribution.
Subject to the terms and conditions stated herein, Prodigy and Prodigy Sub
agree to Contribute all of the Prodigy Assets and Prodigy Liabilities to
Operating Partnership, and Operating Partnership agrees to accept all such
Prodigy Assets from Prodigy and Prodigy Sub and Assume all such Prodigy
Liabilities from Prodigy and Prodigy Sub, in each case at the Closing.
2.2 Unit Issuance and SBC Contribution.
Subject to the terms and conditions stated herein, Operating Partnership
agrees to issue to SBC Sub at the Closing a number of Units of Operating
Partnership (the "SBC Units"), which shall be equal to 43.0% of a fraction, the
numerator of which shall be (A) the total number of shares of Prodigy Common
Stock issued and outstanding on a fully-diluted basis immediately prior to the
Closing after giving effect to the issuance by Prodigy of the number of shares
of Prodigy Common Stock issuable pursuant to the Agreement and Plan of Merger
(including, without limitation, shares issuable upon exercise of assumed options
and warrants) (the "Merger Agreement"), dated as of November 5, 1999, by and
among Prodigy, Pucknut Corporation and Fig, and the exercise of all rights to
receive Prodigy Common Stock, whether pursuant to stock options, convertible
securities, warrants or otherwise, less the sum of (i) 4,818,290 shares of
Prodigy Common Stock issuable as of the date hereof pursuant to outstanding
warrants issued by Prodigy and (ii) the number of shares of Prodigy Common Stock
issued or issuable by Prodigy pursuant to the Merger Agreement (including,
without limitation, shares issued or issuable upon exercise of assumed options
and warrants) as of the Closing, and the denominator of which shall be (B)
fifty-seven one hundredths (.57), in exchange for the Contribution by SBC Sub to
Operating Partnership of all of the SBC Mandatory Contributed Assets and SBC
Mandatory Liabilities associated with such SBC Mandatory Contributed Assets, the
Contribution by SBC Sub to Operating Partnership of all of the SBC Discretionary
Contributed Assets and SBC Discretionary Liabilities associated with such SBC
Discretionary Contributed Assets, and Operating Partnership agrees to accept all
such SBC Mandatory Contributed Assets and SBC Discretionary Contributed Assets
from SBC Sub and Assume all such SBC Mandatory Liabilities associated with such
SBC Mandatory Contributed Assets and the SBC Discretionary Liabilities
associated with such SBC Discretionary Contributed Assets from SBC Sub, in each
case at the Closing. The SBC Units shall have the rights and privileges set
forth in the Amended and Restated Limited Partnership Agreement.
Notwithstanding the inclusion of an asset on Exhibit B as of the date
hereof, as the Parties perform transition planning between the date hereof and
the Closing, SBC Sub may exclude and retain any of the assets listed on Schedule
B that could reasonably be used in support of related SBC DSL products by
written notice to Prodigy prior to the Closing. For purposes of this Agreement,
"SBC Discretionary Contributed Assets" shall mean only those assets listed on
Exhibit B, which Prodigy selects by giving written notice to SBC Sub at least
five Business Days prior to the Closing Date, which assets shall not include any
assets that have been excluded and retained by SBC Sub in accordance with this
Section 2.2.
2.3 Issuance of Investment Share.
Subject to the terms and conditions stated herein, Prodigy agrees to issue
to SBC Sub on the Closing Date, and SBC Sub agrees to purchase from Prodigy, one
share (the "Investment Share") of Class B Common Stock, par value $0.01 per
share (the "Class B Common Stock"), of Prodigy, in consideration of $100, which
Class B Common Stock shall have the rights and privileges set forth in the
Restated Certificate of Incorporation and Amended and Restated By-Laws.
ARTICLE III
CLOSING; CONDITIONS
3.1 Closing.
The closing of the Prodigy Contribution, the Unit Issuance and SBC
Contribution and the Investment Share Issuance shall take place on the third
Business Day which follows the date upon which satisfaction or waiver of the
conditions set forth in Sections 3.2 and 3.3 hereof occurs (other than
conditions which by their nature are to be satisfied at the Closing, but subject
to the satisfaction or waiver of such conditions), at 10:00 A.M., New York time,
at the offices of Sullivan & Cromwell, 125 Broad Street, New York, New York
10004, or at such other time and place as the Parties may agree in writing (the
"Closing"). The actual date on which the Closing shall occur is referred to
herein as the "Closing Date." At the Closing, (a) Operating Partnership shall
deliver to SBC Sub certificates (in such denominations as shall be designated in
writing by SBC Sub not less than five Business Days prior to the Closing)
registered in the name of SBC Sub representing the SBC Units, (b) Prodigy shall
deliver to SBC Sub a certificate registered in the name of SBC Sub representing
the Investment Share, (c) SBC Sub shall Contribute to Operating Partnership all
of the SBC Mandatory Contributed Assets and SBC Mandatory Liabilities associated
with such SBC Mandatory Contributed Assets and the SBC Discretionary Contributed
Assets and the SBC Discretionary Liabilities associated with such SBC
Discretionary Contributed Assets, (d) Operating Partnership shall accept all of
the SBC Mandatory Contributed Assets and all of the SBC Discretionary
Contributed Assets and Assume all of the SBC Mandatory Liabilities associated
with such SBC Mandatory Contributed Assets and the SBC Discretionary
Liabilitiesassociated with the SBC Discretionary Contributed Assets, (e) Prodigy
and Prodigy Sub shall Contribute to Operating Partnership all of the Prodigy
Assets and Prodigy Liabilities and (f) Operating Partnership shall accept all of
the Prodigy Assets and Assume all of the Prodigy Liabilities.
3.2 Conditions to Obligations of SBC and SBC Sub.
The obligations of SBC and SBC Sub to effect the Unit Issuance and SBC
Contribution, the Investment Share Issuance and the other transactions
contemplated by this Agreement and the transactions contemplated by the
Strategic Agreement are subject to the satisfaction or waiver at or prior to the
Closing of each of the following conditions precedent:
(a) Representations and Warranties of Prodigy, Prodigy Sub and Operating
Partnership. The representations and warranties made by Prodigy, Prodigy Sub and
Operating Partnership in this Agreement and the Strategic Agreement shall have
been true and correct in all respects when made, and shall be true and correct
in all respects on the Closing Date as though such representations and
warranties were made on and as of the Closing Date (except to the extent any
such representation or warranty expressly speaks as of an earlier date, in which
case such representation and warranty need be true and correct in all respects
as of such earlier date); provided, however, that notwithstanding anything
herein to the contrary, the conditions set forth in this Section 3.2(a) shall be
deemed to have been satisfied even if such representations or warranties are not
so true and correct unless the failure of such representations or warranties to
be so true and correct, individually or in the aggregate, has had, or is
reasonably likely to have, a Prodigy Material Adverse Effect or is reasonably
likely to prevent or to materially burden or materially impair the ability of
Prodigy, Prodigy Sub or Operating Partnership to consummate the Prodigy
Contribution, the Unit Issuance and SBC Contribution, the Investment Share
Issuance or the other transactions contemplated by this Agreement or the
transactions contemplated by the Strategic Agreement.
(b) Prodigy, Prodigy Sub and Operating Partnership Compliance with
Agreements and Conditions. Each of Prodigy, Prodigy Sub and Operating
Partnership shall have performed and complied in all material respects with all
covenants, agreements, obligations and conditions required by this Agreement and
the Strategic Agreement to be performed or complied with by it at or before the
Closing.
(c) Certificates and Other Documents of Prodigy, Prodigy Sub and Operating
Partnership. SBC shall have received a certificate executed on behalf of
Prodigy, Prodigy Sub and Operating Partnership by an executive officer of
Prodigy to the effect that the conditions set forth in clauses (a) and (b) above
have been satisfied as of the Closing Date and such other documents and
certificates as may be required to be delivered or made available by Prodigy,
Prodigy Sub and Operating Partnership pursuant to this Agreement and the
Strategic Agreement or that may be reasonably requested by SBC.
(d) Registration Rights Agreement. The Registration Rights Agreement shall
have been duly executed and delivered by Prodigy.
(e) Litigation. No court or Governmental Entity of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any Order that
restrains, enjoins or otherwise prohibits consummation of the Unit Issuance and
SBC Contribution, the Investment Share Issuance, the Prodigy Contribution or the
other transactions contemplated by this Agreement or the transactions
contemplated by the Strategic Agreement, and no Governmental Entity shall have
threatened or instituted any proceeding seeking any such Order.
(f) Regulatory Consents. (i) All required filings under the HSR Act shall
have been made and any applicable waiting period under the HSR Act shall have
expired or been terminated.
(ii) All required notices, reports and filings with the Nasdaq Stock Market
shall have been made and the issuance by Prodigy of the Class B Common Stock to
SBC Sub and the rights and privileges of such Class B Common Stock as set forth
in the Restated Certificate of Incorporation and the Amended and Restated
By-Laws shall have been approved and authorized by The Nasdaq Stock Market prior
to the Closing. Any other notices, reports and filings required to be made prior
to the Closing by Prodigy, Prodigy Sub, Operating Partnership, SBC or SBC Sub or
any of their respective Subsidiaries with, and any other consents,
registrations, approvals, Permits and authorizations required to be obtained
prior to the Closing by Prodigy, Prodigy Sub, Operating Partnership, SBC or SBC
Sub or any of their respective Subsidiaries from, The Nasdaq Stock Market in
connection with the execution and delivery of this Agreement, and the
consummation of the Unit Issuance and SBC Contribution, the Investment Share
Issuance, the Prodigy Contribution and the other transactions contemplated by
this Agreement shall have been made or obtained (as the case may be).
(iii) In addition to those described in Section 3.2(f)(ii), all other
notices, reports and filings required to be made prior to the Closing by
Prodigy, Prodigy Sub, Operating Partnership, SBC or SBC Sub or any of their
respective Subsidiaries with, and all other consents, registrations, approvals,
Permits and authorizations required to be obtained prior to the Closing by
Prodigy, Prodigy Sub, Operating Partnership, SBC or SBC Sub or any of their
respective Subsidiaries from, any Governmental Entity in connection with the
execution and delivery of this Agreement and the Strategic Agreement and the
consummation of the Unit Issuance and SBC Contribution, the Investment Share
Issuance, the Prodigy Contribution and the other transactions contemplated by
this Agreement and the transactions contemplated by the Strategic Agreement
shall have been made or obtained (as the case may be), except those that the
failure to make or to obtain are not, individually or in the aggregate,
reasonably likely to have a Prodigy Material Adverse Effect or a material
adverse effect on SBC or to provide a reasonable basis to conclude that the
Parties hereto or any of their Affiliates or respective directors, officers,
agents, advisors or other representatives would be subject to the risk of
criminal liability.
(g) Restated Certificate of Incorporation and Amended and Restated By-
Laws. Prodigy shall have duly adopted the Restated Certificate of Incorporation
and the Amended and Restated By-Laws, the Restated Certificate of Incorporation
shall have been approved by the stockholders of Prodigy in accordance with
Prodigy's certificate of incorporation and by-laws and the Delaware General
Corporation Law and shall have been duly filed by Prodigy with the Secretary of
State of the State of Delaware, the Amended and Restated By-Laws shall have been
approved by the stockholders of Prodigy in accordance with Prodigy's certificate
of incorporation and by-laws and the Delaware General Corporation Law and the
Restated Certificate of Incorporation and the Amended and Restated By-Laws shall
be in full force and effect.
(h) Amended and Restated Limited Partnership Agreement. The Amended and
Restated Limited Partnership Agreement shall have been duly executed and
delivered by each of Prodigy and Prodigy Sub.
(i) Stockholder Approval. Prodigy Stockholder Approval shall have been
obtained.
(j) Consents under Agreements. Each of Prodigy, Prodigy Sub and Operating
Partnership shall have obtained the consent or approval of each Person whose
consent or approval shall be required in order to consummate the Unit Issuance
and SBC Contribution, the Prodigy Contribution, the Investment Share Issuance
and the other transactions contemplated by this Agreement and the transactions
contemplated by the Strategic Agreement under any Contract to which Prodigy,
Prodigy Sub or Operating Partnership or any of Prodigy's Subsidiaries is a
party, except those for which failure to obtain such consents and approvals,
individually or in the aggregate, is not reasonably likely to have a Prodigy
Material Adverse Effect or is not reasonably likely to prevent or to materially
burden or materially impair the ability of Prodigy, Prodigy Sub or Operating
Partnership to consummate the Unit Issuance and SBC Contribution, the Prodigy
Contribution, the Investment Share Issuance or the other transactions
contemplated by this Agreement or the transactions contemplated by the Strategic
Agreement; provided, however, that in determining whether a Prodigy Material
Adverse Effect has occurred for purposes of this Section 3.2(j), no
consideration shall be given to those Contracts for which consents and approvals
were not obtained if Prodigy is able to perform fully its obligations and
exercise all of its rights under such Contracts, in each case on behalf of
Operating Partnership.
(k) Legal Opinion. SBC shall have received an opinion of Hale and Dorr LLP,
counsel to Prodigy, dated the Closing Date, to the effect that neither Prodigy
nor Operating Partnership is, and after giving effect to the Prodigy
Contribution, the Unit Issuance and SBC Contribution, the Investment Share
Issuance and the other transactions contemplated by this Agreement and the
transactions contemplated by the Strategic Agreement, will be an "investment
company" as such term is defined in the Investment Company Act of 1940, as
amended. In rendering such opinion, Hale and Dorr LLP may rely as to factual
matters on a certificate of an officer of Prodigy.
(l) No Prodigy Material Adverse Effect. There shall not have been any
change in the assets, business, financial condition, or results of operations of
Prodigy, Operating Partnership or any Subsidiary of Prodigy or any event or
development or combination of events or developments since the Prodigy Most
Recent Balance Sheet Date which, individually or in the aggregate has had, or
would reasonably be expected to have, a Prodigy Material Adverse Effect.
3.3 Conditions to Obligations of Prodigy, Prodigy Sub and Operating
Partnership.
The obligations of Prodigy, Prodigy Sub and Operating Partnership to effect
the Prodigy Contribution, the Unit Issuance and SBC Contribution, the Investment
Share Issuance and the other transactions contemplated by this Agreement and the
transactions contemplated by the Strategic Agreement are subject to the
satisfaction or waiver at or prior to the Closing of each of the following
conditions precedent:
(a) Representations and Warranties of SBC and SBC Sub. The representations
and warranties made by SBC and SBC Sub in this Agreement and the Strategic
Agreement shall have been true and correct in all respects when made, and shall
be true and correct in all respects on the Closing Date as though such
representations and warranties were made on and as of the Closing Date (except
to the extent any such representation or warranty expressly speaks as of an
earlier date, in which case such representation and warranty need be true and
correct in all respects as of such earlier date); provided, however, that,
notwithstanding anything herein to the contrary, the conditions set forth in
this Section 3.3(a) shall be deemed to have been satisfied even if such
representations or warranties are not so true and correct unless the failure of
such representations or warranties to be so true and correct, individually or in
the aggregate, has had, or is reasonably likely to have, a material adverse
effect on SBC or is reasonably likely to prevent or to materially burden or
materially impair the ability of SBC to consummate the Unit Issuance and SBC
Contribution, the Investment Share Issuance or the other transactions
contemplated by this Agreement or the transactions contemplated by the Strategic
Agreement.
(b) SBC and SBC Sub Compliance with Agreements and Conditions. Each of SBC
and SBC Sub shall have performed and complied in all material respects with all
covenants, agreements, obligations and conditions required by this Agreement and
the Strategic Agreement to be performed or complied with by SBC at or before the
Closing.
(c) Certificates and Other Documents of SBC and SBC Sub. Prodigy shall have
received a certificate executed on behalf of SBC and SBC Sub by an executive
officer of SBC to the effect that the conditions set forth in clauses (a) and
(b) above have been satisfied as of the Closing Date and such other documents
and certificates as may be required to be delivered or made available by SBC and
SBC Sub pursuant to this Agreement and the Strategic Agreement or that may be
reasonably requested by Prodigy.
(d) Registration Rights Agreement. The Registration Rights Agreement shall
have been executed and delivered by each of SBC and SBC Sub.
(e) Litigation. No court or Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
Order that restrains, enjoins or otherwise prohibits consummation of the Unit
Issuance and SBC Contribution, the Investment Share Issuance, the Prodigy
Contribution or the other transactions contemplated by this Agreement or the
transactions contemplated by the Strategic Agreement, and no Governmental Entity
shall have threatened or instituted any proceeding seeking any such Order.
(f) Regulatory Consents. (i) All required filings under the HSR Act
shall have been made and any applicable waiting period under the HSR Act shall
have expired or been terminated.
(ii) All required notices, reports and filings with The Nasdaq Stock Market
shall have been made and the issuance by Prodigy of the Class B Common Stock to
SBC Sub and the rights and privileges of such Class B Common Stock as set forth
in the Restated Certificate of Incorporation and the Amended and Restated
By-Laws shall have been approved and authorized by The Nasdaq Stock Market prior
to the Closing. Any other notices, reports and filings required to be made prior
to the Closing by Prodigy, Prodigy Sub, Operating Partnership, SBC or SBC Sub or
any of their respective Subsidiaries with, and any other consents,
registrations, approvals, Permits and authorizations required to be obtained
prior to the Closing by Prodigy, Prodigy Sub, Operating Partnership, SBC or SBC
Sub or any of their respective Subsidiaries from, The Nasdaq Stock Market in
connection with the execution and delivery of this Agreement, and the
consummation of the Unit Issuance and SBC Contribution, the Investment Share
Issuance, the Prodigy Contribution and the other transactions contemplated by
this Agreement shall have been made or obtained (as the case may be).
(iii) In addition to those described in Section 3.3(f)(ii), all other
notices, reports and filings required to be made prior to the Closing by
Prodigy, Prodigy Sub, Operating Partnership, SBC or SBC Sub or any of their
respective Subsidiaries with, and all other consents, registrations, approvals,
Permits and authorizations required to be obtained prior to the Closing by
Prodigy, Prodigy Sub, Operating Partnership, SBC or SBC Sub or any of their
respective Subsidiaries from, any Governmental Entity in connection with the
execution and delivery of this Agreement and the Strategic Agreement and the
consummation of the Unit Issuance and SBC Contribution, the Investment Share
Issuance, the Prodigy Contribution and the other transactions contemplated by
this Agreement and the transactions contemplated by the Strategic Agreement
shall have been made or obtained (as the case may be), except those that the
failure to make or to obtain are not, individually or in the aggregate,
reasonably likely to have a Prodigy Material Adverse Effect or a material
adverse effect on SBC or to provide a reasonable basis to conclude that the
Parties hereto or any of their Affiliates or respective directors, officers,
agents, advisors or other representatives would be subject to the risk of
criminal liability.
(g) Amended and Restated Limited Partnership Agreement. The Amended and
Restated Limited Partnership Agreement shall have been duly executed and
delivered by SBC Sub.
(h) Stockholder Approval. Prodigy Stockholder Approval shall have been
obtained.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Prodigy, Prodigy Sub and Operating
Partnership.
Each of Prodigy, Prodigy Sub and Operating Partnership jointly and
severally hereby makes the following representations and warranties to SBC and
SBC Sub:
(a) Corporate Existence; Ownership. (i) Each of Prodigy and Prodigy Sub is
a corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and assets and conduct its
business as now conducted by it. Each of Prodigy and Prodigy Sub is duly
qualified as a foreign corporation to transact business and is in good standing
in each jurisdiction in which it owns or leases properties or assets or conducts
business so as to require such qualification (except where the failure of
Prodigy or Prodigy Sub to be so qualified or in good standing, when taken
together with all other such failures, is not reasonably likely to have a
Prodigy Material Adverse Effect).
(ii) Operating Partnership has been duly formed and is validly existing as
a limited partnership in good standing under the laws of the State of Delaware,
with all requisite power and authority to own, lease and operate its properties
and assets and conduct its business as now conducted by it. Operating
Partnership is duly qualified to transact business and is in good standing in
each jurisdiction in which it owns or leases properties or assets or conducts
business so as to require such qualification (except where the failure of
Operating Partnership to be so qualified or in good standing, when taken
together with all other such failures, is not reasonably likely to have a
Prodigy Material Adverse Effect).
(b) Authorization; Enforcement. (i) Each of Prodigy and Prodigy Sub has all
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations under this Agreement in accordance with its terms
and, in respect of Prodigy, to issue and sell the Investment Share. Operating
Partnership has all requisite power and authority to execute and deliver this
Agreement and to perform its obligations under this Agreement in accordance with
its terms and to issue the SBC Units. Each of Prodigy and Prodigy Sub has taken
all necessary corporate action to authorize the execution and delivery of this
Agreement and, in respect of Prodigy, the issuance and sale of the Investment
Share, and the consummation of the transactions contemplated hereby. Operating
Partnership has taken all necessary action to authorize the execution of this
Agreement and the issuance of the SBC Units, and the consummation of the
transactions contemplated hereby. This Agreement is a valid and legally binding
obligation of each of Prodigy, Prodigy Sub and Operating Partnership,
enforceable against each of them in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles (the "Bankruptcy and Equity Exception"). On the
Closing Date, each of Prodigy and Prodigy Sub will have all requisite corporate
power and authority to execute and deliver the Amended and Restated Limited
Partnership Agreement and to perform its respective obligations under the
Amended and Restated Limited Partnership Agreement in accordance with its terms.
On the Closing Date, each of Prodigy and Prodigy Sub will have taken all
necessary corporate action to authorize the execution and delivery of the
Amended and Restated Limited Partnership Agreement and the consummation of the
transactions contemplated thereby. When executed, the Amended and Restated
Limited Partnership Agreement will be a valid and legally binding obligation of
each of Prodigy and Prodigy Sub, enforceable against each of them in accordance
with its terms, subject to the Bankruptcy and Equity Exception. Prodigy has
taken all action necessary so that neither SBC nor SBC Sub will be an
"interested stockholder" within the meaning of Section 203 of the Delaware
General Corporation Law as a result of the execution and delivery of this
Agreement or the Voting Agreement.
(ii) Prior to the Closing Date, Prodigy will have taken all necessary
action to permit it to issue the number of shares of Prodigy Class B Common
Stock required to be issued pursuant to the Investment Share Issuance. The
Prodigy Class B Common Stock, when issued in connection with the Investment
Share Issuance, will be validly issued, fully paid and nonassessable, and no
stockholder of Prodigy will have any preemptive right of subscription or
purchase in respect thereof.
(iii) Prior to the Closing Date, Operating Partnership will have taken all
necessary action to permit it to issue the number of SBC Units required to be
issued pursuant to the Unit Issuance and SBC Contribution. The SBC Units, when
issued in connection with the Unit Issuance and SBC Contribution, will be
validly issued, fully paid and nonassessable, and no Person will have a
preemptive right of subscription or purchase in respect thereof.
(iv) Prior to the Closing Date, Prodigy will have taken all necessary
action to permit it to issue the number of shares of Prodigy Class A Common
Stock required to be issued upon conversion of the Investment Share or exchange
of SBC Units. The Prodigy Class A Common Stock, when issued upon conversion of
the Investment Share or exchange of SBC Units, will be validly issued, fully
paid and nonassessable, and no stockholder of Prodigy will have any preemptive
right of subscription or purchase in respect thereof.
(c) Compliance with Law. (i) The execution and delivery by each of Prodigy,
Prodigy Sub and Operating Partnership of this Agreement do not and, subject to
the satisfaction of the Closing conditions specified in Sections 3.3(e), (f) and
(h), the issuance of the SBC Units, in respect of Operating Partnership, the
issuance and sale of the Investment Share, in respect of Prodigy, the
performance by each of Prodigy, Prodigy Sub and Operating Partnership of its
respective obligations under this Agreement and the consummation by each of
Prodigy, Prodigy Sub and Operating Partnership of the transactions contemplated
hereby will not, violate any provision of any Law or regulation, or any existing
writ or decree of any court or Governmental Entity applicable to Prodigy,
Prodigy Sub or Operating Partnership.
(ii) The execution and delivery by each of Prodigy and Prodigy Sub of the
Amended and Restated Limited Partnership Agreement will not, and the performance
by each of Prodigy and Prodigy Sub of its respective obligations under the
Amended and Restated Limited Partnership Agreement and the consummation by each
of Prodigy and Prodigy Sub of the transactions contemplated thereby will not,
violate any provision of any Law or regulation, or any existing writ or decree
of any court or Governmental Entity applicable to Prodigy or Prodigy Sub.
(d) Compliance with Obligations. (i) The execution and delivery by each of
Prodigy, Prodigy Sub and Operating Partnership of this Agreement do not, and,
subject to the satisfaction of the Closing conditions specified in Sections
3.3(e), (f) and (h), the issuance of the SBC Units, in respect of Operating
Partnership, the issuance and sale of the Investment Share, in respect of
Prodigy, the performance by each of Prodigy, Prodigy Sub and Operating
Partnership of its respective obligations under this Agreement and the
consummation by each of Prodigy, Prodigy Sub and Operating Partnership of the
transactions contemplated hereby will not, violate, conflict with or constitute
a breach of, or a default under, the certificate of incorporation or By-Laws of
Prodigy or Prodigy Sub, the Restated Certificate of Incorporation of Prodigy or
the Amended and Restated By-Laws of Prodigy or the Certificate of Limited
Partnership of Operating Partnership or the comparable governing instruments of
any of their respective Subsidiaries, or result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation, modification or
acceleration) (whether after the giving of notice or the passage of time or
both) under any material Contract to which Prodigy, Prodigy Sub or Operating
Partnership is a party or which is binding on it or its assets, and will not
result in the creation of any Lien on, or security interest in, any of the
assets or properties of Prodigy, Prodigy Sub or Operating Partnership or any of
their Subsidiaries. Schedule 4.1(d)(i) sets forth a correct and complete list of
material Contracts of Prodigy and its Subsidiaries pursuant to which consents or
waivers are or may be required prior to consummation of the transactions
contemplated by this Agreement.
(ii) The execution and delivery by each of Prodigy and Prodigy Sub of the
Amended and Restated Limited Partnership Agreement will not, and the performance
by each of Prodigy and Prodigy Sub of its respective obligations under the
Amended and Restated Limited Partnership Agreement and the consummation by each
of Prodigy and Prodigy Sub of the transactions contemplated thereby will not,
violate, conflict with or constitute a breach of, or a default under the
certificate of incorporation or by-laws of Prodigy or Prodigy Sub, the Restated
Certificate of Incorporation of Prodigy or the Amended and Restated By-Laws of
Prodigy or the comparable governing instruments of any of Prodigy's
Subsidiaries, or result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation, modification or acceleration) (whether after
the giving of notice or the passage of time or both) under any material Contract
to which Prodigy or Prodigy Sub is a party or which is binding on it or its
assets, and will not result in the creation of any Lien on, or security interest
in, any of the assets or properties of Prodigy or Prodigy Sub or any of their
Subsidiaries. Schedule 4.1(d)(ii) sets forth a correct and complete list of
material Contracts of Prodigy and its Subsidiaries pursuant to which consents or
waivers are or may be required prior to the consummation of the transactions
contemplated by the Amended and Restated Limited Partnership Agreement.
(e) Consents and Approvals. (i) All notices, reports or other filings
required to be made by Prodigy, Prodigy Sub or Operating Partnership, and all
consents, registrations, approvals, Permits, authorizations and Orders of
Governmental Entities or other third parties required to be obtained by Prodigy,
Prodigy Sub or Operating Partnership, in connection with the execution and
delivery of this Agreement by each of Prodigy, Prodigy Sub and Operating
Partnership, the performance by each of Prodigy, Prodigy Sub and Operating
Partnership of its respective obligations under this Agreement and the
consummation by each of Prodigy, Prodigy Sub and Operating Partnership of the
transactions contemplated hereby (other than, as of the date hereof, the
expiration or termination of the waiting period under the HSR Act, Prodigy
Stockholder Approval, the approval of The Nasdaq Stock Market and those set
forth on Schedule 4.1(e)(i)) have been made or obtained.
(ii) On the Closing Date, all notices, reports or other filings required to
be made by each of Prodigy or Prodigy Sub, and all consents, registrations,
approvals, Permits, authorizations and Orders of Governmental Entities or other
third parties required to be obtained by each of Prodigy or Prodigy Sub, in
connection with the execution and delivery of the Amended and Restated Limited
Partnership Agreement by each of Prodigy and Prodigy Sub, the performance by
each of Prodigy and Prodigy Sub of its respective obligations under the Amended
and Restated Limited Partnership Agreement and the consummation by each of
Prodigy and Prodigy Sub of the transactions contemplated thereby will have been
made or obtained.
(f) Litigation. There is no legal action, suit, investigation or proceeding
pending or, to the knowledge of Prodigy, Prodigy Sub or Operating Partnership,
threatened against or affecting Prodigy, Prodigy Sub, Operating Partnership, any
of Prodigy's Affiliates or the assets of Prodigy, Prodigy Sub or Operating
Partnership which, if adversely determined, would reasonably be expected to have
a Prodigy Material Adverse Effect, or would materially and adversely affect
Prodigy's, Prodigy Sub's or Operating Partnership's ability to perform or
observe any obligation or condition under this Agreement.
(g) Corporate Subsidiaries. (i) Schedule 4.1(g) sets forth (w) the name of
each corporate Subsidiary of Prodigy; (x) the number and type of outstanding
equity securities of each corporate Subsidiary of Prodigy and a list of the
holders thereof; (y) the jurisdiction of organization of each corporate
Subsidiary of Prodigy; and (z) the jurisdictions in which each corporate
Subsidiary of Prodigy is qualified or holds licenses to do business as a foreign
corporation.
(ii) Each corporate Subsidiary of Prodigy is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation and has all requisite corporate power and authority to own and
operate its properties and assets and conduct its business as now conducted by
it. Each corporate Subsidiary of Prodigy is duly qualified as a foreign
corporation to transact business and is in good standing in each jurisdiction in
which it owns or leases properties or assets or conducts business so as to
require such qualification (except where the failure to be so qualified or in
good standing, when taken together with all other such failures, is not
reasonably likely to have a Prodigy Material Adverse Effect). Prodigy has
delivered or made available to SBC complete and accurate copies of the charter
and By-Laws (or comparable governing instruments) of each corporate Subsidiary
of Prodigy, as amended to date. No corporate Subsidiary of Prodigy is in default
under or in violation of any provision of its charter or By-Laws (or comparable
governing instruments). All of the issued and outstanding shares of capital
stock of each corporate Subsidiary of Prodigy are duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights. All shares of
each corporate Subsidiary of Prodigy that are held of record or owned
beneficially by either Prodigy or any corporate Subsidiary of Prodigy are held
or owned free and clear of any restrictions on transfer (other than restrictions
under the Securities Act and state securities laws), claims, Liens, options,
warrants, rights, Contracts, calls, commitments, equities and demands. There are
no outstanding options, warrants or other rights to subscribe for or acquire
from any corporate Subsidiary of Prodigy, or any Contracts or commitments
providing for the issuance of, or the granting of rights to acquire, any capital
stock of or other ownership interest in any corporate Subsidiary of Prodigy, or
any securities or obligations convertible into or exchangeable for any of such
capital stock or other ownership interest. There are no agreements, voting
trusts, proxies or understandings with respect to the voting, or registration
under the Securities Act of 1933, of any capital stock of any corporate
Subsidiary of Prodigy.
(h) Prodigy Reports; Financial Statements. Prodigy has delivered or made
available to SBC a complete and accurate copy of each registration statement,
report, proxy statement or information statement filed with the SEC by it since
January 1, 1998, including (i) Prodigy's Annual Report on Form 10-K (the
"Prodigy 10-K") for the fiscal year ended December 31, 1998 (the "Prodigy Most
Recent Balance Sheet Date") and (ii) Prodigy's Quarterly Reports on Form 10-Q
for the periods ended March 31, 1999 and June 30, 1999, respectively, each in
the form (including exhibits, annexes and any amendments thereto) filed with the
SEC (collectively, including any such reports filed subsequent to the date
hereof, the "Prodigy Reports"). As of their respective dates, each of the
Prodigy Reports complied, and any Prodigy Reports filed with the SEC after the
date hereof will comply, as to form in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, and the Prodigy Reports
did not, and any Prodigy Reports filed with the SEC after the date hereof will
not, at the time of their filing, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. Each of the consolidated balance sheets included in
or incorporated by reference into Prodigy Reports (including the related notes
and schedules) fairly presents, or will fairly present, in all material respects
the consolidated financial position of Prodigy and its Subsidiaries as of its
date and each of the consolidated statements of operations and of changes in
stockholders' equity and of cash flows included in or incorporated by reference
into the Prodigy Reports (including any related notes and schedules) fairly
presents, or will fairly present, in all material respects the results of
operations, retained earnings, changes in stockholders' equity and cash flow, as
the case may be, of Prodigy and its Subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to notes and normal year-
end audit adjustments that will not be material in amount or effect), in each
case in accordance with GAAP, consistently applied during the periods involved.
Prodigy has heretofore made available or promptly will make available to SBC a
complete and correct copy of all amendments or modifications which are required
to be filed with the SEC but have not yet been filed with the SEC to the Prodigy
Reports, agreements, documents or other instruments which previously had been
filed by Prodigy with the SEC pursuant to the Exchange Act.
(i) Absence of Certain Changes. Since the Prodigy Most Recent Balance Sheet
Date, except as described in Schedule 4.1(i) or in the Prodigy Reports filed
since the Prodigy Most Recent Balance Sheet Date,
(i) there has not been any change in the assets, business, financial
condition or results of operations of Prodigy, Operating Partnership or any
Subsidiary of Prodigy or any event or development or combination of events
or developments which, individually or in the aggregate has had, or would
reasonably be expected to have, a Prodigy Material Adverse Effect;
(ii) neither Prodigy, Operating Partnership nor any Subsidiary of
Prodigy has taken any of the actions set forth in Section 5.1(a);
(iii) there has not been any material damage, destruction or other
casualty loss with respect to any material asset or property owned, leased
or otherwise used by Prodigy, Operating Partnership or any Subsidiary of
Prodigy, whether or not covered by insurance;
(iv) there has not been any entry into, termination of, receipt of
notice of termination of, or cancellation or waiver of any material claims
or rights with respect to, any material Contract to which Prodigy,
Operating Partnership or any Subsidiary of Prodigy is or was a party; and
(v) there has not been any change by Prodigy, Operating Partnership or
any Subsidiary of Prodigy in accounting principles, practices or methods;
(j) Undisclosed Liabilities. Except as disclosed in the Prodigy Reports
filed prior to the date hereof or as set forth on Schedule 4.1(j), none of
Prodigy and its Subsidiaries has any obligation or liability (whether known or
unknown, whether absolute or contingent, whether liquidated or unliquidated,
whether due or to become due, and whether or not required to be disclosed in the
Prodigy Reports, including those relating to environmental and occupational
health and safety matters), and there are no other facts or circumstances of
which Prodigy or its Subsidiaries has knowledge that could result in any
obligations or liabilities of Prodigy or its Subsidiaries, except for those that
are not, individually or in the aggregate, reasonably likely to have a Prodigy
Material Adverse Effect or prevent or materially burden or materially impair the
ability of Prodigy or Operating Partnership to consummate the Prodigy
Contribution, the Unit Issuance and SBC Contribution, the Investment Share
Issuance or the other transactions contemplated by this Agreement or the
transactions contemplated by the Strategic Agreement.
(k) Capitalization. (i) As of the date of this Agreement, the authorized
capital stock of Prodigy consists of 150,000,000 shares of Prodigy Common Stock,
par value $0.01 per share, and 10,000,000 shares of preferred stock, par value
$0.01 per share, none of which preferred shares are issued or outstanding as of
the date hereof (the "Prodigy Preferred Stock"). As of the Closing Date, Prodigy
will have an authorized capitalization as set forth in the Restated Certificate
of Incorporation. All of the issued shares of capital stock of Prodigy have been
duly authorized and are validly issued, fully paid and nonassessable. Except as
set forth in Schedule 4.1(k)(i), there are no outstanding options, warrants or
other rights to subscribe for or acquire from Prodigy, or any plans, Contracts
or commitments providing for the issuance of, or the granting of rights to
acquire, any capital stock of or other ownership interest in Prodigy, or any
securities or obligations convertible into or exchangeable for any of such
capital stock or other ownership interest. Prodigy is not a party to any
agreements, voting trusts, proxies or understandings with respect to the voting,
or registration under the Securities Act, of any Prodigy Common Stock, except as
set forth in Schedule 4.1(k)(i). There are no preemptive rights in respect of
the capital stock of Prodigy. Prodigy does not have outstanding any Voting Debt
having the right to vote with the stockholders of Prodigy on any matter. As of
the date of this Agreement, the Prodigy Common Stock constitutes and, as of the
Closing Date the Class A Common Stock will constitute, the only class of
securities of Prodigy or any of its Subsidiaries registered or required to be
registered under the Exchange Act.
(ii) As of the date of this Agreement, the Operating Partnership has an
authorized capitalization as set forth in the Limited Partnership Agreement, and
all of the issued and outstanding interests in Operating Partnership have been
duly authorized and are validly issued, fully paid and non-assessable and the
interests owned by each of Prodigy and Prodigy Sub are owned free and clear of
all Liens. As of the Closing Date, Operating Partnership will have an authorized
capitalization as set forth in the Amended and Restated Limited Partnership
Agreement, and all of the issued and outstanding Units will have been duly
authorized and will be validly issued, fully paid and nonassessable and the
Units owned by each of Prodigy and SBC Sub will be owned free and clear of all
Liens. There are (a) no other Units or voting interests of Operating
Partnership, (b) no securities of Operating Partnership convertible into or
exchangeable for Units or voting interests of Operating Partnership, and (c) no
options or other rights to acquire from Operating Partnership, and no
obligations of Operating Partnership to issue, any Units, voting interests or
securities convertible into or exchangeable for Units or voting interests of
Operating Partnership, except pursuant to the Unit Issuance and SBC
Contribution. Operating Partnership has not conducted any business prior to the
date hereof and does not have any, and prior to the Closing Date will not have
any, assets, liabilities or obligations of any nature other than those incident
to its formation and pursuant to this Agreement and the transactions
contemplated by this Agreement. Schedule 4.1(k)(ii) contains true, complete and
correct copies of the Certificate of Limited Partnership of Operating
Partnership as in full force and effect on the date hereof. Operating
Partnership does not own, or have any Contract to acquire, any equity securities
or other securities of any Person or any direct or indirect equity or ownership
interest in any other Person. Upon consummation of the transactions contemplated
by this Agreement, SBC will own a number of Units (free and clear of all Liens)
equal to forty-three percent (43%) of a fraction, the numerator of which shall
be (A) the total number of shares of Prodigy Common Stock issued and outstanding
on a fully-diluted basis immediately prior to Closing after giving effect to the
issuance by Prodigy of the number of shares of Prodigy Common Stock issuable
pursuant to the Merger Agreement (including, without limitation, shares issuable
upon exercise of assumed options and warrants) and the exercise of all rights to
receive Prodigy Common Stock, whether pursuant to stock options, convertible
securities, warrants or otherwise, less the sum of (i) 4,818,290 shares of
Prodigy Common Stock issuable as of the date hereof pursuant to outstanding
warrants issued by Prodigy and (ii) the number of shares of Prodigy Common Stock
issued or issuable by Prodigy pursuant to the Merger Agreement (including,
without limitation, shares issued or issuable upon exercise of assumed options
and warrants) as of the Closing, and the denominator of which shall be (B)
fifty-seven one hundredths (.57).
(l) Taxes. (i) For purposes of this Agreement, the following terms shall
have the following meanings:
(A) "Taxes" means all taxes, charges, fees, levies or other
similar assessments or liabilities, including without limitation
income, profits, gross receipts, ad valorem, premium, value-added,
excise, real property, personal property, sales, service, license,
lease, use, transfer, withholding, employment, unemployment,
insurance, social security, business license, business organization,
environmental, workers compensation, payroll, severance, stamp,
occupation, customs, duties and franchise taxes imposed by the United
States of America or any state, local or foreign government, or any
agency thereof, or other political subdivision of the United States or
any such government, and any interest, fines, penalties, assessments
or additions to tax resulting from, attributable to or incurred in
connection with any tax or any contest or dispute thereof.
(B) "Tax Returns" means all reports, returns, declarations,
statements or other information required to be supplied to
a taxing authority in connection with Taxes.
(ii) Each of Prodigy and its Subsidiaries has filed on a timely basis all
Tax Returns that it was required to file, and all such Tax Returns were complete
and accurate in all material respects. Neither Prodigy nor any Subsidiary of
Prodigy is or has ever been a member of a group of corporations with which it
has filed (or been required to file) consolidated, combined or unitary Tax
Returns, other than a group of which only Prodigy and the Subsidiaries of
Prodigy are or were members. Each of Prodigy and the Subsidiaries of Prodigy has
paid on a timely basis all Taxes that were shown to be due and payable on the
Tax Returns referred to in the first sentence of this paragraph. The unpaid
Taxes of Prodigy and the Subsidiaries of Prodigy for tax periods through the
Prodigy Most Recent Balance Sheet Date do not exceed the accruals and reserves
for Taxes (excluding reserves for deferred taxes) set forth on the balance sheet
included in the Prodigy 10-K. Neither Prodigy nor any Subsidiary of Prodigy has
any actual or potential liability for any tax obligation of any taxpayer
(including without limitation any affiliated group of corporations or other
entities that included Prodigy or any Subsidiary of Prodigy during a prior
period) other than Prodigy and the Subsidiaries of Prodigy. AllTaxes that
Prodigy or any Subsidiary of Prodigy is or was required by Law to withhold or
collect have been duly withheld or collected and, to the extent required, have
been paid to the proper Governmental Entity.
(iii) Prodigy has delivered or made available to SBC complete and accurate
copies of all federal income Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by Prodigy or any Subsidiary of
Prodigy since January 1, 1996. The federal income Tax Returns of Prodigy and
each Subsidiary of Prodigy have not been audited by the Internal Revenue Service
and are not closed by the applicable statute of limitations for any taxable
year. Prodigy has delivered or made available to SBC complete and accurate
copies of all other Tax Returns of Prodigy and the Subsidiaries of Prodigy
together with all related examination reports and statements of deficiency for
all periods from and after January 1, 1996. Except as described in Schedule
4.1(l)(iii), no examination or audit of any Tax Return of Prodigy or any
Subsidiary of Prodigy by any Governmental Entity is currently in progress or, to
the knowledge of Prodigy, threatened or contemplated. Neither Prodigy nor any
Subsidiary of Prodigy has been informed by any jurisdiction that the
jurisdiction believes that Prodigy or any Subsidiary of Prodigy was required to
file any Tax Return that was not filed. Neither Prodigy nor any Subsidiary of
Prodigy has waived any statute of limitations with respect to Taxes or agreed to
an extension of time with respect to a Tax assessment or deficiency.
(iv) Neither Prodigy nor any Subsidiary of Prodigy:
(C) is a "consenting corporation" within the meaning of Section 341(f)
of the Code, and none of the assets of Prodigy or the Subsidiaries of
Prodigy are subject to an election under Section 341(f) of the Code;
(D) has been a United States real property holding corporation within
the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(l)(A)(ii) of the Code;
(E) except as set forth in Schedule 4.1(l)(ii), has made any payments,
is obligated to make any payments, or is a party to any agreement that
could obligate it to make any payments that may be treated as an "excess
parachute payment" under Section 280G of the Code in connection with any
transaction contemplated by this Agreement;
(F) has any actual or potential liability for any Taxes of any person
(other than Prodigy and its Subsidiaries) under Treasury Regulation Section
1.1502-6 (or any similar provision of federal, state, local, or foreign
law), or as a transferee or successor, by Contract, or otherwise; or
(G) is or has been required to make a basis reduction pursuant to
Treasury Regulation Section 1.1502-20(b) or Treasury Regulation Section
1.337(d)-2(b).
(v) None of the assets of Prodigy or any Subsidiary of Prodigy: (A) is
property that is required to be treated as being owned by any other person
pursuant to the provisions of former Section 168(f)(8) of the Code; (B) is "tax-
exempt use property" within the meaning of Section 168(h) of the Code; or (C)
directly or indirectly secures any debt the interest on which is tax exempt
under Section 103(a) of the Code.
(vi) Neither Prodigy nor any Subsidiary of Prodigy has undergone a change
in its method of accounting resulting in an adjustment to its taxable income
pursuant to Section 481 of the Code.
(vii) On the Closing Date, except as set forth in Schedule 4.1(l)(vii), no
state or federal "net operating loss" of Prodigy determined as of the Closing
Date will be subject to limitation on its use pursuant to Section 382 of the
Code or comparable provisions of state law as a result of any "ownership change"
within the meaning of Section 382(g) of the Code or comparable provisions of any
state law occurring prior to the Closing Date.
(m) Real Property. Neither Prodigy nor any Subsidiary of Prodigy owns any
real property. Schedule 4.1(m) identifies the real property leased to Prodigy in
White Plains, New York, Yorktown Heights, New York and Houston, Texas and lists
the term of such lease, any extension and expansion options, and the rent
payable thereunder. Other than the leases identified on Schedule 4.1(m), no
other real property which is material to the business and operations of Prodigy,
Operating Partnership or any Subsidiary of Prodigy is leased or subleased to or
by Prodigy, Operating Partnership or any Subsidiary of Prodigy. With respect to
each lease listed on Schedule 4.1(m):
(i) the lease or sublease is legal, valid, binding, enforceable
against Prodigy (and, to Prodigy's knowledge, against the other party
thereto) and in full force and effect;
(ii) the lease or sublease will continue to be legal, valid, binding,
enforceable against Prodigy (and, to Prodigy's knowledge, against the other
party thereto) and in full force and effect immediately following the
Closing in accordance with the terms thereof as in effect immediately prior
to the Closing;
(iii) neither Prodigy nor any Subsidiary of Prodigy nor, to the
knowledge of Prodigy or Operating Partnership, any other party, is in
breach or violation of, or default under, any such lease or sublease in any
material respect, and no event has occurred, is pending or, to the
knowledge of Prodigy or Operating Partnership, is threatened, which, after
the giving of notice, with lapse of time, or otherwise, would constitute a
breach or default by Prodigy or any Subsidiary of Prodigy or, to the
knowledge of Prodigy or Operating Partnership, any other party under such
lease or sublease in any material respect;
(iv) neither Prodigy nor any Subsidiary of Prodigy has assigned,
transferred, conveyed, mortgaged, deeded in trust or encumbered any
interest in the leasehold or subleasehold; and
(v) neither Prodigy nor Operating Partnership is aware of any Lien,
mortgage, easement, covenant or other restriction applicable to the real
property subject to such lease, except for recorded mortgages, easements,
covenants and other restrictions which do not materially impair the current
uses or the occupancy by Prodigy or a Subsidiary of Prodigy of the property
subject thereto.
(n) Personal Property. Each of Prodigy and its Subsidiaries has good title
to, or a valid leasehold interest in, or other good and sufficient right to use,
all tangible personal properties that are material to the business and
operations of Prodigy or such Subsidiary.
(o) Intellectual Property; Year 2000. (i) Each of Prodigy and the
Subsidiaries of Prodigy owns or has the right to use each item of Intellectual
Property incorporated in its products or necessary for, or used in, the
operation of its business as presently conducted (the "Prodigy Intellectual
Property"), which is material to Prodigy and the Subsidiaries of Prodigy (it
being understood and agreed that each of the Prodigy Marks specified in the
Strategic Agreement is a material item of Prodigy Intellectual Property) and has
the full right and authority to grant the licenses in respect of such Prodigy
Intellectual Property to SBC under the Strategic Agreement. Each of Prodigy and
Operating Partnership has taken all reasonable measures to protect the
proprietary nature of each material item of Prodigy Intellectual Property, and
to maintain in confidence all trade secrets and confidential information, that
it owns or uses. To the knowledge of Prodigy or Operating Partnership, no other
person or entity has any rights to any material Prodigy Intellectual Property
owned by Prodigy and the Subsidiaries of Prodigy (except pursuant to agreements
or licenses specified in Schedule 4.1(o)(i) or incidental licenses granted in
the ordinary course of business). To the knowledge of Prodigy or Operating
Partnership, no other person or entity is infringing, violating or
misappropriating any material item of Prodigy Intellectual Property. Each of
Prodigy and Operating Partnership has made available to SBC complete and
accurate copies of all written documentation in its possession relating to
pending claims or disputes known to it concerning any material item of Prodigy
Intellectual Property, and all such claims and disputes are described on
Schedule 4.1(o)(ii). Schedule 4.1(o)(iii) lists each Prodigy patent, patent
application, registered trademark, registered service mark, registered trade
name, registered copyright and material unregistered trademark, service mark and
copyright, including all applications for registration thereof. The consummation
of the transactions contemplated by this Agreement will not alter, impair or
extinguish any of the rights of Prodigy or Operating Partnership to any material
item of Prodigy Intellectual Property.
(ii) None of the activities or business presently conducted by Prodigy or a
Subsidiary of Prodigy and none of the Prodigy Marks infringes or violates, or
constitutes a misappropriation of, any Intellectual Property rights of any
person or entity except for such infringement, violation or misappropriation
that, individually or in the aggregate, would not reasonably be likely to have a
Prodigy Material Adverse Effect. Neither Prodigy nor any Subsidiary of Prodigy
has received any complaint, claim or notice alleging any such infringement,
violation or misappropriation and no such claim has been threatened by any Third
Party.
(iii) Schedule 4.1(o)(iv) identifies each license or other agreement
pursuant to which Prodigy or a Subsidiary of Prodigy has licensed, distributed
or otherwise granted any rights to any Third Party with respect to, any Prodigy
Intellectual Property, except as is not material to Prodigy and its Subsidiaries
taken as a whole.
(iv) Schedule 4.1(o)(v) identifies each item of Prodigy Intellectual
Property that is owned by a party other than Prodigy or a Subsidiary of Prodigy,
and the license or agreement pursuant to which Prodigy or a Subsidiary of
Prodigy uses it (excluding off-the-shelf software programs licensed by Prodigy
pursuant to "shrink wrap" licenses), except as is not material to Prodigy and
its Subsidiaries taken as a whole.
(v) Prodigy has conducted "year 2000" audits with respect to
(A) all of the internal systems used in the business or operations of
Prodigy or its Subsidiaries, including, without limitation, computer
hardware systems, software applications, firmware, equipment containing
embedded microchips and other embedded systems; and
(B) all of the software, hardware, firmware and other technology which
constitute part of the products and services manufactured, marketed, sold
or licensed by Prodigy or its Subsidiaries.
(vi) Except as set forth in Schedule 4.1(o)(vi), all of
(A) the internal systems used in the business or operations of Prodigy
or its Subsidiaries, including, without limitation, computer hardware
systems, software applications, firmware, equipment containing embedded
microchips and other embedded systems; and
(B) the software, hardware, firmware and other technology of Prodigy
and its Subsidiaries which constitute part of the products and services
manufactured, marketed, sold or licensed by Prodigy or its Subsidiaries
are Year 2000 Compliant and will not be materially adversely affected with
respect to value, utility, marketability, operability or any other aspect
by virtue of the arrival of the year 2000.
(vii) Neither Prodigy nor any of its Subsidiaries is aware of any failure
to be Year 2000 Compliant of any third-party system, software, hardware,
firmware or other technology used in connection with the business or operations
of Prodigy or its Subsidiaries, including without limitation any system
belonging to one of the suppliers or service providers of Prodigy or its
Subsidiaries.
(p) Contracts. (i) Prodigy has filed with the SEC complete and accurate
copies of each Contract to which Prodigy or any Subsidiary of Prodigy is a party
and which is required to be filed by Prodigy with the SEC under Item 601 of
Regulation S-K. With respect to each such Contract:
(A) the Contract is legal, valid, binding and enforceable against
Prodigy (and, to Prodigy's knowledge, against the other party thereto) and
in full force and effect;
(B) the Contract will continue to be legal, valid, binding and
enforceable against Prodigy (and, to Prodigy's knowledge, against the other
party thereto) and in full force and effect immediately following the
Closing in accordance with the terms thereof as in effect immediately prior
to the Closing; and
(C) neither Prodigy nor any Subsidiary of Prodigy nor, to the
knowledge of Prodigy, any other party, is in breach or violation of, or
default under, any such Contract, and no event has occurred, is pending or,
to the knowledge of Prodigy, is threatened, which, after the giving of
notice, with lapse of time, or otherwise, would constitute a breach or
default by Prodigy or any Subsidiary of Prodigy or, to the knowledge of
Prodigy, any other party under such Contract, in each case except as would
not individually or in the aggregate reasonably be expected to have a
Prodigy Material Adverse Effect.
(ii) None of Prodigy or Operating Partnership or any Subsidiary of Prodigy,
nor, to the knowledge of Prodigy, any other party to any Contracts to which any
of Prodigy or Operating Partnership or any Subsidiary of Prodigy is bound or is
a party, is (or, with notice or lapse of time or both, would be) in material
breach or default thereof which breaches or defaults individually or in the
aggregate, are reasonably likely to have a Prodigy Material Adverse Effect or
prevent or materially burden or materially impair the ability of Prodigy or
Operating Partnership or any Subsidiary of Prodigy to consummate the Prodigy
Contribution, the Unit Issuance and SBC Contribution, the Investment Share
Issuance or the other transactions contemplated by this Agreement or the
transactions contemplated by the Strategic Agreement.
(q) Insurance. Prodigy maintains, and Operating Partnership will maintain,
in full force and effect insurance policies (including, without limitation,
fire, theft, casualty, general liability, workers' compensation, business
interruption, environmental, product liability and automobile insurance policies
and bond and surety arrangements) of the type and in amounts customarily carried
by organizations conducting businesses or owning assets similar to those of
Prodigy, Operating Partnership and the Subsidiaries of Prodigy. There is no
material claim pending under any such policy as to which coverage has been
questioned, denied or disputed by the underwriter of such policy. All premiums
due and payable under all such policies have been paid and Prodigy and the
Subsidiaries of Prodigy are otherwise in compliance in all material respects
with the terms of such policies. Prodigy has no knowledge of any threatened
termination of, or material premium increase with respect to, any such policy.
Each such policy will continue to be enforceable and in full force and effect
immediately following the Closing in accordance with the terms thereof as in
effect immediately prior to the Closing.
(r) Employee Matters. (i) For purposes of this Agreement, the following
terms shall have the following meanings:
(A) "Employee Benefit Plan" means any "employee pension benefit plan"
(as defined in Section 3(2) of ERISA), any "employee welfare benefit plan"
(as defined in Section 3(1) of ERISA), and any other written or oral plan,
agreement or arrangement involving direct or indirect compensation,
including without limitation insurance coverage, severance benefits,
disability benefits, deferred compensation, bonuses, stock options, stock
purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement compensation covering current or former
employees or directors of Prodigy, Operating Partnership or any Subsidiary
of Prodigy.
(B) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(C) "ERISA Affiliate" means any entity which is considered one
employer with Prodigy under Section 4001 of ERISA or which is, or at any
applicable time was, a member of (1) a controlled group of corporations (as
defined in Section 414(b) of the Code), (2) a group of trades or businesses
under common control (as defined in Section 414(c) of the Code), or (3) an
affiliated service group (as defined under Section 414(m) of the Code or
the regulations under Section 414(o) of the Code), any of which includes or
included Prodigy or a Subsidiary of Prodigy.
(ii) Schedule 4.1(r)(ii) contains a complete and accurate list of all
Employee Benefit Plans maintained, or contributed to, by Prodigy, any Subsidiary
of Prodigy or any ERISA Affiliate. Complete and accurate copies of (i) all
Employee Benefit Plans which have been reduced to writing, (ii) written
summaries of all unwritten Employee Benefit Plans, (iii) all related trust
agreements, insurance Contracts and summary plan descriptions, and (iv) all
annual reports filed on IRS Form 5500, 5500C or 5500R and (for all funded plans)
all plan financial statements for the last five plan years for each Employee
Benefit Plan, have been delivered or made available to SBC. Each Employee
Benefit Plan has been administered in all material respects in accordance with
its terms and each of Prodigy, the Subsidiaries of Prodigy and each ERISA
Affiliate has met its obligations with respect to such Employee Benefit Plan and
has timely made or has reflected in its audited financial statements all
contributions required to be made under the terms of such Employee Benefit Plan.
Prodigy, each ERISA Affiliate and each Employee Benefit Plan are in compliance
in all material respects with the currently applicable provisions of ERISA and
the Code and the regulations thereunder (including without limitation Section
4980 B of the Code, Subtitle K, Chapter 100 of the Code and Sections 601 through
608 and Section 701 et seq. of ERISA). All filings and reports as to each
Employee Benefit Plan required to have been submitted to the Internal Revenue
Service or to the United States Department of Labor have been timely submitted.
(iii) There are no actions, suits, proceedings, claims, arbitrations or
investigations pending before any Governmental Entity or before any arbitrator
(except claims for benefits payable in the normal operation of the Employee
Benefit Plans and proceedings with respect to qualified domestic relations
orders), or to the knowledge of Prodigy, threatened against or involving any
Employee Benefit Plan or asserting any rights or claims to benefits under any
Employee Benefit Plan.
(iv) All the Employee Benefit Plans that are intended to be qualified under
Section 401(a) of the Code have received favorable determination letters from
the Internal Revenue Service to the effect that such Employee Benefit Plans are
so qualified and the plans and the trusts related thereto are exempt from
federal income taxes under Sections 401(a) and 501(a), respectively, of the
Code, no such determination letter has been revoked and revocation has not been
threatened, and no such Employee Benefit Plan has been amended or operated since
the date of its most recent determination letter or application therefor in any
respect, and no act or omission has occurred, that would adversely affect the
qualification or materially increase the cost of such Employee Benefit Plan.
Each Employee Benefit Plan which is required to satisfy Section 401(k)(3) or
Section 401(m)(2) of the Code has been tested for compliance with, and satisfies
the requirements of, Section 401(k)(3) and Section 401(m)(2) of the Code for
each plan year ending prior to the Closing Date.
(v) None of Prodigy, any Subsidiary of Prodigy, or any ERISA Affiliate has
ever maintained an Employee Benefit Plan subject to Section 412 of the Code or
Title IV of ERISA.
(vi) At no time has Prodigy, any Subsidiary of Prodigy or any ERISA
Affiliate been obligated to contribute to any "multiemployer plan" (as defined
in Section 4001(a)(3) of ERISA).
(vii) There are no unfunded obligations under any Employee Benefit Plan
providing benefits after termination of employment to any employee of Prodigy or
any Subsidiary of Prodigy (or to any beneficiary of any such employee),
including but not limited to retiree health coverage and deferred compensation,
but excluding continuation of health coverage required to be continued under
Section 4980B of the Code or other applicable Law and insurance conversion
privileges under state law. The assets of each Employee Benefit Plan which is
funded are reported at their fair market value on the books and records of such
Employee Benefit Plan.
(viii) No act or omission has occurred and no condition exists with respect
to any Employee Benefit Plan maintained by Prodigy, any Subsidiary of Prodigy or
any ERISA Affiliate that would subject Prodigy, any Subsidiary of Prodigy or any
ERISA Affiliate to (x) any material fine, penalty, tax or liability of any kind
imposed under ERISA or the Code or (y) any Contractual indemnification or
contribution obligation protecting any fiduciary, insurer or service provider
with respect to any Employee Benefit Plan.
(ix) No Employee Benefit Plan is funded by, associated with or related to a
"voluntary employee's beneficiary association" within the meaning of Section
501(c)(9) of the Code.
(x) Each Employee Benefit Plan is amendable and terminable unilaterally by
Prodigy at any time without liability to Prodigy as a result thereof and no
Employee Benefit Plan, plan documentation or agreement, summary plan description
or other written communication distributed generally to employees by its terms
prohibits Prodigy from amending or terminating any such Employee Benefit Plan.
(xi) Schedule 4.1(r)(xi) discloses each:
(A) agreement, plan, understanding or arrangement under which any
person may receive payments from Prodigy or any Subsidiary of Prodigy that
may be subject to the tax imposed by Section 4999 of the Code or included
in the determination of such person's "parachute payment" under Section
280G of the Code; and
(B) agreement, understanding or plan binding Prodigy or any Subsidiary
of Prodigy, including without limitation any Employee Benefit Plan, any of
the benefits of which will be triggered or increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement.
(xii) Neither Prodigy nor any Subsidiary of Prodigy is a party to or bound
by any collective bargaining agreement, Contract or other agreement with a labor
union or labor organization, nor is there pending or, to the knowledge of
Prodigy, threatened, any strike, dispute, walk-out, work stoppage, slow-down,
lockout, grievance, claim of unfair labor practices or other collective
bargaining disputes involving Prodigy or any Subsidiary of Prodigy. Prodigy has
no knowledge of any organizational effort made or threatened, either currently
or within the past two years, by or on behalf of any labor union with respect to
employees of Prodigy or any Subsidiary of Prodigy. Each of Prodigy and any
Subsidiary of Prodigy is in compliance with all currently applicable Laws
regarding employment and employment matters, terms and conditions of employment
and wages and hours and is not engaged in any unfair labor practice, except for
any failures that would not, individually or in the aggregate, reasonably be
expected to have a Prodigy Material Adverse Effect or prevent or materially
impair the ability of Prodigy, Prodigy Sub or Operating Partnership to
consummate the Prodigy Contribution, the Unit Issuance and SBC Contribution, the
Investment Share Issuance or the other transactions contemplated hereby or the
transactions contemplated by the Strategic Agreement.
(s) Environmental Matters. (i) Each of Prodigy and the Subsidiaries of
Prodigy has complied with all applicable Environmental Laws, except for any
violations that would not, individually or in the aggregate, reasonably be
expected to have a Prodigy Material Adverse Effect. There is no pending or, to
the knowledge of Prodigy, threatened, civil or criminal litigation, notice of
violation, claim, notice of liability, administrative proceeding, or
investigation, inquiry or information request by any Governmental Entity or
Third Party, relating to any Environmental Law involving Prodigy or any
Subsidiary of Prodigy.
(ii) There have been no releases of any Materials of Environmental Concern
into the environment at or from any parcel of real property or any facility
formerly or currently owned, operated or controlled by Prodigy or a Subsidiary
of Prodigy, except for any releases that would not, individually or in the
aggregate, reasonably be expected to have a Prodigy Material Adverse Effect or
prevent or materially impair the ability of Prodigy, Prodigy Sub or Operating
Partnership to consummate the Prodigy Contribution, the Unit Issuance and SBC
Contribution, the Investment Share Issuance or the other transactions
contemplated hereby or the transactions contemplated by the Strategic Agreement.
There have not been any releases of Materials of Environmental Concern or
threatened releases at parcels of real property or facilities other than those
owned, operated or controlled by Prodigy or a Subsidiary of Prodigy that could
reasonably be expected to result in liability to Prodigy or any Subsidiary of
Prodigy or have an impact on the real property or facilities owned, operated or
controlled by Prodigy or a Subsidiary of Prodigy, except for any releases that
would not, individually or in the aggregate, reasonably be expected to have a
Prodigy Material Adverse Effect or prevent or materially impair the ability of
Prodigy, Prodigy Sub or Operating Partnership to consummate the Prodigy
Contribution, the Unit Issuance and SBC Contribution, the Investment Share
Issuance or the other transactions contemplated hereby or the transactions
contemplated by the Strategic Agreement.
(iii) Neither Prodigy nor any Subsidiary of Prodigy is subject to any
Order, decree, injunction or other arrangement with any Governmental Entity or
any indemnity or other agreement with any Third Party relating to liability
under any Environmental Law or relating to any Materials of Environmental
Concern and there are no other circumstances or conditions involving Prodigy or
any Subsidiary of Prodigy that could reasonably be expected to result in any
claim, liability, investigation, cost or restriction on the ownership, use, or
transfer of any property in connection with any Environmental Law.
(iv) There are no documents (whether in hard copy or electronic form) known
to Prodigy's current executive officers that contain any environmental reports,
investigations and audits relating to premises currently or previously owned or
operated by Prodigy or a Subsidiary of Prodigy (whether conducted by or on
behalf of Prodigy or a Subsidiary of Prodigy or a Third Party, and whether done
at the initiative of Prodigy or a Subsidiary of Prodigy or directed by a
Governmental Entity or other Third Party) which were issued or conducted during
the past five years and which Prodigy has possession of or access to. A complete
and accurate copy of each such document has been provided to SBC.
(t) Permits. Each of Prodigy and its Subsidiaries has all Permits necessary
to conduct their respective businesses as presently conducted or as proposed to
be conducted, except for those the absence of which would not reasonably be
expected to have a Prodigy Material Adverse Effect. Each such Permit is in full
force and effect and, to the best of the knowledge of Prodigy, no suspension or
cancellation of such Permit is threatened and there is no basis for believing
that such Permit will not be renewable upon expiration. Each such Permit will
continue in full force and effect immediately following the Closing.
(u) Brokers Fees. Neither Prodigy nor any Subsidiary of Prodigy has any
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement, except
that Prodigy has employed Bear, Stearns & Co. Inc. as its financial advisor, all
fees of which shall be borne by Prodigy.
(v) Investment Company Act. Neither Prodigy nor Operating Partnership is,
and after giving effect to the Prodigy Contribution, the Unit Issuance and SBC
Contribution, the Investment Share Issuance and the other transactions
contemplated by this Agreement and the transactions contemplated by the
Strategic Agreement, will be an "investment company," as such term is defined in
the Investment Company Act of 1940, as amended.
(w) Subscribers. As of the date of this Agreement, the number of managed
Subscribers to Prodigy's Retail ISP Service is at least 1,400,000.
(x) Title to Prodigy Contributed Assets. As to each Prodigy Contributed
Asset, Prodigy, Prodigy Sub or a Subsidiary of Prodigy has lawful title to, a
proprietary interest in, or a Contractual interest in such Prodigy Contributed
Asset (including, in the case of Intellectual Property, an ownership interest,
license or other lawful right to the benefit or use of such Intellectual
Property) and the ability to convey such title to, or proprietary or Contractual
interest in, such Prodigy Contributed Asset, free of all Liens and encumbrances
other than Permitted Encumbrances (or in the case of Contracts that cannot be
assigned to Operating Partnership, the ability to perform fully such contracts
for the benefit of Operating Partnership).
4.2 Representations and Warranties of SBC and SBC Sub. Each of SBC and SBC
Sub jointly and severally hereby makes the following representations and
warranties to Prodigy, Prodigy Sub and Operating Partnership:
(a) Corporate Existence; Ownership. Each of SBC and SBC Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation and has all requisite corporate power and
authority to own and operate its properties and assets and conduct its business
as now conducted by it. Each of SBC and SBC Sub is duly qualified as a foreign
corporation to transact business and is in good standing in each jurisdiction in
which it owns or leases properties or assets or conducts business so as to
require such qualification (except where the failure of SBC or SBC Sub to be so
qualified or in good standing, when taken together with all other such failures,
is not reasonably likely to have a material adverse effect on SBC).
(b) Authorization; Enforcement. (i) Each of SBC and SBC Sub has all
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations under this Agreement in accordance with its
terms. Each of SBC and SBC Sub has taken all necessary action to authorize the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby. This Agreement is a valid and legally binding
obligation of each of SBC and SBC Sub, enforceable against each of them in
accordance with its terms, subject to the Bankruptcy and Equity Exception.
(ii) On the Closing Date, SBC Sub will have all requisite corporate power
and authority to execute and deliver the Amended and Restated Limited
Partnership Agreement and to perform its obligations under the Amended and
Restated Limited Partnership Agreement in accordance with its terms. On the
Closing Date, SBC Sub will have taken all necessary corporate action to
authorize the execution and delivery of the Amended and Restated Limited
Partnership Agreement and the consummation of the transactions contemplated
thereby. When executed, the Amended and Restated Limited Partnership Agreement
will be a valid and legally binding obligation of SBC Sub, enforceable in
accordance with its terms, subject to the Bankruptcy and Equity Exception.
(c) Compliance with Law. (i) The execution and delivery by each of SBC and
SBC Sub of this Agreement do not, and, subject to the satisfaction of the
Closing conditions specified in Sections 3.2(e) and (f), the performance by each
of SBC and SBC Sub of its respective obligations under this Agreement and the
consummation by each of SBC and SBC Sub of the transactions contemplated hereby
will not, violate any provision of any Law or regulation, or any existing writ
or decree of any court or Governmental Entity applicable to SBC or SBC Sub.
(ii) The execution and delivery by SBC Sub of the Amended and Restated
Limited Partnership Agreement will not, and the performance by it of its
obligations under the Amended and Restated Limited Partnership Agreement and the
consummation of the transactions contemplated thereby will not, violate any
provision of any Law or regulation, or an existing writ or decree of any court
or Governmental Entity applicable to it.
(d) Compliance with Obligations. (i) The execution and delivery by each of
SBC and SBC Sub of this Agreement do not, and, subject to the satisfaction of
the Closing conditions specified in Sections 3.2(e) and (f), the performance by
each of SBC and SBC Sub of its respective obligations under this Agreement and
the consummation by each of SBC and SBC Sub of the transactions contemplated
hereby will not, violate, conflict with or constitute a breach of, or a default
under, the certificate of incorporation or By-Laws of SBC or SBC Sub, or result
in a violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of termination,
cancellation, modification or acceleration) (whether after the giving of notice
or the passage of time or both) under any material Contract to which SBC or SBC
Sub is a party or which is binding on it or its assets, and will not result in
the creation of any Lien on, or security interest in, any of the assets or
properties of SBC or any of its Subsidiaries.
(ii) The execution and delivery by SBC Sub of the Amended and Restated
Limited Partnership Agreement will not, and the performance by it of its
obligations under the Amended and Restated Limited Partnership Agreement and the
consummation by SBC Sub of the transactions contemplated thereby will not,
violate, conflict with or constitute a breach of, or a default under, its
certificate of incorporation or By-Laws, or result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation, modification or
acceleration) (whether after the giving of notice or the passage of time or
both) under any material Contract to which SBC Sub is a party or which is
binding on it or its assets, and will not result in the creation of any Lien on,
or security interest in, any of the assets or properties of SBC Sub.
(e) Consents and Approvals. (i) All notices, reports or other filings
required to be made by SBC or SBC Sub, and all consents, registrations,
approvals, Permits, authorizations and Orders of Governmental Entities or other
third parties required to be obtained by SBC or SBC Sub in connection with the
execution and delivery of this Agreement by each of SBC and SBC Sub, the
performance by each of SBC and SBC Sub of its respective obligations under this
Agreement and the consummation by each of SBC and SBC Sub of the transactions
contemplated hereby (other than, as of the date hereof, the expiration or
termination of the waiting period under the HSR Act) have been made or obtained.
(ii) On the Closing Date, all notices, reports or other filings required to
be made by SBC Sub, and all consents, registrations, approvals, Permits,
authorizations and Orders of Governmental Entities or other third parties
required to be obtained by SBC Sub in connection with the execution and delivery
of the Amended and Restated Limited Partnership Agreement by SBC Sub, the
performance by SBC Sub of its obligations under the Amended and Restated Limited
Partnership Agreement and the consummation by SBC Sub of the transactions
contemplated thereby, will have been made or obtained.
(f) Litigation. There is no legal action, suit, investigation or proceeding
pending or, to the knowledge of SBC or SBC Sub, threatened against or affecting
SBC, SBC Sub or the assets of SBC or SBC Sub which, if adversely determined,
would reasonably be expected to have a material adverse effect on SBC or would
materially and adversely affect SBC's or SBC Sub's ability to perform or observe
any obligation or condition under this Agreement.
(g) Investment Intent. SBC Sub is taking possession of the SBC Units and
the Investment Share for the purpose of investment and not with a view to any
resale, distribution or other disposition thereof.
(h) Title to SBC Contributed Assets. As to each SBC Contributed Asset, SBC
represents and warrants that it, SBC Sub or an Affiliate of SBC, has lawful
title to, a proprietary interest in, or a Contractual interest in such SBC
Contributed Asset (including, in the case of Intellectual Property, an ownership
interest, license or other lawful right to the benefit or use of such
Intellectual Property) and the ability to convey such title to, or proprietary
or Contractual interest in, such SBC Contributed Asset, free of all Liens and
encumbrances other than Permitted Encumbrances.
(i) Subscribers. As of the date of this Agreement, the number of
Subscribers to the Retail ISP Services of SBC and its Affiliates is at least
625,000.
(j) Disclaimer of Warranties. Except as otherwise provided herein, all SBC
Contributed Assets are transferred to Operating Partnership "AS IS," "WHERE IS,"
and "WITH ALL FAULTS." Other than the warranty of title in paragraph (h) of this
Section 4.2, neither SBC nor SBC Sub makes any other warranty, express or
implied, including without limitation any implied warranty of merchantability or
fitness for a particular purpose, with respect to the SBC Contributed Assets.
Without limiting the foregoing, Prodigy hereby waives and releases SBC and SBC
Sub from any claims or demands that Prodigy may have regarding any defect,
error, or other condition of any SBC Contributed Asset.
(k) Brokers Fees. Neither SBC nor any Subsidiary of SBC has any liability
or obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement, except that SBC has
employed Goldman, Sachs & Co., Inc. as its financial advisor, all fees of which
shall be borne by SBC.
(l) Intellectual Property; Year 2000. (i) SBC or a Subsidiary of SBC owns
or has the right to use each material item of Intellectual Property necessary
for, or used in, the SBC Contributed Assets and the assets used in providing
billing services and Network Services (the "SBC Intellectual Property") (it
being understood and agreed that each of the SBC Marks specified in the
Strategic Agreement is a material item of SBC Intellectual Property) and has the
full right and authority to grant the licenses in respect of such SBC
Intellectual Property to Prodigy under the Strategic Agreement. SBC has taken
all reasonable measures to protect the proprietary nature of each material item
of SBC Intellectual Property, and to maintain in confidence all trade secrets
and confidential information, that it owns or uses. To the knowledge of SBC, no
other person or entity has any rights to any material SBC Intellectual Property
owned by SBC and the Subsidiaries of SBC (except pursuant to licenses granted in
the ordinary course of business). To the knowledge of SBC, no other person or
entity is infringing, violating or misappropriating any material item of SBC
Intellectual Property. SBC has made available to Prodigy complete and accurate
copies of all written documentation in its possession relating to pending claims
or disputes known to it concerning any material item of SBC Intellectual
Property. The consummation of the transactions contemplated by this Agreement
will not alter, impair or extinguish any of the rights of SBC or any Subsidiary
of SBC to any material item of SBC Intellectual Property.
(ii) None of the activities or business presently conducted by SBC or a
Subsidiary of SBC and none of the SBC Marks infringes or violates, or
constitutes a misappropriation of, any Intellectual Property rights of any
person or entity except for such infringement, violation or misappropriation
that, individually or in the aggregate, would not reasonably be likely to have a
material adverse effect on SBC. Neither SBC nor any Subsidiary of SBC has
received any complaint, claim or notice alleging any such infringement,
violation or misappropriation and no such claim has been threatened by any Third
Party.
(iii) SBC has conducted "year 2000" audits with respect to all of the
internal systems used in the SBC Contributed Assets and the assets used in
providing billing services and Network Services, including, without limitation,
computer hardware systems, software applications, firmware, equipment containing
embedded microchips and other embedded systems.
(iv) All of the internal systems used in the SBC Contributed Assets and the
assets used in providing billing services and Network Services, including,
without limitation, computer hardware systems, software applications, firmware,
equipment containing embedded microchips and other embedded systems are Year
2000 Compliant and will not be materially adversely affected with respect to
value, utility, marketability, operability or any other aspect by virtue of the
arrival of the year 2000.
(v) Neither SBC nor any of its Subsidiaries is aware of any failure to be
Year 2000 Compliant of any third-party system, software, hardware, firmware or
other technology used in connection with the SBC Contributed Assets and the
assets used in providing billing services and Network Services, including
without limitation any system belonging to one of the suppliers or service
providers of SBC or its Subsidiaries.
ARTICLE V
COVENANTS
5.1 Covenants of Prodigy, Prodigy Sub and Operating Partnership.
(a) Conduct of Business. (i) During the period from the date hereof until
the consummation of the Closing, Prodigy shall, except as otherwise expressly
provided in this Agreement, operate only in the ordinary course of business
consistent with past practice. Prodigy shall use all reasonable efforts to
preserve intact the present organization of its business, keep available the
services of its officers and employees and preserve its relationships with
subscribers, suppliers, and others having significant business dealings with its
business.
(ii) Without limiting the generality of the foregoing, except as otherwise
expressly provided in this Agreement, from the date of this Agreement until the
consummation of the Closing, each of Prodigy and Operating Partnership shall
not, and Prodigy shall cause its Subsidiaries not to, without the written
consent of SBC (which consent shall not be unreasonably withheld or delayed):
(1) amend or propose to amend its certificates of incorporation or
By-Laws (or other similar organizational documents) or alter through
merger, liquidation, reorganization, restructuring or in any other
fashion, its corporate or ownership structure or ownership or any of its
Subsidiaries;
(2) issue, sell or ag ree or commit to issue, sell or deliver (whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise), pledge or otherwise
encumber any of its shares of capital stock, Units, Voting Debt or the
shares of capital stock of any Subsidiary, or any securities convertible
into, or exchangeable for, any such shares, Units or Voting Debt, except
pursuant to possible issuances, sales or deliveries disclosed in Schedule
5.1(a)(ii)(2), or amend the terms of any such securities or agreements
outstanding on the date hereof;
(3) (x) declare, set aside, make or pay any dividend or other
distribution in respect of its capital stock or Units or (y) redeem,
repurchase or otherwise acquire any of its securities or split, combine or
reclassify any shares of its capital stock or Units;
(4) (x) transfer, sell, lease, license or dispose of any material
assets or rights, unless in the ordinary course of business consistent with
past practice; (y) enter into any Contract, note, lease, license or other
agreement which requires the payment or receipt of an amount (in one or a
series of transactions) in excess of $25 million or (z) acquire or agree to
acquire, by merging or consolidating with, by purchasing an equity interest
in or a portion of the assets of or by any other manner any business or any
corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets of any
other person requiring consideration payable or assumption of liabilities
in excess of $25 million;
(5) except as set forth on Schedule 5.1(a)(ii)(5), other than in the
ordinary course of business and other than transactions with wholly- owned
Subsidiaries, (u) incur, assume, discharge, cancel or prepay any material
indebtedness or other obligation or issue or sell any debt securities or
rights to acquire any debt securities, (v) assume, guarantee, endorse or
otherwise become liable (whether directly, contingently or otherwise) for
the obligations of any other person, (w) make any loans, advances or
capital contributions to, or investments in, any other person; (x) change
any practices with respect to the timing of payments or collections; (y)
pledge or otherwise encumber shares of capital stock of Prodigy or its
Subsidiaries or Units of Operating Partnership; or (z) mortgage or pledge
any of the assets or permit to exist any Lien (other than those liens
arising in the ordinary course of business) thereupon;
(6) enter into, adopt, amend or terminate any employee benefit plan,
or increase the compensation or benefits of any officer or employee of
Prodigy or Operating Partnership or pay any benefit not required by any
existing plan or agreement, except in the ordinary course of business or as
required by applicable Law or existing Contractual arrangements;
(7) enter into any material employment or severance agreement with
any officer or employee, or adopt or enter into any collective bargaining
agreement;
(8) enter into, amend, assign or terminate any Contract, except in the
ordinary course of business and consistent with past practices;
(9) settle or compromise any material litigation (whether or not
commenced prior to the date of this Agreement) or settle, pay or compromise
any claims, liabilities or obligations not required to be paid,
individually in an amount in excess of $1 million;
(10) change or agree to change any accounting method or policy other
than as required by GAAP or by applicable Law;
(11) change, or agree to change, any business policies which relate to
advertising, pricing, personnel, labor relations, sales, returns, or
product acquisitions, in each case in a manner which would have a Prodigy
Material Adverse Effect; or
(12) take, or agree in writing or otherwise to take, any of the
foregoing actions.
(iii) During the period from the date hereof until the consummation of the
Closing, each of Prodigy and Operating Partnership shall not, and Prodigy shall
cause its Subsidiaries not to, take, or agree in writing or otherwise to take,
any other actions that are or would be prohibited by, or would require SBC's
consent or approval, under this Agreement, the Strategic Agreement (as of the
date hereof or as of the Closing) or any of the following, if in effect on the
date hereof: the Restated Certificate of Incorporation, the Amended and Restated
By-Laws, the Amended and Restated Limited Partnership Agreement, or the
Registration Rights Agreement.
(b) HSR Approvals. Each of Prodigy and Operating Partnership agrees to use
its commercially reasonable efforts to assist SBC in obtaining the early
termination or expiration of the waiting period provided under the HSR Act.
(c) Information. So long as SBC owns in the aggregate a number of shares of
Class A Common Stock, Class B Common Stock and/or Units constituting at least
one-quarter of the initial number of SBC Units issued pursuant to this Agreement
and the Amended and Restated Limited Partnership Agreement (subject to
adjustment in accordance with Article FOURTH, Clause (b)(iv) of the Restated
Certificate of Incorporation), Prodigy shall permit SBC, upon reasonable notice,
to visit and inspect at SBC's expense any of the properties, corporate books,
and financial and other records of Prodigy and its Subsidiaries, and to discuss
the affairs, finances and accounts of Prodigy and its Subsidiaries with the
officers of Prodigy, its Subsidiaries and Prodigy's independent public
accountants, all at such times and as often as SBC may reasonably request.
(d) Right of First Refusal. In the event Prodigy or Operating Partnership
elects to dispose of any SBC Contributed Asset, each of Prodigy and Operating
Partnership hereby undertakes and agrees to offer to SBC a right of first
refusal to purchase such SBC Contributed Asset at its book value.
(e) Amended and Restated Limited Partnership Agreement. At or prior to the
Closing, Prodigy and Operating Partnership each shall execute and deliver the
Amended and Restated Limited Partnership Agreement.
(f) Registration Rights Agreement. At or prior to the Closing, Prodigy
shall execute and deliver the Registration Rights Agreement.
(g) Restated Certificate of Incorporation and Amended and Restated By-
Laws. The board of directors of Prodigy shall (i) use its best efforts to obtain
the approval of the stockholders of Prodigy of the Restated Certificate of
Incorporation, the Amended and Restated By-Laws and the other transactions
contemplated in the Agreement and the Strategic Agreement prior to the Closing
in accordance with Prodigy's certificate of incorporation and by-laws and the
Delaware General Corporation Law and (ii) duly file the Restated Certificate of
Incorporation with the Secretary of State of the State of Delaware immediately
prior to the Closing.
(h) Rights Agreement. As soon as practicable following the Closing Date,
Prodigy shall adopt a Stockholder Protection Rights Agreement, in a form to be
agreed between Prodigy and SBC, which shall, among other things, provide for a
15% "flip-in" triggering level; a "flip-over" trigger; an exchange option; and
an exception to the definition of "Acquiring Person" to exclude therefrom SBC,
Telefonos de Mexico, S.A. de C.V. and Carso Global Telecom, S.A. de C.V. and
their respective Affiliates and transferees.
5.2 Covenants of SBC and SBC Sub.
(a) Conduct of Business. (i) During the period from the date hereof until
the consummation of the Closing, SBC and SBC Sub shall, except as otherwise
expressly provided in this Agreement, operate the SBC Internet Businesses only
in the ordinary course of business consistent with past practice. SBC Sub and
SBC shall use all reasonable efforts to preserve intact the present organization
of the SBC Internet Businesses, keep available the services of the officers and
employees associated with the SBC Internet Businesses and preserve the
relationships with subscribers, suppliers, and others associated with the SBC
Internet Businesses having significant business dealings with the SBC Internet
Businesses.
(ii) Without limiting the generality of the foregoing, except as otherwise
expressly provided in this Agreement, from the date of this Agreement until the
consummation of the Closing, SBC shall not, and shall cause its Subsidiaries not
to, in each case solely with respect to the SBC Internet Businesses, without the
written consent of Prodigy (which consent shall not be unreasonably withheld or
delayed):
(1) (x) transfer, sell, lease, license or dispose of any material
assets or rights, unless in the ordinary course of business consistent with
past practice; (y) enter into any Contract, note, lease, license or other
agreement which involves the payment or receipt of an amount (in one or a
series of transactions) in excess of $25 million or (z) acquire or agree to
acquire, by merging or consolidating with, by purchasing an equity interest
in or a portion of the assets of or by any other manner any business or any
corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets of any
other person in excess of $25 million;
(2) enter into, adopt, amend or terminate any employee benefit plan,
or increase in any material respect the compensation or fringe benefits of
any officer or employee of the SBC Internet Businesses or pay any benefit
not required by any existing plan, except in the ordinary course of
business or as required by applicable Law or existing contractual
arrangements;
(3) enter into any employment or severance agreement with any employee
of the SBC Internet Businesses, adopt or enter into any collective
bargaining agreement applicable to such employees;
(4) enter into, amend, assign or terminate any contract, except in the
ordinary course of business and consistent with past practices;
(5) change, or agree to change, any business policies which relate to
advertising, pricing, personnel, labor relations, sales, returns, or
product acquisitions, in each case in a manner which would have a material
adverse effect on the SBC Internet Businesses; or
(6) take, or agree in writing or otherwise to take, any of the
foregoing actions.
(iii) During the period from the date hereof until the consummation of the
Closing, SBC shall not, and shall cause its Subsidiaries not to, take, or agree
in writing or otherwise to take, any other actions that are or would be
prohibited by, or would require Prodigy's consent or approval, under this
Agreement or the Strategic Agreement (as of the date hereof or as of the
Closing).
(iv) The limitations in this Section 5.2(a) shall apply only to the extent
affecting the SBC Internet Businesses.
(b) HSR Approvals. SBC agrees that it will use its commercially
reasonable efforts to obtain the early termination or expiration of the waiting
period provided under the HSR Act.
(c) Observance of Securities Act. SBC Sub agrees that it will not offer to
sell, sell or otherwise dispose of any of the SBC Units or the Investment Share
in violation of the Securities Act.
(d) Third Party Warranties. If any warranties applicable to any SBC
Contributed Asset cannot be assigned to Operating Partnership, SBC will, to the
extent it is able, allow Operating Partnership to be subrogated to SBC's rights
under such warranties. SBC agrees that, to the extent such it is able, it will
be permitted at Operating Partnership's expense to prosecute any claims or
causes of action relating to such warranties in SBC's name.
(e) Use of SBC's Marks. Operating Partnership may use the SBC Contributed
Assets without removing SBC's or its Affiliate's name, logo, or other
proprietary marks for a mutually agreeable reasonable period of time following
the Closing Date.
(f) Access to Operating Employees. Following the Closing, SBC shall make
the Operating Employees reasonably available to Operating Partnership so as to
enable Operating Partnership to continue to operate the SBC Contributed Assets.
(g) Registration Rights Agreement. At or prior to the Closing, each of SBC
and SBC Sub shall execute and deliver the Registration Rights Agreement.
(h) Amended and Restated Limited Partnership Agreement. At or prior to
Closing, SBC Sub shall execute and deliver the Amended and Restated Limited
Partnership Agreement.
(i) Investments. During the period from the date hereof until the
Exclusivity Termination Date, SBC agrees that it will not invest directly in
other ISPs whose primary business is the consumer ISP business. SBC shall be
permitted to invest directly in an entity having a consumer ISP business if such
consumer ISP business is not the primary business of such entity and so long as
SBC agrees to negotiate in good faith with Prodigy in an attempt to transfer
such consumer ISP business to Prodigy on terms acceptable to both SBC and
Prodigy.
5.3 Provisions Regarding Third Party Acquisitions.
(a) Prodigy agrees that neither it nor any of its Subsidiaries nor any
of its or its Subsidiaries' employees or directors shall, and it shall
direct and use its best efforts to cause its and its Subsidiaries' agents
and representatives (including Bear, Stearns & Co. Inc. (the "Prodigy
Financial Advisor") or any other investment banker and any attorney or
accountant retained by it or any of its Subsidiaries (collectively, the
"Prodigy Advisors")) not to, directly or indirectly, initiate, solicit,
encourage or otherwise facilitate any inquiries in respect of, or the
making of any proposal for, a Prodigy Third Party Acquisition (as
hereinafter defined) or any other transaction that could reasonably be
expected to compete with, impede, interfere with or discourage the
transactions contemplated hereby or inhibit the timely consummation of the
transactions contemplated hereby (a "Competing Transaction"). Prodigy
further agrees that neither it nor any of its Subsidiaries nor any of its
or its Subsidiaries' employees or directors shall, and it shall direct and
use its best efforts to cause all Prodigy Advisors not to, directly or
indirectly, engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any
Third Party (as hereinafter defined) relating to the proposal of a Prodigy
Third Party Acquisition or any Competing Transaction, or otherwise
facilitate any effort or attempt to make or implement a Prodigy Third Party
Acquisition or any Competing Transaction; provided, however, that if the
board of directors of Prodigy determines in good faith, after consultation
with its outside counsel, that it is necessary to do so in order to comply
with its fiduciary duties to Prodigy stockholders under applicable Law,
Prodigy may, in response to an inquiry, proposal or offer for a Prodigy
Third Party Acquisition which was not solicited subsequent to the date
hereof, (x) furnish only such information with respect to Prodigy or any
Subsidiary of Prodigy to any such person pursuant to a customary
confidentiality agreement and (y) participate in the discussions and
negotiations regarding such inquiry, proposal or offer. Prodigy shall
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any Third Parties conducted heretofore
with respect to any of the foregoing. Prodigy agrees to notify SBC promptly
if (i) any inquiries relating to or proposals for a Prodigy Third Party
Acquisition are received by Prodigy, any of its Subsidiaries or any of the
Prodigy Advisors, (ii) any confidential or other non-public information
about Prodigy or any of its Subsidiaries is requested from Prodigy, any of
its Subsidiaries or any of the Prodigy Advisors, or (iii) any negotiations
or discussions in connection with a possible Prodigy Third Party
Acquisition are sought to be initiated or continued with Prodigy, any of
its Subsidiaries or any of the Prodigy Advisors, indicating, in connection
with such notice, the principal terms and conditions of any proposals or
offers.
(b) Except as expressly permitted by this Section 5.3(b), neither the
board of directors of Prodigy nor any committee thereof shall (i) withdraw
or modify, or propose publicly to withdraw or modify, its recommendation of
the approval of this Agreement, the Strategic Agreement and the
transactions contemplated thereby, the Prodigy Contribution, the Restated
Certificate of Incorporation, the Amended and Restated By-Laws, the Unit
Issuance and SBC Contribution, the Investment Share Issuance and the other
transactions contemplated by this Agreement (including the issuance of
Class A Common Stock upon conversion of Class B Common Stock or conversion
of Units), or (ii) approve or recommend, or propose publicly to approve or
recommend, or cause Prodigy to enter into any agreement, letter of intent,
agreement in principle or similar agreement with respect to, any Prodigy
Third Party Acquisition. Notwithstanding the preceding sentence, if, prior
to obtaining Prodigy Stockholder Approval, the board of directors of
Prodigy determines in its good faith judgment, after consultation with its
outside counsel, that it is necessary to do so in order to comply with its
fiduciary duties, the board of directors of Prodigy may terminate this
Agreement and, simultaneously with or following such termination, if it so
chooses, take any of the actions referred to in the preceding sentence. For
purposes of this Agreement, "Prodigy Third Party Acquisition" means the
occurrence of any of the following events: (i) the acquisition of Prodigy
by merger or otherwise by any person (which includes a "person" as such
term is defined in Section 13(d)(3) of the Exchange Act) other than any
Party hereto or any Affiliate thereof (a "Third Party"); (ii) the
acquisition by a Third Party of 10% or more of the total assets of Prodigy
and its Subsidiaries, taken as a whole; (iii) the acquisition by a Third
Party of 10% or more of the outstanding Prodigy Common Stock; (iv) the
adoption by Prodigy of a plan of partial or complete liquidation or the
declaration or payment of an extraordinary dividend; (v) the repurchase by
Prodigy or any of its Subsidiaries of 10% or more of the outstanding
Prodigy Common Stock; or (vi) the acquisition by Prodigy or any of its
Subsidiaries by merger, purchase of stock or assets, joint venture or
otherwise of a direct or indirect ownership interest or investment in any
business whose annual revenues, net income or assets is equal to or greater
than 10% of the annual revenues, net income or assets of Prodigy and its
Subsidiaries, taken as a whole.
5.4 Provisions Regarding Prodigy Stockholder Approval.
(a) As soon as reasonably practicable following the date of this
Agreement, Prodigy shall prepare and file with the SEC a proxy statement
providing information in connection with the Prodigy Stockholder Approval
(the "Proxy Statement"). Prodigy shall use commercially reasonable efforts
to respond to and resolve all SEC comments on the Proxy Statement, and to
mail the Proxy Statement to Prodigy's stockholders, as promptly as
practicable after such filing. SBC shall furnish for inclusion in the Proxy
Statement all information regarding SBC, SBC Sub and the SBC Internet
Businesses, as is required to be disclosed in the Proxy Statement, and
shall cooperate fully with Prodigy in the preparation of the Proxy
Statement and in responding to and resolving SEC comments thereon. No
filing of, or amendment or supplement to, the Proxy Statement will be made
by Prodigy without providing SBC the opportunity to review and comment
thereon and without the consent of SBC (which consent shall not be
unreasonably withheld or delayed). Prodigy will advise SBC, promptly after
it receives notice thereof, of any request by the SEC for amendment of the
Proxy Statement or comments thereon and responses thereto or requests by
the SEC for additional information. If at any time prior to the date of the
meeting of Prodigy's stockholders contemplated by Section 5.4(b) below, any
information relating to Prodigy or SBC, or any of their respective
Affiliates, officers, directors or businesses, is discovered by Prodigy or
SBC that should be set forth in an amendment or supplement to the Proxy
Statement, so that the Proxy Statement would not include any misstatement
of a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, the Party that discovers such information shall
promptly notify the other Party hereto and an appropriate amendment or
supplement describing such information shall be promptly filed with the SEC
and, to the extent required by Law, disseminated to the stockholders of
Prodigy.
(b) Prodigy shall, as soon as reasonably practicable following the
date of this Agreement, duly call, give notice of, convene and hold a
meeting of its stockholders for the purpose of obtaining the Prodigy
Stockholder Approval and shall, through its board of directors or a special
committee thereof, recommend to its stockholders the approval and adoption
of this Agreement, the Prodigy Contribution, the Restated Certificate of
Incorporation, the Amended and Restated By-Laws, the Unit Issuance and SBC
Contribution, the Investment Share Issuance and the other transactions
contemplated hereby (including the issuance of Class A Common Stock upon
conversion of Class B Common Stock or conversion of Units) and the
Strategic Agreement and the transactions contemplated thereby. Without
limiting the generality of the foregoing but subject to its right to
terminate this Agreement pursuant to Section 7.4(a) and its right to
withdraw or modify its recommendation pursuant to Section 5.3(b), Prodigy
agrees that its obligations pursuant to the first sentence of this Section
5.4(b) shall not be affected by the commencement, public proposal, public
disclosure or communication to Prodigy of any Prodigy Third Party
Acquisition or any withdrawal or modification of its recommendation.
(c) SBC represents and warrants to Prodigy that to the extent that any
statements or omissions made in the Proxy Statement or any amendment or
supplement thereto are made in reliance upon and in conformity with written
information furnished to Prodigy by SBC expressly for use therein, such
Proxy Statement and any further amendments or supplements to the Proxy
Statement, at the time the Proxy Statement is first mailed to Prodigy's
stockholders, at the time of the Prodigy stockholders meeting and at the
time of any amendment or supplement thereto, will not contain any untrue
statements of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they are made, not misleading.
(d) Prodigy represents and warrants to SBC that the Proxy Statement
will not, at the time the Proxy Statement is first mailed to Prodigy's
stockholders, at the time of the Prodigy stockholders meeting and at the
time of any amendment or supplement thereto, contain any untrue statements
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading, except that no
representation or warranty is made by Prodigy with respect to statements or
omissions made in reliance upon and in conformity with written information
furnished to Prodigy by SBC expressly for use therein. The Proxy Statement
and any amendments or supplements to the Proxy Statement will comply as to
form in all material respects with the requirements of the Exchange Act and
the rules and regulations of the SEC thereunder, except that no
representation or warranty is made by Prodigy with respect to statements or
omissions made in reliance upon and in conformity with written information
furnished to Prodigy by SBC expressly for use therein.
(e) Prodigy Votes. Prodigy shall vote (or consent with respect to) or
cause to be voted (or a consent to be given with respect to) any shares of
capital stock of Prodigy beneficially owned (as such term is used in
Section 13d-3 of the Exchange Act) by it or any of its Subsidiaries or with
respect to which it or any of its Subsidiaries has the power (by agreement,
proxy or otherwise) to cause to be voted (or to provide a consent), in
favor of the adoption and approval of this Agreement, the Restated
Certificate of Incorporation, the Amended and Restated By-Laws, the
Investment Share Issuance, the Prodigy Contribution, the Unit Issuance and
SBC Contribution and any and all of the other transactions contemplated
hereby and the Strategic Agreement and the transactions contemplated
thereby at any meeting of stockholders of Prodigy at which such matters
shall be submitted for adoption and approval and at all adjournments and
postponements thereof (or, if applicable, by any action of stockholders of
Prodigy by consent in lieu of a meeting).
5.5 Additional Covenants.
(a) Filings; Other Actions; Notification. (i) SBC and SBC Sub, on the one
hand, and Prodigy, Prodigy Sub and Operating Partnership, on the other hand,
shall cooperate with each other and use (and shall cause their respective
Subsidiaries to use) commercially reasonable efforts to take or cause to be
taken all actions, and do or cause to be done all things, necessary, proper or
advisable on its part under this Agreement and applicable Laws to cause to be
satisfied all of the conditions set forth in Sections 3.2 and 3.3 of this
Agreement and to consummate and make effective each of the transactions
contemplated by this Agreement and the Strategic Agreement as soon as
practicable, including preparing and filing as promptly as practicable all
documentation to effect all necessary notices, reports and other filings and to
obtain as promptly as practicable all consents, registrations, approvals,
Permits and authorizations necessary or advisable to be obtained from any Third
Party and/or any Governmental Entity in order to consummate each of the
transactions contemplated by this Agreement and the Strategic Agreement and
responding as promptly as practicable to any inquiries received from any
Governmental Entity in connection therewith. Subject to applicable laws relating
to the exchange of information, Prodigy, Prodigy Sub, Operating Partnership, SBC
and SBC Sub each shall have the right to review in advance, and to the extent
practicable each will consult the other on, all the information relating to
Prodigy, Prodigy Sub, Operating Partnership, SBC or SBC Sub, as the case may be,
and any of their respective Subsidiaries, that may appear in any filing made
with, or written materials submitted to, any Third Party and/or any Governmental
Entity in connection with the transactions contemplated by this Agreement and
the Strategic Agreement. In exercising the foregoing right, each of SBC, SBC
Sub, Prodigy, Prodigy Sub and Operating Partnership shall act reasonably and as
promptly as practicable.
(ii) Except as provided in Section 5.4(a), SBC and SBC Sub, on the one
hand, and Prodigy, Prodigy Sub and Operating Partnership, on the other hand,
shall, upon request by the other, furnish the other with all information
concerning itself, its Subsidiaries, directors, officers and stockholders and
such other matters as may be reasonably necessary or advisable in connection
with any statement, filing, notice or application made by or on behalf of
Prodigy, Prodigy Sub, Operating Partnership, SBC, SBC Sub or any of their
respective Subsidiaries to any Third Party and/or any Governmental Entity in
connection with the transactions contemplated by this Agreement and the
Strategic Agreement.
(iii) SBC and SBC Sub, on the one hand, and Prodigy, Prodigy Sub and
Operating Partnership, on the other hand, each shall keep the other apprised of
the status of matters relating to completion of the transactions contemplated by
this Agreement and the Strategic Agreement, including promptly furnishing the
other with copies of notices or other communications received by Prodigy,
Prodigy Sub or Operating Partnership or SBC or SBC Sub, as the case may be, or
any of their respective Subsidiaries, from any Third Party and/or any
Governmental Entity with respect to the transactions contemplated by this
Agreement and the Strategic Agreement. SBC and Prodigy each shall give prompt
notice to the other of any change that is reasonably likely to result in a
material adverse effect upon SBC or a Prodigy Material Adverse Effect,
respectively.
(b) Additional Information and Confidentiality. Upon reasonable notice, and
subject to applicable Law, SBC and SBC Sub each agrees to provide Prodigy,
Prodigy Sub and Operating Partnership promptly with all information which may be
reasonably requested by Prodigy, Prodigy Sub or Operating Partnership concerning
the business, financial condition and prospects of the SBC Internet Businesses.
Upon reasonable notice, and subject to applicable Law, Prodigy, Prodigy Sub and
Operating Partnership each agrees to provide SBC and SBC Sub promptly with all
information which may reasonably be requested by SBC or SBC Sub concerning its
business, financial condition and prospects. In addition, Prodigy, Prodigy Sub
and Operating Partnership shall afford SBC's officers, employees, counsel,
accountants and other authorized representatives access, during normal business
hours throughout the period prior to the consummation of the Closing, to its
properties, books, Contracts and records; provided that no investigation
pursuant to this Section 5.5(b) shall affect or be deemed to modify any
representation or warranty made by SBC, SBC Sub, Prodigy, Prodigy Sub or
Operating Partnership; provided, further, that the foregoing shall not require
SBC or SBC Sub, on the one hand, or Prodigy, Prodigy Sub or Operating
Partnership, on the other hand, to permit any inspection, or to disclose any
information, that in the reasonable judgment of SBC, SBC Sub or Prodigy, Prodigy
Sub or Operating Partnership, as the case may be, would result in the disclosure
of any trade secrets of third parties or violate any of its obligations with
respect to confidentiality if SBC or SBC Sub or Prodigy, Prodigy Sub or
Operating Partnership, as the case may be, shall have used reasonable best
efforts to obtain the consent of such Third Party to such inspection or
disclosure. Each of SBC and SBC Sub, on the one hand, and Prodigy, Prodigy Sub
and Operating Partnership, on the other hand, agrees to keep all such
information confidential and not to disclose any such information to any third
party or use it for its own benefit unless (i) it receives the express written
consent of SBC, SBC Sub, Prodigy, Prodigy Sub or Operating Partnership, as the
case may be, (ii) such information otherwise becomes publicly available or (iii)
in its reasonable judgment it is required by applicable Law to do so, and then
only to the extent it is so required, in each case, to the extent practicable,
only after notice to and consultation with SBC, SBC Sub, Prodigy, Prodigy Sub or
Operating Partnership, as the case may be. In the event that this Agreement is
terminated prior to Closing, all information (including all copies of any
documents) obtained by one Party from another pursuant to this paragraph shall
be returned.
ARTICLE VI
FURTHER AGREEMENTS
6.1 Directors of Prodigy.
(a) Prodigy hereby agrees that Prodigy shall at or prior to the Closing
Date cause three vacancies to be created on the board of directors of Prodigy
(by increasing the size of the board or otherwise) and at the Closing (or such
later date as shall be specified by SBC) the three persons designated by SBC to
be elected to the board of directors of Prodigy shall be elected to the board of
directors of Prodigy in accordance with the Restated Certificate of
Incorporation and the Amended and Restated By-Laws. The designees of SBC shall
serve on the board of directors of Prodigy in accordance with the Restated
Certificate of Incorporation and the Amended and Restated By-Laws.
(b) Except for the Executive Steering Committee (on which two of SBC's
designees elected to the board of directors of Prodigy shall be elected to
serve), Prodigy shall at or prior to the Closing cause at least one of SBC's
designees elected to the board of directors of Prodigy in accordance with
Section 6.1(a) above to be elected to serve on each committee of the board of
directors of Prodigy in accordance with the Amended and Restated By-Laws.
(c) Prodigy agrees that any designees of SBC who are elected to serve on
the board of directors of Prodigy shall be furnished with all information
generally provided to the board of directors of Prodigy, shall have access to
information regarding Prodigy on a basis equal to that of the other outside or
its inside directors and shall be entitled to the same perquisites as Prodigy's
other outside directors. The designees of SBC elected to serve on any committee
of the board of directors of Prodigy shall be provided with, and have access to,
all information regarding Prodigy provided to other members of such committee.
6.2 Assignments and Officers.
The management of Prodigy and Operating Partnership, including the Chairman
of the Board of Directors, Chief Executive Officer, Chief Operating Officer and
President shall be appointed in accordance with the Restated Certificate of
Incorporation and the Amended and Restated By-Laws and the Amended and Restated
Limited Partnership Agreement, respectively, to serve until such time as
provided in the Restated Certificate of Incorporation and the Amended and
Restated By-Laws and the Amended and Restated Limited Partnership Agreement,
respectively.
Other officers and managers shall be selected from among the officers and
managers of the Prodigy and SBC businesses, with a view towards selecting the
management team best able to preserve and increase the Retail ISP businesses
that will receive the Prodigy brand. The Chief Executive Officer of Prodigy
shall consult with an executive of SBC designated by SBC for transition and
regarding all executive appointments.
6.3 Company Headquarters.
The company headquarters will be in White Plains, New York, unless the
board of directors of Prodigy approves another location.
6.4 Cooperation.
Subject to the terms and conditions of this Agreement, Prodigy and SBC
agree to use their commercially reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective, as soon as reasonably practicable, the transactions contemplated by
this Agreement.
6.5 Publicity.
Between the date hereof and the Closing Date (or, if the Closing does not
occur, the date this Agreement terminates), Prodigy and SBC agree to consult
with each other and to coordinate the issuance of any press release or similar
public announcement or communication and prior to making any filings with any
Third Party and/or Governmental Entity (including any national securities
exchange) relating to the execution or performance of this Agreement or to the
transactions contemplated hereby; provided, however, that no Party shall be
restrained, after consultation with the other Parties, from making such
disclosure as it shall be advised by counsel it is required by Law or by the
applicable regulations of any stock exchange to make.
6.6 Registration Rights.
Prodigy shall comply with the provisions of the Registration Rights
Agreement.
6.7 Expenses.
Except as otherwise provided in Section 9.20 of this Agreement, whether or
not any of the transactions contemplated by this Agreement are consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated by this Agreement shall be paid by the Party incurring
such expense.
ARTICLE VII
TERMINATION
7.1 Termination by Mutual Consent.
All or any portion of this Agreement may be terminated and any or all of
the Prodigy Contribution, the Unit Issuance and SBC Contribution and the
Investment Share Issuance may be abandoned at any time prior to the Closing,
whether before or after the receipt of Prodigy Stockholder Approval, by mutual
written consent of SBC and Prodigy by action of their respective boards of
directors.
7.2 Termination by Either Prodigy or SBC.
Prodigy may, by action of its board of directors, terminate this Agreement
and SBC may, by action of its board of directors, terminate this Agreement, and
the Prodigy Contribution, the Unit Issuance and SBC Contribution and the
Investment Share Issuance, in the case of a termination by Prodigy, and the Unit
Issuance and SBC Contribution and Investment Share Issuance, in the case of a
termination by SBC, may be abandoned at any time prior to the Closing if (a) the
Prodigy Contribution, the Unit Issuance and SBC Contribution and the Investment
Share Issuance, in the case of Prodigy, or the Unit Issuance and SBC
Contribution and Investment Share Issuance, in the case of SBC, shall not have
been consummated by the date that is six months (or nine months in the event of
receipt of a request for additional information under the HSR Act) after the
date hereof whether such date is before or after the date of the receipt of
Prodigy Stockholder Approval (the "Termination Date"), (b) Prodigy Stockholder
Approval shall not have been obtained at a meeting(s) duly convened therefor or
at any adjournment or postponement thereof or pursuant to consent given in
accordance with Section 228 of the Delaware General Corporation Law and the
certificate of incorporation and by-laws of Prodigy prior to the Termination
Date, (c) the approval of The Nasdaq Stock Market referred to in Sections
3.2(f)(ii) and 3.3(f)(ii) shall not have been obtained prior to the Termination
Date or (d) any Order permanently restraining, enjoining or otherwise
prohibiting consummation of the Unit Issuance and SBC Contribution or Investment
Share Issuance, in the case of SBC, or the Prodigy Contribution, the Unit
Issuance and SBC Contribution or the Investment Share Issuance, in the case of
Prodigy, shall become final and non-appealable whether before or after the
receipt of Prodigy Stockholder Approval; provided, that the right to
terminate any or all of this Agreement pursuant to this Section 7.2 shall not be
available to any Party that has breached in any material respect its obligations
under this Agreement in any manner that shall have proximately contributed to
the occurrence of the failure of the transactions contemplated hereby to be
consummated.
7.3 Termination by SBC.
(a) SBC may, by action of its board of directors, terminate its obligations
and rights under this Agreement and the Unit Issuance and SBC Contribution and
Investment Share Issuance may be abandoned at any time prior to the Closing,
whether before or after the receipt of Prodigy Stockholder Approval, by action
of the board of directors of SBC if there has been a material breach by Prodigy,
Prodigy Sub or Operating Partnership of any representation, warranty, covenant
or agreement contained in this Agreement that is not curable or, if curable, is
not cured within 30 days after written notice of such breach is given by SBC to
the Party committing such breach or if either of the Stockholders (as defined in
the Voting Agreement) shall not execute and deliver to SBC the Voting Agreement
and the irrevocable proxy required thereby at or prior to the date hereof.
(b) This Agreement may be terminated and the Unit Issuance and SBC
Contribution and the Investment Share Issuance may be abandoned at any time
prior to the Closing, whether before or after the receipt of Prodigy Stockholder
Approval, by action of the board of directors of SBC if any of the conditions
set forth in Section 3.2 of this Agreement has not been satisfied as of the
Termination Date or if satisfaction of such a condition is or becomes impossible
(other than through the failure of SBC or SBC Sub to comply fully with its
respective obligations hereunder) and SBC has not waived such condition on or
before the Termination Date.
7.4 Termination by Prodigy.
(a) This Agreement may be terminated and the Prodigy Contribution, the Unit
Issuance and SBC Contribution and the Investment Share Issuance may be abandoned
at any time prior to the receipt of Prodigy Stockholder Approval by action of
the board of directors of Prodigy in accordance with Section 5.3(b) of this
Agreement.
(b) This Agreement may be terminated and the Prodigy Contribution, the Unit
Issuance and SBC Contribution and the Investment Share Issuance may be abandoned
at any time prior to the Closing, whether before or after the receipt of Prodigy
Stockholder Approval, by action of the board of directors of Prodigy if there
has been a material breach by SBC or SBC Sub of any representation, warranty,
covenant or agreement contained in this Agreement that is not curable or, if
curable, is not cured within 30 days after written notice of such breach is
given by Prodigy to the Party committing such breach.
(c) This Agreement may be terminated and the Prodigy Contribution, the Unit
Issuance and SBC Contribution and the Investment Share Issuance may be abandoned
at any time prior to the Closing, whether before or after the receipt of Prodigy
Stockholder Approval, by action of the board of directors of Prodigy, if any of
the conditions set forth in Section 3.3 of this Agreement has not been satisfied
as of the Termination Date or if satisfaction of such a condition is or becomes
impossible (other than through the failure of Prodigy, Prodigy Sub or Operating
Partnership to comply fully with its respective obligations hereunder) and
Prodigy has not waived such condition on or before the Termination Date.
7.5 Effect of Termination and Abandonment.
In the event of termination of this Agreement and the abandonment of the
Prodigy Contribution, the Unit Issuance and SBC Contribution and Investment
Share Issuance pursuant to this Article VII, this Agreement (other than this
Section 7.5 and Sections 6.7 (Expenses), 9.2 (Governing Law), 9.3 (Venue; WAIVER
OF JURY TRIAL) and 9.19 (Confidentiality), which shall remain in full force and
effect) shall become void and of no effect and no Party hereto (or of any of its
directors, officers, employees, agents, legal and financial advisors or other
representatives) shall have any liability or further obligation to any other
Party hereto, except as provided in this Section 7.5; provided, however, that if
this Agreement is terminated by a Party because of the breach of this Agreement
by the other Party or because one or more of the conditions to the terminating
Party's obligations under this Agreement is not satisfied as a result of the
other Party's failure to comply with its obligations under this Agreement, the
terminating Party's rights to pursue all legal remedies will survive such
termination unimpaired. Notwithstanding the foregoing, Prodigy shall, within two
business days after termination of this Agreement, pay SBC $45 million if this
Agreement is terminated by Prodigy pursuant to Section 7.4(a) hereof.
ARTICLE VIII
SURVIVAL AND INDEMNIFICATION
8.1 Survival.
Notwithstanding (a) the making of this Agreement, (b) any investigation or
examination conducted with respect to, or any knowledge acquired (or capable of
being acquired) about the accuracy or inaccuracy of or compliance with, any
representation, warranty, covenant, agreement, undertaking or obligation made by
or on behalf of the Parties hereto, (c) the waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
compliance with any covenant, agreement, undertaking or obligation, and (d) the
Closing hereunder:
(i) All of the representations and warranties of the Parties contained in
this Agreement and any other certificate or document delivered pursuant to this
Agreement shall survive the Closing until the first anniversary of the Closing
Date, except for the representations and warranties contained in (A) Section
4.1(k) (Capitalization) and Section 4.1(s)(Environmental Matters) both of which
shall survive the execution and delivery of this Agreement and the Closing
indefinitely, and (B) Section 4.1(l) (Taxes) and Section 4.1(r) (Employee
Matters), which shall survive the execution and delivery of this Agreement and
the Closing until 90 days after the expiration of all relevant statutes of
limitations (and any extensions thereof).
(ii) All of the covenants, agreements, undertakings and obligations of the
Parties contained in this Agreement and any other certificate or document
delivered pursuant to this Agreement shall survive until fully performed or
fulfilled, unless non-compliance with such covenants, agreements, undertakings
or obligations is waived in writing by the Party or Parties entitled to such
performance. No claim for indemnification, reimbursement or any other remedy
pursuant to Sections 8.2 and 8.3 hereof may be brought with respect to breaches
of representations or warranties contained herein after the applicable
expiration date set forth in clause (i) of this Section 8.1; provided, however,
that if, prior to such applicable date, a Party hereto shall have notified the
other Party hereto in writing of a claim for indemnification under this Article
VIII (whether or not formal legal action shall have been commenced based upon
such claim), such claim shall continue to be subject to indemnification in
accordance with this Article VIII notwithstanding such expiration date.
8.2 Indemnification and Reimbursement by Prodigy.
Prodigy shall indemnify and hold harmless SBC and its successors, assigns,
stockholders, controlling persons, officers, directors, employees, agents,
representatives and Affiliates or direct or indirect owners of any of the
foregoing (collectively, the "SBC Indemnified Persons") from and against, and
shall reimburse the SBC Indemnified Persons for, any and all Damages incurred
thereby or caused thereto based on, arising out of, resulting from, relating to,
or in connection with:
(a) Any breach of or inaccuracy in any representation or warranty made by
Prodigy, Prodigy Sub or Operating Partnership in this Agreement or any other
certificate or document delivered by Prodigy, Prodigy Sub or Operating
Partnership pursuant to this Agreement, other than those, if any, that have been
waived in writing by SBC;
(b) Any breach or violation of or failure to fully perform any covenant,
agreement, undertaking or obligation of Prodigy, Prodigy Sub or Operating
Partnership set forth in this Agreement, other than those, if any, that have
been waived in writing by SBC; or
(c) Any claim by any Person for brokerage or finder's fees or commissions
or similar payments based upon any agreement or understanding alleged to have
been made by any such Person with Prodigy, Prodigy Sub or Operating Partnership
or any Prodigy Subsidiary (or any Person acting on their behalf) in connection
with any of the transactions contemplated herein.
For purposes of this Article VIII and for purposes of determining whether SBC is
entitled to indemnification from Prodigy pursuant to this Section 8.2 and for
calculating Damages hereunder, any breach of or inaccuracy in any representation
or warranty of Prodigy shall be determined without regard to any materiality
qualifications set forth in such representation or warranty, and all references
to the terms "material", "materially", "materiality", "Prodigy Material Adverse
Effect" or any similar terms shall be ignored for purposes of determining
whether such representation or warranty was true and correct when made.
8.3 Indemnification and Reimbursement by SBC.
SBC shall indemnify and hold harmless Prodigy and its successors, assigns,
stockholders, controlling persons, officers, directors, employees, agents,
representatives and Affiliates or direct or indirect owners of any of the
foregoing (collectively, the "Prodigy Indemnified Persons") from and against,
and shall reimburse the Prodigy Indemnified Persons for, any and all Damages
incurred thereby or caused thereto based on, arising out of, resulting from,
relating to, or in connection with:
(a) any breach of or inaccuracy in any representation or warranty made by
SBC or SBC Sub in this Agreement or in any other certificate or document
delivered by SBC or SBC Sub pursuant to this Agreement, other than those, if
any, that have been waived in writing by Prodigy;
(b) any breach or violation of or failure to fully perform any covenant,
agreement, undertaking or obligation of SBC or SBC Sub set forth in this
Agreement, other than those, if any, that have been waived in writing by
Prodigy; or
(c) any claim by any Person for brokerage or finder's fees or commissions
or similar payments based upon any agreement or understanding alleged to have
been made by any such Person with SBC or SBC Sub (or any Person acting on its
behalf) in connection with any of the transactions contemplated herein.
For purposes of this Article VIII and for purposes of determining whether
Prodigy is entitled to indemnification from SBC pursuant to this Section 8.3 and
for calculating Damages hereunder, any breach of or inaccuracy in any
representation or warranty of SBC shall be determined without regard to any
materiality qualifications set forth in such representation or warranty, and all
references to the terms "material", "materially", "materiality", "material
adverse effect" or any similar terms shall be ignored for purposes of
determining whether such representation or warranty was true and correct when
made.
8.4 Limitations on Amount - Prodigy.
(a) Prodigy shall not be liable for Damages arising in connection with its
indemnification obligations under Section 8.2 hereof until the amount of such
Damages exceeds $30 million, in the aggregate. If the aggregate amount of such
Damages exceeds $30 million, Prodigy shall be liable for all such Damages,
including the first $30 million. No breach of any representation or warranty,
covenant or agreement shall be deemed to have occurred unless the actual Damages
incurred as a result thereof is in excess of $5 million.
(b) The limitations set forth in this Section 8.4 will not apply to any
intentional or willful breach of any of Prodigy's representations and warranties
or any intentional or willful breach by either Prodigy or any Subsidiary of
Prodigy of any covenant, agreement, undertaking or obligation, and Prodigy shall
be liable for all Damages with respect to such breach or breaches.
8.5 Limitations on Amount - SBC.
(a) SBC shall not be liable for Damages arising in connection with its
indemnification obligations under Section 8.3 hereof until the amount of such
Damages exceeds $30 million, in the aggregate. If the aggregate amount of such
Damages exceeds $30 million, SBC shall be liable for all such Damages, including
the first $30 million. No breach of any representation or warranty, covenant or
agreement shall be deemed to have occurred unless the actual Damages incurred as
a result thereof is in excess of $5 million.
(b) The limitations set forth in this Section 8.5 will not apply to any
intentional or willful breach of any of SBC's representations and warranties or
any intentional or willful breach by either SBC or any Subsidiary of SBC of any
covenant, agreement, undertaking or obligation, and SBC shall be liable for all
Damages with respect to such breach or breaches.
8.6 Notice and Payment of Claims.
(a) Notice. The Party entitled to indemnification pursuant to this Article
VIII (the "Indemnified Party") shall notify the Party liable for indemnification
pursuant to this Article VIII (the "Indemnifying Party") within ten (10) days
after becoming aware of, and shall provide to the Indemnifying Party as soon as
practicable thereafter all information and documentation necessary to support
and verify, any Damages that the Indemnified Party shall have determined to have
given or is reasonably likely to give rise to a claim for indemnification
hereunder, and the Indemnifying Party shall be given access to all books and
records in the possession or under the control of the Indemnified Party which
the Indemnifying Party reasonably determines to be related to such claim.
Notwithstanding the foregoing, the failure to so notify the Indemnifying Party
shall not relieve the Indemnifying Party of any liability that it may have to
any Indemnified Party, except to the extent that the Indemnifying Party
demonstrates that it is prejudiced by the Indemnified Party's failure to give
such notice.
(b) Payment. In the event an action for indemnification under this Article
VIII shall have been finally determined, such final determination shall be paid
by the Indemnifying Party to the Indemnified Party on demand in immediately
available funds in U.S. dollars; provided, however, that any payments to SBC
Indemnified Persons shall be increased by a factor of 1.75 (subject to
proportionate reduction based on reductions in SBC's voting interest in Prodigy,
if any). An action, and the liability for and amount of Damages therefor, shall
be deemed to be "finally determined" for purposes of this Article VIII when the
parties to such action have so determined by mutual agreement or, if disputed,
when a final non-appealable Order shall have been entered.
(c) Interest. Any amounts not paid when due pursuant to this Article VIII
shall bear interest from the date thereof until the date paid at a rate equal to
6% per annum.
8.7 Procedure for Indemnification - Third Party Claims. (a) Upon receipt by
an Indemnified Party of notice of the commencement of any action by a Third
Party (a "Third Party Claim") against it, such Indemnified Party shall, if a
claim is to be made against an Indemnifying Party under this Article VIII, give
notice to the Indemnifying Party of the commencement of such Third Party Claim
as soon as practicable, but in no event later than ten (10) days after the
Indemnified Party shall have been served, but the failure to so notify the
Indemnifying Party shall not relieve the Indemnifying Party of any liability
that it may have to any Indemnified Party, except to the extent that the
Indemnifying Party demonstrates that the defense of such Third Party Claim is
prejudiced by the Indemnified Party's failure to give such notice.
(b) If a Third Party Claim is brought against an Indemnified Party and it
gives proper notice to the Indemnifying Party of the commencement of such Third
Party Claim, the Indemnifying Party will, unless the claim involves Taxes, be
entitled to participate in such Third Party Claim and, to the extent that it
wishes (unless (i) the Indemnifying Party is also a party to such Third Party
Claim and the Indemnified Party determines in good faith that joint
representation would be inappropriate, or (ii) the Indemnifying Party fails to
provide reasonable assurance to the Indemnified Party of its financial capacity
to defend such Third Party Claim and provide indemnification with respect to
such Third Party Claim) to assume the defense of such Third Party Claim with
counsel satisfactory to the Indemnified Party and, after notice from the
Indemnifying Party to the Indemnified Party of its election to assume the
defense of such Third Party Claim, the Indemnifying Party shall not, as long as
it legitimately conducts such defense, be liable to the Indemnified Party under
this Article VIII for any fees of other counsel or any other expenses with
respect to the defense of such Third Party Claim, in each case subsequently
incurred by the Indemnified Party in connection with the defense of such Third
Party Claim, other than reasonable costs of investigation.
If the Indemnifying Party assumes the defense of a Third Party Claim, (i)
it shall be conclusively established for purposes of this Agreement that the
claims made in such Third Party Claim are within the scope of and subject to
indemnification; (ii) no compromise, discharge or settlement of, or admission of
liability in connection with, such claims may be effected by the Indemnifying
Party without the Indemnified Party's written consent (which consent shall not
be unreasonably withheld or delayed) unless (A) there is no finding or admission
of any violation of Law or any violation of the rights of any Person and no
effect on any other claims that may be made against the Indemnified Party, and
(B) the sole relief provided is monetary damages that are paid in full by the
Indemnifying Party; (iii) the Indemnifying Party shall have no liability with
respect to any compromise or settlement of such claims effected without its
written consent; and (iv) the Indemnified Party shall cooperate in all
reasonable respects with the Indemnifying Party in connection with such defense,
and shall have the right to participate, at the Indemnified Party's sole
expense, in such defense, with counsel selected by it. If proper notice is given
to an Indemnifying Party of the commencement of any Third Party Claim and the
Indemnifying Party does not, within ten (10) days after the Indemnified Party's
notice is given, give notice to the Indemnified Party of its election to assume
the defense of such Third Party Claim, the Indemnifying Party shall be bound by
any determination made in such Third Party Claim or any compromise or settlement
effected by the Indemnified Party.
(c) Notwithstanding the foregoing, if an Indemnified Party determines in
good faith that there is a reasonable probability that a Third Party Claim may
materially adversely affect it or its successors, assigns, stockholders,
controlling persons, officers, directors, employees, agents, representatives or
Affiliates or direct or indirect owners of any of the foregoing other than as a
result of monetary damages for which it could be entitled to indemnification
under this Agreement, the Indemnified Party may, by notice to the Indemnifying
Party, assume the exclusive right to defend, compromise, or settle such Third
Party Claim, but the Indemnifying Party shall not be bound by any determination
of a Third Party Claim so defended or any compromise or settlement effected
without its written consent (which may not be unreasonably withheld or delayed).
(d) The Indemnifying Party hereby consents to the non-exclusive
jurisdiction of any court in which a Third Party Claim is brought against the
Indemnified Party for purposes of any claim that the Indemnified Party may have
under this Agreement with respect to such Third Party Claim or the matters
alleged therein, and agree that process may be served on the Indemnifying Party
with respect to such a claim anywhere in the world.
8.8 Other Indemnification Provisions.
The indemnification rights provided by this Article VIII shall be the
exclusive remedy of any Indemnified Party hereunder seeking money damages with
respect to any breach or violation of, or failure to fully perform, any
covenant, agreement, undertaking, or obligation of the Parties set forth in this
Agreement. Notwithstanding the foregoing, any Indemnified Party hereunder shall
have the right to seek specific performance or other injunctive relief with
respect to any breach or violation of, or failure to fully perform, any
covenant, agreement, undertaking, or obligation of the Parties set forth in this
Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 Assignment.
Neither this Agreement nor any rights or obligations hereunder may be
assigned by any Party without the prior written consent of the other Parties
hereto. Any attempted assignment that does not comply with this Section 9.1
shall be void.
9.2 Governing Law.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH AND SUBJECT TO THE LAWS OF THE
STATE OF DELAWARE, WITHOUT REFERENCE TO CONFLICTS OF LAWS PRINCIPLES.
9.3 Venue; WAIVER OF JURY TRIAL.
The parties hereby irrevocably submit to the jurisdiction of the courts of
the State of Delaware and the Federal court of the United States of America
located in the State of Delaware solely in respect of the interpretation and
enforcement of the provisions of thisAgreement and of the documents governed by
Delaware law referred to in this Agreement, and in respect of the transactions
contemplated hereby, and hereby waive, and agree not to assert, as a defense in
any action, suit or proceeding for the interpretation or enforcement hereof or
of any such document, that it is not subject thereto or that such action, suit
or proceeding may not be brought or is not maintainable in said courts or that
the venue thereof may not be appropriate or that this Agreement or any such
document may not be enforced in or by such courts, and the parties hereto
irrevocably agree that all claims with respect to such action or proceeding
shall be heard and determined in such a Delaware State or Federal court. The
parties hereby consent to and grant any such court jurisdiction over the person
of such parties and over the subject matter of such dispute and agree that
mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 9.5 of this Agreement or in such
other manner as may be permitted by Law shall be valid and sufficient service
thereof.
EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 9.3.
9.4 Counterparts.
This Agreement may be executed in any number of counterparts, each such
counterpart being deemed to be an original instrument, and may be executed by
facsimile signature. All counterparts shall collectively constitute one and the
same Agreement.
9.5 Notices.
In any case where any notice or other communication is required or
permitted to be given hereunder, such notice or communication shall be in
writing and deemed to have been duly given and delivered: (a) if delivered in
person, on the date of such delivery; (b) if sent by overnight express or
registered or certified mail (with return receipt requested), on the date of
receipt of such mail; or (c) if sent by confirmed facsimile transmission (with
answer back received), on the date of such facsimile transmission provided that
notice is also sent on the same day by one of the methods set forth in (a) or
(b) above. Such notice or other communication shall be sent to the following
address(es) (or such other address(es) as a Party may designate from time to
time in writing):
If to SBC or SBC Sub:
SBC Communications Inc.
175 East Houston Street
San Antonio, Texas 78705
Facsimile: 210-351-5034
Attention: James S. Kahan
Senior Vice President
Corporate Development
With copies, which shall not constitute notice, to:
SBC Communications Inc.
175 East Houston Street
San Antonio, Texas 78705
Facsimile: 210-351-3488
Attention: Senior Counsel - M&A
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Facsimile: 212-558-3588
Attention: Joseph B. Frumkin
Keith A. Pagnani
If to Prodigy, Prodigy Sub or Operating Partnership:
Prodigy Communications Corporation
44 South Broadway
White Plains, New York 10601
Facsimile: 914-448-8198
Attention: Andrea S. Hirsch
With a copy, which shall not constitute notice, to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Facsimile: 617-526-5000
Attention: David Westenberg
9.6 Entire Agreement.
The terms and conditions contained in this Agreement (including the
exhibits and schedules attached hereto) constitute the entire agreement between
or among the Parties relating to the subject matter of this Agreement and shall
supersede all previous communications between the Parties with respect to the
subject matter of this Agreement. No Party has entered into this Agreement in
reliance upon any representation, warranty, covenant or undertaking of any other
Party that is not set out or referred to in this Agreement.
9.7 Amendment.
Except as expressly provided otherwise in this Agreement, this Agreement
may be varied, amended or extended only by written agreement executed and
delivered by duly authorized officers or representatives of the respective
Parties.
9.8 Severability.
In the event that any provision of this Agreement is held to be illegal,
invalid or unenforceable in a final, unappealable Order or judgment (each such
provision, an "invalid provision"), then such provision shall be severed from
this Agreement and shall be inoperative, and the Parties promptly shall
negotiate in good faith a lawful, valid and enforceable provision that is as
similar to the invalid provision as may be possible and that preserves the
original intentions and economic positions of the Parties as set forth herein to
the maximum extent feasible, while the remaining provisions of this Agreement
shall remain binding on the Parties hereto. Without limiting the generality of
the foregoing sentence, in the event a change in any applicable Law, rule or
regulation makes it unlawful for a Party to comply with any of its obligations
hereunder, the Parties shall negotiate in good faith a modification to such
obligation to the extent necessary to comply with such Law, rule or regulation
that is as similar in terms to the original obligation as may be possible while
preserving the original intentions and economic positions of the parties as set
forth herein to the maximum extent feasible.
9.9 Headings; Recitals.
The descriptive headings of the articles and sections of this Agreement and
its Schedules and Exhibits and the recitals herein are inserted for convenience
only and do not constitute a part of this Agreement.
9.10 No Waiver of Rights.
No failure or delay on the part of a Party in the exercise of any power or
right hereunder shall operate as a waiver thereof. No single or partial exercise
of any right or power hereunder shall operate as a waiver of such right or of
any other right or power. The waiver by any Party of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any other or
subsequent breach hereunder. No waiver shall be effective unless in writing
signed by the waiving Party.
9.11 Remedies Cumulative.
Unless expressly provided otherwise herein, all rights and remedies granted
to each Party under this Agreement are cumulative and in addition to, and not in
lieu of, any other rights or remedies otherwise available to such Party at law
or in equity.
9.12 No Agency.
Each of the Parties hereto is an independent contractor and shall have no
right, power or authority to assume or create any obligation or responsibility
on behalf of any of the other Parties. This Agreement shall not create or imply,
or be construed to create or imply, any partnership, association, agency, or
joint venture between or among the Parties.
9.13 No Third Party Beneficiaries.
This Agreement is entered into solely among, and may be enforced only by,
the Parties hereto. This Agreement shall not be deemed to create any rights in
any third parties, including suppliers, customers and employees of any Party, or
to create any obligations of a Party to any such third parties.
9.14 Force Majeure.
If any circumstance beyond the reasonable control of any Party occurs which
delays or renders impossible the performance of that Party's obligations under
this Agreement on the dates herein provided, such obligation shall be postponed
for such time as such performance necessarily has had to be suspended or delayed
on account thereof, provided such Party shall notify the other Parties in
writing as soon as practicable, but in no event more than ten days, after the
occurrence of such force majeure. In such event, the Parties shall meet promptly
to determine an equitable solution to the effects of any such event, provided
that such Partner who fails because of force majeure to perform its obligations
hereunder shall use commercially reasonable efforts to implement work-arounds or
otherwise minimize the length of the delay and to resume promptly performance
upon the cessation of the force majeure. Events of force majeure shall include
war, revolution, invasion, insurrection, riots, mob violence, sabotage or other
civil disorders, power outages, and acts of God; provided, however, that, in the
event that a change in any applicable Law, rule or regulation makes it unlawful
for a Party to comply with any of its obligations hereunder and could be
considered an event of force majeure, the characterization of such change in
Law, rule or regulation as an event of force majeure shall be without prejudice
to the obligations of the Parties under Section 9.8 above.
9.15 Further Assurances; Affiliates.
In addition to any other obligations set forth in the Agreement, each
Party agrees to take such action (including, but not limited to, the execution,
acknowledgment and delivery of documents) as may reasonably be requested by the
other Party for the implementation or continuing performance of this Agreement.
Unless otherwise expressly set forth herein, any agreement by a Party to take or
refrain from taking any action shall constitute an agreement by such Party to
cause each of its Subsidiaries, and to use all reasonable best efforts to cause
each of its Affiliates, to so act or refrain from acting.
9.16 Export Controls.
Each Party agrees to comply fully with all relevant export laws and
regulations of the United Sates to ensure that no information or technical data
provided pursuant to this Agreement is exported or re-exported directly or
indirectly in violation of Law.
9.17 Negotiated Terms.
Each Party acknowledges that the provisions of this Agreement were
negotiated to reflect an informed, voluntary allocation between the Parties of
all risks (both known and unknown) associated with the transactions contemplated
by this Agreement.
9.18 Principles of Construction.
In this Agreement and all other attached Schedules, Exhibits or Attachments
to this Agreement, unless otherwise expressly indicated or required by the
context:
(a) reference to and the definition of any document shall be deemed a
reference to such document as it may be amended, supplemented, revised, or
modified, in writing, from time to time but disregarding any amendment,
supplement, replacement or novation made in breach of this Agreement;
(b) references in this Agreement to any statute, decree or regulation shall
be construed as a reference to such statute, Law, decree or regulation as
re-enacted, redesignated, amended or extended from time to time and references
herein or in this Agreement to any document or agreement shall be deemed to
include references to such document or agreement as amended, varied,
supplemented or replaced from time to time in accordance with such document's or
agreement's terms;
(c) defined terms in the singular shall include the plural and vice versa,
and the masculine, feminine or neuter gender shall include all genders;
(d) the words "including" or "includes" shall be deemed to mean "including
without limitation" and "including but not limited to" (or "includes without
limitation" and "includes but is not limited to") regardless of whether the
words "without limitation" or "but not limited to" actually follow the term;
(e) accounting terms used herein but not defined herein shall have their
respective meanings provided under GAAP;
(f) the words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement or its Schedules or Exhibits shall refer to
this Agreement and its Schedules and Exhibits as a whole and not to any
particular provision hereof or thereof, as the case may be; and
(g) any reference herein to a time of day means the time of day in New
York, New York.
9.19 Confidentiality.
The Parties shall maintain the confidentiality of this Agreement and of any
provisions of this Agreement in accordance with any applicable laws, rules and
regulations.
9.20 Transfer Taxes.
All Transfer Taxes imposed on transfers to Operating Partnership pursuant
to this Agreement shall be paid by Prodigy.
9.21 Legend.
The share certificates evidencing the SBC Units and the share
certificate evidencing the Investment Share (unless a registration statement
under the Securities Act with respect to such SBC Units or Investment Share is
then effective) shall bear the following legend until such time as SBC or any
transferee thereof delivers an opinion of counsel reasonably acceptable to
Prodigy to the effect that such legend is no longer required under the
Securities Act:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE NOT REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, NOR REGISTERED OR QUALIFIED UNDER ANY STATE
SECURITIES LAWS, AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS SO REGISTERED OR AN EXEMPTION THEREFROM IS
AVAILABLE.
<PAGE>
IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to
be duly executed in its name and on its behalf, all as of the date first above
written.
SBC COMMUNICATIONS INC.
By: /s/ James S. Kahan
-------------------------
Name: James S. Kahan
Title: Senior Executive Vice President - Corporate
Development
SBC INTERNET COMMUNICATIONS, INC.
By: /s/ Stephen A. McGaw
-------------------------
Name: Stephen A. McGaw
Title: President
PRODIGY COMMUNICATIONS CORPORATION
By: /s/ Andrea S. Hirsch
-------------------------
Name: Andrea S. Hirsch
Title: Executive Vice President
PRODIGY TRANSITION CORPORATION
By: /s/ Andrea S. Hirsch
-------------------------
Name: Andrea S. Hirsch
Title: Vice President
PRODIGY COMMUNICATIONS LIMITED PARTNERSHIP
By: Prodigy Communications Corporation, as general partner
of Prodigy Communications Limited Partnership
By: /s/ Andrea S. Hirsch
-------------------------
Name: Andrea S. Hirsch
Title: Executive Vice President
<PAGE>
(Exhibit C)
FORM OF
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
FOR
PRODIGY COMMUNICATIONS LIMITED PARTNERSHIP
By and Among
PRODIGY COMMUNICATIONS CORPORATION
SBC INTERNET COMMUNICATIONS, INC.
and
PRODIGY TRANSITION CORPORATION
Dated as of ______ __, ____
TABLE OF CONTENTS
-----------------
Page No.
--------
ARTICLE 1 OFFICES AND PURPOSES; DEFINITIONS...................... 1
1.1 Principal Office...................................... 1
1.2 Registered Office and Agent........................... 1
1.3 Purposes and Powers................................... 2
1.4 Definitions........................................... 2
ARTICLE 2 PARTNERS AND FINANCIAL MATTERS......................... 6
2.1 Identity of Partners.................................. 6
2.2 Limitation of Liability of Partners................... 6
2.3 Initial Capital Contributions......................... 7
2.4 Additional Capital Contributions...................... 7
2.5 Initial Percentage Interests and Units................ 7
2.6 Withdrawals of Capital; Interest...................... 8
2.7 Tax Classification and Treatment...................... 8
2.8 Tax Allocations and Capital Accounts.................. 9
2.9 Distributions......................................... 11
2.10 Accounting and Books of Account....................... 12
2.11 Tax Returns........................................... 12
2.12 Banking............................................... 13
2.13 Tax Matters Partner................................... 13
2.14 Reports............................................... 13
2.15 Freedom of Action..................................... 13
2.16 Tax Elections and Accounting.......................... 15
ARTICLE 3 MANAGEMENT............................................ 15
3.1 General Partner....................................... 15
3.2 Officers.............................................. 17
ARTICLE 4 ACTIONS BY PARTNERS................................... 17
4.1 Meetings.............................................. 17
4.2 Quorum for Meetings and Vote of the Partners.......... 18
4.3 Written Action without a Meeting; Telephone Meetings.. 18
4.4 Proxies............................................... 18
ARTICLE 5 DISSOLUTION AND LIQUIDATION........................... 18
5.1 Events of Dissolution................................. 18
5.2 Procedure Upon Dissolution............................ 19
5.3 Liquidating Trustee................................... 20
5.4 Powers of the Liquidating Trustee..................... 20
5.5 Duties of Liquidating Trustee......................... 21
5.6 Withdrawal of Limited Partners........................ 21
5.7 Indemnification of Liquidating Trustee................ 22
5.8 Contributions for Deficiencies........................ 22
ARTICLE 6 INDEMNIFICATION....................................... 22
6.1 General............................................... 22
6.2 Nonexclusivity........................................ 23
6.3 Enforcement........................................... 23
6.4 Insurance............................................. 23
ARTICLE 7 TRANSFERABILITY OF UNITS............................... 24
7.1 Transfer of Units..................................... 24
7.2 Transfer of General Partner Interests................. 24
ARTICLE 8 UNITS; CERTIFICATES.................................... 24
8.1 Certificates.......................................... 24
8.2 Lost or Destroyed Certificates........................ 25
8.3 Transfer of Units..................................... 25
8.4 Exchange of Units..................................... 25
8.5 Combinations and Subdivisions......................... 27
8.6 Incentive Plans; Registered and Private Offerings..... 27
ARTICLE 9 MISCELLANEOUS.......................................... 28
9.2 Governing Law......................................... 28
9.3 Counterparts.......................................... 28
9.4 Headings; Recitals.................................... 28
9.5 Integration........................................... 28
9.6 Severability.......................................... 29
9.7 Notices............................................... 29
9.8 Further Assurances.................................... 31
9.9 No Third Party Beneficiaries.......................... 31
9.10 Assignment............................................ 31
9.11 Successors and Assigns................................ 31
9.12 No Agency............................................. 31
9.13 Consent to Jurisdiction; Venue; WAIVER OF JURY TRIAL.. 31
9.14 Equitable Remedies................................... 32
9.15 Principles of Construction........................... 32
9.16 No Waiver of Rights.................................. 33
9.17 Force Majeure........................................ 33
9.18 Negotiated Terms..................................... 34
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
FOR PRODIGY COMMUNICATIONS LIMITED PARTNERSHIP
THIS AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT (as amended from
time to time in accordance with its terms, this "Agreement"), dated as of ______
__, ____, by and among Prodigy Communications Corporation, a Delaware
corporation (in its capacity as general partner of the Partnership, together
with any additional or substitute general partners of the Partnership, the
"General Partner" or "Public Corp."), Prodigy Transition Corporation, a
Delaware corporation, as the Initial Limited Partner (the "Initial Limited
Partner"), and SBC Internet Communications, Inc., a Delaware corporation ("SBC
Partner"). This Agreement constitutes the "limited partnership agreement" for
PRODIGY COMMUNICATIONS LIMITED PARTNERSHIP (the "Partnership"), a limited
partnership formed under the Delaware Revised Uniform Limited Partnership Act,
as amended from time to time (the "Act"). Capitalized terms used but not defined
herein shall have the meaning assigned to such terms in the Investment Agreement
(as defined below).
WHEREAS, the Partnership was formed as a limited partnership pursuant to
the Act by the filing of a Certificate of Limited Partnership with the Office of
the Secretary of State of Delaware on November 19, 1999, and in connection
therewith, the General Partner and the Initial Limited Partner entered into a
Limited Partnership Agreement of the Partnership, dated as of November 19, 1999
(the "Original Partnership Agreement");
WHEREAS, the parties hereto desire to amend and to restate the Original
Partnership Agreement to provide for the admission of SBC Partner, as a Limited
Partner and the withdrawal of the Initial Limited Partner from the Partnership
and to establish the respective rights and obligations of SBC Partner and the
General Partner with respect to the Partnership.
Now therefore, in consideration of the respective covenants and agreements
contained herein, the Original Partnership Agreement is hereby amended and
restated in its entirety as follows:
ARTICLE 1
OFFICES AND PURPOSES; DEFINITIONS
1.1 Principal Office. The principal office of the Partnership shall be
located at such place as may be determined by the General Partner. The principal
office may be changed by the General Partner at any time. The Partnership may
have such other offices as the General Partner may designate or as the business
of the Partnership may from time to time require.
1.2 Registered Office and Agent. The registered office of the Partnership,
as required by the Act to be maintained in the State of Delaware, shall be
located at 1209 Orange Street, Wilmington, Delaware 19801, and the original
registered agent at such address shall be The Corporation Trust Company. The
registered office and registered agent may be changed from time to time by the
General Partner and by the filing of the prescribed forms with and the payment
of any prescribed fees to the Delaware Secretary of State.
1.3 Purposes and Powers. The Partnership has been formed for the following
purposes:
(i) To create, manage, operate and market an Internet access service
providing broadband and narrowband Internet access targeted at consumers and
small businesses in the United States and to engage in any and all legal action
in furtherance thereof; and
(ii) Subject to Sections 2.1 and 3.1 of the By-Laws, the Partnership shall
have the power to do any and all acts necessary, appropriate, proper, advisable,
incidental or convenient to or for the furtherance of the purposes and the
Business, and shall have, without limitation (other than the limitations imposed
by Sections 2.1 and 3.1 of the By-Laws), any and all of the powers that may be
exercised on behalf of the Partnership by the General Partner pursuant to this
Agreement.
1.4 Definitions. As used herein, the following terms have the following
meanings:
"Affiliate" of any specified Person means any other Person that directly,
or indirectly through one or more intermediaries, Controls, is Controlled by, or
is under common Control with the specified Person.
"Bankruptcy" means with respect to any Person (a) the entry of a decree or
order by a court having jurisdiction in the premises judging such Person
bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjudication or composition of or in respect of
such Person under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law, or appointing a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of such Person or of
any substantial part of its property or ordering the winding up or liquidation
of its affairs, and the continuance of any such decree or order unstayed and in
effect for a period of 60 consecutive days; or (b) the institution by such
Person of proceedings to be adjudicated bankrupt or insolvent, or the consent by
it to the institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization or relief
under any applicable federal or state bankruptcy, insolvency, reorganization or
other similar law, or the consent by it to the filing of any such petition or to
the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or
similar official) of such Person or of any substantial part of its property or
the making by it of an assignment for the benefit of creditors, or the admission
by it in writing of its inability to pay its debts generally as they become due
and its willingness to be adjudicated a bankrupt, or the taking of corporate
action by such Person in furtherance of any such action.
"Book Value" means, with respect to any asset, the asset's adjusted basis
for federal income tax purposes; provided, however, (i) the initial Book Value
of any asset contributed to the Partnership shall be adjusted to equal its gross
fair market value at the time of its contribution and (ii) the Book Values of
all assets held by the Partnership shall be adjusted to equal their respective
gross fair market values (taking Code Section 7701(g) into account) upon an
adjustment to the Capital Accounts of the Partners described in Section
2.8(a)(vi). The Book Value of any asset whose Book Value was adjusted pursuant
to the preceding sentence thereafter shall be adjusted in accordance with the
provisions of Treasury Regulations Section 1.704-1(b)(2)(iv)(g).
"Business" means the business of the Partnership as specified in the
Business Plan as of the date of determination.
"Business Day" means any day other than Saturday, Sunday or a day on which
banks in the City of New York, New York are authorized or obligated by law or
executive order to close.
"Business Plan" means the two-year operating plan of the Partnership
(including the then-current (i) Development Plan and (ii) Marketing Plan)(as
defined in the Strategic Agreement)) and each subsequent two-year operating plan
of the Partnership.
"By-laws" mean the Amended and Restated By-Laws of Public Corp., as adopted
on the Closing Date.
"Certificate of Limited Partnership" means the Certificate of Limited
Partnership of the Partnership as duly filed with the Secretary of State of the
State of Delaware on November 19, 1999 pursuant to the Act, as amended or
restated from time to time.
"Certificate of Incorporation" means the Amended and Restated Certificate
of Incorporation of Public Corp. as filed on the Closing Date with the Secretary
of State of the State of Delaware pursuant to the Delaware General Corporation
Law and in accordance with Investment Agreement, as amended or restated from
time to time.
"Class A Common Stock" shall have the meaning assigned in the Certificate
of Incorporation.
"Code" means the Internal Revenue Code of 1986, as amended as of the date
hereof.
"Control," including its various tenses and derivatives (such as
"Controlled"), means, with respect to any Person, the presence of one of the
following: (i) the legal, beneficial or equitable ownership, directly or
indirectly, of more than 50% of the capital or voting stock (or other ownership
or voting interest, if not a corporation) of such Person or (ii) the ability,
directly or indirectly, to direct the voting of a majority of the directors of
such Person's board of directors or, if the Person does not have a board of
directors, a majority of the positions on any similar body, whether through
appointment, voting agreement or otherwise.
"Investment Agreement" means the Investment, Issuance, Contribution and
Assumption Agreement, dated as of November 19, 1999, by and among SBC
Communications Inc., SBC Partner, Public Corp., the Initial Limited Partner and
the Partnership, as amended from time to time.
"Limited Partners" means, at any time, SBC Partner, if at such time it owns
a Partnership Interest in the Partnership, and any additional or substitute
limited partners of the Partnership admitted in accordance with this Agreement.
"Liquidating Trustee" means the liquidating trustee of the Partnership
provided for in Section 5.3 hereof.
"Net Income" and "Net Loss" for any taxable period shall mean the taxable
income or loss, as the case may be, of the Partnership for such period
determined in accordance with Code Section 703(a) computed with the following
adjustments:
(i) Items of gain, loss, and deduction shall be computed based upon the
Book Values of the Partnership's assets (in accordance with Treasury Regulation
Section 1.70(b)(2)(iv)(g) and/or 1.704-3(d)) rather than upon the assets'
adjusted bases for federal income tax purposes;
(ii) Any tax exempt income received by the Partnership shall be included as
an item of gross income;
(iii) The amount of any adjustments to the Book Values of any assets of the
Partnership pursuant to Code Section 743 shall not be taken into account;
(iv) Any expenditure of the Partnership described in Code Section
705(a)(2)(B) (including any expenditure treated as being described in Code
Section 705(a)(2)(B) pursuant to Treasury Regulations under Code Section
(704(b)) shall be treated as a deductible.
(v) The amount of items of income, gain, loss, or deduction specially
allocated to any Partners pursuant to Sections 2.8(d), 2.8(e), and 2.8(f) shall
not be included in the computation; and
(vi) The amount of any items of Net Income or Net Loss deemed realized
pursuant to Section 2.8(a)(v) shall be included in the computation.
"Partners" mean the General Partner and SBC Partner and any other person
admitted to the Partnership as a partner.
"Partnership Interest" means, the interest representing a Partner's
interest in the Partnership.
"Percentage Interest" means a Partner's aggregate percentage interest in
the Partnership as determined by dividing the number of Units owned by such
Partner by the number of Units then owned by all Partners. The Percentage
Interests of the Partners as of the effective date of the Agreement are set
forth in Section 2.5.
"Person" means a natural person, a corporation, a limited liability
company, a partnership, a trust, a joint venture, any governmental authority, or
any other entity or organization.
"Regulations" means the income tax regulations, including temporary
regulations, promulgated under the Code, as such regulations are in effect on
the date hereof.
"Retail ISP Service" means any service for consumers and small businesses
using any transport at any speed via any device providing connectivity to the
Internet anywhere in the United States via a single IP address at any one time,
integrated with the provision of e-mail services, access to Usenet newsgroup,
chat or instant messaging and a default screen linking to an aggregation of a
broad variety of Internet-based content and excludes any Web hosting services.
"Strategic Agreement" means the Strategic and Marketing Agreement, dated as
of November 19, 1999, by and among SBC Communications Inc., SBC Partner, Public
Corp. and the Partnership, as amended from time to time.
"Subscriber" means with respect to any Retail ISP Service, a subscriber
that has remained a subscriber for at least one monthly billing cycle (excluding
any unpaid trial period) and has paid at least one monthly bill.
"Transfer" means any disposition of all or a portion of a Partnership
Interest (legal or equitable) by any means, direct or indirect, absolute or
conditional, voluntary or involuntary, including, but not limited to, by sale,
assignment, put, transfer, distribution, gift, bequest or disposal.
"Unit" means an interest (or portion thereof) of a Partner or an assignee
in the Partnership representing such fractional part of the interests of all
Partners or assignees pursuant to this Agreement as is equal to the quotient of
one divided by the number of outstanding Units in the Partnership. The number of
Units initially issued to, and the Percentage Interest held by, each Partner are
set forth on Schedule 2.5 attached hereto. The General Partner shall modify
Schedule 2.5 attached hereto from time to time to reflect changes in Units and
Percentage Interests held by the Partners or assignees due to Transfers of Units
or other events permitted by the terms of this Agreement.
In addition, the following terms are defined in the following Sections of
this Agreement:
Term Reference
---- ---------
Act Introduction
Agreement Introduction
Another Enterprise 6.1
Book Capital Account 2.8(a)(i)
Capital Accounts 2.8(a)(iii)
Capital Call 2.4(a)
Capital Call Notice 2.4(a)
Covered Person 2.15(d)
Event of Dissolution 5.1
General Partner Introduction
Imputed Capital Account 2.8(a)(ii)
Indemnitees 6.1
Initial Limited Partner Introduction
Objection Notice 2.11
Officers 3.2
Other Enterprise 6.1
Partner Introduction
Partnership Introduction
Partnership Tax Returns 2.11
Proceeding 6.1
Public Corp. Introduction
Relevant Tax Audits 2.13
Revaluation 2.8(e)
SBC 5.2(f)
SBC Partner Introduction
Securities Act 8.1
Tax Matters Partner 2.13
ARTICLE 2
PARTNERS AND FINANCIAL MATTERS
2.1 Identity of Partners. Without the need for any additional action on
the part of any Person, (i)Public Corp. shall continue to be a general partner
of the Partnership and (ii) SBC Partner is hereby admitted as a limited partner
of the Partnership. Upon the admission of SBC Partner as a limited partner, the
Initial Limited Partner shall be deemed to have withdrawn from the Partnership
as a limited partner. Upon such withdrawal, the Initial Limited Partner shall
have its capital contribution returned to it without any interest or deduction
and shall have no further interest in the Partnership. The Partners shall
consist of the General Partner and the Limited Partner. Subject to the prior
written consent of the Partners, but subject to Article 7, a new Person may be
admitted from time to time as a Limited Partner; provided, however, that each
such new Limited Partner shall execute an appropriate supplement to this
Agreement pursuant to which the new Limited Partner agrees to be bound by and
subject to all of the terms and conditions of this Agreement. Admission of a new
Limited Partner shall not be cause for the dissolution of the Partnership.
2.2 Limitation of Liability of Partners. Except as otherwise provided for
herein and in the Act, no Limited Partner (in its capacity as Limited Partner)
shall be required under any circumstance to contribute to the capital of the
Partnership any amount beyond that amount required pursuant to this Article 2,
nor shall any Limited Partner (in its capacity as a Limited Partner) be
obligated to lend any funds to the Partnership. No Limited Partner (in its
capacity as a limited partner of the Partnership) shall have any obligation with
respect to any debts, obligations or liabilities of the Partnership whether
arising in contract, tort or otherwise. No Limited Partner, in its capacity as
such, except as otherwise provided herein, shall take part in the day-to-day
management, operation or control of the business and affairs of the Partnership.
The Limited Partners shall not have any right, power or authority to transact
any business in the name of the Partnership or to act for or on behalf of or to
bind the Partnership. A Limited Partner shall have no rights other than those
specifically provided herein or granted by law. A Limited Partner and its
Affiliates or an employee, agent, director or officer thereof may also be an
employee, agent, director or officer of the Partnership or the General Partner.
The existence of these relationships and acting in such capacities will not
result in a Limited Partner being deemed to be participating in the control of
the business of the Partnership or otherwise affect the liability of the Limited
Partner or the Person so acting.
2.3 Initial Capital Contributions. Each of the Partners shall make an
initial capital contribution to the Partnership, to which Code Section 721 will
apply, of the assets and liabilities set forth in Article II of the Investment
Agreement.
2.4 Additional Capital Contributions. Except as provided in Section 2.3
hereof or this Section 2.4, no Partner shall have any obligation to make any
capital contribution to the Partnership. In the event that the Limited Partners
determine that the Partnership needs additional capital to satisfy its business
objectives, the General Partner shall make a capital call (a "Capital Call") to
the Partners by delivering to each such Partner a written notice (a "Capital
Call Notice") specifying the amount of such Capital Call, the time and manner
for satisfying such Capital Call and the proposed use of the proceeds thereof.
The General Partner shall have the authority to specify any penalties or
consequences to be imposed on defaulting Partners.
2.5 Initial Percentage Interests and Units. Once the initial capital
contributions have been made pursuant to Section 2.3 hereof, the Partners shall
have the following respective Percentage Interests and Units in the Partnership
(as also set forth on Schedule 2.5 hereto which schedule may be modified by the
General Partner from time to time in accordance with the terms of this
Agreement):
Percentage Interest Units
------------------- -----
Public Corp. __% [___]*
SBC Partner __% [___]**
2.6 Withdrawals of Capital; Interest. Except as otherwise provided
herein, no Partner shall have the right to withdraw any part of its capital
contributions to the Partnership without the consent of the other Partners. No
interest shall be paid on or on account of any capital contributions to the
Partnership.
2.7 Tax Classification and Treatment. It is the intention of the Partners
that the Partnership will be classified as a partnership for purposes of federal
and any state income tax law. The General Partner is authorized to make any
election it may deem to be prudent to maintain partnership classification. The
Partnership shall take all reasonable actions to prevent its being treated as a
"publicly traded partnership" under Code Section 7704.
- -----------------------------
* Public Corp. shall have a number of Units equal to the number of issued
and outstanding shares of Common Stock (as defined in the Restated
Certificate of Incorporation as of the date hereof) of Prodigy
Communications Corporation upon issuance of the Units and the Class B
Common Stock to SBC.
** SBC Partner shall have a number of Units equal to 43.0% of a fraction,
the numerator of which shall be (A) the total number of shares of Prodigy
Common Stock issued and outstanding on a fully-diluted basis immediately
prior to the Closing after giving effect to the issuance by Prodigy of the
number of shares of Prodigy Common Stock issuable pursuant to the Agreement
and Plan of Merger (including, without limitation, shares issuable upon
exercise of assumed options and warrants) (the "Merger Agreement"), dated
as of November 5, 1999, by and among Prodigy, the Initial Limited Partner
and FlashNet, and the exercise of all rights to receive Prodigy Common
Stock, whether pursuant to stock options, convertible securities, warrants
or otherwise, less the sum of (i) 4,818,290 shares of Prodigy Common Stock
issuable as of the date hereof by Prodigy pursuant to outstanding warrants
issued by Prodigy and (ii) the number of shares of Prodigy Common Stock
issued or issuable by Prodigy pursuant to the Merger Agreement (including,
without limitation, shares issuable upon exercise of assumed options and
warrants) as of the Closing, and the denominator of which shall be (B)
fifty-seven one hundredths (.57).
2.8 Tax Allocations and Capital Accounts.
(a) Capital Account Maintenance.
(i) A "Book Capital Account" shall be maintained for each Partner and shall
be adjusted from time to time in accordance with the terms of this Agreement.
The Partners agree that for the purposes of determining the initial Book Capital
Accounts, the fair market values of all of the assets contributed pursuant to
the Investment Agreement is as set forth on Schedule 2.8(a)(i).
(ii) An "Imputed Capital Account" shall be maintained for each Partner and
shall be adjusted from time to time in accordance with the terms of this
Agreement. Initially, the Imputed Capital Account of each Partner shall be
credited with the amounts set forth with respect to such Partner in Schedule
2.8(a)(ii).
(iii) The Book Capital Accounts and the Imputed Capital Accounts of each
Partner (together, the "Capital Accounts") shall be increased by (A) the amount
of any cash and the fair market value of any property contributed by such
Partner to the Partnership, net of any liabilities of the Partner assumed by the
Partnership or to which property contributed by the Partner to the Partnership
was subject, pursuant to this Agreement (other than the initial capital
contributions) set forth on Schedule 2.8(a) and (B) such Partner's share of Net
Income allocated to such Partner pursuant to Section 2.8(b) hereof, and
decreased by (C) the amount of cash or the fair market value of any property,
net of any liabilities assumed by the Partner or to which such property is
subject under Section 752 of the Code, distributed to such Partner pursuant to
this Agreement and (D) such Partner's share of Net Loss allocated to such
Partner pursuant to Section 2.8(c) hereof.
(iv) The Capital Accounts shall be maintained in accordance with the
Regulations implementing Section 704(b) of the Code as currently in effect to
the extent applicable and to the extent, if any, that any required adjustments
thereunder are not otherwise effected through any allocations made pursuant to
this Agreement.
(v) If the Partnership at any time distributes any of its assets in kind to
any Partner, the Capital Account of each Partner shall be adjusted to account
for that Partner's allocable share of the Net Income, Net Loss or items thereof
that would be realized by the Partnership if it sold the assets that were
distributed at their respective fair market values (taking Code Section 7701(g)
into account) immediately prior to their distribution.
(vi) Upon a revaluation required pursuant to Section 2.8(e), the Book
Capital Account balance of each Partner shall be adjusted to the extent provided
under Treasury Regulations Section 1.704-1(b)(2)(iv)(f) to reflect the Partner's
allocable share as determined under Section 2.8(e)of items of gain or loss that
would be realized by the Partnership if it sold all of its property at its fair
market value (taking Code Section 7701(g)into account) on the day of the
adjustment.
(vii) In the event any Units in the Partnership are Transferred in
accordance with the terms of this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent it relates to the Units.
(b) Net Income. After giving effect to the special allocations set forth in
Section 2.8(d) and (f) hereof, Net Income for any fiscal year shall be allocated
in the following order of priority:
(i) First, 100% to the Partners in proportion to and to the extent of the
excess, if any, of (A) the cumulative Net Loss allocated to each such Partner
pursuant to Section 2.8(c)(ii) hereof for all prior fiscal years, over (B) the
cumulative Net Income allocated to each such Partner pursuant to this Section
2.8(b)(i) for all prior fiscal years; and
(ii) The balance, if any, to the Partners pro rata in accordance with the
respective Percentage Interests held by them.
(c) Net Loss. After giving effect to the special allocations set forth in
Section 2.8(d), (e) and (f) hereof, Net Loss for any fiscal year shall be
allocated in the following order of priority:
(i) First, 100% to the Partners in proportion to and to the extent of the
excess, if any, of (1) the cumulative Net Income allocated to each such Partner
pursuant to Section 2.8(b)(ii) hereof for all prior fiscal years, over (2) the
cumulative Net Loss allocated to each such Partner pursuant to this Section
2.8(c)(i) for all prior fiscal years; and
(ii) The balance, if any, to the Partners pro rata in accordance with the
respective Percentage Interests held by them.
(d) Certain Allocations upon Distributions. Any allocation of items of
income or loss made with respect to the accounting period ending immediately
prior to a distribution of Partnership capital in connection with the
liquidation or winding-up of the Partnership (or a sale of the Partnership)
shall be allocated, first, among the Partners' Book Capital Accounts to the
extent necessary to cause each such Partner's Book Capital Account to equal such
Partner's Imputed Capital Account after giving effect to all such allocations
for such accounting period and, then, ratably in accordance with the respective
Percentage Interests.
(e) Revaluation. The General Partner shall be required to revalue the
Partnership's property upon (i) the contribution of more than a de minimis
amount of cash or other property to the Partnership, (ii) the distribution of
more than a de minimis amount of cash or other property to a Partner as
consideration for the redemption, repurchase or discharge of an interest in the
Partnership or (iii) the liquidation, winding up or incorporation of the
Partnership (in any such case, a "Revaluation"). Any gain or loss resulting
directly from such Revaluation shall be allocated for the period in which such
Revaluation occurs first, among the Partners' Book Capital Accounts to the
extent necessary to cause each such Partner's Book Capital Account to equal such
Partner's Imputed Capital Account and, thereafter, ratably in accordance with
their respective Percentage Interests. Any such Revaluation shall be made in a
manner consistent with Treasury Regulation Section 1.704-1(b)(2)(iv)(e) or (f)
and Net Income (Loss) shall thereafter be determined in a manner consistent with
Treasury Regulation Section 1.704-1(b)(2)(iv)(g). For the purposes of this
Section 2.8(e), the aggregate value of the Partnership's property shall be
determined by an independent investment banker or national accounting firm
selected by SBC or in a manner otherwise agreed upon between the General Partner
and SBC Partner.
(f) Regulatory Allocations. Section 704 of the Code and the Regulations
issued thereunder as currently in effect, including, without limitation, the
provisions of such Regulations addressing qualified income offset provisions,
minimum gain charge back requirements and allocations of deductions attributable
to nonrecourse debt and partner nonrecourse debt, are hereby incorporated by
reference. If any allocation is required by the first sentence of this Section
2.8(f) (the "Original Allocation"), special offsetting allocations of other
items of Partnership income, gain, loss and deduction shall be made as rapidly
as possible so that, after such offsetting allocations are made, each Partner's
Capital Account balance is, to the extent possible, equal to the Capital Account
balance such Partner would have had if the allocations made under the first
sentence of this Section 2.8(f) had not been made, provided, however, that no
such special offsetting allocations shall be made if (i) the Original Allocation
had the effect of offsetting a prior Original Allocation, or (ii) the Original
Allocation (in the opinion of the Partnership's accountants) likely will be
offset by another Original Allocation in the future (e.g., an Original
Allocation of "nonrecourse deductions" that likely will be offset by a
subsequent "minimum gain chargeback").
(g) Tax Allocations.
(i) Except as otherwise provided in this Section 2.8(g), for federal, state
and local income tax purposes, each item of income, gain, loss and deduction
shall be allocated among the Partners in the same manner as its correlative item
of "book" income, gain, loss or deduction is allocated pursuant to Section
2.8(b) through (f) hereof.
(ii) Income, gain, loss or deductions of the Partnership shall, solely for
income tax purposes, be allocated among the Partners in accordance with Section
704 (c) of the Code and the Treasury Regulations promulgated thereunder, so as
to take account of any difference between the adjusted bases of the assets of
the Partnership and their respective fair market values in accordance with the
traditional method set forth in Section 1.704-3(b) of the Treasury Regulations.
(h) If the amount of income or loss allocable under Section 2.8(d) or
Section 2.8(e) is insufficient to allow the Book Capital Account balance of each
Partner to equal such Partner's Imputed Capital Account balance, such income or
loss shall be allocated among the Partners in such a manner as to decrease the
differences between the Partners' respective Book Capital Account balances and
their respective Imputed Capital Account balances in proportion to such
differences.
(i) In the event that a Partner acquires an interest in the Partnership
either by Transfer from another Partner or by acquisition from the Partnership,
the Partnership shall close its books as of the date of the acquisition and (i)
Net Income, Net Loss, gross income, nonrecourse deductions and items thereof
computed for the portion of the year ending as of the end of the day on the date
of the acquisition shall be allocated among the Partners without regard to such
acquisition, and (ii) Net Income, Net Loss, gross income, nonrecourse deductions
and items thereof computed for the portion of the year commencing on the day
following the acquisition shall be allocated among the Partners taking into
account such acquisition. For purposes of determining the date on which the
acquisition occurs, the Partnership may make use of any convention allowable
under Section 706(d) of the Code.
(j) Timing of Allocations. Allocations of Net Income and Net Loss provided
for in this Section 2.8 shall generally be made as of the end of the fiscal year
of the Partnership; provided, however, that allocation of items of Net Income
and Net Loss described in clause (vi) of the definition of "Net Income" and "Net
Loss" shall be made at the time deemed realized as described in Section
2.8(a)(v).
2.9 Distributions. (a) General. Subject to Sections 2.9(b), 2.9(d), 2.9(e)
and 5.2 hereof, distributions shall be made by the General Partner on behalf of
the Partnership at such times and in such amounts as the Partners shall
determine.
(b) Allocation of Amounts Distributed. Except as provided in Sections
2.9(d) and 2.9(e) and Article 5 hereof, any amounts distributed by the
Partnership hereunder shall be distributed to the Partners pro rata in
accordance with their respective Percentage Interests.
(c) Withholding Taxes. Each Partner hereby authorizes the Partnership to
withhold from or pay on behalf of or with respect to such Partner any amount of
federal, state, local, or foreign taxes that the General Partner determines that
the Partnership is required to withhold or pay with respect to any amount
distributable or allocable to such Partner pursuant to this Agreement,
including, without limitation, any taxes required to be withheld or paid by the
Partnership pursuant to Code Sections 1441, 1442, 1445 or 1446. Any amount paid
on behalf of or with respect to a Partner pursuant to the preceding sentence
shall constitute a loan by the Partnership to such Partner, which loan shall be
repaid by such Partner within 15 days after notice from the General Partner that
such payment must be made unless (i) the Partnership withholds such payment from
a distribution which would otherwise be made to the Partner, or (ii) the General
Partner determines, in its sole and absolute discretion, that such payment may
be satisfied out of the available funds of the Partnership which would, but for
such payment, be distributed to the Partner. Any amounts withheld pursuant to
the foregoing clauses (i) or (ii) shall be treated as having been distributed to
such Partner. In the event that a Partner fails to pay any amounts owed to the
Partnership pursuant to this Section 2.9(c) when due, the General Partner may,
in its sole and absolute discretion, elect to make the payment to the
Partnership on behalf of such defaulting Partner and in such event shall be
deemed to have loaned such amount to such defaulting Partner. Until repayment of
such loan, the General Partner (i) shall have a security interest in such
defaulting Partner's Partnership Interest and (ii) shall succeed to all rights
and remedies of the Partnership as against such defaulting Partner (including,
without limitation, the right to receive distributions). Any amounts payable by
a Partner hereunder shall bear interest at the lower of (i) the base rate on
corporate loans at large United States money center commercial banks, as
published from time to time in The Wall Street Journal, plus four percentage
points and (ii) the maximum lawful rate from the date such amount is due (i.e.,
15 days after demand) until such amount is paid in full. Each defaulting Partner
shall take such actions as the Partnership or the General Partner shall request
in order to perfect or enforce the security interest created hereunder.
(d) Limitations on Distributions. Notwithstanding anything to the contrary
contained in this Agreement, the Partnership and the General Partner, on behalf
of the Partnership, shall not make a distribution to any Partner on account of
its interest in the Partnership if such distribution would violate the Act or
other applicable law.
(e) Tax Distributions. Notwithstanding the foregoing provisions of Section
2.9, on or before [March 15] of each fiscal year commencing after the date
hereof during the term of this Agreement, the Partnership shall distribute (i)
to Prodigy, in cash, an amount equal to Prodigy's actual capability attributable
to the income of the Partnership that was allocated to Prodigy in the
immediately preceding taxable year, and (ii) to SBC, in cash, an amount
sufficient to make all distributions pursuant to this Section of 2.9(e) pro rata
among the Partners, in accordance with their Percentage Interests provided,
however, that any distributions required to be made to the Partners pursuant to
this Section 2.9(e) shall be required to be so made by the Partnership only to
the extent of cash available therefor, and the Partnership shall not be required
to dispose of assets outside of the ordinary course of business or engage in any
other extraordinary transactions in order to obtain the cash necessary for such
distributions. Amounts distributed to a Partner pursuant to the immediately
preceding sentence shall be treated as advances against amounts distributable to
it pursuant to Section 2.9(b) or Section 5.2 and shall, accordingly, reduce the
amounts otherwise to be distributed to the Partner pursuant to such Sections in
the future.
(f) Distributions Upon Transfer or Admission. In the event that a Partner
acquires an interest in the Partnership either by Transfer from another Partner
(subject to the provisions of Article 7) or by acquisition from the Partnership,
the Partnership shall close its books as of the date of the acquisition and (i)
all distributions attributable to the portion of the year ending as of the end
of the day of the date of the acquisition shall be made to the Partners without
regard to such acquisition, and (ii) all distributions attributable to the
portion of the year commencing on the day following the date of the acquisition
shall be made to the Partners taking into account such acquisition. The date on
which the acquisition occurs shall be determined in a manner consistent with the
last sentence of Section 2.8(i).
2.10 Accounting and Books of Account. The accounts, books and records of
the Partnership shall be maintained at the principal office of the Partnership
and shall be open for inspection, copying and audit upon reasonable notice by
any of the Partners or their duly authorized representatives (at the expense of
any such Partners) during reasonable business hours, irrespective of any
requirements or limitations set forth in Section 17-305 of the Act. The
Partnership's books shall be closed and balanced at the end of each month. Each
Partner represents that it is not a "foreign partner" within the meaning of Code
Section 1446(e).
2.11 Tax Returns. The General Partner shall designate an officer of the
Partnership to be responsible for the preparation of all required federal,
state, local and foreign tax returns for the Partnership. The General Partner
shall deliver an Internal Revenue Service Form 1065 and drafts of any other
federal, state or local partnership income tax returns (including related
information returns) (collectively, the "Partnership Tax Returns"), prepared by
the officer of the Partnership responsible for the preparation of the
Partnership Tax Returns pursuant to this Section 2.11 by no later than May 1 of
each year. On or before June 1 of that year, SBC Partner shall have the right to
deliver a notice (an "Objection Notice") to the General Partner stating that SBC
Partner objects to any information contained on or omitted from any draft
Partnership Tax Return and setting forth an alternative tax treatment of the
item or items disputed. If SBC Partner files an Objection Notice, the relevant
Partnership Tax Return shall be filed in accordance with the alternative tax
treatment described in the Objection Notice. The General Partner shall send to
each Partner a final schedule K-1 by no later than June 15 of each year. No
final Partnership Tax Return shall be amended without the prior written consent
of SBC Partner, which consent may be withheld in SBC Partner's sole and absolute
discretion.
2.12 Banking. All funds of the Partnership shall be deposited in its name
in one or more separate accounts with such financial institutions as shall be
designated by the General Partner. Funds of Partners or other Persons shall not
be deposited in such Partnership accounts. The funds in such accounts shall be
used solely for the Partnership's purposes. Withdrawals from, or checks drawn
upon, such accounts shall require the signatures of such Persons as may be
designated by the General Partner.
2.13 Tax Matters Partner. The "Tax Matters Partner," within the meaning
of Code Section 6231(a)(7), of the Partnership shall be the General Partner. The
General Partner shall promptly notify SBC Partner in writing upon receipt by the
General Partner or the Partnership of notice of (i) any pending or threatened
federal, state or local tax audits or assessments for which the General Partner
is the Tax Matters Partner (the "Relevant Tax Audits"), (ii) any meeting with
the Internal Revenue Service or the appropriate state or local tax authority
regarding the Relevant Tax Audits, and (iii) any hearing or other proceeding
relating to or arising out of the Relevant Tax Audits. SBC Partner shall be
entitled to participate in all such meetings at its own expense. The General
Partner shall send SBC Partner a draft of all written documents expected to be
submitted to a relevant taxing authority, court or other entity in connection
with the Relevant Tax Audits 10 days before such written document is required or
expected to be submitted. SBC Partner shall make all final decisions regarding
the Relevant Tax Audits (including whether and how to litigate and the contents
of any written document submitted to any taxing authority). General Partner
shall not settle any Relevant Tax Audit or any litigation or other proceeding
relating to or arising out of any Relevant Tax Audit without the prior written
consent of SBC Partner, which consent may be withheld in SBC Partner's sole and
absolute discretion.
2.14 Reports. The General Partner shall furnish to the SBC Partner:
(a) within 20 days after the end of each month, unaudited summary financial
information for the Partnership for such month and individual Capital Accounts
reconciliations; and
(b) within 60 days after the end of each fiscal year, a balance sheet and
statement of operations and a statement of the Partners' capital for the
Partnership for such year (audited by a firm of independent public accountants
of recognized national standing chosen by the General Partner), and individual
Capital Accounts reconciliations.
2.15 Freedom of Action. To the fullest extent permitted by law, the Limited
Partners hereby expressly disclaim any fiduciary duties owed by the Limited
Partners to the Partnership or to each other. Except as expressly provided
herein, in the Strategic Agreement or in any other agreement between or among
the Partners:
(a) No Limited Partner or its Affiliates (other than the General Partner)
shall have any obligation to the Partnership, the other Partners or Public Corp.
to refrain from (i) engaging in activities similar or dissimilar to the Business
or developing or marketing any products or services that compete, directly or
indirectly, with those of the Partnership, (ii) investing in or owning any
interest publicly or privately, or developing a business relationship, with any
Person engaged in activities similar or dissimilar to the Business, or otherwise
in competition with the Partnership, (iii) conducting business with any client
or customer of the Partnership, or (iv) employing or otherwise engaging any
officer or employee of the Partnership; provided, that, no Limited Partner may
actively solicit any officer or employee of the Partnership without the consent
of the Chief Executive Officer of Public Corp; provided, further, that, the
foregoing provisions in this subsection (a) shall not modify any of the duties
owed by such Limited Partners or their respective Affiliates to Public Corp. in
their other capacities;
(b) No Limited Partner, its Affiliates (other than the General Partner) or
any of such Limited Partner's or its Affiliate's (other than the General
Partner's) officers, directors, employees or former employees shall have any
obligation, or be liable, to the Partnership or any of the Partners (i) for or
arising out of the conduct described in Section 2.15(a) and (c) hereof, (ii) for
exercising or failing to exercise its rights under this Agreement, or the
Strategic Agreement, or (iii) for exercising or failing to exercise its rights
as a partner of the Partnership. The Partnership and each Partner therefore
waives, to the fullest extent permitted by law, any claim or cause of action
against the Limited Partners or the Partnership asserting, in connection with
the determination of any and all matters presented to the Limited Partners for
action, breach of fiduciary duty or any other duty, or breach of any duty
created by special circumstances arising out of this Agreement or the
Partnership;
(c) If any Limited Partner or any officer, director, employee or former
employee (other than a Limited Partner's designees to the Board of Directors of
Public Corp.) of any Limited Partner acquires knowledge of a potential
transaction, agreement, arrangement or other matter that may be an opportunity
for both such Person (or its Affiliate (other than the General Partner)), on the
one hand, and the Partnership, on the other hand, neither such Person nor its
officers, directors, employees or former employees shall have any duty to
communicate or offer such opportunity to the Partnership, and neither such
Person nor its officers, directors, employees or former employees (other than
(i) any former employee who is a current employee of the Partnership and (ii) a
Limited Partner's designees to the Board of Directors of Public Corp.) shall be
liable to the Partnership for breach of any fiduciary or other duty, as a
Partner or otherwise, by reason of the fact that such Person pursues or acquires
such opportunity for itself, directs such opportunity to another Person or does
not communicate such opportunity or information to the Partnership; and
(d) To the extent that, at law or in equity, a Partner, its Affiliates, or
any officer, director, employee or former employee of such Partner or its
Affiliates (each, a "Covered Person" and collectively, the "Covered Persons")
have duties (including fiduciary duties) and liabilities relating thereto to the
Partnership or to another Partner, such Covered Person acting in connection with
the Partnership's business or affairs, shall not be liable to the Partnership or
to any Partner for such Covered Person's good faith reliance on the provisions
of this Agreement. The provisions of this Agreement, to the extent that they
restrict the duties and liabilities of a Covered Person otherwise existing at
law or in equity, are agreed by the Partners to replace such other duties and
liabilities of such Covered Person.
2.16 Tax Elections and Accounting. Neither, the General Partner nor the
Partnership shall make any tax elections or change any method of tax accounting
without the prior written consent of SBC Partner, which consent may be withheld
in SBC Partner's sole and absolute discretion. If SBC Partner and the General
Partner disagree on whether an election or change in method of tax accounting
should be made, the Partnership shall make the election or change that minimizes
or defers the recognition of income or maximizes or accelerates a deduction,
credit or similar tax benefit.
ARTICLE 3
MANAGEMENT
3.1 General Partner. (a) The business, property and affairs of the
Partnership shall be managed under the direction of the General Partner. The
General Partner shall have the general power to manage or cause the management
of the Partnership within the scope of the business purpose set forth in Section
1.3 and shall have the authority to delegate to any officer of the Partnership
the authority to make any lawful decision on the Partnership's behalf. No
Limited Partner shall have any power or authority to bind the Partnership.
(b) Except as otherwise expressly provided herein, the General Partner
(acting on behalf of the Partnership), shall have the right, power and
authority, in the management of the business and affairs of the Partnership, to
do or cause to be done any and all acts, at the expense of the Partnership, as
the case may be, deemed by the General Partner to be necessary or appropriate to
effectuate the business, purposes and objectives of the Partnership. The power
and authority of the General Partner shall include, without limitation, the
power and authority:
(1) To pay, collect, compromise, litigate, arbitrate, or
otherwise adjust or settle any and all other claims or demands of or
against the Partnership or to hold such proceeds against the payment
of contingent liabilities;
(2) To borrow money or to obtain credit in such amounts, at such
rate of interest and upon such other terms and conditions as the
General Partner deems appropriate, recourse or nonrecourse, from
banks, other lending institutions or any other Person, including the
Partners, and pursuant to indentures, loan agreements or any other
type of instrument, for any purpose of the Partnership and to secure
payment of the principal of any such indebtedness and the interest
thereon by mortgage, pledge, conveyance or assignment in trust of or
grant security interest in the whole or any part of any or all of the
property and assets of the Partnership;
(3) To make, execute, assign, acknowledge and file on behalf of
the Partnership any and all documents or instruments of any kind that
the General Partner may deem necessary or appropriate in carrying out
the purposes and business of the Partnership; and any Person dealing
with the General Partner shall not be required to determine or inquire
into its authority or power to bind the Partnership or to execute,
acknowledge or deliver any and all documents in connection therewith;
(4) To invest funds of the Partnership;
(5) To employ and engage suitable agents, employees, advisors,
consultants and counsel (including any custodian, investment advisor,
accountant, attorney, corporate fiduciary, bank or other reputable
financial institution, or any other agents, employees or Persons who
may serve in such capacity for the General Partner or any Affiliate of
the General Partner) to carry out any activities that the General
Partner is authorized or required to carry out under this Agreement
(subject to the supervision and control of the General Partner),
including without limitation, a Person who may be engaged to undertake
some or all of the general management, property management, financial
accounting and recordkeeping or other duties of the General Partner
and to indemnify such Persons against liabilities incurred by them in
acting in such capacity as on behalf of the Partnership;
(6) To qualify the Partnership to do business in any state,
territory, dependency or foreign country; and
(7) To possess and exercise any additional rights and powers of a
General Partner under the partnership laws of the State of Delaware,
including, without limitation, the Act and the Delaware Uniform
Partnership Law (and any other applicable laws, to the extent not
expressly prohibited by this Agreement).
The expression of any power or authority of the General Partner in this
Agreement shall not in any way limit or exclude any other power or authority
which is not specifically or expressly set forth in this Agreement.
Notwithstanding any of the foregoing, the Partnership shall be operated in such
a manner as the General Partner deems reasonable and necessary or appropriate to
preserve the limited liability of the Limited Partners.
(c) Notwithstanding the foregoing provisions of Sections 3.1(a) and (b),
the General Partner shall have no authority, without written approval of all of
the Limited Partners to:
(1) subject to Article VII, admit a new Limited Partner to the
Partnership;
(2) make any Capital Call or deliver to the Partners a Capital Call
Notice;
(3) make any distributions;
(4) institute any proceeding for Bankruptcy on behalf of the
Partnership; or
(5) dissolve the Partnership.
(d) Except as provided elsewhere in this Agreement (including the
provisions regarding distributions, payments and allocations to which it may be
entitled), the General Partner shall not be compensated for its services as
general partner of the Partnership.
3.2 Officers.
(a) The officers of the Partnership (the "Officers") shall at all times be
identical in name and title to the then officers of Public Corp. Any changes in
the officers of Public Corp., whether by election, resignation, removal, death
or otherwise, shall automatically and concurrently take effect with respect to
the Officers of the Partnership. No Officer may resign from the Partnership
unless such Officer concurrently resigns as an officer of Public Corp. Any
resignation by an officer of Public Corp. shall constitute such officer's
concurrent resignation as an Officer of the Partnership. The Chief Executive
Officer of the Partnership and other Officers and employees of the Partnership
shall develop and implement management policies consistent with the general
policies and programs established by the management and the Chairman of the
Board of Directors of Public Corp. for Public Corp.
(b) Except to the extent set forth in this Agreement, the Officers shall
have the duties of officers with comparable titles of a corporation for profit
organized under the General Corporation Law of the State of Delaware.
ARTICLE 4
ACTIONS BY PARTNERS
4.1 Meetings. Meetings of the Partners, for any purpose or purposes, may be
called by the General Partner or by any Partner and may be held at the principal
office of the Partnership, at any location within the States of Texas or New
York as determined by the General Partner or at any other location as determined
by the General Partner. Notice of any such meeting shall be given to each
Partner at least 10 and no more than 60 days prior to the date thereof. Such
notice shall specify the date, time and place of such meeting and shall set
forth an agenda of items to be discussed or acted upon at such meeting. Partners
may participate in any meeting of the Partners by means of a conference
telephone or similar communications equipment by means of which all Persons
participating in the meeting can hear each other at the same time and
participation by such means shall constitute a waiver of notice of such meeting,
except when a Partner participates for the express purpose of objecting to the
transaction of any business because such meeting has not been (or has allegedly
not been) duly noticed.
4.2 Quorum for Meetings and Vote of the Partners. The presence in person or
by proxy of each of the Limited Partners shall constitute a quorum at the
Partners' meeting for the transaction of any business. No action of the Partners
shall be valid in the absence of a quorum. Except as otherwise set forth in this
Agreement, any action taken at a meeting of the Partners at which a quorum is
present shall require approval of Partners holding all of the outstanding
Partnership Interests present at such meeting. Nothing in this Section 4.2 shall
be deemed to modify the requisite vote on any matter as provided in this
Agreement.
4.3 Written Action without a Meeting; Telephone Meetings. Any action
required or permitted to be taken at any meeting of the Partners may be taken
without a meeting and without prior notice, if consent in writing to such action
is provided by all Partners entitled to vote to approve such action. Such
written consent or consents shall be filed with the books and records of the
Partnership and made a part of the minutes of the meeting of the Partners.
Action by written consent shall have the same force and effect as a vote of the
Partners.
4.4 Proxies. Each Partner may appear and vote at any meeting of the
Partners, and may execute waivers of notice, consents, or approvals, through the
agency of one or more Persons, provided such agents are authorized to so act on
behalf of the Partner by the terms of a written proxy which has been
executed by such Partner and delivered to the secretary of the Partnership. The
secretary of the Partnership shall cause such written proxies to be filed with
the books and records of the Partnership. If a written proxy authorizes an agent
to appear and/or to vote at any meeting of the Partnership, such written proxy
must be delivered to the secretary of the Partnership.
ARTICLE 5
DISSOLUTION AND LIQUIDATION
5.1 Events of Dissolution. The Partnership shall have a perpetual
existence. Notwithstanding the foregoing, the Partnership shall be dissolved and
its affairs shall be wound up upon the earliest occurrence of any of the
following events (each an "Event of Dissolution"):
(a) the entry of a decree of dissolution under Section 17-802 of the Act;
(b) upon the written consent of the General Partner and the Limited
Partners;
(c) at such time as there are no limited partners of the Partnership,
unless the business of the Partnership is continued in accordance with the Act;
and
(d) any event that results in the General Partner's ceasing to be a general
partner of the Partnership under the Act; provided, that, the Partnership shall
not be dissolved and required to be wound up in connection with any such event
if (i) at the time of the occurrence of such event there is at least one
remaining general partner of the Partnership who is hereby authorized to and
does carry on the business of the Partnership, or (ii) within 180 days after the
occurrence of such event, the Limited Partners agrees in writing or vote to
continue the business of the Partnership and to the appointment, effective as of
the date of such event, if required, of one or more additional general partners
of the Partnership. The occurrence of the event described in Section
17-402(a)(4) or (5) of the Act shall not cause the General Partner to cease to
be a general partner of the Partnership.
5.2 Procedure Upon Dissolution.
(a) Upon the dissolution of the Partnership, the Liquidating Trustee
appointed pursuant to Section 5.3 hereof shall immediately commence to wind up
the Partnership's affairs, and shall proceed with reasonable promptness to
liquidate the business of the Partnership;
(b) If the Partnership is dissolved while its business is in progress, the
winding up of the affairs of the business of the Partnership may include
completion of any work in progress and any contracts in existence on the date of
dissolution, provided that, the Liquidating Trustee shall use all reasonable
efforts to terminate any such contracts as soon as practicable;
(c) Except as otherwise required by the Act, upon the dissolution of the
Partnership, the assets of the Partnership shall be applied in the following
order:
(i) To the satisfaction (whether by payment or by establishment of
reasonable reserves thereof including for any contingent, conditional or
unmatured liabilities or obligations of the Partnership) of debts and
liabilities of the Partnership to creditors in the order of priority provided by
law, and the expenses of dissolution and liquidation; and
(ii) To the Partners in accordance with their respective positive Book
Capital Account balances.
(d) Reserves for any contingent, conditional or unmatured liabilities or
obligations shall be held in trust by the Liquidating Trustee for the purpose of
disbursing such reserves in payment of any such liabilities or obligations and,
at the expiration of such period as the Liquidating Trustee shall deem
advisable, to distribute the balance of the trust corpus in the manner herein
provided.
(e) Subject to subsection (c), upon the dissolution of the Partnership, all
of the Partnership's Subscribers shall be divided among SBC Partner and Public
Corp. in accordance with their respective positive Book Capital Account
balances.
(f) Subject to subsections (c) and (e), in making distributions pursuant to
a dissolution of the Partnership and in the assignment of Subscribers, the
Liquidating Trustee (i) shall use commercially reasonable efforts to allocate
and to return to the Partners the assets contributed by such Partners to the
Partnership and (ii) shall give due consideration to the Retail Local Loop
Customers of SBC Communications Inc. ("SBC") and the markets in which SBC
operates; provided, that, each of the Partners shall assume all liabilities
associated with the assets distributed to such Partner, and the allocation of
assets to the Partners shall be based on the net value of such assets after
taking into account such associated liabilities. The fair value of such assets
shall be determined by the Liquidating Trustee in such manner as it deems
appropriate. In furtherance of the foregoing, whenever assets are distributed in
kind under this Agreement, a Partner shall accept a distribution of any asset in
kind from the Partnership regardless of whether the percentage of the asset
distributed to such Partner differs from the percentage in which such Partner
otherwise shares in distributions from the Partnership.
5.3 Liquidating Trustee. The liquidating trustee of the Partnership shall
be appointed by the General Partner or, if there is no General Partner, by a
Person selected by the unanimous consent of the Limited Partners.
5.4 Powers of the Liquidating Trustee. The Liquidating Trustee, subject to
the provisions of Section 5.5 hereof, shall have full power and authority to,
and shall, wind up the business and affairs of the Partnership, including
without limiting the generality of the foregoing, full power and authority to:
(a) sell, transfer, hypothecate, pledge or otherwise encumber or dispose of
all or any part of the Partnership's assets for cash or a cash equivalent at
such price and on such terms as the Liquidating Trustee shall determine to be
necessary, appropriate or desirable in order to accomplish an orderly and prompt
dissolution of the Partnership at the most favorable price and on the most
favorable terms reasonably obtainable; provided, that, such sale, transfer,
hypothecation, pledge, encumbrance or disposition of any such asset is in
accordance with Sections 5.2(c), 5.2(d), 5.2(e) and 5.2(f) hereof;
(b) represent and act for and on behalf of the Partnership in all matters,
including, without limitation, the power and authority to engage professional
and technical services including, without limitation, accountants, attorneys,
appraisers, brokers and auctioneers, and to institute and defend any legal
proceedings that may be pending or brought by or against the Partnership;
(c) prepare, execute, file, record and publish on behalf of the Partners
and the Partnership any agreements, documents or instruments relating to the
dissolution and winding up of the business and affairs of the Partnership;
(d) satisfy or pay or otherwise settle or discharge all of the debts,
liabilities and other obligations of the Partnership;
(e) distribute to the Partners any of the Partnership's assets, including
without limitation, the proceeds of any sale of assets remaining after payment
of debts, liabilities and other obligations in accordance with Sections 5.2(c),
5.2(d), 5.2(e) and 5.2(f) hereof; and
(f) take all other action necessary, appropriate or incidental to the
foregoing powers or to the performance of the duties of the Liquidating Trustee
under this Agreement.
5.5 Duties of Liquidating Trustee. The Liquidating Trustee shall devote
such time as it deems reasonably necessary to wind up the Partnership in the
manner provided in this Article 5. In addition, the Liquidating Trustee shall:
(a) arrange for an independent certified public accountant to supervise a
complete inventory and accounting of the Partnership's assets and liabilities as
of the date of dissolution; and
(b) prepare, file, publish and record in a timely manner all appropriate
agreements, documents and instruments, including federal and state tax returns,
to reflect the dissolution and termination of the Partnership and the cessation
of the use of its name; obtain any necessary or desirable permits or other
authorizations, including, without limitation, tax rulings relating to the
dissolution and winding up of the Partnership or the disposition of its
business, assets and goodwill; and, to the extent required by law, cancel any
existing authorizations, licenses or permits and resolve or dispose of other
matters relating to the dissolution and winding up as required by law and
consistent with the purposes and provisions of this Agreement. In the
performance of these duties, the Liquidating Trustee shall act diligently,
honestly and in good faith and shall account to the Partners for any benefit or
profits derived from transactions connected with the liquidation and winding up.
5.6 Withdrawal of Limited Partners. No Limited Partner shall have the
right to voluntarily withdraw as a Limited Partner of the Partnership other than
following a Transfer of all of its Units, which Transfer shall be in accordance
with Article 7.
5.7 Indemnification of Liquidating Trustee. To the fullest extent permitted
by law, the Partnership shall indemnify the Liquidating Trustee as provided in
Article 6 hereof.
5.8 Contributions for Deficiencies. No Partner shall have any obligation to
restore a deficit balance in its Capital Account at any time, and such deficit
shall not be considered as owed to the Partnership or any other Person for any
purpose whatsoever.
ARTICLE 6
INDEMNIFICATION
6.1 General. Each Person who was or is made a party or is threatened to be
made a party to or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"Proceeding"), arising out of the fact (a) that such Person is or was a General
Partner, Limited Partner, Liquidating Trustee, officer, employee or agent of the
Partnership or the General Partner, or a director, officer, employee, or agent
of one or more of the Partners acting on behalf of the Partnership, or (b) that
such Person is or was serving at the request of the Partnership as a general
partner, limited partner, liquidating trustee, trustee, director, officer,
employee or agent of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan (collectively,
"Another Enterprise" or "Other Enterprise"), whether either in case (a) or in
case (b) the basis of such Proceeding is alleged action or inaction (x) in an
official capacity as a general partner, limited partner, liquidating trustee,
officer, employee or agent of the Partnership, or as an agent, employee, officer
or director of one or more of the Partners acting on behalf of the Partnership
or as a director, general partner, limited partner, liquidating trustee,
trustee, director, officer, employee or agent of such Other Enterprise, or (y)
in any other capacity related to the Partnership or such Other Enterprise while
so serving as a director, general partner, limited partner, liquidating trustee,
trustee, director, officer, employee or agent, is and shall be indemnified and
held harmless by the Partnership to the fullest extent not prohibited by
applicable law against all expense, liability and loss (including, without
limitation, attorneys' fees, judgments, fines, excise taxes or penalties and
amounts paid in settlement) reasonably incurred or suffered by such Person in
connection therewith, unless such Person, in connection with a matter for which
indemnification is sought, is found by a court of competent jurisdiction to have
acted in a grossly negligent manner, to have committed willful malfeasance or
fraud, or to have breached (taking into account the provisions of Section 2.15
hereof) such Person's duty to the Partnership or the Partners. The Persons
indemnified by this Article 6 are hereinafter referred to as "Indemnitees." Such
indemnification as to such alleged action or inaction shall continue as to an
Indemnitee who has after such alleged action or inaction ceased to be a General
Partner, Limited Partner, Liquidating Trustee, officer, employee or agent of the
Partnership, or agent, manager, employee, officer or director of one or more of
the Partners acting on behalf of the Partnership, or director, officer, general
partner, limited partner, liquidating trustee, trustee, employee or agent of
Another Enterprise; and shall inure to the benefit of the Indemnitee's heirs,
executors and administrators. The right to indemnification conferred in this
Article 6: (i) is a contract right; (ii) shall not be affected adversely as to
any Indemnitee by any amendment of this Agreement with respect to any action or
inaction occurring prior to such amendment; and (iii) subject to any
requirements imposed by law, includes the right to be paid by the Partnership
the expenses incurred in investigating, defending or settling any such
Proceeding in advance of its final disposition, which expenses shall be paid
promptly upon request of the Indemnitee; provided, however, that a
Person shall have the right to require such advance payment by the
Partnership only upon receipt by the Partnership of an undertaking by or on
behalf of such Person to repay such amount to the Partnership if it is
ultimately determined by a court of competent jurisdiction that the Person is
not entitled to be indemnified by the Partnership under this Agreement.
6.2 Nonexclusivity. The rights to indemnification and to the advancement of
expenses conferred in this Article 6 are not exclusive of any other right that
any Person may have or hereafter acquire under any statute, agreement, vote of
Partners or otherwise.
6.3 Enforcement. If a claim for indemnification hereunder is not paid in
full by the Partnership within 60 days after it has been received in writing by
the Partnership, except in the case of a claim for an advancement of expenses,
in which case the applicable period is 20 days, the Indemnitee may at any time
thereafter bring suit against the Partnership to recover the unpaid amount of
the claim. If successful as a whole or in part in any such suit, or in a suit
brought by the Partnership to recover an advancement of expenses pursuant to the
terms of an undertaking, the Indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. Neither the failure of the
Partnership (including the General Partner, independent legal counsel or its
Partners) to have made a determination prior to the commencement of such suit
that indemnification of the Indemnitee is proper under the circumstances because
the Indemnitee has met the applicable standard of conduct, nor an actual
determination by the Partnership (including the General Partner, independent
legal counsel or its Partners) that the Indemnitee has not met such applicable
standard of conduct, creates or shall create a presumption that the Indemnitee
has not met the applicable standard of conduct or, in the case of such a suit
brought by the Indemnitee, be a defense to such suit.
6.4 Insurance. The Partnership shall maintain insurance, at its expense, to
protect itself and any Indemnitee against any expense, liability or loss,
whether or not the Partnership would have the power to indemnify such Indemnitee
against such expense, liability or loss; provided, that, the Partnership shall
not be required to maintain such insurance if it cannot be obtained on
commercially reasonable terms, as determined by the General Partner.
ARTICLE 7
TRANSFERABILITY OF UNITS
7.1 Transfer of Units.
(a) No Limited Partner shall Transfer, or cause or permit to be
Transferred, all or any portion of its respective Units, except for Transfers in
compliance with this Article 7, and, to the fullest extent permitted by law, any
purported Transfer in violation hereof shall be null and void. Upon any Transfer
of any Units in accordance with this Agreement, the General Partner shall
appropriately adjust (i) the number of Units owned by each Partner and the
Percentage Interest of each Partner as set forth on Schedule 2.5 and (ii) each
Partner's Capital Account.
(b) A Limited Partner may Transfer, or cause or permit to be Transferred,
all or any portion of its Units to any Person as long as (i) prior to any such
Transfer, such Person shall agree in writing that such Person shall be bound by
and subject to all of the terms and conditions of this Agreement and (ii) if a
Limited Partner makes any such Transfer to a wholly-owned Affiliate, such
Limited Partner shall remain liable to the Partnership and the Partners to the
same extent it was prior to such Transfer, unless otherwise required by law or
regulation.
(c) Notwithstanding anything in this Agreement to the contrary, SBC Partner
may Transfer some or all of its Units to Public Corp. in exchange for Class A
Common Stock in accordance with Article 8. Public Corp. shall receive such
transferred Units in its capacity as General Partner.
7.2 Transfer of General Partner Interests.
The General Partner shall not Transfer, or cause or permit to be
Transferred, all or any of its Units without the written consent of the Limited
Partners.
ARTICLE 8
UNITS; CERTIFICATES
8.1 Certificates. Units shall be represented by a certificate or
certificates, setting forth upon the face thereof that the Partnership is a
limited partnership formed under the laws of the State of Delaware, the name of
the Person to which it is issued and the number of Units which such certificate
represents. Such certificates shall be entered in the books of the Partnership
as they are issued, and shall be signed by the Chairman or the Chief Executive
Officer of the Partnership. Upon any Transfer permitted under this Agreement,
the transferring Partner shall (i) issue to the transferee a certificate
representing the number of Units so transferred and (ii) surrender to the
Partnership and the Partnership shall issue to the transferring Partner
certificates representing the remaining Units, if any, held by such transferring
Partner after taking into account such Transfer. All certificates representing
Units (unless registered under the Securities Act of 1933, as amended (the
"Securities Act")), shall bear the following legend:
THE PARTNERSHIP INTERESTS REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE,
AND MAY NOT BE SOLD, ASSIGNED, PLEDGED, ENCUMBERED, TRANSFERRED, GRANTED
AN OPTION WITH RESPECT TO OR OTHERWISE DISPOSED OF, (I) UNLESS AND UNTIL
THEY HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OR SUCH SALE,
ASSIGNMENT, PLEDGE, ENCUMBRANCE, TRANSFER, OPTION GRANT OR OTHER
DISPOSITION IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND (II)
UNLESS IN ACCORDANCE WITH THE PROVISIONS OF THE AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT OF THE PARTNERSHIP (AS AMENDED AND RESTATED
FROM TIME TO TIME), A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE
OFFICES OF THE PARTNERSHIP.
8.2 Lost or Destroyed Certificates. The Partnership may issue a new
certificate for Units in place of any certificate or certificates theretofore
issued by it, alleged to have been lost or destroyed, upon the making of an
affidavit of that fact, and providing an indemnity in form and substance
reasonably satisfactory to the General Partner by the Person claiming the
certificate to be lost or destroyed.
8.3 Transfer of Units. No Transfer of Units shall be valid as against the
Partnership except upon surrender to and cancellation of the certificate
therefor, accompanied by an assignment or transfer by the Partner, subject to
any restrictions on Transfer contained in this Agreement.
8.4 Exchange of Units. (a) Each holder (other than Public Corp. or any of
its Subsidiaries) of a Unit shall be entitled to exchange, at any time and from
time to time, any or all of such holder's Units, for a number of fully paid and
non-assessable shares of Class A Common Stock equal to the difference between
(i) the number of shares of Class A Common Stock outstanding divided by (A) one
minus (B) a fraction, the numerator of which shall be the Book Capital Account
(as defined in Section 2.8(a)(i) and computed as if, immediately prior to the
exchange, there was a Revaluation pursuant to Section 2.8(e)) of such holder
attributable to the Units exchanged at the time of the proposed exchange, and
the denominator of which shall be the Book Capital Accounts (as defined in
Section 2.8(a)(i) and computed as if, immediately prior to the exchange, there
was a Revaluation pursuant to Section 2.8(e)) of Prodigy immediately after the
exchange of Units (giving effect to Section 2.8(a)(vii) and (ii) the number of
shares of Class A Common Stock outstanding; provided, however, that from and
after such time that the Book Capital Account of such holder equals the Imputed
Capital Account of such holder, each holder (other than Public Corp. or any of
its Subsidiaries) of a Unit shall be entitled to exchange, at any time and from
time to time, any or all of such holder's Units, on a one-for-one basis, into
the same number of fully paid and non-assessable shares of Class A Common Stock.
Such right shall be exercised by the surrender to Public Corp. of the
certificate or certificates representing the Units to be exchanged at any time
during normal business hours at the principal executive offices of Public Corp.
or at the office of the Transfer Agent (as defined in the Restated Certificate
of Incorporation), accompanied by a written notice of the holder of such Units
stating that such holder desires to exchange such Units, or a stated number of
Units represented by such certificate or certificates, into the relevant number
of shares of Class A Common Stock, and, if any such Class A Common Stock
certificate is to be issued in a name other than that of the holder of the Unit
or Units exchanged, by instruments of transfer to Public Corp., in form
satisfactory to Public Corp. and to the Transfer Agent, duly executed by such
holder or such holder's duly authorized attorney, and transfer tax stamps or
funds therefor, if required pursuant to Section 8.4(e).
(b) As promptly as practicable following the surrender for exchange of a
certificate representing Units in the manner provided in Section 8.4(a), and the
payment in cash of any amount required by Section 8.4(e), Public Corp. will
deliver or cause to be delivered at the office of the Transfer Agent, a
certificate or certificates representing the number of full shares of Class A
Common Stock issuable upon such exchange, issued in such name or names as such
holder may direct. Such exchange shall be deemed to have been effected
immediately prior to the close of business on the date of the surrender of the
certificate or certificates representing Units. Upon the date any such exchange
is made or effected, all rights of the holder of such Units as such holder shall
cease, and the person or persons in whose name or names the certificate or
certificates representing the shares of Class A Common Stock are to be issued
shall be treated for all purposes as having become the record holder or holders
of such shares of Class A Common Stock; provided, however, that if any such
surrender and payment occurs on any date when the stock transfer books of Public
Corp. shall be closed, the person or persons in whose name or names the
certificate or certificates representing shares of Class A Common Stock are to
be issued shall be deemed the record holder or holders thereof for all purposes
immediately prior to the close of business on the next succeeding day on which
the stock transfer books are open.
(c) In the event of a reclassification or other similar transaction
approved in accordance with Article FIFTH, Clauses (f)(ii) and (g)(i) of the
Restated Certificate of Incorporation as a result of which the shares of Class A
Common Stock are converted into another security, then a holder of Units shall
be entitled to receive upon exchange the amount of such security that such
holder would have received if such exchange had occurred immediately prior to
the record date of such reclassification or other similar transaction. No
adjustments in respect of dividends shall be made upon the exchange of any Unit;
provided, however, that if a Unit shall be exchanged subsequent to the record
date for the payment of a dividend or other distribution on Units but prior to
such payment, then the registered holder of such Unit at the close of business
on such record date shall be entitled to receive the dividend or other
distribution payable on such Unit on such date notwithstanding the exchange
thereof or the default in payment of the dividend or distribution due on such
date.
(d) Public Corp. covenants that it will at all times reserve and keep
available out of its authorized but unissued shares of Class A Common Stock,
solely for the purpose of issuance upon exchange of the outstanding Units, such
number of shares of Class A Common Stock that shall be issuable upon the
exchange of all such outstanding Units. Public Corp. covenants that if any
shares of Class A Common Stock require registration with or approval of any
governmental authority under any federal or state law before such shares of
Class A Common Stock may be issued upon exchange, Public Corp. will cause such
shares to be so registered or approved, as the case may be. Public Corp. will
use its best efforts to list the shares of Class A Common Stock required to be
delivered upon exchange prior to such delivery upon the Nasdaq National Market
and/or each national securities exchange upon which the outstanding Class A
Common stock is listed at the time of such delivery. Public Corp. covenants that
all shares of Class A Common Stock that shall be issued upon exchange of the
Units will, upon issue, be validly issued, fully paid and non-assessable.
(e) The issuance of certificates for shares of Class A Common Stock upon
exchange of Units shall be made without charge to the holders of such Units for
any stamp or other similar tax in respect of such issuance; provided, however,
that if any such certificate is to be issued in a name other than that of the
holder of the Units exchanged, then the person or persons requesting the
issuance thereof shall pay to Public Corp. the amount of any tax that may be
payable in respect of any transfer involved in such issuance or shall establish
to the satisfaction of Public Corp. that such tax has been paid or is not
payable.
8.5 Combinations and Subdivisions. The Partnership will not in any manner
subdivide (by any split, distribution, reclassification, recapitalization or
otherwise) or combine (by reverse split, reclassification, recapitalization or
otherwise) the outstanding Units unless an identical event is occurring with
respect to the Class A Common Stock, in which event the Units shall be combined
or subdivided concurrently with and in the same manner as the Class A Common
Stock.
8.6 Incentive Plans; Registered and Private Offerings.
(a) At any time Public Corp. issues a share of Class A Common Stock
pursuant to an Employee Benefit Plan (whether pursuant to the exercise of a
stock option or the grant of a restricted share award or otherwise), the
following shall occur: (i) Public Corp. shall be deemed to contribute to the
capital of the Partnership an amount of cash equal to the current per share
market price of a share of Class A Common Stock on the date such share is issued
(or, if earlier, the date the related option is exercised); (ii) the Partnership
shall be deemed to purchase from Public Corp. a share of Class A Common Stock
for an amount of cash equal to the amount of cash deemed contributed by Public
Corp. to the Partnership in clause (i) above (and such share is deemed delivered
to its owner under the Employee Benefit Plan); (iii) the net proceeds (including
the amount of any payments made on a loan with respect to a stock purchase
award) received by Public Corp. with respect to such share, if any, shall be
concurrently transferred to the Partnership (and such net proceeds so
transferred shall not constitute a capital contribution); and (iv) the
Partnership shall issue to Public Corp., in its capacity as General Partner, one
(1) Unit registered in the name of Public Corp. The Partnership shall retain any
net proceeds that are paid directly to the Partnership.
(b) At any time Public Corp. issues a share of Class A Common Stock
pursuant to a primary public offering registered under the Securities Act or in
a private placement (including in connection with any acquisition, business
combination, merger or similar transaction), the net proceeds, assets or
securities received by Public Corp. with respect to such share, if any, shall be
concurrently transferred to the Partnership and the Partnership shall issue to
Public Corp., in its capacity as General Partner, one (1) Unit registered in the
name of Public Corp.
ARTICLE 9
MISCELLANEOUS
9.1 Amendment of this Agreement. Other than the right of the General
Partner to adjust the number of Units and Percentage Interests set forth in
Schedule 2.5 hereto in accordance with this Agreement, this Agreement may be
amended only upon the unanimous approval thereof by the Partners.
9.2 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAWS PRINCIPLES THEREOF.
9.3 Counterparts. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and may be executed by facsimile signature. All counterparts shall collectively
constitute one and the same Agreement.
9.4 Headings; Recitals. The descriptive headings of this Agreement and its
Schedules and Exhibits and the recitals herein are inserted for convenience and
identification only and are in no way intended to describe, interpret, define or
limit the scope, extent or intent of this Agreement or any provisions hereof.
9.5 Integration. This Agreement, including the Schedules and Exhibits
hereto and all other documents referenced herein or contemplated hereby,
constitutes the entire agreement and understanding of the parties hereto with
respect to the matters herein set forth, and all prior negotiations and
understandings relating to the subject matter of this Agreement are merged
herein and are superceded and canceled by this Agreement.
9.6 Severability. In the event that any provision of this Agreement is
held to be illegal, invalid or unenforceable in a final, unappealable Order or
judgment (each such provision, an "invalid provision"), then such provision
shall be severed from this Agreement and shall be inoperative, and the parties
promptly shall negotiate in good faith a lawful, valid and enforceable provision
that is as similar to the invalid provision as may be possible and that
preserves the original intentions and economic positions of the parties as set
forth herein to the maximum extent feasible, while the remaining provisions of
this Agreement shall remain binding on the parties hereto. Without limiting the
generality of the foregoing sentence, in the event a change in any applicable
law, rule or regulation makes it unlawful for a party to comply with any of its
obligations hereunder, the parties shall negotiate in good faith a modification
to such obligation to the extent necessary to comply with such law, rule or
regulation that is as similar in terms to the original obligation as may be
possible while preserving the original intentions and economic positions of the
parties as set forth herein to the maximum extent feasible.
9.7 Notices. In any case where any notice or other communication is
required or permitted to be given hereunder, such notice or communication shall
be in writing and deemed to have been duly given and delivered: (a) if delivered
in person, on the date of such delivery; (b) if sent by overnight express or
registered or certified mail (with return receipt requested), on the date of
receipt of such mail; or (c) if sent by confirmed facsimile transmission (with
answer back received), on the date of such facsimile transmission provided that
notice is also sent on the same day by one of the methods set forth in (a) or
(b) above. Such notice or other communication shall be sent to the following
address(es) (or such other address(es) as the relevant party may designate from
time to time in writing):
If to SBC Partner:
James S. Kahan
Senior Vice President
Corporate Development
SBC Communications Inc.
175 East Houston Street
San Antonio, Texas 78705
Telecopy: (210) 351-5034
Telephone: (210) 351-5030
With copies, which shall not constitute notice, to:
Senior Counsel - M&A
SBC Communications Inc.
175 East Houston Street
San Antonio, Texas 78705
Telecopy: (210) 351-3488
Telephone: (210) 351-3445
Joseph B. Frumpkin, Esq.
Keith A. Pagnani, Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Telecopy: (212) 558-3588
Telephone: (212) 558-4000
If to Prodigy Communications Limited Partnership or Public Corp.:
Prodigy Communications Corporation
44 South Broadway
White Plains, New York 10601
Telecopy: (914) 448-8198
Telephone: (914) 448-8000
Attention: Andrea S. Hirsch
Executive Vice President
Business Development
and General Counsel
With a copy, which shall not constitute notice, to:
David A. Westenberg, Esq.
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Telecopy: (617) 526-5000
Telephone: (617) 526-6000
9.8 Further Assurances. In addition to any other obligations set forth in
this Agreement, each party agrees to take such action (including, but not
limited to, the execution, acknowledgment and delivery of documents) as may
reasonably be requested by the other party for the implementation or continuing
performance of this Agreement. Unless otherwise expressly set forth herein, any
agreement by a party to take or refrain from taking any action shall constitute
an agreement by such party to cause each of its subsidiaries, and to use all
reasonable best efforts to cause each of its Affiliates, to so act or refrain
from acting.
9.9 No Third Party Beneficiaries. This Agreement is entered into solely
among, and may be enforced only by, the parties hereto. This Agreement shall not
be deemed to create any rights in any third parties, including suppliers,
customers and employees of any party, or to create any obligations of a party to
any such third parties. Notwithstanding the foregoing, any Person entitled to
indemnification hereunder shall be deemed to be an express third party
beneficiary hereof with respect to all matters relating to such indemnification,
and may enforce the provisions of this Agreement relating thereto to the same
extent as if such Person were a party hereto.
9.10 Assignment. Neither this Agreement nor any rights or obligations
hereunder may be assigned by any party without the prior written consent of the
other parties hereto. Any attempted assignment that does not comply with this
Section 9.10 shall be void.
9.11 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the respective successors and permitted assigns of each
party hereto.
9.12 No Agency. Each of the parties hereto shall have no right, power or
authority to assume or create any obligation or responsibility on behalf of any
of the other parties.
9.13 Consent to Jurisdiction; Venue; WAIVER OF JURY TRIAL. The parties
hereby irrevocably submit to the jurisdiction of the courts of the State of
Delaware and the federal court of the United States of America located in the
State of Delaware solely in respect of the interpretation and enforcement of the
provisions of this Agreement and of the documents governed by Delaware law
referred to in this Agreement, and in respect of the transactions contemplated
hereby, and hereby waive, and agree not to assert, as a defense in any action,
suit or proceeding for the interpretation or enforcement hereof or of any such
document, that it is not subject thereto or that such action, suit or proceeding
may not be brought or is not maintainable in said courts or that the venue
thereof may not be appropriate or that this Agreement or any such document may
not be enforced in or by such courts, and the parties hereto irrevocably agree
that all claims with respect to such action or proceeding shall be heard and
determined in such a Delaware State or Federal court. The parties hereby consent
to and grant any such court jurisdiction over the person of such parties and
over the subject matter of such dispute and, to the fullest extent permitted by
law, agree that mailing of process or other papers in connection with any such
action or proceeding in the manner provided in Section 9.7 of this Agreement or
in such other manner as may be permitted by law shall be valid and sufficient
service thereof.
EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 9.13.
9.14 Equitable Remedies. Each party acknowledges that no adequate remedy of
law would be available for any breach of this Agreement, and any breach of any
Section or Article of this Agreement by one party would irreparably injure the
other party or parties and accordingly agrees that in the event of a breach of
any Section or Article of this Agreement, the respective rights and obligations
of the parties hereunder shall be enforceable by specific performance,
injunction or other equitable remedy (without bond or security being required),
and each party waives the defense in any action and/or proceeding brought to
enforce this Agreement that there exists an adequate remedy or that the other
party is not irreparably harmed.
9.15 Principles of Construction. In this Agreement and all other attached
Schedules, Exhibits or Attachments to this Agreement, unless otherwise expressly
indicated or required by the context:
reference to and the definition of any document shall be deemed a reference
to such document as it may be amended, supplemented, revised, or modified, in
writing, from time to time but disregarding any amendment, supplement,
replacement or novation made in breach of this Agreement;
references in this Agreement to any statute, decree or regulation shall be
construed as a reference to such statute, law, decree or regulation as
re-enacted, redesignated, amended or extended from time to time and references
herein or in this Agreement to any document or agreement shall be deemed to
include references to such document or agreement as amended, varied,
supplemented or replaced from time to time in accordance with such document's or
agreement's terms;
defined terms in the singular shall include the plural and vice versa, and
the masculine, feminine or neuter gender shall include all genders;
the words "including" or "includes" shall be deemed to mean "including
without limitation" and "including but not limited to" (or "includes without
limitation" and "includes but is not limited to") regardless of whether the
words "without limitation" or "but not limited to" actually follow the term;
accounting terms used herein but not defined herein shall have their
respective meanings provided under GAAP;
the words "hereof," "herein" and "hereunder" and words of similar import
when used in this Agreement or its Schedules or Exhibits shall refer to this
Agreement and its Schedules and Exhibits as a whole and not to any particular
provision hereof or thereof, as the case may be; and
any reference herein to a time of day means the time of day in New York,
New York.
9.16 No Waiver of Rights. No failure or delay on the part of a party in the
exercise of any power or right hereunder shall operate as a waiver thereof. No
single or partial exercise of any right or power hereunder shall operate as a
waiver of such right or of any other right or power. The waiver by any party of
a breach of any provision of this Agreement shall not operate or be construed as
a waiver of any other or subsequent breach hereunder. No waiver shall be
effective unless in writing signed by the waiving party.
9.17 Force Majeure. If any circumstance beyond the reasonable control of
any party occurs which delays or renders impossible the performance of that
party's obligations under this Agreement on the dates herein provided, such
obligation shall be postponed for such time as such performance necessarily has
had to be suspended or delayed on account thereof, provided such party shall
notify the other parties in writing as soon as practicable, but in no event more
than ten days, after the occurrence of such force majeure. In such event, the
parties shall meet promptly to determine an equitable solution to the effects of
any such event, provided that such party who fails because of force majeure to
perform its obligations hereunder shall use commercially reasonable efforts to
implement work-arounds or otherwise minimize the length of the delay and to
resume promptly performance upon the cessation of the force majeure. Events of
force majeure shall include war, revolution, invasion, insurrection, riots, mob
violence, sabotage or other civil disorders, power outages, and acts of God;
provided, however, that, in the event that a change in any applicable law, rule
or regulation makes it unlawful for a party to comply with any of its
obligations hereunder and could be considered an event of force majeure, the
characterization of such change in law, rule or regulation as an event of force
majeure shall be without prejudice to the obligations of the parties under
Section 9.6 above.
9.18 Negotiated Terms. Each party acknowledges that the provisions of
this Agreement were negotiated to reflect an informed, voluntary allocation
between the parties of all risks (both known and unknown) associated with the
transactions contemplated by this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first above written.
GENERAL PARTNER
PRODIGY COMMUNICATIONS CORPORATION
By: ____________________________
Name:
Title:
INITIAL LIMITED PARTNER
PRODIGY TRANSITION CORPORATION
By: ____________________________
Name:
Title:
LIMITED PARTNER
SBC INTERNET COMMUNICATIONS, INC.
By: ____________________________
Name:
Title:
<PAGE>
Schedule 2.5
------------
Percentage Interests
-------------------
<PAGE>
Schedule 2.8
------------
<PAGE>
Schedule 2.8(a)(i)
------------------
Book Capital Account Schedule
-----------------------------
Book Capital Account
--------------------
Public Corp. [$_______]
SBC Partner [$_______]
<PAGE>
Schedule 2.8(a)(ii)
-------------------
Imputed Capital Account Schedule
--------------------------------
Imputed Capital Account
-----------------------
Public Corp. [$______]
SBC Partner [$______]
<PAGE>
Exhibit A
----------
(Exhibit D)
FORM OF
RESTATED CERTIFICATE OF INCORPORATION
OF
PRODIGY COMMUNICATIONS CORPORATION
(originally incorporated under the name Prodigy, Inc. on June 13, 1996)
Prodigy Communications Corporation (hereinafter called the "Corporation"),
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, does hereby certify as follows:
FIRST. The name of the Corporation is: Prodigy Communications
Corporation.
SECOND. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or promoted
by the Corporation is as follows:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
FOURTH. (a) Authorized Capital Stock. The total number of shares of stock
that the Corporation shall have the authority to issue is 290,000,001 shares,
consisting of: (i) 280,000,000 shares of Class A Common Stock, par value $.01
per share (the "Class A Common Stock"); (ii) 1 share of Class B Common Stock,
par value $.01 per share (the "Class B Common Stock"); and (iii) 10,000,000
shares of Series Preferred Stock, par value $.01 per share (the "Preferred
Stock"), issuable in one or more series as hereinafter provided. The Class A
Common Stock and the Class B Common Stock shall hereinafter collectively be
called the "Common Stock." The number of authorized shares of any class or
classes of capital stock of the Corporation may be increased or decreased (but
not below the number of shares thereof then outstanding) by each of the
following, voting separately as a class: (y) the affirmative vote of the holders
of a majority of the voting power of the stock of the Corporation entitled to
vote generally in the election of directors ("Voting Stock") irrespective of the
provisions of Section 242(b)(2) of the General Corporation Law of the State of
Delaware or any corresponding provision hereinafter enacted; and (z) if a Class
B Director (as defined below) is then entitled to be a member of the Executive
Steering Committee (as defined), by the affirmative vote of the holders of a
majority of the Class B Common Stock.
(b) Terms of Common Stock; Voting; Directors.
(i) Rights and Privileges; Voting Rights. (A) All shares of Common Stock
will be identical in all respects and will entitle the holders thereof to the
same rights and privileges, except as otherwise provided in this Restated
Certificate of Incorporation.
(B) The holders of shares of Common Stock shall have the following voting
rights:
(1) Each holder of Class A Common Stock shall be entitled to one vote for
each share of Class A Common Stock held by such holder on all matters submitted
to a vote of the holders of Common Stock.
(2) Each holder of Class B Common Stock shall be entitled to one vote for
each share of Class B Common Stock held by such holder and one vote for each
Unit (as defined below) held by such holder on all matters submitted to a vote
of the holders of Common Stock. "Units" shall mean units in Prodigy
Communications Limited Partnership, the Delaware limited partnership in which
the Corporation is the sole General Partner, or any successor entity thereto
(the "Operating Partnership"), issued under its Amended and Restated Limited
Partnership Agreement, as amended from time to time (the "L.P. Agreement"). A
copy of the L.P. Agreement shall be made available to any stockholder of the
Corporation upon request.
(3) Except as may be provided pursuant to resolutions of the Board, adopted
pursuant to the provisions of this Restated Certificate of Incorporation and the
Amended and Restated By-Laws of the Corporation (the "Amended and Restated
By-Laws"), establishing any series of Preferred Stock and granting to the
holders of such shares of Preferred Stock rights to elect additional directors
under specified circumstances, and subject to Article FIFTH, Clause (c) below,
the Board of Directors shall consist of nine (9) directors. Subject to Article
FIFTH, Clause (c) below: the holders of the Class B Common Stock, voting
separately as a class, shall be entitled to elect three (3) of the nine (9)
directors of the Board (each a "Class B Director"); and the remaining six (6)
directors (each a "Class A Director"), shall be elected by the vote of the
holders of the Common Stock (or if any holders of shares of Preferred Stock are
entitled to vote together with the holders of Common Stock, as a single class
with such holders of shares of Preferred Stock), voting as a class.
(4) Except as otherwise required in this Restated Certificate of
Incorporation or the Amended and Restated By-Laws or by applicable law, the
holders of shares of Common Stock shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation (or if any
holders of shares of Preferred Stock are entitled to vote together with the
holders of Common Stock, as a single class with such holders of shares of
Preferred Stock).
(5) There shall be no cumulative voting.
(C) Notwithstanding anything in this Restated Certificate of Incorporation
to the contrary, no vote of the holders of Class A Common Stock, and only the
vote of seventy-five percent (75%) of the holders of the Class B Common Stock
voting separately as a class, shall be required to approve or take any action
necessary to authorize a merger of the Operating Partnership (and optionally any
one or more of its subsidiaries) into the Corporation, and to amend this
Restated Certificate of Incorporation accordingly, provided that the Corporation
is the surviving entity in the merger and the economic and voting interests of
the holders of Class A Common Stock in the merged entities (taken as a whole)
immediately after such merger are the same as the economic and voting interests
of the holders of Class A Common Stock in the merged entities (taken as a whole)
immediately before such merger.
(ii) Dividends and Distributions.
(A) Subject to the preferences applicable to Preferred Stock, if any,
outstanding at any time, the holders of shares of Common Stock shall be entitled
to receive such dividends and other distributions in cash, property or shares of
stock of the Corporation as may be declared thereon by the Corporation's Board
of Directors (the "Board") from time to time out of assets or funds of the
Corporation legally available thereof; provided, that, subject to the provisions
of this Article FOURTH, Clause (b)(ii), the Corporation shall not pay dividends
or make distributions to any holders of any class of Common Stock unless
simultaneously with such dividend or distribution, as the case may be, the
Corporation makes the same dividend or distribution with respect to each
outstanding share of Common Stock regardless of class.
(B) In the case of dividends or other distributions payable in Class A
Common Stock or Class B Common Stock including distributions pursuant to stock
splits or divisions of Class A Common Stock or Class B Common Stock which occur
after the first date upon which the Corporation has issued shares of any of
Class A Common Stock or Class B Common Stock, only shares of Class A Common
Stock shall be distributed with respect to Class A Common Stock and only shares
of Class B Common Stock shall be distributed with respect to Class B Common
Stock. In the case of any such dividend or distribution payable in shares of
Class A Common Stock or Class B Common Stock, the number of shares of each class
of Common Stock payable per share of such class of Common Stock shall be equal
in number.
(C) In the case of dividends or other distributions consisting of other
voting securities of the Corporation or of voting securities of any corporation
which is a wholly owned subsidiary of the Corporation, the Corporation shall
declare and pay such dividends in two separate classes of such voting
securities, identical in all respects, except that: (1) the voting rights of
each such security paid to the holders of Class B Common Stock, when compared to
the voting rights of each such security paid to the holders of Class A Common
Stock, shall have voting rights determined pursuant to the same formula as
provided in Clause (b)(i)(B)(2) of Article FOURTH above; (2) such security paid
to the holders of Class B Common Stock shall convert into the security paid to
the holders of Class A Common Stock upon the same terms and conditions
applicable to the conversion of Class B Common Stock into Class A Common Stock
and shall have the same restrictions on transfer and ownership applicable to the
transfer and ownership of Class B Common Stock; and (3) with respect only to
dividends or other distributions of voting securities of any corporation which
is a wholly owned subsidiary of the Corporation, the respective voting rights of
each such security paid to holders of Class A Common Stock and Class B Common
Stock with respect to the election of directors shall otherwise be as comparable
as is practicable, as determined by the Board, to those of the Class A Common
Stock and Class B Common Stock, respectively.
(D) In the case of dividends or other distributions consisting of
securities convertible into, or exchangeable for, voting securities of the
Corporation or voting securities of another corporation which is a wholly owned
subsidiary of the Corporation, the Corporation shall provide that such
convertible or exchangeable securities and the underlying securities be
identical in all respects (including, without limitation, the conversion or
exchange rate), except that: (1) the voting rights of each security underlying
the convertible or exchangeable security paid to the holders of Class B Common
Stock, when compared to the voting rights of each security underlying the
convertible or exchangeable security paid to the holders of the Class A Common
Stock, shall have voting rights determined pursuant to the same formula as
provided in Clause (b)(i)(B)(2) of Article FOURTH above; and (2) such underlying
securities paid to the holders of the Class B Common Stock shall convert into
the underlying securities paid to the holders of Class A Common Stock upon the
same terms and conditions applicable to the conversion of Class B Common Stock
into Class A Common Stock and shall have the same restrictions on transfer and
ownership applicable to the transfer and ownership of the Class B Common Stock.
(iii) Conversion of Class B Common Stock.
(A) Each holder of Class B Common Stock shall be entitled to convert, at
any time and from time to time, any or all of the shares of such holder's Class
B Common Stock, on a one-for-one basis, into the same number of fully paid and
non-assessable shares of Class A Common Stock. Such right shall be exercised by
the surrender to the Corporation of the certificate or certificates representing
the shares of Class B Common Stock to be converted at any time during normal
business hours at the principal executive offices of the Corporation or at the
office of the Corporation's transfer agent (the "Transfer Agent"), accompanied
by a written notice of the holder of such shares stating that such holder
desires to convert such shares, or a stated number of the shares represented by
such certificate or certificates, into an equal number of shares of Class A
Common Stock, and, if any such Class A Common Stock certificate is to be issued
in a name other than that of the holder of the share or shares of Class B Common
Stock converted, by instruments of transfer, in form satisfactory to the
Corporation and to the Transfer Agent, duly executed by such holder or such
holder's duly authorized attorney, and transfer tax stamps or funds therefor, if
required pursuant to Article FOURTH, Clause (b)(iii)(F) below.
(B) Each share of Class B Common Stock transferred by one or more Parent
Entities (as defined below) to one or more persons or entities other than Parent
Entities, and each share of Class B Common Stock held by one or more entities
other than Parent Entities, shall automatically convert into one (1) fully paid
and non-assessable share of Class A Common Stock upon such transfer; provided
that no such conversion shall occur solely as a result of the pledge or
hypothecation of any Class B Common Stock by a Parent Entity. "Parent Entities"
shall mean, collectively, SBC Communications Inc. (and any successors thereto),
and any of its Affiliates. "Affiliate" shall have the meaning ascribed thereto
in the L.P. Agreement.
(C) As promptly as practicable following the surrender for conversion of a
certificate representing shares of Class B Common Stock in the manner provided
in Article FOURTH, Clauses (b)(iii)(A) or (B) above, and the payment in cash of
any amount required by the provisions of Article FOURTH, Clause (b)(iii)(F)
below, the Corporation will deliver or cause to be delivered at the office of
the Transfer Agent, a certificate or certificates representing the number of
full shares of Class A Common Stock issuable upon such conversion, issued in
such name or names as such holder may direct. Such conversion shall be deemed to
have been effected immediately prior to the close of business on the date of the
surrender of the certificate or certificates representing shares of Class B
Common Stock. Upon the date any such conversion is made or effected, all rights
of the holder of such shares of Class B Common Stock as such holder shall cease,
and the person or persons in whose name or names the certificate or certificates
representing the shares of Class A Common Stock are to be issued shall be
treated for all purposes as having become the record holder or holders of such
shares of Class A Common Stock; provided, however, that if any such surrender
and payment occurs on any date when the stock transfer books of the Corporation
shall be closed, the person or persons in whose name or names the certificate or
certificates representing shares of Class A Common Stock are to be issued shall
be deemed the record holder or holders thereof for all purposes immediately
prior to the close of business on the next succeeding day on which the stock
transfer books are open.
(D) In the event of a reclassification or other similar transaction
approved in accordance with Article FIFTH, Clauses (f)(ii) and (g)(i) as a
result of which the shares of Class A Common Stock are converted into another
security, then a holder of Class B Common Stock shall be entitled to receive
upon conversion the amount of such security that such holder would have received
if such conversion had occurred immediately prior to the record date of such
reclassification or other similar transaction. No adjustments in respect of
dividends shall be made upon the conversion of any share of Class B Common
Stock; provided, however, that if a share of Class B Common Stock shall be
converted subsequent to the record date for the payment of a dividend or other
distribution on shares of Class B Common Stock but prior to such payment, then
the registered holder of such share at the close of business on such record date
shall be entitled to receive the dividend or other distribution payable on such
share on such date notwithstanding the conversion thereof or the default in
payment of the dividend or distribution due on such date.
(E) The Corporation covenants that it will at all times reserve and keep
available out of its authorized but unissued shares of Class A Common Stock,
solely for the purpose of issuance upon conversion of the outstanding shares of
Class B Common Stock, such number of shares of Class A Common Stock that shall
be issuable upon the conversion of all such outstanding shares of Class B Common
Stock. The Corporation covenants that if any shares of Class A Common Stock
require registration with or approval of any governmental authority under any
federal or state law before such shares of Class A Common Stock may be issued
upon conversion, the Corporation will cause such shares to be registered or
approved, as the case may be. The Corporation will use its best efforts to list
the shares of Class A Common Stock required to be delivered upon conversion
prior to such delivery upon the Nasdaq National Market and/or each national
securities exchange upon which the outstanding Class A Common stock is listed at
the time of such delivery. The Corporation covenants that all shares of Class A
Common Stock that shall be issued upon conversion of the shares of Class B
Common Stock will, upon issue, be validly issued, fully paid and non-assessable.
(F) The issuance of certificates for shares of Class A Common Stock upon
conversion of shares of Class B Common Stock shall be made without charge to the
holders of such shares for any stamp or other similar tax in respect of such
issuance; provided, however, that if any such certificate is to be issued in a
name other than that of the holder of the share or shares of Class B Common
Stock converted, then the person or persons requesting the issuance thereof
shall pay to the Corporation the amount of any tax that may be payable in
respect of any transfer involved in such issuance or shall establish to the
satisfaction of the Corporation that such tax has been paid or is not payable.
(G) Shares of Class B Common Stock that are converted into shares of Class
A Common Stock as provided herein shall continue to be authorized shares of
Class B Common Stock and available for reissue by the Corporation; provided,
however, that no shares of Class B Common Stock shall be reissued except as
expressly permitted by Article FOURTH, Clause (b)(ii) above and Article FOURTH,
Clause (b)(iv) below.
(iv) Stock Splits. The Corporation shall not in any manner subdivide (by
any stock split, stock dividend, reclassification, recapitalization or
otherwise) or combine (by reverse stock split, reclassification,
recapitalization or otherwise) the outstanding shares of one class of Common
Stock unless the outstanding shares of all classes of Common Stock shall be
proportionately subdivided or combined.
(v) Options, Rights or Warrants.
(A) The Corporation shall not make any offering of options, rights or
warrants to subscribe for shares of Class B Common Stock. If the Corporation
makes an offering of options, rights or warrants to subscribe for shares of any
class or classes of capital stock, other than Class B Common Stock, to all
holders of a class of Common Stock, then the Corporation shall simultaneously
make an identical offering to all holders of the other classes of Common Stock
other than to any class of Common Stock the holders of which, voting as a
separate class, determine that such offering need not be made to such class. All
such options, rights or warrants offerings shall offer the respective holders of
Class A Common Stock and Class B Common Stock the right to subscribe at the same
rate per share.
(B) Subject to Article FOURTH, clause (b)(v)(A) above, the Corporation
shall have the power to create and issue, whether or not in connection with the
issue and sale of any shares of stock or other securities of the Corporation,
rights or options entitling the holders thereof to purchase from the Corporation
any shares of its capital stock of any class or classes at the time authorized
(other than Class B Common Stock), such rights or options to have such terms and
conditions, and to be evidenced by or in such instrument or instruments, as
shall be approved by the Board.
(vi) Mergers, Consolidation, Etc. In the event that the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then, and in such event, the shares
of each class of Common Stock shall be exchanged for or changed into either (A)
the same amount of stock, securities, cash and/or any other property, as the
case may be, into which or for which each share of any other class of Common
Stock is exchanged or changed; provided, however, that if shares of Common Stock
are exchanged for or changed into shares of capital stock, such shares so
exchanged for or changed into may differ to the extent and only to the extent
that the Class A Common Stock and the Class B Common Stock differ as provided
herein, or (B) if holders of each class of Common Stock are to receive different
distributions of stock, securities, cash and/or any other property (other than
as contemplated by clause (b)(vi)(A) of this Article FOURTH), an amount of
stock, securities, cash and/or property per share having a value, as determined
by an independent investment banking firm of national reputation selected by the
Board, equal to the value per share into which or for which each share of any
other class of Common Stock is exchanged or changed.
(vii) Liquidation Rights. In the event of any dissolution, liquidation or
winding-up of the affairs of the Corporation, whether voluntary or involuntary,
after payment or provision for payment of the debts and other liabilities of the
Corporation and after making provision for the holders of each series of
Preferred Stock, if any, the remaining assets and funds of the Corporation, if
any, shall be divided among and paid ratably to the holders of the shares of the
Class A Common Stock and the Class B Common Stock treated as a single class.
(viii) No Preemptive Rights. Except as provided in Article FOURTH, Clause
(b)(v) above, the holders of shares of Common Stock are not entitled to any
preemptive right to subscribe for, purchase or receive any part of any new or
additional issue of stock of any class, whether now or hereafter authorized, or
of bonds, debentures or other securities convertible into or exchangeable for
stock.
(ix) Reclassification. Immediately upon the effectiveness of this Restated
Certificate of Incorporation, each share of issued and outstanding common stock
of the Corporation immediately prior to such effectiveness shall be changed into
and reclassified as one (1) share of Class A Common Stock. Promptly after such
effectiveness, all certificates that, immediately prior to such effectiveness,
represented common stock of the Corporation shall automatically represent Class
A Common Stock.
(c) Preferred Stock.
(i) Subject to the voting and approval procedures set forth in this
Restated Certificate of Incorporation, Preferred Stock may be issued from time
to time in one of more series, each of such series to have such terms as stated
or expressed herein and in the resolution or resolutions providing for the issue
of such series adopted by the Board as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law. Different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purposes of voting by classes unless expressly provided.
(ii) Subject to the voting and approval procedures set forth in this
Restated Certificate of Incorporation, authority is hereby expressly granted to
the Board from time to time to issue the Preferred Stock in one or more series,
and in connection with the creation of any such series, by resolution or
resolutions providing for the issue of the shares thereof, to determine and fix
such voting powers, full or limited, or no voting powers, and such designations,
preferences and relative participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, including without
limitation thereof, dividend rights, special voting rights, conversion rights,
redemption privileges and liquidation preferences, as shall be stated and
expressed in such resolutions, all to the full extent now or hereafter permitted
by the General Corporation Law of the State of Delaware.
FIFTH. (a) Unless and except to the extent that the Amended and Restated
By-Laws of the Corporation shall so require, the election of directors of the
Corporation need not be by written ballot.
(b) Subject to the approval procedures in Article FIFTH, Clauses (f)(ii)
and (g)(i), the Board may from time to time make, amend, supplement or repeal
the Amended and Restated By-Laws by a vote of a majority of the Board; provided,
however, that the stockholders may change or amend or repeal any provision of
the Amended and Restated By-Laws by each of: (i) the affirmative vote of the
holders of a majority of the Voting Stock voting as one class; and (ii) if a
Class B Director is then entitled to be a member of the Executive Steering
Committee, by the affirmative vote of the holders of a majority of the Class B
Common Stock, voting separately as a class.
(c) Reduction in Number of Directors.
(i) At any time that the holders of Class B Common Stock shall have
transferred (other than to Parent Entities) in the aggregate (i.e., together
with all other shares of Common Stock and/or Units previously transferred by
holders of Class B Common Stock other than to Parent Entities) a number of
shares of Common Stock and/or Units constituting an aggregate of more than
thirty-three percent (33%) of the initial number of Units issued to holders of
Class B Common Stock (subject to adjustment in accordance with Section 8.5 of
the L.P. Agreement) (the "First Class B Triggering Event"), then the number of
Class B Directors shall be reduced from three (3) to two (2) (and the resulting
size of the Board shall be reduced by one (1) and no vacancy shall be created)
and the term of one of the Class B Directors, selected by the holders of Class B
Common Stock within ten (10) days of the occurrence of the First Class B
Triggering Event, shall terminate; provided, however, that the exchange by the
holders of Class B Common Stock of Units into shares of Class A Common Stock
pursuant to Section 8.4 of the L.P. Agreement, shall not constitute a transfer
of such Units for purposes of this Article FIFTH, Clause (c)(i). In the absence
of such selection within said ten-day period, the Class A Directors shall select
the Class B Director whose term shall terminate. In calculating whether the
First Class B Triggering Event has occurred, each time a transfer of shares of
Common Stock and/or Units by the holders of Class B Common Stock occurs (other
than to a Parent Entity), a calculation shall be made with respect to the
percentage that such number of shares and/or Units transferred bears to the
number of Units initially issued to the holders of Class B Common Stock (subject
to adjustment in accordance Section 8.5 of the L.P. Agreement). This percentage
shall be added to the aggregate of such percentages calculated at the respective
times of all prior transfers by the holders of the Class B Common Stock (other
than to a Parent Entity).
(ii) At any time that the holders of Class B Common Stock shall have
transferred (other than to Parent Entities) in the aggregate (i.e., together
with all other shares of Common Stock and/or Units transferred by holders of
Class B Common Stock other than to Parent Entities) a number of shares of Common
Stock and/or Units constituting an aggregate of more than sixty-seven percent
(67%) of the initial number of Units issued to holders of Class B Common Stock
(subject to adjustment in accordance with Section 8.5 of the L.P. Agreement)
(the "Second Class B Triggering Event"), then the number of Class B Directors
shall be reduced to one (1) (and the resulting size of the Board shall be
reduced by the relevant number and no vacancy or vacancies shall be created) and
the term of the relevant number of Class B Directors, selected by the holders of
Class B Common Stock within ten (10) days of the occurrence of the Second Class
B Triggering Event, shall terminate; provided, however, that the exchange by the
holders of Class B Common Stock of Units into shares of Class A Common Stock
pursuant to Section 8.4 of the L.P. Agreement, shall not constitute a transfer
of such Units for purposes of this Article FIFTH, Clause (c)(ii). In the absence
of such selection within said ten-day period, the Class A Directors shall select
the Class B Director or Directors whose term shall terminate. In calculating
whether the Second Class B Triggering Event has occurred, each time a transfer
of shares of Common Stock and/or Units by the holders of Class B Common Stock
occurs (other than to a Parent Entity), a calculation shall be made with respect
to the percentage that such number of shares and/or Units transferred bears to
the number of Units initially issued to the holders of Class B Common Stock
(subject to adjustment in accordance with Section 8.5 of the L.P. Agreement).
This percentage shall be added to the aggregate of such percentages calculated
at the respective times of all prior transfers by the holders of the Class B
Common Stock (other than to a Parent Entity).
(iii) At any time that the holders of Class B Common Stock shall have
transferred (other than to Parent Entities) in the aggregate (i.e., together
with all other shares of Common Stock and/or Units transferred by holders of
Class B Common Stock other than to Parent Entities) a number of shares of Common
Stock and/or Units constituting an aggregate of one hundred percent (100%) of
the initial number of Units issued to holders of Class B Common Stock (subject
to adjustment in accordance with Section 8.5 of the L.P. Agreement) (the "Third
Class B Triggering Event"), then the number of Class B Directors shall be
reduced to zero (0) (and the resulting size of the Board shall be reduced by the
relevant number and no vacancy or vacancies shall be created) and the term of
each remaining Class B Director shall terminate; provided, however, that the
exchange by the holders of Class B Common Stock of Units into shares of Class A
Common Stock pursuant to Section 8.4 of the L.P. Agreement, shall not constitute
a transfer of such Units for purposes of this Article FIFTH, Clause (c)(iii). In
calculating whether the Third Class B Triggering Event has occurred, each time a
transfer of shares of Common Stock and/or Units by the holders of Class B Common
Stock occurs (other than to a Parent Entity), a calculation shall be made with
respect to the percentage that such number of shares and/or Units transferred
bears to the number of Units initially issued to the holders of Class B Common
Stock (subject to adjustment in accordance with Section 8.5 of the L.P.
Agreement). This percentage shall be added to the aggregate of such percentages
calculated at the respective times of all prior transfers by the holders of the
Class B Common Stock (other than to a Parent Entity).
(d) Vacancies in the Board. Any vacancies resulting from death,
resignation, disqualification, removal or other cause with respect to a Class A
Director shall be filled by the affirmative vote of the remaining Class A
Directors then in office, even if less than a quorum of the Board. Any vacancies
resulting from death, resignation, disqualification, removal or other cause with
respect to a Class B Director shall be filled only by the affirmative vote of
the remaining Class B Directors then in office, even if less than a quorum of
the Board, or by a sole remaining Class B Director. In the absence of a sole
remaining Class B Director, such vacancies shall be filled by a majority vote of
the holders of the Class B Common Stock, voting separately as a class. Any
director elected in accordance with this Clause (d) shall hold office until the
next annual meeting of stockholders and until such director's successor shall
have been duly elected and qualified, or until such director's term of office
otherwise terminates.
(e) Removal of Directors. (i) Subject to Article FIFTH, Clause (e)(ii)
below, any director may be removed from office only for cause by the affirmative
vote of the holders of at least eighty percent (80%) of the voting power of the
Voting Stock, voting together as a single class.
(ii) Notwithstanding the foregoing, (A) any Class A Director may be removed
at any time, with or without cause, by a majority vote of the holders of the
Voting Stock, voting together as one class, and (B) any Class B Director may be
removed at any time, with or without cause, only by a majority vote of the
holders of the Class B Common Stock, voting separately as a class.
(f) General Powers of the Board of Directors. (i) Subject to Article FIFTH,
Clause (g), the business and affairs of the corporation shall be managed by or
under the direction of the Board. The Board may, subject to the approval
procedures of Article FIFTH, Clause (f)(ii) and Article FIFTH, Clause (g)(i)
hereof, exercise all of the powers of the Corporation except as otherwise
provided by law or this Restated Certificate of Incorporation.
(ii) Subject to Article FIFTH, Clause (g) hereof, and without limiting the
powers of the Board set forth in Article FIFTH, Clause (f)(i), the Corporation
shall not, and shall not permit any Subsidiary (as defined below) to, and no
officer, employee or agent of the Corporation or any Subsidiary shall, take any
of the actions specified in Schedule FIFTH, Clause (f)(ii), without the prior
approval of the Board. "Subsidiary" shall mean each of Operating Partnership and
Prodigy Communications Sub Corporation, a Delaware corporation and a wholly
owned subsidiary of Prodigy, and any other corporation, limited liability
company, partnership or other entity in which the Corporation, directly or
indirectly, has a controlling equity interest.
(g) Appointment and Powers of Executive Steering Committee. (i) The Board
shall establish a four (4) member Executive Steering Committee (the "Executive
Steering Committee") consisting of two (2) Class A Directors selected by
Telefonos de Mexico, S.A. de C.V. ("Telmex") and Carso Global Telecom, S.A. de
C.V. ("Carso") and two (2) Class B Directors selected by the Class B Directors,
subject to reduction as provided in Article FIFTH, Clauses (g)(ii) and (g)(iii)
below. The purpose of the Executive Steering Committee shall be to evaluate the
matters set forth on Schedule FIFTH, Clause (g)(i) of this Restated Certificate
of Incorporation and to report to the Board for approval only those matters
specified on said Schedule which have been unanimously approved by the Executive
Steering Committee. Approval by the Board or any committee of the Board of any
action set forth on Schedule FIFTH, Clause (g)(i) shall not be effective unless
and until such action has been unanimously approved by the Executive Steering
Committee. Nothing contained herein shall restrict the right of any director of
the Corporation to bring any matter to, or discuss any matter with, the
Executive Steering Committee.
(ii) At any time that a First Class B Triggering Event shall have occurred,
then the number of Class B Directors on the Executive Steering Committee shall
be reduced from two (2) to one (1) (and the resulting size of the Executive
Steering Committee shall be reduced by one (1) and no vacancy shall be created)
and the term of one (1) of the Class B Directors on such Committee, selected by
the holders of Class B Common Stock within ten (10) days of the occurrence of
the Second Class B Triggering Event, shall terminate. In the absence of such
selection within said ten-day period, the Class A Directors shall select the
Class B Director whose term shall terminate. At any time that a Second Class B
Triggering Event shall have occurred, then the number of Class B Directors on
the Executive Steering Committee shall be reduced to zero (0) (and the resulting
size of the Committee shall be reduced by the relevant number and no vacancy or
vacancies shall be created) and the term of each remaining Class B Director on
such Committee shall terminate.
(iii) At any time that Telmex and Carso, acting separately or jointly,
shall have transferred (other than to an Affiliate within the same corporate
group) in the aggregate (i.e., together with all other shares of Common Stock
previously transferred by Telmex or Carso other than to an Affiliate within the
same corporate group) a number of shares of Common Stock constituting an
aggregate of more than thirty-three percent (33%) of the number of shares of
Common Stock owned or held of record by Telmex and Carso as of November 19, 1999
(subject to adjustment in accordance with Article FOURTH, Clause (b)(iv)) (the
"First Telmex/Carso Triggering Event"), then the number of Class A Directors on
the Executive Steering Committee shall be reduced from two (2) to one (1) (and
the resulting size of such Committee shall be reduced by one (1) and no vacancy
shall be created) and the term of one of the Class A Directors on such
Committee, selected by Telmex and Carso within ten (10) days of the occurrence
of the First Telmex/Carso Triggering Event, shall terminate. In the absence of
such selection within said ten-day period, the Class B Directors or, if there
are no Class B Directors, the Class A Directors not selected by Telmex and
Carso, shall select the Class A Director whose term shall terminate. In
calculating whether the First Telmex/Carso Triggering Event has occurred, each
time a transfer of shares of Common Stock by Telmex or Carso occurs (other than
to an Affiliate within the same corporate group), a calculation shall be made
with respect to the percentage that such number of shares transferred bears to
the number of shares owned or held of record by Telmex and Carso as of November
19, 1999 (subject to adjustment in accordance with Article FOURTH, Clause
(b)(iv)). This percentage shall be added to the aggregate of such percentages
calculated at the respective times of all prior transfers by Telmex or Carso
(other than to Affiliates within the same corporate group). At any time that
Telmex and Carso, acting separately or jointly, shall have transferred (other
than to an Affiliate within the same corporate group) in the aggregate (i.e.,
together with all other shares of Common Stock transferred by Telmex or Carso
other than to Affiliates within the same corporate group) a number of shares of
Common Stock constituting an aggregate of more than sixty-seven percent (67%) of
the number of shares of Common Stock owned or held of record by Telmex and Carso
as of November 19, 1999 (subject to adjustment in accordance with Article
FOURTH, Clause (b)(iv)) (the "Second Telmex/Carso Triggering Event"), then the
number of Class A Directors on the Executive Steering Committee shall be reduced
to zero (0) (and the resulting size of such Committee shall be reduced by the
relevant number and no vacancy or vacancies shall be created) and the term of
each remaining Class A Director on such Committee shall terminate. In
calculating whether the Second Telmex/Carso Triggering Event has occurred, each
time a transfer of shares of Common Stock by Telmex or Carso occurs (other than
to an Affiliate within the same corporate group), a calculation shall be made
with respect to the percentage that such number of shares transferred bears to
the number of shares owned or held of record by Telmex and Carso as of November
19, 1999 (subject to adjustment in accordance with Article FOURTH, Clause
(b)(iv)). This percentage shall be added to the aggregate of such percentages
calculated at the respective times of all prior transfers by Telmex or Carso
(other than to Affiliates within the same corporate group).
(iv) At any time that both a Second Class B Triggering Event and a Second
Telmex/Carso Triggering Event shall have occurred, the Executive Steering
Committee shall be deemed dissolved as of such time, and this Article FIFTH,
Clause (g) shall cease to have any effect.
(h) Other Committees. (i) For so long as a Class B Director is entitled to
be a member of the Executive Steering Committee, each such committee designated
by the Board in accordance with Section 3.1 of the Amended and Restated By-Laws
shall contain at least one Class B Director.
(ii) Except as the Board may otherwise determine, any such committee may
adopt, amend and repeal rules for the conduct of its business, but unless
otherwise provided by the directors or in such rules, a majority of the total
number of the authorized members of such committee, which majority must include
at least one Class B Director, shall constitute a quorum for the transaction of
business, the vote of a majority of the members present at a meeting at the time
of such vote if a quorum is then present shall be the act of such committee, and
in other respects each committee shall conduct its business as nearly as
possible in the same manner as the Board conducts its business pursuant to this
Restated Certificate of Incorporation and the Amended and Restated By-Laws of
the Corporation.
(i) Committee Resignation; Removals. Any member of any committee may resign
at any time by giving notice to the Corporation; provided, however, that notice
to the Board, the Chairman of the Board, the Chief Executive Officer of the
Corporation, the chairman of such committee or the Secretary of the Corporation
shall be deemed to constitute notice to the Corporation. Such resignation shall
take effect upon receipt of such notice or at any later time specified therein;
and, unless otherwise specified therein, acceptance of such resignation shall
not be necessary to make it effective. Any member of any such committee may be
removed at any time, either with or without cause, by the affirmative vote of a
majority of the authorized number of directors at any meeting of the Board
called for that purpose; except that any member of the Executive Steering
Committee elected by the Class B Directors may be removed from the Executive
Steering Committee at any time, either with or without cause, by the affirmative
vote of a majority of the Class B Directors. Any member of the Executive
Steering Committee may be removed from the Executive Steering Committee for
cause by the affirmative vote of two (2) Class A Directors (or the sole Class A
Director) and two (2) Class B Directors (or the sole Class B Director), even if
less than a quorum of the Board. Any vacancies on any committee of the Board
shall be filled in the manner set forth above and in the Amended and Restated
By-Laws in respect of the appointment of such committee.
SIXTH. Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
SEVENTH. Except to the extent that the General Corporation Law of the State
of Delaware prohibits the elimination or limitation of liability of directors
for breaches of fiduciary duty, no director of the Corporation shall be
personally liable to the Corporation or its stockholders for monetary damages
for any breach of fiduciary duty as a director, notwithstanding any provision of
law imposing such liability. No amendment to or repeal of this provision shall
apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment. For the purposes of this Article
SEVENTH and Article EIGHTH below, the term "director" shall include any member
of the Executive Steering Committee serving in such capacity.
EIGHTH. 1. Actions, Suits and Proceedings Other than by or in the Right of
the Corporation. The Corporation shall indemnify each person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture trust or
other enterprise (including any employee benefit plan) (any such person being
referred to hereafter as an "Indemnitee"), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. Notwithstanding
anything to the contrary in this Article, except as set forth in Section 7
below, the Corporation shall not indemnify an Indemnitee seeking indemnification
in connection with a proceeding (or part thereof) initiated by the Indemnitee
unless the initiation thereof was approved by the Board of Directors of the
Corporation.
2. Actions or Suits by or in the Right of the Corporation. The Corporation
shall indemnify any Indemnitee who was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was, or has agreed to become, a director or officer of the
Corporation, or is or was serving, or has agreed to serve, at the request of the
Corporation, as a director, officer or trustee of, or in a similar capacity
with, another corporation, partnership, joint venture, trust or other enterprise
(including any employee benefit plan), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees) and amounts paid in settlement actually and reasonably incurred
by him or on his behalf in connection with such action, suit or proceeding and
any appeal therefrom, if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the Corporation,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery of Delaware
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of such liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses (including attorneys' fees) which the Court of
Chancery of Delaware or such other court shall deem proper.
3. Indemnification for Expenses of Successful Party. Notwithstanding the
other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of any
claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a disposition without
prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an
adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of
guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the
Indemnitee did not act in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and (v) with
respect to any criminal proceeding, an adjudication that the Indemnitee had
reasonable cause to believe his conduct was unlawful, the Indemnitee shall be
considered for the purposes hereof to have been wholly successful with respect
thereto.
4. Notification and Defense of Claim. As a condition precedent to his right
to be indemnified, the Indemnitee must notify the Corporation in writing as soon
as practicable of any action, suit, proceeding or investigation involving him
for which indemnity will or could be sought. With respect to any action, suit,
proceeding or investigation of which the Corporation is so notified, the
Corporation will be entitled to participate therein at its own expense and/or to
assume the defense thereof at its own expense, with legal counsel reasonably
acceptable to the Indemnitee. After notice from the Corporation to the
Indemnitee of its election so to assume such defense, the Corporation shall not
be liable to the Indemnitee for any legal or other expenses subsequently
incurred by the Indemnitee in connection with such claim, other than as
provided below in this Section 4. The Indemnitee shall have the right to employ
his own counsel in connection with such claim, but the fees and expenses of such
counsel incurred after notice from the Corporation of its assumption of the
defense thereof shall be at the expense of the Indemnitee unless (i) the
employment of counsel by the Indemnitee has been authorized by the Corporation,
(ii) counsel of the Indemnitee shall have reasonably concluded that there may be
a conflict of interest or position on any significant issue between the
Corporation and the Indemnitee in the conduct of the defense of such action or
(iii) the Corporation shall not in fact have employed counsel to assume the
defense of such action, in each of which cases the fees and expenses of counsel
for the Indemnitee shall be at the expense of the Corporation, except as
otherwise expressly provided by this Article. The Corporation shall not be
entitled, without the consent of the Indemnitee, to assume the defense of any
claim brought by or in the right of the Corporation or as to which counsel for
the Indemnitee shall have reasonably made the conclusion provided for in clause
(ii) above.
5. Advance of Expenses. Subject to the provisions of Section 6 below, in
the event that the Corporation does not assume the defense pursuant to Section 4
of this Article or any action, suit, proceeding or investigation of which the
Corporation receives notice under this Article, any expenses (including
attorneys' fees) incurred by an Indemnitee in defending a civil or criminal
action, suit, proceeding or investigation or any appeal therefrom shall be paid
by the Corporation in advance of the final disposition of such matter, provided,
however, that the payment of such expenses incurred by an Indemnitee in advance
of the final disposition of such matter shall be made only upon receipt of an
undertaking by or on behalf of the Indemnitee to repay all amounts so advanced
in the event that it shall ultimately be determined that the Indemnitee is not
entitled to be indemnified by the Corporation as authorized in this Article.
Such undertaking may be accepted without reference to the financial ability of
such person to make such repayment.
6. Procedure for Indemnification. In order to obtain indemnification or
advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article, the
Indemnitee shall submit to the Corporation a written request, including in such
request such documentation and information as is reasonably available to the
Indemnitee and is reasonably necessary to determine whether and to what extent
the Indemnitee is entitled to indemnification or advancement of expenses. Any
such indemnification or advancement of expenses shall be made promptly, and in
any event within 60 days after receipt by the Corporation of the written request
of the Indemnitee, unless with respect to requests under Section 1, 2 or 5 the
Corporation determines within such 60-day period that the Indemnitee did not
meet the applicable standard of conduct set forth in Section 1 or 2, as the case
may be. Such determination shall be made in each instance by (a) a majority vote
of a quorum of the directors of the Corporation consisting of persons who are
not at that time parties to the action, suit or proceeding in question
("disinterested directors"), (b) if no such quorum is obtainable, a majority
vote of a committee of two or more disinterested directors, (c) a majority vote
of a quorum of the outstanding shares of stock of all classes entitled to vote
for directors, voting as a single class, which quorum shall consist of
stockholders who are not at that time parties to the action, suit or proceeding
in question, (d) independent legal counsel (who may be regular legal counsel to
the Corporation), or (e) a court of competent jurisdiction.
7. Remedies. The right to indemnification or advances as granted by this
Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 6. Unless otherwise required by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
this Article shall be on the Corporation. Neither the failure of the Corporation
to have made a determination prior to the commencement of such action that
indemnification is proper in the circumstances because the Indemnitee has met
the applicable standard of conduct, nor an actual determination by the
Corporation pursuant to Section 6 that the Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the Indemnitee has not met the applicable standard of conduct.
The indemnitees expenses (including attorneys' fees) incurred in connection with
successfully establishing his right to indemnification, in whole or in part, in
any such proceeding shall also be indemnified by the Corporation.
8. Subsequent Amendment. No amendment, termination or repeal of this
Article or of the relevant provisions of the General Corporation Law of the
State of Delaware or any other applicable laws shall affect or diminish in any
way the rights of any Indemnitee to indemnification under the provisions hereof
with respect to any action, suit, proceeding or investigation arising out of or
relating to any actions, transactions or facts occurring prior to the final
adoption of such amendment, termination or repeal.
9. Other Rights. The indemnification and advancement of expenses provided
by this Article shall not be deemed exclusive of any other rights to which an
Indemnitee seeking indemnification or advancement of expenses may be entitled
under any law (common or statutory), agreement or vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in any other capacity while holding office for the Corporation,
and shall continue as to an Indemnitee who has ceased to be a director or
officer, and shall inure to the benefit of the estate, heirs, executors and
administrators of the Indemnitee. Nothing contained in this Article shall be
deemed to prohibit, and the Corporation is specifically authorized to enter
into, agreements with officers and directors providing indemnification rights
and procedures different from those set forth in this Article. In addition, the
Corporation may, to the extent authorized from time to time by its Board of
Directors, grant indemnification rights to other employees or agents of the
Corporation or other persons serving the Corporation and such rights may be
equivalent to, or greater or less than, those set forth in this Article.
10. Partial Indemnification. If an Indemnitee is entitled under any
provision of this Article to indemnification by the Corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
11. Insurance. The Corporation may purchase and maintain insurance, at
its expense, to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) against any expense,
liability or loss incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
such person against such expense, liability or loss under the General
Corporation Law of the State of Delaware.
12. Merger or Consolidation. If the Corporation is merged into or
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
13. Savings Clause. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest extent permitted by any applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.
14. Definitions. Terms used herein and defined in Section 145(h) and
Section 145(i) of the General Corporation Law of the State of Delaware shall
have the respective meanings assigned to such terms in such Section 145(h) and
Section 145(i).
15. Subsequent Legislation. If the General Corporation Law of the State of
Delaware is amended after adoption of this Article to expand further the
Indemnification permitted to Indemnitees, then the Corporation shall indemnify
such persons to the fullest extent permitted by the General Corporation Law of
the State of Delaware, as so amended.
NINTH. The affirmative vote of the holders of at least eighty percent (80%)
of the issued and outstanding Voting Stock, voting as one class, shall be
required to amend or repeal this Restated Certificate of Incorporation;
provided, however, that no such amendment which shall adversely affect the
rights of the holders of Class A Common Stock or Class B Common Stock,
respectively, may be adopted unless the holders of such Class A Common Stock or
Class B Common Stock, as the case may be, voting separately as a class, shall by
majority vote approve such amendment.
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Restated Certificate of Incorporation, in the manner
now or hereafter prescribed by statute, provided that such action is approved in
the manner, and otherwise complies with the requirements, set forth in this
Restated Certificate of Incorporation, and all rights conferred upon
stockholders herein are granted subject to this reservation.
<PAGE>
IN WITNESS WHEREOF, this Restated Certificate of Incorporation, which
restates, integrates and further amends the provisions of the Certificate of
Incorporation of the Corporation, and which was duly adopted in accordance with
Sections 242 and 245 of the General Corporation Law of the State of Delaware,
has been signed by its President this ________, 1999.
PRODIGY COMMUNICATIONS CORPORATION
By: ____________________________________
President
<PAGE>
Schedule FIFTH, Clause (f)(ii)
------------------------------
ACTIONS REQUIRING BOARD APPROVAL
(Except as indicated below, capitalized terms used and not defined in this
Schedule shall have the respective meanings ascribed thereto in the Restated
Certificate of Incorporation to which this Schedule is attached.)
1. Any amendment, change or other modification or restatement of the Restated
Certificate of Incorporation or Amended and Restated By-Laws of the
Corporation, the L.P. Agreement, or similar constitutive documents of any
other Subsidiary; or the merger, consolidation, dissolution or liquidation
of the Corporation, the Operating Partnership or any other Subsidiary, or
any transaction having the same effect.
2. Except pursuant to (i) outstanding options, warrants or other rights to
subscribe for or acquire equity securities of the Corporation, or any
outstanding securities or obligations convertible into or exchangeable for
any such equity securities of the Corporation, in each case as set forth on
Annex A hereto, (ii) incentive or other employee benefit plans or agreements
adopted by the Board after the date hereof in accordance with paragraph 7 of
this Schedule FIFTH, Clause (f)(ii) or (iii) a conversion or exchange right
set forth in the Restated Certification of Incorporation, the L.P. Agreement
or similar constitutive documents of any other Subsidiary, the issuance,
authorization, cancellation, alteration, modification, reclassification,
redemption or any change in, of, or to, any equity security of the
Corporation or any Unit or other equity interest in the Operating
Partnership or any other Subsidiary, or any option, put, call or warrant
with respect to the foregoing, including, without limitation, any such
issuance, authorization, cancellation, alteration, modification,
reclassification, redemption or change pursuant to any merger, consolidation
or similar transaction. Notwithstanding the foregoing, in no event shall the
exceptions set forth in clauses (i), (ii) and (iii) above apply to the
issuance, authorization, cancellation, alteration, modification,
reclassification, redemption or any change in, of, or to, any shares of
Class B Common Stock of the Corporation, or any option, put, call or warrant
with respect to any shares of Class B Common Stock of the Corporation,
including, without limitation, any such issuance, authorization,
cancellation, alteration, modification, reclassification, redemption or
change pursuant to any merger, consolidation or similar transaction.
3. The transfer or other disposition (other than inventory or obsolete assets
of the Corporation, the Operating Partnership or any other Subsidiary) of,
or placing any encumbrance (other than encumbrances arising by operation of
law) on, any material asset of the Corporation, the Operating Partnership or
any other Subsidiary, except Permitted Encumbrances (as defined in the L.P.
Agreement).
4. The acquisition of any interest in, or the making of any loan or extension
of credit to, another person or entity by the Corporation, the Operating
Partnership or any other Subsidiary for or in an amount in excess of
$5,000,000, except for short-term cash management with recognized money
market institutions; any capital expenditure (or series of related capital
expenditures) by the Corporation, the Operating Partnership or any other
Subsidiary in excess of $5,000,000; or any debt, loan or borrowing of the
Corporation, the Operating Partnership or any other Subsidiary (other than
borrowings under revolving credit facilities approved by the Board)
exceeding $5,000,000 outstanding in the aggregate at any time, or any
revolving credit facility of the Corporation, the Operating Partnership or
any other Subsidiary permitting aggregate borrowings at any one time
outstanding to exceed $5,000,000.
5. Adoption and approval of any Business Plan for the Corporation, the
Operating Partnership or any other Subsidiary.
6. Appointment of the Chief Executive Officer for the Corporation, the
Operating Partnership or any other Subsidiary.
7. Adoption of any incentive or other employee benefit plan by the Corporation,
the Operating Partnership or any other Subsidiary or any material amendment
to any such existing plan.
8. Hiring any personnel of the Corporation, the Operating Partnership or any
other Subsidiary with any annual salary in excess of $250,000 or increasing
the compensation of any such personnel above $250,000.
9. Appointment or dismissal of auditors for the Corporation, the Operating
Partnership or any other Subsidiary.
10. The conduct by the Corporation, the Operating Partnership or any other
Subsidiary of any business other than the Business (as defined in the L.P.
Agreement) and any ancillary or related businesses, or the establishment of
any entity (or the creation of any entity owned jointly with any other
party) by the Corporation, the Operating Partnership or any other Subsidiary
to conduct any business.
11. Any action by, in respect of or otherwise involving any entity in which the
Corporation, the Operating Partnership or any other Subsidiary has or
acquires a controlling interest which would require Board approval under
FIFTH, Clause (f)(ii) if such action were by, in respect of or otherwise
involving the Corporation, the Operating Partnership or any other
Subsidiary, as described above.
<PAGE>
Schedule FIFTH, Clause (g)(i)
-----------------------------
MATTERS FOR THE EXECUTIVE STEERING COMMITTEE
(Except as indicated below, capitalized terms used and not defined in this
Schedule shall have the respective meanings ascribed thereto in the Restated
Certificate of Incorporation to which this Schedule is attached.)
1. Any amendment, change or other modification or restatement of the Restated
Certificate of Incorporation or Amended and Restated By-Laws of the
Corporation, the L.P. Agreement or similar constitutive documents of any
other Subsidiary; or the merger, consolidation, dissolution or liquidation
of the Corporation, the Operating Partnership or any other Subsidiary, or
any transaction having the same effect.
2. Except pursuant to (i) outstanding options, warrants or other rights to
subscribe for or acquire equity securities of the Corporation, or any
outstanding securities or obligations convertible into or exchangeable for
any such equity securities of the Corporation, in each case as set forth on
Annex A hereto, (ii) incentive or other employee benefit plans or agreements
adopted by the Board after the date hereof in accordance with paragraph 7 of
Schedule FIFTH, Clause (f)(ii) hereof or (iii) a conversion or exchange
right set forth in the Restated Certificate of Incorporation, the L.P.
Agreement or similar constitutive documents of any other Subsidiary, the
issuance, authorization, cancellation, alteration, modification,
reclassification, redemption or any change in, of, or to, any equity
security of the Corporation or any Unit or other equity interest in the
Operating Partnership or any other Subsidiary, or any option, put, call or
warrant with respect to the foregoing, including, without limitation, any
such issuance, authorization, cancellation, alteration, modification,
reclassification, redemption or change pursuant to any merger, consolidation
or similar transaction. Notwithstanding the foregoing, in no event shall the
exceptions set forth in clauses (i), (ii) and (iii) above apply to the
issuance, authorization, cancellation, alteration, modification,
reclassification, redemption or any change in, of, or to, any shares of
Class B Common Stock of the Corporation, or any option, put, call or warrant
with respect to any shares of Class B Common Stock of the Corporation,
including, without limitation, any such issuance, authorization,
cancellation, alteration, modification, reclassification, redemption or
change pursuant to any merger, consolidation or similar transaction.
3. The transfer or other disposition (other than inventory or obsolete assets
of the Corporation, the Operating Partnership or any other Subsidiary) of,
or placing any encumbrance (other than encumbrances arising by operation of
law) on, any material asset of the Corporation, the Operating Partnership or
any other Subsidiary, except Permitted Encumbrances (as defined in the L.P.
Agreement).
4. The acquisition of any interest in, or the making of any loan or extension
of credit to, another person or entity by the Corporation, the Operating
Partnership or any other Subsidiary for or in an amount in excess of
$20,000,000, except for short-term cash management with recognized money
market institutions; any capital expenditure (or series of related capital
expenditures) by the Corporation, the Operating Partnership or any other
Subsidiary in excess of $20,000,000; or any debt, loan or borrowing of the
Corporation, the Operating Partnership or any other Subsidiary (other than
borrowings under revolving credit facilities approved by the Board)
exceeding $20,000,000 outstanding in the aggregate at any time, or any
revolving credit facility of the Corporation, the Operating Partnership or
any other Subsidiary permitting aggregate borrowings at any one time
outstanding to exceed $20,000,000.
5. Approval of any Business Plan for the Corporation, the Operating
Partnerships or any other Subsidiary.
6. Approval of the Chief Executive Officer for the Corporation, the Operating
Partnership or any other Subsidiary.
7. The conduct by the Corporation, the Operating Partnership or any other
Subsidiary of any business other than the Business (as defined in the L.P.
Agreement) and any ancillary or related businesses, or the establishment of
any entity (or the creation of any entity owned jointly with any other
party) by the Corporation, the Operating Partnership or any other Subsidiary
to conduct any business.
8. Any action by, in respect of or otherwise involving any entity in which the
Corporation, the Operating Partnership or any other Subsidiary has or
acquires a controlling interest which would require Executive Steering
Committee approval under Article FIFTH, Clause (g)(i) if such action were
by, in respect of, or otherwise involving the Corporation, the Operating
Partnership or any other Subsidiary, as described above.
<PAGE>
(Exhibit E)
FORM OF
AMENDED AND RESTATED BY-LAWS
OF
PRODIGY COMMUNICATIONS CORPORATION
Adopted as of __ , 1999
AMENDED AND RESTATED BY-LAWS
----------------------------
OF
--
PRODIGY COMMUNICATIONS CORPORATION
----------------------------------
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1 - Stockholders.......................................... 1
1.1 Place of Meetings..................................... 1
1.2 Annual Meeting........................................ 1
1.3 Special Meetings...................................... 1
1.4 Notice of Meetings.................................... 1
1.5 Voting List........................................... 2
1.6 Quorum................................................ 2
1.7 Adjournments.......................................... 2
1.8 Voting and Proxies.................................... 2
1.9 Action at Meeting..................................... 3
1.10 Action without Meeting................................ 3
ARTICLE 2 - Directors............................................. 3
2.1 Number; Election and Qualification.................... 3
2.2 Tenure................................................ 4
2.3 Vacancies............................................. 4
2.4 Resignation........................................... 4
2.5 Regular Meetings...................................... 4
2.6 Special Meetings...................................... 4
2.7 Notice of Special Meetings............................ 4
2.8 Meetings by Telephone or Video Conference Calls....... 4
2.9 Quorum................................................ 4
2.10 Action at Meeting..................................... 5
2.11 Action by Consent..................................... 5
2.12 Removal............................................... 5
2.13 Compensation of Directors............................. 5
ARTICLE 3 - Committees of the Board............................... 5
3.1 Other Committees...................................... 5
3.2 Action by Consent; Participation by Telephone,
Video or Similar Equipment............................ 6
3.4 Committee Resignation; Removals....................... 6
ARTICLE 4 - Officers.............................................. 6
4.1 Enumeration........................................... 6
4.2 Election.............................................. 6
4.3 Qualification......................................... 7
4.4 Tenure................................................ 7
4.5 Resignation and Removal............................... 7
4.6 Vacancies............................................. 7
4.7 Chairman of the Board and Vice-Chairman of the Board.. 7
4.8 President............................................. 8
4.9 Vice Presidents....................................... 8
4.10 Secretary and Assistant Secretaries................... 8
4.11 Treasurer and Assistant Treasurers.................... 9
4.12 Salaries.............................................. 9
ARTICLE 5 - Capital Stock......................................... 9
5.1 Issuance of Stock..................................... 9
5.2 Certificates of Stock................................. 9
5.3 Transfers............................................. 9
5.4 Lost, Stolen or Destroyed Certificates................ 10
5.5 Record Date........................................... 11
ARTICLE 6 - General Provisions.................................... 11
6.1 Fiscal Year........................................... 11
6.2 Corporate Seal........................................ 11
6.3 Waiver of Notice...................................... 11
6.4 Voting of Securities.................................. 12
6.5 Evidence of Authority................................. 12
6.6 Certificate of Incorporation.......................... 12
6.7 Severability.......................................... 12
6.8 Pronouns.............................................. 12
ARTICLE 7 - Amendments............................................ 12
<PAGE>
AMENDED AND RESTATED
BY-LAWS
OF
PRODIGY COMMUNICATIONS CORPORATION
ARTICLE 1 - Stockholders
------------------------
1.1 Place of Meetings. All meetings of stockholders shall be held at such
place within or without the State of Delaware as may be designated from time to
time by the Board of Directors or the President or, if not so designated, at the
registered office of the corporation.
1.2 Annual Meeting. The annual meeting of stockholders for the election of
directors and for the transaction of such other business as may properly be
brought before the meeting shall be held on a date to be fixed by the Board of
Directors or the President (which date shall not be a legal holiday in the place
where the meeting is to be held) at the time and place to be fixed by the Board
of Directors or the President and stated in the notice of the meeting. If no
annual meeting is held in accordance with the foregoing provisions, the Board of
Directors shall cause the meeting to be held as soon thereafter as convenient.
If no annual meeting is held in accordance with the foregoing provisions, a
special meeting may be held in lieu of the annual meeting, and any action taken
at that special meeting shall have the same effect as if it had been taken at
the annual meeting, and in such case all references in these By-Laws to the
annual meeting of the stockholders shall be deemed to refer to such special
meeting.
1.3 Special Meetings. Special meetings of stockholders may be called at any
time by the President, any member of the Executive Steering Committee (as
defined below), or by the Board of Directors pursuant to a resolution approved
by a majority of the then authorized number of directors. Any such call must
specify the matter or matters to be acted upon at such meeting and only such
matter or matters shall be acted upon thereat.
1.4 Notice of Meetings. Except as otherwise provided by law, written notice
of each meeting of stockholders, whether annual or special, shall be given not
less than 10 nor more than 60 days before the date of the meeting to each
stockholder entitled to vote at such meeting. The notices of all meetings shall
state the place, date and hour of the meeting. The notice of a special meeting
shall state, in addition, the purpose or purposes for which the meeting is
called. If mailed, notice is given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the corporation, unless such stockholder shall have filed with the
Secretary of the Corporation a written request that notices to such stockholder
be mailed to some other address in which case it shall be directed to such
stockholder at such other address.
1.5 Voting List. The officer who has charge of the stock ledger of the
corporation shall prepare, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order for each class of stock, and showing the
address of each stockholder and the number of shares of the Corporation and the
number of Units (as defined in the Certificate of Incorporation) in the
Operating Partnership (as defined in Section 1.8 below), which are registered in
the name of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least 10 days prior to the meeting, at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting. The list shall also be produced and kept at the time and
place of the meeting during the whole time of the meeting, and may be inspected
by any stockholder who is present. The Corporation shall cause the Operating
Partnership to provide complete, current and accurate records of the holdings of
Units in the Operating Partnership to be made available to the Corporation at
all times to be used for the purposes of maintaining the above-described list.
1.6 Quorum. Except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws, the holders of a majority of the voting power of
the capital stock of the corporation issued and outstanding and entitled to vote
at the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business. Where a separate vote by a class or
classes or series is required, a majority of the shares of such class or classes
or series in person or represented by proxy shall constitute a quorum entitled
to take action with respect to that vote on that matter.
1.7 Adjournments. Any meeting of stockholders may be adjourned to any other
time and to any other place at which a meeting of stockholders may be held under
these By-Laws by a majority vote of the stockholders present or represented at
the meeting and entitled to vote, although less than a quorum, or, if no
stockholder is present, by any officer entitled to preside at or to act as
Secretary of such meeting. It shall not be necessary to notify any stockholder
of any adjournment of less than 30 days if the time and place of the adjourned
meeting are announced at the meeting at which adjournment is taken, unless after
the adjournment a new record date is fixed for the adjourned meeting. At the
adjourned meeting at which a quorum shall be present or represented by proxy,
the corporation may transact any business which might have been transacted at
the original meeting called if a quorum had been present or represented by proxy
thereat.
1.8 Voting and Proxies. Except as otherwise provided in a resolution of the
Board adopted pursuant to the Restated Certificate of Incorporation of the
Corporation (the "Certificate of Incorporation") and these By-Laws establishing
a series of Preferred Stock of the Corporation ("Preferred Stock"), at each
meeting of stockholders, each holder of shares of the Corporation's Class A
Common Stock, par value $.01 per share ("Class A Common Stock"), shall be
entitled to one (1) vote for each such share, and each holder of the
Corporation's Class B Common Stock, par value $.01 per share ("Class B Common
Stock", and together with the Class A Common Stock, the "Common Stock"), shall
be entitled to one vote for each share of Class B Common Stock and one vote for
each Unit in the Operating Partnership standing in such holder's name on the
stock records of the Corporation maintained in accordance with Section 1.5
hereof. Each stockholder of record entitled to vote at a meeting of
stockholders, or to express consent or dissent to corporate action in writing
without a meeting, may vote or express such consent or dissent in person or may
authorize another person or persons to vote or act for him by proxy executed or
authorized by the stockholder in accordance with applicable law or his
authorized agent and delivered to the Secretary of the corporation. No such
proxy shall be voted or acted upon after three years from the date of its
execution, unless the proxy expressly provides for a longer period.
1.9 Action at Meeting. When a quorum is present at any meeting, all matters
shall be decided by a majority of the votes cast at such meeting by the holders
of shares of capital stock present or represented by proxy and entitled to vote
thereon, except when a different vote is required by express provision of law,
the Certificate of Incorporation or these By-Laws. When a quorum is present at
any meeting, any election of directors by stockholders shall be determined by a
plurality of the votes cast on the election.
1.10 Action without Meeting. Any action required or permitted to be taken
at any annual or special meeting of stockholders of the corporation may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, is signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote on such action were present and voted. Prompt notice of the
taking of corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
ARTICLE 2 - Directors
---------------------
2.1 Number; Election and Qualification. The Corporation shall have the
number of directors as is set forth in the Certificate of Incorporation. The
directors shall be elected at the annual meeting of stockholders by such
stockholders as have the right to vote on such election. Directors need not be
stockholders of the corporation.
2.2 Tenure. Each director shall hold office until the next annual
meeting and until his successor is elected and qualified, or until his earlier
death, resignation or removal or until his term otherwise terminates.
2.3 Vacancies. Any vacancies on the Board resulting from death,
resignation, disqualification, removal or other cause shall be filled in the
manner provided in the Certificate of Incorporation.
2.4 Resignation. Any director may resign by delivering his written
resignation to the corporation at its principal office or to the President or
Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
2.5 Regular Meetings. Regular meetings of the Board shall be held at such
time and place, either within or without the State of Delaware, in accordance
with a yearly meeting schedule as determined by the Board; or such meetings may
be held on such other days and at such other times as the Board may from time to
time determine; provided that any director who is absent when such a
determination is made shall be given notice of the determination.
2.6 Special Meetings. Special meetings of the Board of Directors may be
held at any time and place, within or without the State of Delaware, designated
in a call by the Chairman of the Board, President, a majority of the directors
then in office, any member of the Executive Steering Committee or by one
director in the event that there is only a single director in office.
2.7 Notice of Special Meetings. Notice of any special meeting of directors
stating the time, place and expected purposes thereof shall be given to each
director by the Secretary or by the officer or one of the directors calling the
meeting. Notice shall be duly given to each director (i) by giving notice to
such director in person or by telephone at least 48 hours in advance of the
meeting, (ii) by sending a telegram or telex, or delivering written notice by
hand, to his last known business or home address at least 48 hours in advance of
the meeting, or (iii) by mailing written notice to his last known business or
home address at least five (5) days in advance of the meeting.
2.8 Meetings by Telephone or Video Conference Calls. Directors or any
members of any committee designated by the directors may participate in a
meeting of the Board of Directors or such committee by means of conference
telephone, video or similar communications equipment or any other forms of
communication as may be authorized from time to time under the Delaware General
Corporation Law, by means of which all persons participating in the meeting can
hear each other, and participation by such means shall constitute presence in
person at such meeting.
2.9 Quorum. A majority of the total number of the whole Board of
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the number so fixed constitute a quorum. In the absence of a quorum at
any such meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice other than announcement at the meeting,
until a quorum shall be present.
2.10 Action at Meeting. At any meeting of the Board of Directors at which a
quorum is present, the vote of a majority of those present shall be sufficient
to take any action, unless a different vote is specified by law, the Certificate
of Incorporation or these By-Laws.
2.11 Action by Consent. Any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee of the Board of Directors
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent to the action in writing, and the written consents are
filed with the minutes of proceedings of the Board or committee.
2.12 Removal. Subject to the rights of the holders of Preferred Stock to
elect directors under circumstances specified in a resolution of the Board,
adopted pursuant to the provisions of the Certificate of Incorporation or these
By-Laws establishing such series, and further subject to the respective rights
of holders of Voting Stock and Class B Common Stock to remove Class A Directors
and Class B Directors as provided in the Certificate of Incorporation, any
director may be removed from office only for cause by the affirmative vote of
the holders of at least eighty percent (80%) of the Voting Power of the Voting
Stock (as defined in the Certificate of Incorporation), voting together as a
single class.
2.13 Compensation of Directors. Directors may be paid such compensation for
their services and such reimbursement for expenses of attendance at meetings as
the Board of Directors may from time to time determine. No such payment shall
preclude any director from serving the corporation or any of its parent or
subsidiary corporations in any other capacity and receiving compensation for
such service.
ARTICLE 3 - Committees of the Board
-----------------------------------
3.1 Other Committees. In addition to the Executive Steering Committee
provided for in the Certificate of Incorporation, the Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more other
committees, each such committee to consist of one or more of the directors of
the corporation. The Board may designate one or more directors as alternate
members of any such committee, who may replace any absent or disqualified member
at any meeting of the committee. In the absence or disqualification of a member
of any such committee, the member or members of the committee present at any
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors
and subject to the provisions of the General Corporation Law of the State of
Delaware, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the corporation
and may authorize the seal of the corporation to be affixed to all papers which
may require it. Each such committee shall keep minutes and make such reports as
the Board of Directors may from time to time request.
3.2 Action by Consent; Participation by Telephone, Video or Similar
Equipment. Unless the Board shall otherwise provide, any action required or
permitted to be taken by any committee may be taken without a meeting if all
members of the committee consent in writing to the adoption of a resolution
authorizing the action. The resolution and the written consents thereto by the
members of the committee shall be filed with the minutes of the proceedings of
the committee. Unless the Board shall otherwise provide, any one or more members
of any such committee may participate in any meeting of the committee by means
of conference telephone, video or similar communications equipment or any other
forms of communication as may be authorized from time to time under the Delaware
General Corporation Law, by means of which all persons participating in the
meeting can hear each other. Participation by such means shall constitute
presence in person at a meeting of the committee.
ARTICLE 4 - Officers
--------------------
4.1 Enumeration. The officers of the corporation shall consist of a
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including a Chairman of the
Board (subject to the approval procedures of Article FIFTH, Clause (g)(i) of the
Certificate of Incorporation), a Vice-Chairman of the Board, and one or more
Vice Presidents, Assistant Treasurers, and Assistant Secretaries. The Board of
Directors may appoint such other officers as it may deem appropriate.
4.2 Election. Subject to the approval procedures of Article FIFTH, Clause
(g)(i) of the Certificate of Incorporation, the President, Treasurer and
Secretary shall be elected annually by the Board of Directors at its first
meeting following the annual meeting of stockholders. Other officers may be
appointed by the Board of Directors at such meeting or at any other meeting.
4.3 Qualification. No officer need be a stockholder. Any two or more
offices may be held by the same person.
4.4 Tenure. Except as otherwise provided by law, by the Certificate of
Incorporation or by these By-Laws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.
4.5 Resignation and Removal. Any officer may resign by delivering his
written resignation to the corporation at its principal office or to the
President or Secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event.
Any officer may be removed at any time, with or without cause, by vote of a
majority of the entire number of directors then in office.
Except as the Board of Directors may otherwise determine, no officer who
resigns or is removed shall have any right to any compensation as an officer for
any period following his resignation or removal, or any right to damages on
account of such removal, whether his compensation be by the month or by the year
or otherwise, unless such compensation is expressly provided in a duly
authorized written agreement with the corporation.
4.6 Vacancies. The Board of Directors may fill any vacancy occurring
in any office for any reason and may, in its discretion, leave
unfilled for such period as it may determine any offices other than those of
President, Treasurer and Secretary. Each such successor shall hold office for
the unexpired term of his predecessor and until his successor is elected and
qualified, or until his earlier death, resignation or removal.
4.7 Chairman of the Board and Vice-Chairman of the Board. Subject to the
approval procedures of Article FIFTH, Clause (g)(i) of the Certificate of
Incorporation, the Board of Directors shall appoint a Chairman of the Board and
shall designate the Chairman of the Board as Chief Executive Officer. The
Chairman of the Board shall perform such duties and possess such powers as are
assigned to him by the Board of Directors. If the Board of Directors appoints a
Vice-Chairman of the Board, he shall, in the absence or disability of the
Chairman of the Board, perform the duties and exercise the powers of the
Chairman of the Board and shall perform such other duties and possess such other
powers as may from time to time be vested in him by the Board of Directors.
4.8 President. The President shall, subject to the direction of the Board
of Directors, have general charge and supervision of the business of the
corporation. Unless otherwise provided by the Board of Directors, he shall
preside at all meetings of the stockholders and, if he is a director, at all
meetings of the Board of Directors. The President shall perform such other
duties and shall have such other powers as the Board of Directors may from time
to time prescribe.
4.9 Vice Presidents. Any Vice President shall perform such duties and
possess such powers as the Board of Directors or the President may from time to
time prescribe. In the event of the absence, inability or refusal to act of the
President, the Vice President (or if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors) shall perform the
duties of the President and when so performing shall have all the powers of and
be subject to all the restrictions upon the President. The Board of Directors
may assign to any Vice President the title of Executive Vice President, Senior
Vice President or any other title selected by the Board of Directors.
4.10 Secretary and Assistant Secretaries. The Secretary shall perform such
duties and shall have such powers as the Board of Directors or the President may
from time to time prescribe. In addition, the Secretary shall perform such
duties and have such powers as are incident to the office of the secretary,
including without limitation the duty and power to give notices of all meetings
of stockholders and special meetings of the Board of Directors, to attend all
meetings of stockholders and the Board of Directors and keep a record of the
proceedings, to maintain a stock ledger and prepare lists of stockholders and
holders of Units and their addresses as required, to be custodian of corporate
records and the corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such powers
as the Board of Directors, the President or the Secretary may from time to time
prescribe. In the event of the absence, inability or refusal to act of the
Secretary, the Assistant Secretary (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any meeting
of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
4.11 Treasurer and Assistant Treasurers. The Treasurer shall perform such
duties and shall have such powers as may from time to time be assigned to him by
the Board of Directors or the President. In addition, the Treasurer shall
perform such duties and have such powers as are incident to the office of
treasurer, including without limitation the duty and power to keep and be
responsible for all funds and securities of the corporation, to deposit funds of
the corporation in depositories selected in accordance with these By-Laws, to
disburse such funds as ordered by the Board of Directors, to make proper
accounts of such funds, and to render as required by the Board of Directors
statements of all such transactions and of the financial condition of the
corporation.
The Assistant Treasurers shall perform such duties and possess such powers
as the Board of Directors, the President or the Treasurer may from time to time
prescribe. In the event of the absence, inability or refusal to act of the
Treasurer, the Assistant Treasurer (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors), shall
perform the duties and exercise the powers of the Treasurer.
4.12 Salaries. Officers of the corporation shall be entitled to such
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.
ARTICLE 5 - Capital Stock
-------------------------
5.1 Issuance of Stock. Subject to the approval procedures of Article FIFTH,
Clauses (f)(ii) and (g)(i) of the Certificate of Incorporation, unless otherwise
voted by the stockholders and subject to the provisions of the Certificate of
Incorporation, the whole or any part of any unissued balance of the authorized
capital stock of the corporation or the whole or any part of any unissued
balance of the authorized capital stock of the corporation held in its treasury
may be issued, sold, transferred or otherwise disposed of by vote of the Board
of Directors in such manner, for such consideration and on such terms as the
Board of Directors may determine.
5.2 Certificates of Stock. Every holder of stock of the corporation shall
be entitled to have a certificate, in such form as may be prescribed by law and
by the Board of Directors, certifying the number and class of shares owned by
him in the corporation. Each such certificate shall be signed by, or in the name
of the corporation by, the Chairman or Vice-Chairman, if any, of the Board of
Directors, or the President or a Vice President, and the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation. Any or all of the signatures on the certificate may be a facsimile.
Each certificate for shares of stock which are subject to any restriction
on transfer pursuant to the Certificate of Incorporation, the By-Laws,
applicable securities laws or any agreement among any number of shareholders or
among such holders and the corporation shall have conspicuously noted on the
face or back of the certificate either the full text of the restriction or a
statement of the existence of such restriction.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of each certificate representing shares of such
class or series of stock, provided that in lieu of the foregoing requirements
there may be set forth on the face or back of each certificate representing
shares of such class or series of stock a statement that the corporation will
furnish without charge to each stockholder who so requests a copy of the full
text of the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications limitations or restrictions of such preferences and/or
rights.
5.3 Transfers. Except as otherwise established by rules and regulations
adopted by the Board of Directors, and subject to applicable law, shares of
stock may be transferred on the books of the corporation by the surrender to the
corporation or its transfer agent of the certificate representing such shares
properly endorsed or accompanied by a written assignment or power of attorney
properly executed, and with such proof of authority or the authenticity of
signature as the corporation or its transfer agent may reasonably require.
Except as may be otherwise required by law, by the Certificate of Incorporation
or by these By-Laws, the corporation shall be entitled to treat the record
holder of stock as shown on its books as the owner of such stock for all
purposes, including the payment of dividends and the right to vote with respect
to such stock, regardless of any transfer, pledge or other disposition of such
stock until the shares have been transferred on the books of the corporation in
accordance with the requirements of these By-Laws.
5.4 Lost, Stolen or Destroyed Certificates. The corporation may issue a new
certificate of stock in place of any previously issued certificate alleged to
have been lost, stolen, or destroyed, upon such terms and conditions as the
Board of Directors may prescribe, including the presentation of reasonable
evidence of such loss, theft or destruction and the giving of such indemnity as
the Board of Directors may require for the protection of the corporation or any
transfer agent or registrar.
5.5 Record Date. The Board of Directors may fix in advance a date as a
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders or to express consent (or dissent) to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 nor less than 10 days before
the date of such meeting, nor more than 10 days after the date of adoption of a
record date for a written consent without a meeting, nor more than 60 days prior
to any other action to which such record date relates.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is necessary, shall be the date on which the
first written consent is properly delivered to the corporation. The record date
for determining stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating to such purpose.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
ARTICLE 6 - General Provisions
------------------------------
6.1 Fiscal Year. Except as from time to time otherwise designated by the
Board of Directors, the fiscal year of the corporation shall begin on the first
day of January in each year and end on the last day of December in each year.
6.2 Corporate Seal. The corporate seal shall be in such form as shall be
approved by the Board of Directors.
6.3 Waiver of Notice. Whenever any notice whatsoever is required to be
given by law, by the Certificate of Incorporation or by these By-Laws, a waiver
of such notice either in writing signed by the person entitled to such notice or
such person's duly authorized attorney, or by telegraph, cable or any other
available method, whether before, at or after the time stated in such waiver, or
the appearance of such person or persons at such meeting in person or by proxy,
shall be deemed equivalent to such notice.
6.4 Voting of Securities. Except as the directors may otherwise designate,
the President or Treasurer may waive notice of, and act as, or appoint any
person or persons to act as, proxy or attorney-in-fact for this corporation
(with or without power of substitution) at, any meeting of stockholders or
shareholders of any other corporation or organization, the securities of which
may be held by this corporation.
6.5 Evidence of Authority. A certificate by the Secretary, or an Assistant
Secretary, or a temporary Secretary, as to any action taken by the stockholders,
directors, a committee or any officer or representative of the corporation shall
as to all persons who rely on the certificate in good faith be conclusive
evidence of such action.
6.6 Certificate of Incorporation. All references in these By-Laws to the
Certificate of Incorporation shall be deemed to refer to the Restated
Certificate of Incorporation of the corporation, as amended and in effect from
time to time.
6.7 Severability. Any determination that any provision of these By- Laws is
for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these By-Laws.
6.8 Pronouns. All pronouns used in these By-Laws shall be deemed to refer
to the masculine, feminine or neuter, singular or plural, as the identity of the
person or persons may require.
ARTICLE 7 - Amendments
----------------------
Subject to the approval procedures in Article FIFTH, Clause (g)(i) of the
Certificate of Incorporation, the Board may from time to time make, amend,
supplement or repeal these By-Laws by vote of a majority of the Board; provided,
however, that the stockholders may change or amend or repeal any provision of
these By-Laws by each of: (a) the affirmative vote of the holders of a majority
of the Voting Stock (as defined in the Certificate of Incorporation), voting as
one class; and (b) if a Class B Director is then entitled to be a member of the
Executive Steering Committee, by the affirmative vote of the holders of a
majority of the Class B Common Stock, voting separately as a class. In addition
to and not in limitation of the foregoing, these By-Laws or any of them may be
amended or supplemented in any respect at any time, either: (i) at any meeting
of stockholders, provided that any amendment or supplement proposed to be acted
upon at any such meeting shall have been described or referred to in the notice
of such meeting; or (ii) at any meeting of the Board, provided that any
amendment or supplement proposed to be acted upon at any such meeting shall have
been described or referred to in the notice of such meeting or an announcement
with respect thereto shall have been made at the last previous Board meeting,
and provided further that no amendment or supplement adopted by the Board shall
vary or conflict with any amendment or supplement adopted by the stockholders.
<PAGE>
(Exhibit F)
FORM OF
REGISTRATION RIGHTS AGREEMENT
Dated as of ., 1999
by and among
Prodigy Communications Corporation
SBC Communications Inc.
and
SBC Internet Communications, Inc.
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of ., 1999, by and among Prodigy Communications Corporation, a Delaware
corporation ("Prodigy"), SBC Communications Inc. a Delaware corporation ("SBC")
and SBC Internet Communications, Inc., a Delaware corporation and an indirect
wholly owned subsidiary of SBC ("SBC Sub").
RECITALS
WHEREAS, Prodigy, Prodigy Transition Corporation, a Delaware corporation
and a wholly owned subsidiary of Prodigy, Prodigy Communications Limited
Partnership, a Delaware limited partnership, SBC and SBC Sub have entered into
an Investment, Issuance, Contribution and Assumption Agreement, dated as of
November 19, 1999 (the "Investment Agreement"); and
WHEREAS, pursuant to the Investment Agreement, SBC Sub received SBC Units
(as defined in the Investment Agreement), which are exchangeable into
Registrable Securities (as defined below) in accordance with the Restated
Certificate of Incorporation (as defined below), and the Investment Share (as
defined in the Investment Agreement), which is convertible into a Registrable
Security in accordance with the Restated Certificate of Incorporation; and
WHEREAS, Prodigy has agreed to provide the registration rights set forth in
this Agreement;
NOW THEREFORE, in consideration of the mutual covenants and undertakings
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and subject to and on the terms
and conditions herein set forth, the parties hereto agree as follows:
1. Definitions.
Capitalized terms used but not defined in this Agreement shall have the
respective meanings assigned to such terms in the Investment Agreement. As used
in this Agreement, the following capitalized terms shall have the following
meanings:
"Amended and Restated By-Laws" means the Amended and Restated By-Laws of
Prodigy as adopted on ., 1999.
"Class A Common Shares" shall mean the shares of Class A Common Stock, par
value $.01 per share, of Prodigy.
"Demand Registration" shall have the meaning set forth in Section 2(a)
hereof.
"Demand Registration Statement" shall have the meaning set forth in Section
2(a) hereof.
"Effective Time" shall mean the date on which the SEC declares a
Registration Statement effective or on which such Registration Statement
otherwise becomes effective.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Indemnified Person" shall have the meaning set forth in Section 6(a)
hereof.
"Investment Agreement" shall have the meaning set forth in the Recitals.
"NASD Rules" shall mean the Rules of the National Association of Securities
Dealers, Inc., as amended from time to time.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
"Piggyback Registration" shall have the meaning set forth in Section 3(a)
hereof.
"Prodigy" shall have the meaning set forth in the Preamble.
"Proposed Registration" shall have the meaning set forth in Section 3(a)
hereof.
"Prospectus" shall mean the prospectus (including, without limitation, any
preliminary prospectus, any final prospectus and any prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Securities Act)
included in a Registration Statement, as amended or supplemented by any
prospectus supplement with respect to the terms of the offering of any portion
of the Registrable Securities covered by such Registration Statement and by all
other amendments and supplements to such prospectus, including all material
incorporated by reference in such prospectus and all documents filed after the
date of such prospectus by Prodigy under the Exchange Act and incorporated by
reference therein.
"Registration Expenses" shall have the meaning set forth in Section 5(a)
hereof.
"Registrable Securities" shall mean the Class A Common Shares issued to
SBC, SBC Sub or any direct or indirect transferee of SBC or SBC Sub upon
conversion of shares of Class B Common Stock or in exchange for Units, from time
to time, together with any other Class A Common Shares owned by SBC, SBC Sub or
such transferee, provided that a security ceases to be a Registrable Security
when it is no longer a Restricted Security.
"Registration Statement" shall mean any registration statement of Prodigy
which covers Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including pre- and post-effective amendments, and all
exhibits and all material incorporated by reference in such registration
statement.
"Restated Certificate of Incorporation" means the Restated Certificate of
Incorporation of Prodigy as filed on ., 1999 with the Secretary of State of the
state of Delaware pursuant to the Delaware General Corporation Law.
"Restricted Security" shall mean any security unless and until:
(i) a registration statement with respect to the sale of such security
shall have been declared effective under the Securities Act and such security
shall have been disposed of in accordance with such registration statement,
(ii) it is distributed to the public pursuant to Rule 144 (or any similar
provision then in force) under the Securities Act,
(iii) the provisions of Section 7(b) hereof apply, or
(iv) such security shall have been otherwise transferred pursuant to an
applicable exemption under the Securities Act, new certificates for such
security not bearing a legend restricting further transfer shall have been
delivered by Prodigy and such security shall be freely transferable to the
public without registration under the Securities Act.
"SBC" shall have the meaning set forth in the Preamble.
"SBC Sub" shall have the meaning set forth in the Preamble.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"SEC" shall mean the Securities and Exchange Commission.
"underwritten", "underwritten registration", "underwritten offering" or
"underwritten registered offering" shall mean a registration in which securities
of Prodigy are sold to an underwriter for re-offering to the public pursuant to
an effective Registration Statement.
2. Demand Registrations.
(a) Notice. SBC or SBC Sub may at any time make a written request to
Prodigy that Prodigy file a registration statement (a "Demand Registration
Statement") registering for offer and sale all or a part of its Registrable
Securities with the SEC under and in accordance with provisions of the
Securities Act (a "Demand Registration"). All requests made pursuant to this
paragraph will specify the aggregate number of the Registrable Securities to be
registered and will also specify the intended methods of disposition thereof.
(b) Restrictions. Each Demand Registration Statement shall be filed as soon
as possible but in no event later than 30 days (which time period may be
extended at the option of Prodigy for up to one hundred twenty (120) days no
more than one time in any calendar year if the Board of Directors of Prodigy
provides written notice (accompanied by a resolution of the Board setting forth
the following) to SBC and/or SBC Sub, as the case may be, that it has determined
that the filing of a Demand Registration Statement would require Prodigy to
disclose material non-public information, the disclosure of which Prodigy's
Board of Directors believes would be materially harmful to Prodigy and its
stockholders at that time) after the date SBC and/or SBC Sub, as the case may
be, makes the written request for registration under the preceding paragraph, so
long as Registrable Securities are still outstanding at each such time. Prodigy
shall not be required to effect more than two Demand Registrations pursuant to
this Section 2 in any calendar year.
(c) Effectiveness. Prodigy agrees to use its best efforts to cause each
such Demand Registration Statement to be declared effective by the SEC within 45
calendar days after filing, and to keep it continuously effective for a period
of 120 days following the dates on which each such Demand Registration Statement
is declared effective or until all Registrable Securities included therein have
been sold, if earlier.
(d) Priority of Securities in Demand Registrations. In connection with any
underwritten Demand Registration, if the managing underwriter or underwriters
advise Prodigy in writing that, in its or their reasonable opinion, the
inclusion of the number of securities proposed to be registered exceeds the
number which can be sold in such offering, Prodigy will include in such
registration the number of securities which, in the opinion of such underwriter
or underwriters, can be sold as follows: (i) first, the Registrable Securities
requested to be included in such Demand Registration by SBC and/or SBC Sub, as
the case may be; (ii) second, the Registrable Securities requested to be
included in such Demand Registration, pro rata among the holders of Registrable
Securities which have requested their Registrable Securities to be included
therein; (iii) third, any Class A Common Shares Prodigy proposes to sell; and
(iv) fourth, other Class A Common Shares requested to be included in such Demand
Registration.
(e) Selection of Underwriters. SBC and/or SBC Sub, as the case may be,
shall have the right, with respect to any Registration Statement to be filed as
a result of a Demand Registration, to determine whether such registration shall
be underwritten or not and to select any managing underwriter or underwriters to
administer the offering, which managing underwriter or underwriters will be of
nationally recognized standing and which will be reasonably acceptable to
Prodigy.
3. Piggyback Registration Rights.
(a) Rights to Piggyback. Subject to the last sentence of this paragraph,
whenever Prodigy proposes to file a registration statement under the Securities
Act (a "Proposed Registration") with respect to any proposed public offering by
Prodigy or by any holders of Class A Common Shares (or securities convertible
into or exchangeable or exercisable for Class A Common Shares) and the
registration form to be used may be used for the registration of the Registrable
Securities (a "Piggyback Registration"), Prodigy will give prompt written notice
to SBC and SBC Sub of its intention to effect such a registration and will,
subject to Section 3(b) below, include in such Piggyback Registration all
Registrable Securities with respect to which Prodigy has received written
request for inclusion therein within 15 days after receipt of Prodigy's notice.
Registrable Securities with respect to which such requests for registration have
been received will be registered by Prodigy and offered to the public pursuant
to this Section 3 on the same terms and subject to the same conditions
applicable to the registration in a Proposed Registration of Class A Common
Shares to be sold by Prodigy or by persons selling under such Proposed
Registration. Holders of Registrable Securities will not be entitled to include
Class A Common Shares pursuant to this Section 3(a) in any Registration
Statement pertaining to the registration of any securities of Prodigy in
connection with mergers, acquisitions, exchange offers, subscription offers,
dividend reinvestment plans or stock options or other employee benefit plans.
(b) Priority on Piggyback Registrations. In connection with an underwritten
Piggyback Registration, if the managing underwriter or underwriters advise
Prodigy in writing that, in its or their reasonable opinion, the inclusion of
the number of securities proposed to be registered exceeds the number which can
be sold in such offering, Prodigy will include in such registration the number
of securities which, in the opinion of such underwriter or underwriters, can be
sold as follows: (i) first, the Class A Common Shares Prodigy proposes to sell
or if the registration is in response to a demand registration right of a Person
(other than SBC or SBC Sub) whose registration rights exist as of the date
hereof and require such a priority, the securities that the Person(s) demanding
such registration propose or proposes to sell to the extent of such a priority,
(ii) second, the Registrable Securities requested to be included in such
registration and any securities requested to be included in such registration by
a Person who exercises its rights to have its securities included in such
registration, but only to the extent of such rights, pro rata among the holders
of Registrable Securities which have requested their Registrable Securities to
be included therein and such Persons which have requested their securities to be
included therein and (iii) third, other Class A Common Shares requested to be
included in such registration.
(c) Selection of Underwriters. If any Piggyback Registration is an
underwritten offering, Prodigy will select a managing underwriter or
underwriters to administer the offering, which managing underwriter or
underwriters will be of nationally recognized standing and which will be
reasonably acceptable to SBC.
4. Registration Procedures.
In connection with Prodigy's obligation to file Registration Statements
pursuant to Sections 2 or 3 hereof, Prodigy shall use its best efforts to effect
such registration to permit the sale of such Registrable Securities in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto Prodigy shall:
(a) before filing a Registration Statement or Prospectus or any amendments
or supplements thereto, including documents incorporated by reference after the
initial filing of the Registration Statement, furnish to SBC and/or SBC Sub, as
the case may be, and the managing underwriters, if any, copies of all such
documents proposed to be filed, which documents will be subject to the review of
SBC and/or SBC Sub, as the case may be, and such managing underwriters, and
Prodigy shall not file any Registration Statement or amendment thereto or any
Prospectus or any supplement thereto (including such documents incorporated by
reference) to which SBC or the managing underwriters, if any, shall reasonably
object;
(b) prepare and file with the SEC such amendments and post-effective
amendments to any Registration Statement, and such supplements to the
Prospectus, as may be reasonably requested by SBC and/or SBC Sub, as the case
may be, or any underwriter of Registrable Securities or as may be required by
the Securities Act or any rules or regulations promulgated thereunder or
otherwise necessary to keep the Registration Statement effective for the
applicable period;
(c) cause the final Prospectus as supplemented to be filed pursuant to Rule
424 under the Securities Act if then required by the Securities Act;
(d) comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
sellers thereof set forth in such Registration Statement or supplement to the
Prospectus;
(e) notify SBC and/or SBC Sub, as the case may be, and the managing
underwriters, if any, promptly, and (if requested by any such Person) confirm
such notification in writing:
(1) when the Prospectus or any Prospectus supplement or post-
effective amendment has been filed, and, with respect to the Registration
Statement or any post-effective amendment, when the same has become
effective,
(2) of any request by the SEC for amendments or supplements to
the Registration Statement or the Prospectus or for additional information,
(3) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose,
(4) of the receipt by Prodigy of any notification with respect
to the suspension of the qualification of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose, and
(5) of the happening of any event or the existence of any state
of facts that requires the making of any changes in the Registration
Statement or the Prospectus included therein so that, as of such date, such
Registration Statement and Prospectus do not contain an untrue statement of
a material fact and do not omit to state a material fact required to be
stated therein or necessary to make the statements therein (in the case of
the Prospectus, in light of the circumstances under which they were made)
not misleading (which advice shall be accompanied by an instruction to SBC
and SBC Sub to suspend the use of the Prospectus until the requisite
changes have been made);
(f) use its best efforts to prevent the issuance, and if issued to obtain
the withdrawal, of any order suspending the effectiveness of the Registration
Statement at the earliest possible time;
(g) if reasonably requested by SBC and/or SBC Sub, as the case may be, or
the managing underwriter, immediately incorporate in a Prospectus supplement or
post-effective amendment such information as SBC and/or SBC Sub, as the case may
be, and the managing underwriters agree should be included therein relating to
the sale of the Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities being sold to
such underwriters, the purchase price being paid therefor by such underwriters
and with respect to any other terms of the underwritten (or best efforts
underwritten) offering of the Registrable Securities to be sold in such
offering, including the plan of distribution therefor; and make all required
filings of such Prospectus supplement or post-effective amendment as soon as
notified of the matters to be incorporated in such Prospectus supplement or
post-effective amendment;
(h) promptly prior to the filing of any document which is to be
incorporated by reference into the Registration Statement or the Prospectus
(after initial filing of the Registration Statement) (i) provide copies of such
document to counsel to SBC and/or SBC Sub, as the case may be, and to the
managing underwriters, if any, and (ii) make Prodigy's representatives available
for discussion of such document and make such changes in such document prior to
the filing thereof as counsel for SBC and/or SBC Sub, as the case may be, or
underwriters may reasonably request;
(i) furnish to SBC and/or SBC Sub, as the case may be, and each managing
underwriter, without charge, at least one signed copy of the Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules, all documents incorporated therein by reference and
all exhibits (including those incorporated by reference);
(j) deliver to SBC and/or SBC Sub, as the case may be, and the
underwriters, if any, without charge, as many copies of the Prospectus
(including each preliminary Prospectus) and any amendment or supplement thereto
as such Persons may reasonably request; Prodigy consents (except during the
continuance of any event described in Section 4(e)(5) above) to the use of the
Prospectus and any amendment or supplement thereto by SBC and/or SBC Sub, as the
case may be, and the underwriters, if any, in connection with the offering and
sale of the Registrable Securities covered by the Prospectus and any amendment
or supplement thereto;
(k) prior to any offering of Registrable Securities pursuant to any
Registration Statement, (i) Prodigy shall register or qualify or cooperate with
SBC and/or SBC Sub, as the case may be, and its or their counsel in connection
with the registration or qualification of such Registrable Securities for offer
and sale under the securities or "blue sky" laws of such jurisdictions of or
within the United States of America as SBC or any underwriter reasonably
requests in writing, (ii) keep such registrations or qualifications in effect
and comply with such laws so as to permit the continuance of offers and sales in
such jurisdictions for so long as may be necessary to enable SBC and/or SBC Sub,
as the case may be, or the managing underwriters, if any, to complete its
distribution of Registrable Securities pursuant to a Registration Statement, and
(iii) take any and all other actions necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by the
Registration Statement; provided, however, that in no event shall Prodigy be
obligated to (i) qualify as a foreign corporation or as a dealer in securities
in any jurisdiction where it would not otherwise be required to so qualify but
for this Section 4(k) or (ii) file any general consent to service of process in
any such jurisdiction where it is not as of the date hereof so subject;
(l) cooperate with SBC and/or SBC Sub, as the case may be, and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold pursuant to the
Registration Statement, which certificates, if so required by any securities
exchange upon which any Registrable Securities are listed, shall be penned,
lithographed or engraved, or produced by any combination of such methods, on
steel engraved borders, and which certificates shall be free of any restrictive
legends and in such denominations and registered in such names as SBC and/or SBC
Sub, as the case may be, or the managing underwriters may request at least two
business days prior to the sale of Registrable Securities pursuant to the
Registration Statement;
(m) use its reasonable best efforts to cause the Registrable Securities
covered by the applicable Registration Statement to be registered with or
approved by such other governmental agencies or authorities of or within the
United States of America as may be necessary to enable SBC and/or SBC Sub, as
the case may be, or the managing underwriters, if any, to consummate the
disposition of such Registrable Securities;
(n) if any fact contemplated by Section 4(e)(5) above shall exist, promptly
prepare a supplement or post-effective amendment to the Registration Statement
or the related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of the Registrable Securities, the Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading;
provided, however, if the Board of Directors of Prodigy provides written notice
(accompanied by a resolution of the board setting forth the following) to SBC
and/or SBC Sub, as the case may be, that it has determined that it is advisable
to disclose in the Registration Statement material non-public information, the
disclosure of which Prodigy's Board of Directors believes would be materially
harmful to Prodigy and its stockholders at that time, Prodigy shall not be
required to prepare and file such amendment, supplement or document for such
period as the Board of Directors of Prodigy believes such disclosure would be
materially harmful to Prodigy; provided that such period shall be no more than
sixty calendar days. If Prodigy notifies SBC and/or SBC Sub, as the case may be,
of the occurrence of any event contemplated by Section 4(e)(5) above, each of
SBC and SBC Sub agrees, as a consequence of the inclusion of any of SBC's or SBC
Sub's Registrable Securities in the Registration Statement, to suspend the use
of the Prospectus until the requisite changes to the Prospectus have been made;
(o) use all reasonable efforts to cause the Registrable Securities covered
by the Registration Statement to be listed for quotation on the Nasdaq National
Market or other stock exchange or trading system on which the Registrable
Securities primarily trade on or prior to the Effective Time of the Registration
Statement;
(p) enter into such agreements (including an underwriting agreement in
form, scope and substance as is customary in underwritten offerings) and take
all such other actions in connection therewith as may be reasonably requested by
SBC and/or SBC Sub, as the case may be, and the managing underwriters, if any,
in order to expedite or facilitate the disposition of such Registrable
Securities and in such connection, whether or not an underwriting agreement is
entered into and whether or not the registration is an underwritten
registration:
(1) make such representations and warranties to SBC and/or SBC Sub, as
the case may be, and the underwriters, if any, in form, substance and scope
as are customarily made by issuers to underwriters in underwritten
offerings;
(2) obtain opinions of counsel to Prodigy and bring-downs of such
opinions (which counsel and opinions (in form, scope and substance) shall
be reasonably satisfactory to SBC and to the managing underwriters, if any,
and addressed to SBC and/or SBC Sub, as the case may be, and the
underwriters, if any, covering: (i) in the case of an underwritten
offering, the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably
requested by SBC and/or SBC Sub, as the case may be, and the underwriters
(it being agreed that the matters to be covered shall include, without
limitation, as of the date of the opinion and as of the Effective Time of
the Registration Statement or most recent post-effective amendment thereto,
as the case may be, a statement as to the absence from the Registration
Statement and the Prospectus, including the documents incorporated by
reference therein, of an untrue statement of a material fact or the
omission of a material fact required to be stated therein or necessary to
make the statements therein not misleading), and (ii) in the case of
offerings not involving an underwriter, the matters customarily covered in
opinions requested in the type of offering involved, and, in the case of
(i) or (ii), stating that the Registration Statement complies, as to form,
with the requirements of the Securities Act;
(3) obtain "cold comfort" letters and updates thereof from the
independent public accountants of Prodigy (and, if necessary, from the
independent public accountants of any Subsidiary of Prodigy or of any
business acquired by Prodigy for which financial statements and financial
data are, or are required to be, included in the Registration Statement)
addressed to SBC and/or SBC Sub, as the case may be, and the underwriters,
if any, such letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters by underwriters in
connection with underwritten offerings;
(4) if an underwriting agreement is entered into, the same shall set
forth in full the indemnification and contribution provisions and
procedures of Section 6 hereof with respect to all parties to be
indemnified pursuant to Section 6 hereof; and
(5) Prodigy shall deliver such documents and certificates as may be
reasonably requested by SBC and/or SBC Sub, as the case may be, and the
managing underwriters, if any, to evidence the continued validity of the
representations and warranties made pursuant to Section 4(p)(1) above and
to evidence compliance with any conditions contained in the underwriting
agreement or other agreement entered into by Prodigy.
The above shall be done at each closing under such underwriting or similar
agreement or as and to the extent required thereunder;
(q) make available for inspection by SBC and/or SBC Sub, as the case may
be, any underwriter participating in any disposition pursuant to such
Registration Statement, and any attorney or accountant retained by SBC and/or
SBC Sub, as the case may be, or such underwriter, all pertinent financial and
other records, pertinent corporate documents and properties of Prodigy and its
Subsidiaries, cause the officers, directors, agents and employees of Prodigy and
its Subsidiaries to supply all information in each case reasonably requested by
SBC and/or SBC Sub, as the case may be, or any such underwriter, attorney or
accountant in connection with the Registration Statement, provide SBC and/or SBC
Sub, as the case may be, and any such underwriter, attorney or accountant with
opportunities to discuss the business of Prodigy and its Subsidiaries with
Prodigy's officers and provide SBC and/or SBC Sub, as the case may be, and any
such underwriter, attorney or accountant with opportunities to discuss the
business of Prodigy and its Subsidiaries with the independent public accountants
who have certified Prodigy's most recent annual financial statements in each
case, as is customary for similar due diligence investigations; provided that
any records, information or documents that are designated in writing by Prodigy,
in good faith, as confidential shall be kept confidential by such Persons unless
disclosure is made in connection with a court proceeding or required by law, or
such records, information or documents become available to the public generally
or through a third party without an accompanying obligation of confidentiality;
and provided further that, if the foregoing inspection and information gathering
would otherwise disrupt Prodigy's conduct of its business, such inspection and
information gathering shall, to the greatest extent possible, be coordinated on
behalf of SBC and/or SBC Sub, as the case may be, and the other parties entitled
thereto by one counsel designated by and on behalf of SBC and/or SBC Sub, as the
case may be, and other parties;
(r) otherwise use its best efforts to comply with all applicable rules and
regulations of the SEC, and make generally available to its securityholders as
soon as practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c) under
the Securities Act), an earnings statement of Prodigy and its Subsidiaries
complying with Section 11(a) of the Securities Act and the rules and regulations
of the SEC thereunder (including, at the option of Prodigy, Rule 158);
(s) in the event that any broker-dealer registered under the Exchange Act
shall be an "affiliate" (as defined in Rule 2720(b)(1) of the NASD Rules (or any
successor provision thereto)) of Prodigy or has a "conflict of interest" (as
defined in Rule 2720(b)(7) of the NASD Rules (or any successor provision
thereto)) and such broker-dealer shall underwrite, participate as a member of an
underwriting syndicate or selling group or assist in the distribution of any
Registrable Securities covered by a Registration Statement, whether as a holder
of such Registrable Securities or as an underwriter, a placement or sales agent
or a broker or dealer in respect thereof, or otherwise, Prodigy shall assist
such broker-dealer in complying with the requirements of the NASD Rules,
including, without limitation, by (A) engaging a "qualified independent
underwriter" (as defined in Rule 2720(b)(15) of the NASD Rules (or any successor
provision thereto)) to participate in the preparation of the registration
statement relating to such Registrable Securities, to exercise usual standards
of due diligence in respect thereto and to recommend the public offering price
of such Registrable Securities, (B) indemnifying such qualified independent
underwriter to the extent of the indemnification of underwriters provided in
Section 6 hereof, and (C) providing such information to such broker-dealer as
may be required in order for such broker-dealer to comply with the requirements
of the NASD Rules;
(t) use its reasonable efforts to assist SBC and/or SBC Sub, as the case
may be, and the underwriters, if any, in marketing the Registrable Securities,
including causing its executive officers to participate in such "road show"
presentations and conference calls as may be customary in the marketing of
equity securities; provided, however, that SBC and/or SBC Sub, as the case may
be, shall cause the managing underwriters or placement agents of any Securities
to give such executives reasonable advance notice concerning the scheduling of
any such presentation or call; provided, further, that such presentations and
conference calls shall be scheduled with the understanding that the regular
responsibilities of such executive officers will take priority over any such
activities; and
(u) take all other steps necessary to effect the registration, offering and
sale of the Registrable Securities covered by the Registration Statement
contemplated hereby.
Prodigy may require SBC and/or SBC Sub, as the case may be, to furnish to
Prodigy such information regarding SBC and/or SBC Sub, as the case may be, and
the distribution of such securities as is required to be disclosed in the
Registration Statement.
Each of SBC and SBC Sub agrees by acquisition of such Registrable
Securities that, upon receipt of any notice from Prodigy of the happening of any
event of the kind described in Section 4(e)(5) hereof, SBC and/or SBC Sub, as
the case may be, will forthwith discontinue disposition of Registrable
Securities pursuant to the Registration Statement until SBC's and/or SBC Sub's,
as the case may be, receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 4(n) hereof, or until it is advised in
writing by Prodigy that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings which are incorporated
by reference in the Prospectus, and, if so directed by Prodigy, SBC and/or SBC
Sub, as the case may be, will deliver to Prodigy (at Prodigy's expense) all
copies, other than permanent file copies then in SBC's and/or SBC Sub's, as the
case may be, possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice; provided that nothing in this
paragraph shall prohibit or restrict SBC and/or SBC Sub, as the case may be,
from effecting sales or transfers otherwise than under a Registration Statement.
In the event Prodigy shall give any such notice, the time periods mentioned in
Section 2(c) hereof shall be extended by the number of days during the period
from and including the date of the giving of such notice to and including the
date when SBC and/or SBC Sub, as the case may be, either receives the copies of
the supplemented or amended prospectus contemplated by Section 4(n) hereof or is
advised in writing by Prodigy that the use of the Prospectus may be resumed.
5. Registration Expenses.
(a) All expenses incident to Prodigy's performance of, or compliance, with
this Agreement, including without limitation:
(1) all registration and filing fees (including with respect to
filings required to be made with the National Association of Securities
Dealers);
(2) fees and expenses of compliance with securities or blue sky
laws of or within the United States of America (including fees and
disbursements of counsel for the underwriters or selling holders in
connection with blue sky qualifications of the Registrable Securities and
determination of their eligibility for investment under the laws of such
jurisdictions as the managing underwriters or SBC and/or SBC Sub, as the
case may be, may designate);
(3) printing, messenger, telephone, delivery, distribution and
reproduction expenses;
(4) fees and disbursements of counsel for Prodigy and up to
$100,000 of the fees and disbursements of counsel for SBC and/or SBC Sub,
as the case may be, (including the expenses of any opinions required by or
incident to such performance) and fees and disbursements for other advisors
for SBC and/or SBC Sub, as the case may be;
(5) fees and disbursements of all independent certified public
accountants of Prodigy (including the expenses of any special audit and
"cold comfort" letters required by or incident to such performance);
(6) fees and disbursements of underwriters (excluding discounts,
commissions or fees of underwriters, selling brokers, dealer managers or
similar securities industry professionals relating to the distribution of
the Registrable Securities or legal expenses of any person other than
Prodigy, SBC and SBC Sub);
(7) fees and expenses of other Persons retained by Prodigy; and
(8) all out-of-pocket expenses and disbursements arising out of
or related to any marketing efforts undertaken pursuant to Section 4(t) of
this Agreement
(all such expenses being, herein called "Registration Expenses") will be borne
by Prodigy, regardless whether the Registration Statement becomes effective.
To the extent that any Registration Expenses are incurred, assumed or paid
by SBC or SBC Sub, or any underwriter, Prodigy shall reimburse such Person for
the full amount of the Registration Expenses so incurred, assumed or paid
promptly after receipt of a written request therefor, which shall specify in
reasonable detail the nature and amount of the Registration Expenses.
Prodigy will, in any event, pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit, rating agency
fees, the fees and expenses incurred in connection with the listing of the
securities to be registered on each securities exchange on which similar
securities issued by Prodigy are then listed and the fees and expenses of any
Person, including special experts, retained by Prodigy.
(b) In connection with each Registration Statement required hereunder,
Prodigy shall not be responsible for the payment of any transfer taxes relating
to the sale or disposition of the Registrable Securities by SBC or SBC Sub or
for any underwriting discounts and commissions attributable to the sale of
Registrable Securities by or on behalf of SBC or SBC Sub.
6. Indemnification.
(a) Indemnification by Prodigy. In the event of any registration of
securities of Prodigy under the Securities Act, Prodigy shall indemnify and hold
harmless (i) in the case of any registration of Registrable Securities
hereunder, SBC and/or SBC Sub, as the case may be, and each underwriter, selling
agent or other securities professional, if any, which facilitates the
disposition of Registrable Securities, and each of their respective officers and
directors and each Person who controls SBC and/or SBC Sub, as the case may be,
or such underwriter, selling agent or other securities professional within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
and (ii) in the case of any registration statement of Prodigy, SBC, its
directors and officers and each Person who controls SBC within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act (each such
person being sometimes referred to as an "Indemnified Person") against any
losses, claims, damages or liabilities, joint or several, to which such
Indemnified Person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (x) an untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement
under which such Registrable Securities are to be registered under the
Securities Act, or any Prospectus contained therein or furnished by Prodigy to
any Indemnified Person, or any amendment or supplement thereto, or (y) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or (z)
the failure of Prodigy to comply with applicable law or the breach by Prodigy of
this Agreement, and Prodigy hereby agrees to reimburse such Indemnified Person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that Prodigy shall not be liable to any such
Indemnified Person in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
Registration Statement or Prospectus, or amendment or supplement, in reliance
upon and in conformity with written information furnished to Prodigy by such
Indemnified Person expressly for use therein.
(b) Indemnification by SBC and any Underwriters. SBC agrees, as a
consequence of the inclusion of any of SBC's Registrable Securities in such
Registration Statement, SBC Sub agrees, as a consequence of the inclusion of any
of SBC Sub's Registrable Securities in such Registration Statement, and each
underwriter, selling agent or other securities professional, if any, which
facilitates the disposition of Registrable Securities shall agree, as a
consequence of facilitating such disposition of Registrable Securities,
severally and not jointly, to (i) indemnify and hold harmless Prodigy, its
directors, officers who sign the registration statement and each person, if any,
who controls Prodigy within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act, against any losses, claims, damages or
liabilities to which Prodigy or such other persons may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
such Registration Statement or Prospectus, or any amendment or supplement, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to Prodigy by SBC and/or SBC Sub, as the case may be, or
such underwriter, selling agent or other securities professional expressly for
use therein, and (ii) reimburse Prodigy for any legal or other expenses
reasonably incurred by Prodigy in connection with investigating or defending any
such action or claim as such expenses are incurred.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified party
under subsection (a) or (b) above of notice of the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to be made
against an indemnifying party under this Section 6 notify such indemnifying
party in writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under this Section 6. In case any such
action shall be brought against any indemnified party and it shall notify an
indemnifying party of the commencement thereof, such indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party (which consent shall
not be unreasonably withheld or delayed), be counsel to the indemnifying party),
and, after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, such indemnifying party shall not be
liable to such indemnified party under this Section 6 for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to,
or an admission of, fault, culpability or a failure to act, by or on behalf of
any indemnified party.
(d) Contribution. If the indemnification provided for in this Section 6 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the indemnified party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such indemnifying party or by such indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6(d) were determined by
pro rata allocation (even if SBC and/or SBC Sub, as the case may be, or any
underwriters, selling agents or other securities professionals or all of them
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to in this Section 6(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The obligations of SBC and/or SBC
Sub, as the case may be, and any underwriters, selling agents or other
securities professionals in this Section 6(d) to contribute shall be several in
proportion to the percentage of Registrable Securities registered or
underwritten, as the case may be, by them and not joint.
(e) Notwithstanding any other provision of this Section 6, in no event will
either (i) SBC or SBC Sub be required to undertake liability to any person under
this Section 6 for any amounts in excess of the dollar amount of the proceeds to
be received by SBC or SBC Sub, respectively, from the sale of its Registrable
Securities (after deducting any fees, discounts and commissions applicable
thereto) pursuant to any Registration Statement under which such Registrable
Securities are to be registered under the Securities Act, or (ii) any
underwriter, selling agent or other securities professional be required to
undertake liability to any person hereunder for any amounts in excess of the
discount, commission or other compensation payable to such underwriter, selling
agent or other securities professional with respect to the Registrable
Securities underwritten by it and distributed to the public.
(f) The obligations of Prodigy under this Section 6 shall be in addition to
any liability which Prodigy may otherwise have to any Indemnified Person and the
obligations of any Indemnified Person under this Section 6 shall be in addition
to any liability which such Indemnified Person may otherwise have to Prodigy.
The remedies provided in this Section 6 are not exclusive and shall not limit
any rights or remedies which may otherwise be available to an indemnified party
at law or in equity.
7. Rule 144.
(a) Prodigy covenants that it will timely file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder (or, if Prodigy is not required to
file such reports, it will, upon the request of SBC make publicly available such
information as necessary to permit sales pursuant to Rule 144 under the
Securities Act), and it will take such further action as SBC and SBC Sub may
reasonably request, all to the extent required from time to time to enable SBC
and SBC Sub to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule 144
under the Securities Act, as such Rule may be amended from time to time, or (b)
any similar rule or regulation hereafter adopted by the SEC, including providing
any legal opinions. Upon the request of SBC and/or SBC Sub, as the case may be,
Prodigy will deliver to SBC and/or SBC Sub, as the case may be, a written
statement as to whether it has complied with such information and requirements.
(b) A security ceases to be a Restricted Security when SBC or SBC Sub, as
the case may be, is permitted to sell such security to the public without
restriction pursuant to Rule 144(k) (or any similar provisions then in force),
unless in SBC's or SBC Sub's, as the case may be, reasonable judgment, after
consultation with Prodigy, an underwritten registered offering is desirable to
distribute the security. The determination as to whether SBC or SBC Sub, as the
case may be, is permitted to sell such security to the public without
restriction pursuant to Rule 144(k) (including, without limitation, the
determination as to whether SBC or SBC Sub, as the case may be, is an
"affiliate" of Prodigy, as such term is used in Rule 144), shall be made
promptly and in good faith by counsel to SBC or SBC Sub, as the case may be, and
counsel to Prodigy at such time as SBC or SBC Sub, as the case may be, seeks to
sell such security to the public pursuant to Rule 144(k). In the event that an
underwritten registered offering is deemed to be desirable by SBC or SBC Sub, as
the case may be, to distribute a security, such security shall continue to be
deemed a Restricted Security hereunder.
8. Approval for Listing.
Promptly after the date hereof and after any subsequent increase in the
number of Registrable Securities, Prodigy shall take all necessary action to
cause all of the Registrable Securities to be approved for listing, subject to
official notice of issuance, on the Nasdaq National Market or other securities
exchange or dealer quotation system on which the Class A Common Shares may then
be listed or authorized for quotation.
9. Term of Registration Rights.
The rights of SBC and SBC Sub with respect to the registration rights
granted pursuant to this Agreement shall remain in effect, subject to the terms
hereof, so long as there are Registrable Securities or securities which are
convertible or exchangeable for Registrable Securities issued and outstanding.
10. Further Agreements.
(a) The parties agree that, subject to the advance notice requirements set
forth in the Restated Certificate of Incorporation, any conversion of Class B
Common Stock or exchange of Units for Class A Common Shares shall occur, at the
option of the exchanging or converting holder, contemporaneously with the
registration of the Class A Common Shares to be received, or the consummation of
the sale of such Class A Common Shares pursuant to such registration, or at such
other time as such holder shall request in writing.
(b) Prodigy will not file any registration statement under the Securities
Act unless it shall first have given to SBC and/or SBC Sub, as the case may be,
for so long as SBC and/or SBC Sub, as the case may be, owns beneficially (as
such term is defined in the Exchange Act) 10% or more of the Common Stock (as
defined in the Restated Certificate of Incorporation) of Prodigy at the time
outstanding or is otherwise deemed to be a control person under the Securities
Act, at least 10 days' prior written notice thereof and, if so requested by SBC
and/or SBC Sub, as the case may be, within 10 days after such notice, SBC and/or
SBC Sub, as the case may be, shall have the right, at any time when, in the
reasonable judgment of SBC and/or SBC Sub, as the case may be, SBC and/or SBC
Sub, as the case may be, is or might be deemed a controlling person of Prodigy
within the meaning of the Securities Act, (a) to participate in the preparation
and filing of each such registration statement to the extent provided in Section
4 hereof; (b) to receive the documents and notices specified in Section 4 hereof
and to make the requests specified in Section 4 hereof; (c) to receive signed
copies of the documents specified in Section 4 hereof addressed to SBC and/or
SBC Sub, as the case may be; and (d) to pay the fees and disbursements of
counsel to SBC and/or SBC Sub, as the case may be, which assists in such
participation. If any such registration statement refers to SBC and/or SBC Sub,
as the case may be, by name or otherwise as the holder of any securities of
Prodigy, then SBC and/or SBC Sub, as the case may be, shall have the right (in
addition to any other rights it may have under this Agreement) to require, in
the event that such reference to SBC and/or SBC Sub, as the case may be, by name
or otherwise is not required by the Securities Act or any rules and regulations
promulgated thereunder, the deletion of the references to SBC and/or SBC Sub, as
the case may be.
11. Miscellaneous.
(a) Remedies. Each of SBC and SBC Sub, in addition to being entitled to
exercise all rights provided herein and granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. Prodigy agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) Registration Rights of Other Persons. Prodigy may grant to any Person
other than SBC and SBC Sub the right to request a registration of securities of
Prodigy under the Securities Act or the right to be included as a selling
stockholder in connection with any registration of Registrable Securities;
provided, however, that the granting of any such rights shall not conflict with
or otherwise alter any rights granted to SBC and SBC Sub hereunder. The rights
granted to SBC and SBC Sub hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of Prodigy's securities
under any other agreements.
(c) Adjustments Affecting Registrable Securities. Prodigy will not take any
action, or permit any change to occur, with respect to the Registrable
Securities which would (i) adversely affect the ability of SBC or SBC Sub to
include such Registrable Securities in a registration undertaken pursuant to
this Agreement or (ii) adversely affect the marketability of such Registrable
Securities in any such registration.
(d) Amendments and Waivers. This Agreement, including this Section 11(d),
may be amended, and waivers or consents to departures from the provisions hereof
may be given, only by a written instrument duly executed by Prodigy, SBC and SBC
Sub. Each holder of Registrable Securities outstanding at the time of any such
amendment, waiver or consent or thereafter shall be bound by any amendment,
waiver or consent effected pursuant to this Section 11(d), whether or not any
notice, writing or marking indicating such amendment, waiver or consent appears
on the Registrable Securities or is delivered to such holder.
(e) Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, registered first- class
mail, telex, telecopier, or air courier guaranteeing overnight delivery:
(1) if to SBC or SBC Sub, initially at its address at .,
Attention: ., with a copy to General Counsel, and thereafter at such other
address, notice of which is given in accordance with the provisions of this
Section 11(e); and
(2) if to Prodigy, initially at its address at ., Attention: .,
and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 11(e).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
(f) Parties in Interest; Benefits of Registration Rights. The parties to
this Agreement intend that each of SBC and SBC Sub shall be entitled to receive
the benefits of this Agreement and that each of SBC and SBC Sub shall be bound
by the terms and provisions of this Agreement by reason of its election with
respect to the Registrable Securities which are included in a Registration
Statement. All the terms and provisions of this Agreement shall be binding upon,
shall inure to the benefit of and shall be enforceable by the respective
successors and assigns of the parties hereto. In the event that any transferee
of SBC or SBC Sub shall acquire Registrable Securities, in any manner, whether
by gift, bequest, purchase, operation of law or otherwise, SBC, SBC Sub and such
transferee may, without any further writing or action of any kind, jointly
exercise the registration rights hereunder in such manner and in such proportion
as SBC and SBC Sub shall determine and, if such transferee jointly exercises
such registration rights with SBC and/or SBC Sub hereunder, such transferee
shall be conclusively deemed to have agreed to be bound by and to perform all of
the terms and provisions of this Agreement to the aforesaid extent.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to any
provisions relating to conflicts of laws.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.
(k) Survival. The respective indemnities, agreements, representations,
warranties and other provisions set forth in this Agreement or made pursuant
hereto shall remain in full force and effect, regardless of any investigation
(or any statement as to the results thereof) made by or on behalf of SBC, SBC
Sub, any director or officer of SBC or SBC Sub, any agent or underwriter, any
director, officer or partner of such agent or underwriter, or any controlling
person of any of the foregoing, and shall survive the transfer and registration
of the Registrable Securities of SBC and SBC Sub.
(l) Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by Prodigy with respect to the
Registrable Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
PRODIGY COMMUNICATIONS CORPORATION
By:___________________________
Name:
Title:
SBC COMMUNICATIONS INC.
By:___________________________
Name:
Title:
SBC INTERNET COMMUNICATIONS, INC.
By:___________________________
Name:
Title:
EXHIBIT 7
Execution Copy
- --------------------------------------------------------------------------------
STRATEGIC AND MARKETING AGREEMENT
By and Among
SBC COMMUNICATIONS INC.
SBC INTERNET COMMUNICATIONS, INC.
PRODIGY COMMUNICATIONS CORPORATION
and
PRODIGY COMMUNICATIONS LIMITED PARTNERSHIP
Dated as of November 19, 1999
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
Article I DEFINITIONS...................................................... 2
ARTICLE II MARKETING....................................................... 9
2.1 Generally............................................................. 9
2.2 Branding.............................................................. 9
2.3 Exclusivity and Limits on Exclusivity................................. 10
2.4 Marketing Commitments................................................. 11
2.5 SBC New Subscriber Marketing Payments................................. 11
2.6 Legacy Subscribers.................................................... 12
2.7 Telecommunications Services........................................... 13
2.8 DSL Preference........................................................ 15
2.9 Bundling.............................................................. 15
2.10 Access to Subscriber Information..................................... 15
2.11 Access to Arrangements............................................... 16
ARTICLE III INTELLECTUAL PROPERTY.......................................... 16
3.1 (a) License Grants................................................... 16
3.2 Portal Intellectual Property.......................................... 17
3.3 Future Products....................................................... 18
ARTICLE IV PRODUCT DEVELOPMENT; PORTAL..................................... 19
4.1 Development of Client Software........................................ 19
4.2 Prodigy Portal........................................................ 19
4.3 Product Development Details........................................... 21
ARTICLE V NETWORK SERVICES................................................. 22
5.1 SBC Preference for Network Services................................... 22
5.2 Qualifications on Preference.......................................... 22
5.3 Favored Pricing; Third Party Agreements............................... 22
5.4 Day-to-Day Business Operations of Prodigy............................. 22
5.5 Technical Assistance by SBC........................................... 23
5.6 Global Services Provider.............................................. 23
ARTICLE VI DISPUTE RESOLUTION.............................................. 23
6.1 Negotiation........................................................... 23
6.2 Arbitration........................................................... 23
ARTICLE VII ADDITIONAL AGREEMENTS.......................................... 25
7.1 Additional Agreements................................................. 25
ARTICLE VIII TERMINATION................................................... 26
8.1 Termination of Agreement.............................................. 26
ARTICLE IX REPRESENTATIONS AND WARRANTIES.................................. 27
9.1 Representations and Warranties of Prodigy and Operating Partnership... 27
9.2 Representations and Warranties of SBC and SBC Sub..................... 28
ARTICLE X MISCELLANEOUS.................................................... 29
10.1 Assignment........................................................... 29
10.2 Governing Law; Venue; Waiver of Jury Trial........................... 29
10.3 Counterparts......................................................... 29
10.4 Notices.............................................................. 30
10.5 Entire Agreement..................................................... 31
10.6 Amendment............................................................ 31
10.7 Severability......................................................... 31
10.8 Headings; Recitals................................................... 32
10.9 No Waiver of Rights.................................................. 32
10.10 Remedies Cumulative................................................. 32
10.11 No Agency........................................................... 32
10.12 No Third Party Beneficiaries........................................ 32
10.13 Force Majeure....................................................... 33
10.14 Further Assurances; Affiliates...................................... 33
10.15 Export Controls..................................................... 33
10.16 Negotiated Terms.................................................... 33
10.17 Principles Of Construction.......................................... 33
10.18 Confidentiality..................................................... 34
10.19 Taxes............................................................... 34
10.20 Treatment in Accordance with Future Transactions.................... 34
<PAGE>
STRATEGIC AND MARKETING AGREEMENT
---------------------------------
This Agreement (the "Agreement") is made as of the 19th day of November,
1999 by and among SBC Communications Inc., a Delaware corporation ("SBC"), and
SBC Internet Communications, Inc., a Delaware corporation and an indirect
wholly-owned subsidiary of SBC ("SBC Sub"), on the one hand, and Prodigy
Communications Corporation, a Delaware corporation ("Prodigy"), and Prodigy
Communications Limited Partnership, a Delaware limited partnership ("Operating
Partnership"), on the other hand. Capitalized terms used but not defined herein
shall have the meaning assigned to them in the Investment Agreement (as defined
below).
WITNESSETH:
WHEREAS, contemporaneously with the execution and delivery of this
Agreement SBC, SBC Sub, Prodigy, Prodigy Transition Corporation, a Delaware
corporation and a wholly owned subsidiary of Prodigy ("PTC"), and Operating
Partnership are entering into an Investment, Issuance, Contribution and
Assumption Agreement (the "Investment Agreement") pursuant to which, among other
things, Prodigy and PTC are contributing to Operating Partnership all of the
Prodigy Assets and Prodigy Liabilities (as such terms are defined in the
Investment Agreement); SBC Sub is contributing to Operating Partnership all of
the SBC Assets and SBC Liabilities (as such terms are defined in the Investment
Agreement); Prodigy is issuing the Investment Share (as such term is defined in
the Investment Agreement) to SBC Sub; and Operating Partnership is issuing the
SBC Units (as such term is defined in the Investment Agreement) to SBC Sub;
WHEREAS, SBC Sub wishes to provide the existing subscribers of the Internet
access services of SBC Sub, as of the Closing, with the Prodigy Service, assist
Prodigy and Operating Partnership in acquiring new subscribers for the Prodigy
Service and provide certain network and other services to Prodigy and Operating
Partnership;
WHEREAS, Prodigy, Operating Partnership, SBC and SBC Sub (each a "Party"
and collectively the "Parties") wish for Prodigy and Operating Partnership to
become a leading analog dial-up, ISDN and DSL Retail ISP Service in the United
States;
WHEREAS, the Parties desire that SBC and its Affiliates be the preferred
provider of Network Services used to Deliver the Prodigy Service.
NOW, THEREFORE, in consideration of the premises, agreements,
representations, covenants and warranties herein contained, the Parties agree as
follows.
Article I
DEFINITIONS
As used in this Agreement, the following terms will have the meaning
ascribed to them below:
"Advertisement" means an interactive advertisement, promotion, link,
banner, pointer or sponsorship.
"Affiliate" of any specified Person means any other Person that directly,
or indirectly through one or more intermediaries, Controls, is Controlled by, or
is under common Control with such specified Person. For the purposes of this
Agreement, SBC Sub is an Affiliate of SBC and each of Operating Partnership and
PTC is an Affiliate of Prodigy.
"Aggregate Subscriber Commitment" means, with respect to the three year
period commencing on the Closing Date, 1,200,000 gross additional Subscribers.
"Arbitration Notice" has the meaning set forth in Section 6.2(a).
"Assume" has the meaning set forth in the Investment Agreement.
"Average Retail Price" means the average of the monthly price that America
Online, Inc., The Microsoft Network, and Mindspring Enterprises, Inc. (or such
other Internet service providers as the Parties may agree from time to time
specifically excluding the Prodigy Service) charge their respective retail
subscribers.
"Bankruptcy and Equity Exception" has the meaning set forth in Section
9.1(a).
"Broadband" or "Broadband Access" means Internet connectivity between an
End User's location and up to and including the backbone and any GSP through DSL
access or other forms of high speed access with speeds of at least 144 kilobits
per second downstream, including connectivity by means of coaxial cable,
wireless and satellite transmissions.
"Business Day" means any day other than Saturday, Sunday or a day on which
banks in the City of New York, New York are authorized or obligated by law or
executive order to close.
"Business Plan" means the two-year operating plan of each of Prodigy and
Operating Partnership (including the then-current (i) Development Plan and (ii)
Marketing Plan) and each subsequent two-year operating plan of each of Prodigy
and Operating Partnership.
"Category I Work Products" has the meaning set forth in Section 3.3(a).
"Category II Work Products" has the meaning set forth in Section 3.3(c).
"Claim" has the meaning set forth in Section 6.1.
"Client Documentation" means the documentation included with the Commercial
Client and the Licensed Client, including any Upgrades thereto.
"Closing" has the meaning set forth in Section 3.1 of the Investment
Agreement.
"Closing Date" has the meaning set forth in Section 3.1 of the Investment
Agreement.
"Co-Brand" means a composite mark or other combination of the trademark(s),
trade name(s), service mark(s) or logo(s) of two or more Persons that is used to
identify a particular product or service.
"Commercial Client" means the English and Spanish language versions (and
other versions as agreed by SBC Sub and Operating Partnership in writing) of the
Internet browser client software utilized by Prodigy and Operating Partnership
at the Closing Date for the Apple Macintosh OS and Microsoft Windows platforms
(and other platforms as agreed by SBC Sub and Operating Partnership in writing),
in executable object-code version only, and any Upgrades or replacements thereto
in executable object-code version only, including any Third Party software
embedded therein.
"Connectivity Software" means software drivers and small applications, in
some cases unseen by the user, typically provided by Microsoft, SBC Sub, and
Third Party vendors to allow networking drivers on the user's PC to communicate
with the network being used, as mutually agreed by SBC Sub and Operating
Partnership.
"Content" means text, images, video, audio (including music included in
synchronous or timed relation with visual displays) and other data, Products,
Advertisements and software, including any modifications, upgrades, updates,
enhancements and related documentation for any of the foregoing.
"Control," including its various tenses and derivatives (such as
"Controlled"), means, with respect to any Person, the presence of one of the
following: (i) the legal, beneficial or equitable ownership, directly or
indirectly, of more than 50% of the capital or voting stock (or other ownership
or voting interest, if not a corporation) of such Person or (ii) the ability,
directly or indirectly, to direct the voting of a majority of the directors of
such Person's board of directors or, if the Person does not have a board of
directors, a majority of the positions on any similar body, whether through
appointment, voting agreement or otherwise.
"CPE" means customer premises equipment.
"Customized Client" means versions of the Licensed Client which may be
modified by or for Prodigy or Operating Partnership and are Marketed and
distributed as a part of the Prodigy Service.
"Deliver" including its various tenses and derivatives (such as
"Delivered"), means providing the Prodigy Service to Prodigy Subscribers by
making broadband or narrowband access available to such Prodigy Subscriber and
distributing the appropriate client software to such Prodigy Subscriber.
"Development Plan" has the meaning set forth in Section 4.3(a).
"Development Projects" has the meaning set forth in Section 4.3(a).
"Documentation" means the Client Documentation and Tools Documentation.
"DSL" means digital subscriber line.
"End User" means a subscriber to the Prodigy Service.
"Escalation Process" has the meaning set forth in Section 2.8(b).
"Excess Narrowband Subscriber" means, in any annual measurement period in
which SBC has procured for the Prodigy Service in excess of 300,000 gross
additional Subscribers (the "Excess Subscribers"), those Excess Subscribers that
are not receiving Broadband Access.
"Exclusivity Termination Date" means the earliest to occur of (i) a date
that is three years following the date hereof, and any successive third
anniversary of such date, at which one Party shall have delivered to the other
Party in writing at least 135 days prior to such date a notice stating that it
does not wish to continue this Agreement (as it may be amended) and (ii) the
occurrence of any Exclusivity Termination Event and the delivery by SBC of a
notice terminating its marketing exclusivity.
"Exclusivity Termination Event" means (x) any action by Prodigy or any of
its Subsidiaries that facilitates or encourages any direct or indirect
acquisition by a SBC Designated Entity of beneficial ownership of shares in
Prodigy or any of its Affiliates entitling the holder to cast 15% or more of the
votes in any election of directors in Prodigy or any of its Affiliates (other
than through the issuance of shares), (y) the occurrence of an event referred to
in Section 4.2(e)(ii), or (z) any material breach by Prodigy or Operating
Partnership of any covenant or agreement contained in this Agreement as
determined in accordance with Section 8.1(b) of this Agreement.
"Executive Steering Committee" means a special committee of the Prodigy
Board, which will be established by Prodigy in accordance with the Amended and
Restated Certificate of Incorporation and the Amended and Restated By-Laws at or
prior to the Closing and which will consist of four members, two of whom will be
selected by the SBC Directors and two of whom will be selected by Telefonos de
Mexico, S.A. de C.V. and Carso Global Telecom, S.A. de C.V. The purpose of the
Executive Steering Committee will be to evaluate certain corporate actions of
Prodigy, which will be specified in the Amended and Restated By-Laws and which
will require the approval of the Executive Steering Committee prior to being
submitted for the approval of the Prodigy Board.
"GSP" means global services provider.
"Home Page" of a Retail ISP Service means the first screen appearing to a
user accessing such Retail ISP Service, including any personalized versions of
such first screen customized by a user.
"Intellectual Property" means all (i) patents and patent applications, (ii)
copyrights and registrations thereof, (iii) mask works and registrations and
applications for registration thereof, (iv) computer software, data and
documentation, (v) know-how, manufacturing and production processes and
techniques, research and development information, copyrightable works, trade
secrets, tangible or intangible proprietary information or materials, (vi)
trademarks, service marks, trade names and applications and registrations
therefor and (vii) other proprietary rights relating to any of the foregoing.
"ISDN" means integrated service digital network.
"ISP" means Internet service provider.
"Legacy Subscribers" has the meaning set forth in Section 2.7(a).
"Licensed Client" means versions of the Commercial Client modified, in
executable object-code version only, including any Third Party software embedded
therein, by or for Prodigy or Operating Partnership to remove (including by
disabling access to, or the user interface of, without actually removing the
code for) any functionality, advertising, trademarks and other references that
would violate the exclusive rights granted to SBC in Section 2.8 of this
Agreement, unless Operating Partnership determines, with the approval of SBC,
that certain such functionality, advertising, trademarks or other references
should not be removed, together with the Licensed Connectivity.
"Licensed Connectivity" means the functionality, including drivers, data
link library, Winsock, dialers and configuration files, necessary to provide
connectivity for the Licensed Client through dial-up, local area network and
Broadband Access connections as developed by or for Prodigy or Operating
Partnership prior to the Closing Date for versions of the Licensed Client
initially developed from the Commercial Client and existing at the Closing Date,
in executable object-code version only.
"Licensed Tools" means any and all software provided by Prodigy (whether
produced by Prodigy or licensed to Prodigy by a Third Party) that facilitates
the modification (either in appearance, performance or content) of the Client
Software.
"Losses" means all direct losses, liabilities, suits, claims, costs,
expenses (including reasonable attorneys' fees) and disbursements and costs of
investigation, litigation, settlement, judgment and interest), penalties, fines,
judgments and/or damages, and in no event shall include any indirect,
consequential or special damages.
"Market," including its various tenses and derivatives (such as
"Marketed"), means, in any medium, to market, offer, advertise, promote,
distribute, register a subscriber (including fulfilling an order), or complete a
sale, as applicable given the context.
"Marketing Plan" has the meaning set forth in Section 2.1(c).
"Marks" means the Prodigy Marks and SBC Marks.
"Narrowband" or "Narrowband Access" means Internet connectivity between an
End User's location up to and including the backbone and any GSP with speeds of
less than 144 kilobits per second downstream.
"Network Services" means Broadband Access and Other Network Services.
"Non-SBC Telecommunications Offering" has the meaning set forth in Section
2.8(b).
"Notice Period" has the meaning set forth in Section 6.2(a).
"Other Network Services" means all types of connectivity and transport
services required to Deliver the Prodigy Service between an End User's location
and up to and including the backbone and any GSP other than Broadband Access,
including but not limited to dial-up access, backbone, transport, and Network
Management and Integration Services.
"Participating Parties" has the meaning set forth in Section 6.1.
"Prodigy Board" means the Board of Directors as established pursuant to the
Amended and Restated Certificate of Incorporation and the Amended and Restated
By-Laws and any successor board of directors or similar governing body of
Prodigy.
"Prodigy Marks" means the trademarks, trade names, service marks and logos
set forth on Exhibit 3.1(a) hereto, together with any others adopted by Prodigy
or Operating Partnership and used for the Prodigy Service from time to time.
Operating Partnership shall notify SBC promptly in writing of any such other
Prodigy Marks.
"Prodigy Portal" means the English version of the portal currently
accessible by the public via the Internet at the URL
http://www.prodigy.com/default.html and/or such other URL or location(s) as
Prodigy or Operating Partnership may designate, including any successor or
replacement implemented by Prodigy or Operating Partnership (on its own or
through a Third Party) for such site, from time to time and all pages directly
or indirectly linked to such address to the extent controlled by Prodigy or
Operating Partnership and which include any Prodigy or Operating Partnership
branding and any successors or replacements for such address and pages.
"Prodigy Service" means all Retail ISP Services offered from time to time
by Prodigy or Operating Partnership.
"Prodigy Subscriber" means any Person that subscribes to the Prodigy
Service, either directly from Prodigy or Operating Partnership (including its
distributors) or from SBC (including its distributors).
"Performance Standards" has the meaning set forth in Section 4.2(d).
"Person" means a natural person, a corporation, a limited liability
company, a general or limited partnership, a trust, an estate, a joint venture,
any Governmental Entity, or any other entity or organization.
"Portal" means an interactive web site featuring a broad selection of
aggregated interactive Content (or navigation thereto) (e.g., an online service
or search and directory service) and/or marketing a broad selection of Products
across numerous interactive commerce categories (e.g., an online mall or other
online commerce site other than electronic yellow pages), and all functionality
included within such interactive site.
"Pre-existing Commitments" means the contracts, licenses and other
obligations or undertakings to which Prodigy and/or Operating Partnership is
subject as set forth in various Schedules to this Agreement.
"Product" means any product, good or service offered, sold, provided,
distributed, or licensed directly or indirectly through: (a) a Portal (including
through any interactive site linked to a Portal); (b) any other electronic means
directed at Prodigy Subscribers (e.g., e-mail offers); or (c) an "offline" means
(e.g., toll-free number) for receiving orders related to specific offers made
electronically to Internet users requiring purchasers to reference a specific
promotional identified or tracking code.
"Retail ISP Service" means any service for consumers and small businesses
using any transport, any speed via any device providing connectivity to the
Internet anywhere in the United States via a single IP address at any one time,
integrated with the provision of e-mail services, access to Usenet newsgroups,
chat or instant messaging and a default screen linking to an aggregation of a
broad variety of Internet based Content and excludes any Web hosting services.
"Retail Price" has the meaning set forth in Section 2.7(b).
"Smart Pages" means the Internet site at the URL http://www.SmartPages.com.
"Subscriber" means, with respect to any Retail ISP Service, a subscriber
that has remained a subscriber for at least one monthly billing cycle (excluding
any unpaid trial period) and has paid at least one monthly bill.
"SBC Brand Names" means SBC, Pacific Bell, Southwestern Bell, Nevada Bell,
Ameritech, SNET and SBC Telecom. In the event SBC initiates a national brand of
voice Telecommunications Service that utilizes a new brand name, the term "SBC
Brand Names" shall include such new brand name. SBC shall notify Prodigy
promptly in writing of any such other brand names.
"SBC Designated Entity" means AT&T, MCI Worldcom, Sprint, Microsoft,
Time-Warner, Bell Atlantic, Bellsouth, US West/Qwest and GTE and any of their
respective Affiliates and any Person in which any of such companies or
Affiliates owns a 25% or greater equity interest.
"SBC Marks" means the trademarks, trade names, service marks and logos set
forth on Exhibit 5.1(b) hereto, together with any others adopted by SBC and used
for the Prodigy Service from time to time. SBC shall notify Prodigy promptly in
writing of any such other SBC Marks.
"SBC Territory" means the states of California, Nevada, Connecticut, Texas,
Missouri, Arkansas, Oklahoma, Kansas, Illinois, Indiana, Ohio, Michigan,
Wisconsin and any other state in which SBC acquires 40% or more of the incumbent
local exchange carrier lines.
"Telecommunications Advertisement" means an Advertisement related primarily
to Telecommunications Services.
"Telecommunications Services" means any of the following products or
services: (a) long distance phone service, local phone service, wireless phone
services, paging services, and any successors thereto; (b) all current and
future ancillary services offered in conjunction with any of the services listed
in (a), including voice mail, caller ID, call waiting, call forwarding,
directory listing services, calling card services, toll calling plans and
associated CPE and any successors thereto; (c) home and business security
services, virtual private networks and associated CPE; and (d) any product or
service that emulates or replicates the foregoing utilizing an IP protocol
and/or the PSTN (including IP telephony, IP fax, unified messaging and Internet
call waiting and associated CPE).
"Third Party" means any Person other than Prodigy, Operating Partnership,
SBC Sub, SBC or any of their respective Affiliates.
"Tools Documentation" means the documentation included with the Licensed
Tools, including any Upgrades thereto.
"Traditional ISP Services" means any products or services that ISPs
traditionally make available to their end users as part of their basic ISP
offering, including Internet access, customer support, member services, billing,
e-mail, bulletin boards, newsgroups, chat, instant messaging and personal Web
space.
"Transaction Expenses" means all governmental fees, sales, use and Transfer
Taxes and charges incurred by any Party in connection with the transactions
contemplated hereby, including all related fees and charges of counsel and
financial advisors of any Party.
"Transfer Taxes" means all federal, state, local or foreign sales, use or
value-added taxes that may be imposed in connection with the transfer of assets,
together with any interest, additions or penalties with respect thereto and any
interest in respect of such additions or penalties.
"Transition Date" means the date as of which the Retail ISP Service
Delivered to at least 60% of the then-existing subscribers of the Retail ISP
Services of SBC and its Affiliates have been transferred to the Prodigy Service
in a manner such that the Home Page of the Prodigy Service is accessible by such
subscribers as contemplated by Section 2.7(c).
"Transition Plan" has the meaning set forth in Section 7.3(c).
"United States" means the 50 states of the United States of America, the
District of Columbia and the Commonwealth of Puerto Rico.
"Upgrade" means, with respect to each of the Commercial Client, Licensed
Client, and Licensed Tools, any successor version or product (irrespective of
its name) of the foregoing reflecting one or more modifications, upgrades,
updates, enhancements, patches, "bug" fixes or other improvements to the
foregoing that is: (a) generally available to end-users or (b) licensed by
Prodigy or Operating Partnership to Third Parties licensed to distribute the
Commercial Client.
"Value Added Data Services" means products or services that ISPs generally
make available to their end users other than Traditional ISP Services, including
Web hosting (shared or dedicated), associated CPE and virtual private networks.
"Wholesale Price" has the meaning set forth in Section 2.7(b).
"Work Product" means any reports, designs, computer software,
documentation, inventions, discoveries, works of authorship, and other items
made by or on behalf of a Party in providing Services, including any and all
Intellectual Property therein or with respect thereto, but expressly excluding
from the foregoing any items that are: (a) preexisting as of the Closing Date;
or (b) independently developed by or on behalf of a Party not pursuant to this
Agreement.
Article II
MARKETING
2.1 Generally. The Parties agree that following the Closing Date, Prodigy
and Operating Partnership shall have the primary responsibility for Marketing
the Prodigy Service in accordance with the terms and subject to the conditions
of this Agreement. SBC and its Affiliates shall also be entitled to Market the
Prodigy Service in accordance with the terms and subject to the conditions of
this Agreement.
(b) Prior to the Closing Date, Prodigy and SBC shall prepare an initial
Business Plan covering the period from the Closing Date through calendar year
2002. Thereafter, the Parties shall prepare not later than October 1 of the
relevant year (beginning October 1, 2001) a Business Plan for the succeeding two
years. The Business Plan shall be subject to the approval of the Executive
Steering Committee prior to being submitted for the approval of the Prodigy
Board.
(c) Prior to the Closing Date, Prodigy and SBC shall prepare an initial
marketing plan (the "Marketing Plan") covering the period from the Closing Date
through calendar year 2001 that will include, among other things, a branding
strategy consistent with Section 2.2 below, the SBC marketing commitments set
forth in Section 2.5 below and a bundling strategy. Thereafter, the Parties
shall prepare not later than October 1 of each year (beginning October 1, 2000)
a Marketing Plan for the succeeding year, which plan shall reflect the objective
of Marketing the Prodigy Service to consumers and to small businesses. The
Marketing Plan shall reflect dial-up, ISDN and DSL Retail ISP Service with a
strong preference for Marketing the Prodigy Service through DSL to the extent
available.
2.2 Branding.
(a) The Parties agree the core brand name for the Prodigy Service shall be
Prodigy, and that prior to the Closing Date they shall agree upon additional
brand name or names and logo or logos for the Prodigy Service. Such brand names
and logos shall include, unless the Parties otherwise agree, the Prodigy name
and such SBC Brand Names as are geographically appropriate for use by Prodigy.
Such branding shall be implemented in accordance with the Parties' reasonable
guidelines for the use of such Parties' Intellectual Property, as provided in
writing from time to time to each other.
(b) Notwithstanding any other term of this Agreement, following the Closing
(i) the Parties agree that any Prodigy Service Delivered to (x) a Subscriber in
the SBC Territory or (y) a Subscriber outside the SBC Territory that is either
(a) procured by SBC Sub, its Affiliates or any of its distributors of the
Prodigy Service or (b) a retail local loop voice customer of SBC or any of its
Affiliates to the extent the identification of such Subscribers is commercially
reasonable (it being understood and agreed by the Parties that identification of
such Subscribers is not currently commercially reasonable) shall always be
Co-Branded on every page in which any Prodigy or Operating Partnership brand
appears with such of the SBC Brand Names as SBC Sub may request (which brands
may vary depending upon the portion of the SBC Territory if any, in which such
Prodigy Subscriber is located); provided, that, in respect of any new states
that become part of the SBC Territory after the date hereof, each of Prodigy and
Operating Partnership shall use its reasonable best efforts to implement this
Section 2.2(b) with respect to such states as soon as practicable, and (ii) each
of Prodigy and Operating Partnership will continue such service and Co-Branding
for one year after any termination of this Agreement if requested to do so by
SBC. Such Co-Branding shall be effected in accordance with SBC's reasonable
guidelines for the use of its Intellectual Property, as provided in writing from
time to time to Prodigy and Operating Partnership.
License to Marketing Materials.
At the Closing, each of Prodigy and Operating Partnership shall grant to SBC and
its Affiliates and its distributors of Prodigy Services a non-transferable, non-
exclusive, fully-paid, royalty-free right and license to use any marketing
materials developed by Prodigy or Operating Partnership for the sole purpose of
Marketing the Prodigy Service, including the right to create derivative works
based upon such Prodigy or Operating Partnership materials; provided, that, SBC
include any proprietary rights, notices or legends included on the Prodigy or
Operating Partnership materials. SBC shall provide Prodigy and Operating
Partnership copies of all such derivative works prior to their use, and Prodigy
and Operating Partnership shall receive a non-transferable, non-exclusive,
fully- paid, royalty-free license to use such derivative works for the sole
purpose of Marketing the Prodigy Service; provided, however, that in the
event the use by SBC and its Affiliates of such derivative works is not within
Prodigy's and Operating Partnership's reasonable guidelines for the use of such
derivative works, as provided in writing from time to time to SBC, the use of
such derivative works will be subject to the consent of Prodigy and Operating
Partnership (which consent shall not be unreasonably withheld).
2.3 Exclusivity and Limits on Exclusivity. (a) Except as otherwise set
forth in this Agreement, from and after the Closing Date and continuing until
the Exclusivity Termination Date, SBC agrees that it and its Affiliates shall
exclusively Market the Prodigy Service as the only dial-up analog, ISDN and DSL
Retail ISP Service within the United States Marketed by SBC and its Affiliates
to consumers and small businesses, and for a period of one year after the
Exclusivity Termination Date, SBC shall not Market on a stand- alone basis any
other dial-up analog, ISDN or DSL Retail ISP Service within the United States to
Prodigy Subscribers; provided, however, that SBC and its Affiliates will be
permitted to engage in mass market advertising during such one-year period;
provided, further, that SBC and its Affiliates will only be subject to this
one-year restriction in the event that the Exclusivity Termination Date results
from SBC's delivery of a notice stating that it does not wish to continue this
Agreement or SBC's material breach of this Agreement. Each Party understands and
agrees that the Parties shall consult with each other with respect to new access
technologies and new Retail ISP Services over time.
(b) The exclusivity obligations set forth in Section 2.4(a) above shall not
prohibit SBC or its Affiliates from (i) taking any action to preserve and retain
Legacy Subscribers prior to their transition to the Prodigy Service, (ii)
Co-Branding with a competitive dial-up analog, ISDN or DSL Retail ISP Service
any products or services offered by SBC or its Affiliates, other than a dial-up
analog, ISDN or DSL Retail ISP Service of SBC or its Affiliates, (iii) entering
into arrangements, including agreements to provide DSL services, with
competitive Retail ISP Services pursuant to which the competitive Retail ISP
Service Markets or Delivers their service in conjunction with products or
services of SBC or its Affiliates, (iv) listing competitive Retail ISP Services
and service providers on its web sites or in its products so long as they are
not more prominent than or otherwise treated more favorably than the Prodigy
Service and assisting customers who refuse the Prodigy Service to select and
procure competitive Retail ISP Services, (v) providing any individual products
and services (other than a Portal) constituting a Retail ISP Service to a
competitor whose services and products are branded under the competitor's marks
or on a retail basis in bundles so long as such bundle does not constitute a
dial-up analog, ISDN or DSL Retail ISP Service, (vi) conducting activities as a
seller and supplier of advertising and e-commerce through any medium, including
electronic yellow pages or a Portal or (vii) Marketing any device not
manufactured by or exclusively for SBC or its Affiliates and which includes a
competitive dial-up analog, ISDN or DSL Retail ISP Service so long as such
Marketing efforts are not predominantly concentrated on the use of a dial-up
analog, ISDN or DSL Retail ISP Service or product.
2.4 Marketing Commitments. (a) Following the Closing Date, Operating
Partnership, Prodigy, SBC Sub and SBC agree to use commercially reasonable
efforts to facilitate and coordinate the Marketing of the Prodigy Service.
(b) Promptly after the execution and delivery of this Agreement, Prodigy
and SBC shall commit a Vice President level (or higher) marketing executive
empowered to make final Marketing decisions to confer with the other on
Marketing matters at least once each quarter and coordinate the Marketing
efforts, including the Marketing of bundles in accordance with Section 2.10, for
the Prodigy Service.
2.5 SBC New Subscriber Marketing Payments.
(a) Following the Closing Date, Operating Partnership shall pay SBC Sub a
one-time marketing fee in respect of each new gross additional Subscriber of the
Prodigy Service that was procured as a Subscriber by SBC, its Affiliates or its
distributors of the Prodigy Service of $40 per Narrowband Subscriber and $75 per
Broadband Subscriber. SBC Sub shall not be entitled to any payment pursuant to
this Section 2.6(a) for any Legacy Subscriber to the Retail ISP Service of SBC
or its Affiliates as of the Closing Date even if such Subscriber switches to
become a Subscriber of the Prodigy Service. The Parties agree that Prodigy and
Operating Partnership shall have the primary responsibility for service
activation and support for Subscribers procured by SBC, its Affiliates or its
distributors of the Prodigy Service and that SBC, its Affiliates and its
distributors of the Prodigy Service may refer potential subscribers to Prodigy
and Operating Partnership for service activation and support.
(b) In addition to the payments referred to in Section 2.6(a), in any
annual measurement period commencing on the Closing Date in which SBC, its
Affiliates and its distributors of the Prodigy Service in the aggregate procure
for the Prodigy Service in excess of 300,000 gross additional Subscribers,
Operating Partnership shall pay SBC Sub an additional one-time marketing fee of
$20 per new Excess Narrowband Subscriber in accordance with Section 2.6(e) of
this Agreement.
(c) If SBC, its Affiliates and its distributors of the Prodigy Service in
the aggregate procure in the three-year measurement period commencing on the
Closing Date for the Prodigy Service fewer gross additional Subscribers than
SBC's Aggregate Subscriber Commitment, SBC Sub shall pay Operating Partnership
the following amounts: in the event that SBC, its Affiliates and its
distributors of the Prodigy Service in the aggregate procure less than (i)
900,000 gross additional Subscribers, $100 times the difference between 900,000
and the number of gross additional Subscribers credited in such three-year
measurement period plus $75 million; or (ii) 1,050,000 but at least 900,000
gross additional Subscribers, $400 times the difference between 1,050,000 and
the number of gross additional Subscribers credited in the three-year
measurement period plus $15 million; or (iii) the Aggregate Subscriber
Commitment but at least 1,050,000 gross additional Subscribers, $100 times the
difference between the Aggregate Subscriber Commitment and the number of gross
additional Subscribers credited in the three-year measurement period; provided,
that, SBC Sub shall not be required to make any payment in respect of
any shortfall in the three-year measurement period except to the extent
that gross additional Subscribers procured in the three-year measurement period
by SBC, its Affiliates and its distributors of the Prodigy Service in the
aggregate were fewer than the gross additional Subscribers of the Prodigy
Service procured through all other channels excluding acquisitions by Prodigy
and Operating Partnership in such three-year measurement period in the aggregate
so long as SBC used its good faith efforts to Market the Prodigy Service.
(d) Unless SBC otherwise agrees in its sole discretion, neither SBC nor SBC
Sub shall be required to bear any one-time, up-front or other non- recurring
charges (e.g., for CPE, installation or software) and such charges shall be
borne either by Prodigy, Operating Partnership or the customer.
(e) The marketing fees described in Sections 2.6(a) and 2.6(b) above shall
be jointly calculated by Operating Partnership and SBC Sub monthly and paid to
SBC Sub quarterly.
2.6 Legacy Subscribers.
(a) Following the Closing Date, SBC Sub shall retain a direct relationship
(contractual, billing and payment) with each subscriber of SBC's Retail ISP
Services (e.g. Pacific Bell Internet, SW Bell Internet, Nevada Bell Internet,
SNET Internet, and Ameritech.net) as of the Closing Date ("Legacy Subscribers"),
all such Legacy Subscribers shall be transitioned to receive the Prodigy
Service, and Prodigy and Operating Partnership shall provide the Prodigy Service
to such Legacy Subscribers in accordance with this Section 2.7 and the
Transition Plan. All costs associated with transitioning such Legacy Subscribers
shall be borne by Operating Partnership and Prodigy. Following the Closing Date,
SBC Sub will retain responsibility for its Legacy Subscribers for billing,
including bad debt risk and contractual relationships (which SBC shall use
commercially reasonable efforts to conform with the contractual terms for
Subscribers of the Prodigy Service). Following the Closing Date, SBC shall
cooperate with Prodigy and Operating Partnership to provide, to the extent
lawful, credit card information and authorizations to Prodigy and Operating
Partnership for Legacy Subscribers or to use commercially reasonable efforts to
obtain such information and any necessary consents from Legacy Subscribers.
(b) Following the Closing Date, SBC Sub shall purchase from Operating
Partnership the Prodigy Service and resell it to Legacy Subscribers. Operating
Partnership will set the wholesale price for narrowband and broadband service
equal to (i) the weighted average price of the amounts charged by SBC and its
Affiliates to the Legacy Subscribers at retail as of the Closing Date (the
"Retail Price"); provided, that, in the event that following the Closing Date,
the Average Retail Price increases or decreases by more than ten percent (10%)
from the Average Retail Price as of the Closing Date, SBC Sub and Operating
Partnership agree to hold discussions to determine whether its is appropriate to
adjust the Retail Price, less (ii) any reasonable and necessary expenses, direct
or indirect, actually incurred by SBC Sub or its Affiliates in serving Legacy
Subscribers, such expenses to be determined in a manner consistent with SBC
Sub's historical practices and consistent with regulatory cost accounting
requirements applicable to SBC and its regulated subsidiaries (such sum, the
"Wholesale Price"). For illustrative purposes only, an example of how this
provision would be implemented in practice is attached hereto as Schedule
2.7(b)(i). SBC Sub shall pay to Operating Partnership the Wholesale Price for
each Legacy Subscriber in respect of which it is obligated to purchase from
Operating Partnership the Prodigy Service pursuant to this Section 2.7(b) on a
monthly basis so long as such Legacy Subscriber (x) is (i) a Prodigy Subscriber
during the month for which such payment is made or (ii) a subscriber on a full
or partial payment waiver pursuant to a SBC promotional offer and (y) has not
cancelled the Prodigy Service. On a quarterly basis, such monthly payments shall
be reconciled to reflect actual experience.
(c) SBC Sub shall use commercially reasonable efforts to cause the Home
Page of each dial-up Legacy Subscriber to be the start page of the Prodigy
Service on or as promptly after the Closing Date as is practicable; provided,
that, SBC Sub shall not be required to override any Legacy Subscriber's
designated start page or prohibit such overrides. SBC Sub will coordinate with
Prodigy and Operating Partnership, to the extent necessary, to implement this
Section 2.7(c).
2.7 Telecommunications Services.
(a) Subject to the Pre-existing Commitments set forth in Schedule 2.8(i) of
this Agreement, in no event following the Closing Date will the Prodigy Service
include any advertising or other promotion or product offering for a
Telecommunications Service, Value Added Data Service, electronic yellow or white
pages from any Person other than SBC or an Affiliate of SBC unless such action
complies with the requirements of Section 4.2(b) and such exclusivity would
materially disadvantage Operating Partnership (financially or competitively) as
determined in accordance with Section 2.8(b). Following the Closing Date, SBC
and its Affiliates shall not offer any Telecommunications Service, Value Added
Data Service, electronic yellow or white pages to any other Retail ISP, which is
comparable to Operating Partnership in terms of both product offerings and
number of subscribers, on terms more favorable than those offered to Operating
Partnership.
(b) In the event Prodigy or Operating Partnership wishes to include in the
Prodigy Service any such advertising or other promotion or product offering for
a Telecommunications Service, Value Added Data Service, electronic yellow or
white pages from any Person other than SBC or an Affiliate of SBC (a "Non-SBC
Telecommunications Offering") because (i) neither SBC nor any of its Affiliates
offer such Telecommunications Service, Value Added Data Service, electronic
yellow or white pages and (ii) Prodigy or Operating Partnership believes the
failure to include in the Prodigy Service any such advertising or other
promotion or other product offering would materially disadvantage Prodigy or
Operating Partnership (financially or competitively), Prodigy or Operating
Partnership shall notify SBC in writing that it wishes to include such
advertising or other promotion or product offering and such notice shall include
the terms and conditions of such advertising or other promotion or product
offering and a detailed written statement of the reasons Prodigy or Operating
Partnership believes such failure would materially disadvantage Prodigy or
Operating Partnership. In the event that SBC disagrees with Prodigy's or
Operating Partnership's belief that such failure would materially disadvantage
Prodigy or Operating Partnership (financially or competitively), representatives
of SBC and Prodigy shall meet in good faith and use commercially reasonable
efforts to resolve whether such failure would materially disadvantage Prodigy or
Operating Partnership (financially and competitively). If the disagreement is
not resolved within five Business Days, either Prodigy or SBC may request in
writing that such disagreement be referred to the SBC and Prodigy
representatives appointed pursuant to Section 2.5(b) of this Agreement, who
shall consult and negotiate with each other in good faith and, recognizing their
mutual interests, attempt to reach an agreement as to whether such failure would
materially disadvantage Prodigy or Operating Partnership (financially and
competitively). If such agreement is not reached by such representatives within
five Business Days, the disagreement will be resolved pursuant to Article VI of
this Agreement; provided, however, that for purposes of this process, any award
to be made pursuant to Article VI shall be made within one month of filing of
the Arbitration Notice notwithstanding anything to the contrary contained in
Section 6.2(f) (the foregoing process set forth in this Section 2.8(b), which
shall also be used by the Parties to resolve certain disagreements among them as
specified in the relevant provisions of this Agreement, being hereinafter
referred to as the "Escalation Process"). If SBC agrees, or if it is determined
through the Escalation Process, that Prodigy or Operating Partnership is
permitted to include in the Prodigy Service a Non-SBC Telecommunications
Offering, Prodigy in consultation and cooperation with SBC shall first use its
commercially reasonable efforts to include in the Prodigy Service a Non-SBC
Telecommunications Offering offered by a Person that is not a SBC Designated
Entity. In the event that such Non-SBC Telecommunications Offering is not
offered by a Person that is not a SBC Designated Entity, Prodigy and Operating
Partnership may include in the Prodigy Service such Non-SBC Telecommunications
Offering offered by a SBC Designated Entity so long as the term of the agreement
pursuant to which Prodigy and Operating Partnership agree to do so is limited in
its duration to one year or less or is otherwise terminable by Prodigy in its
sole discretion on 60 days' notice or less.
2.8 DSL Preference. Each of Prodigy and Operating Partnership agrees that
whenever a SBC-owned or controlled method of Broadband Access is available to a
broadband subscriber or potential subscriber, each of Prodigy and Operating
Partnership shall offer the Prodigy Service to such subscriber only through such
SBC-owned access unless the potential subscriber requests that the Prodigy
Service be Delivered via a competitive Broadband Access and refuses Prodigy's or
Operating Partnership's offer of the SBC-owned or controlled access. In areas
where SBC owned or controlled Broadband Access is not available, each of Prodigy
and Operating Partnership agrees that if DSL access is available that each of
Prodigy and Operating Partnership shall offer the Prodigy Service to broadband
subscribers only through such DSL access unless the potential broadband
subscriber requests that the Prodigy Service be delivered through a non-DSL
access and refuses Prodigy's or Operating Partnership's offer of DSL access.
Neither Prodigy nor Operating Partnership will promote any non- DSL or non-ISDN
Broadband Access; provided, that, Prodigy or Operating Partnership may offer the
Prodigy Service to broadband subscribers through cable modem access so long as
the promotion of such offer through cable modem access is appreciably less
prominent than the promotion of its offer of DSL access (e.g., such promotion of
cable modem access does not take place on the Prodigy Service's Home Page).
2.9 Bundling. The Parties acknowledge that they expect to offer the Prodigy
Service bundled with products and services of SBC and its Affiliates. SBC, SBC's
Affiliates, Prodigy and Operating Partnership each agrees to work with the other
and use commercially reasonable efforts to facilitate the creation and Marketing
by SBC and its Affiliates of such bundles and to make available products and
services for inclusion within bundles on terms, including pricing, and
conditions (taking into account volume requirements) that are not less favorable
than those offered to any unaffiliated Third Party. In respect of this Section
2.9 and other provisions in the Agreement, the Parties agree to comply with the
rules and regulations set forth in the Telecommunications Act of 1996.
2.10 Access to Subscriber Information. (a) Except to the extent prohibited
by Law or confidentiality policies of general applicability of SBC or its
Affiliates that have been communicated in writing to Prodigy and Operating
Partnership, SBC will furnish Prodigy and Operating Partnership with such
information concerning Legacy Subscribers as Prodigy and Operating Partnership
may reasonably request. Except to the extent prohibited by Law or
confidentiality policies of general applicability of Prodigy or Operating
Partnership or any of their Affiliates that have been communicated in writing to
SBC, each of Prodigy and Operating Partnership will furnish SBC with such
information concerning Prodigy Service Subscribers as SBC may reasonably
request.
(b) Except as provided in Section 4.2(b), no Party may directly or
indirectly utilize any Subscriber information in connection with the Marketing
or Delivery of any Retail ISP Service other than the Prodigy Service. Neither
Prodigy nor Operating Partnership may directly or indirectly utilize any
Subscriber information in connection with Marketing any Telecommunications
Service, Value Added Data Service, electronic yellow or white pages unless such
action complies with the requirements of Section 2.8; provided, however, that in
no event may Prodigy or Operating Partnership directly or indirectly utilize any
Subscriber information in connection with Marketing any Telecommunications
Service, Valued Added Data Service, electronic yellow or white pages of a SBC
Designated Entity.
2.11 Access to Arrangements. Following the Closing Date, each of Prodigy
and Operating Partnership shall use its respective commercially reasonable
efforts to allow SBC and Prodigy's Affiliates to have access to, participate in
and benefit from Prodigy's and Operating Partnership's purchasing and
distribution agreements including but not limited to Prodigy's and Operating
Partnership's wholesale DSL contracts.
Article III
INTELLECTUAL PROPERTY
3.1 (a) License Grants. Subject to the terms and conditions of this
Agreement, each of Prodigy and Operating Partnership hereby grants to SBC, its
Affiliates and its distributors of the Prodigy Service a non-transferable,
royalty-free, fully-paid, non-exclusive license for the term of this Agreement
to use the Prodigy Marks in the United States in connection with the
identification, rendering, operation, Marketing and Delivery of the Prodigy
Service, including the Prodigy Portal and product bundles including the Prodigy
Service. Following the Closing, neither Prodigy nor Operating Partnership shall
grant or permit to be granted any right to any SBC Designated Entity to use the
Prodigy Marks to identify, render, operate, Market or Deliver a Retail ISP
Service or any Telecommunications Services, Value Added Data Services,
electronic yellow or white pages, provided that either Prodigy or Operating
Partnership may license SBC Designated Entities to use the Prodigy Marks in
connection with any separate Prodigy Products or services (other than those that
in the aggregate constitute a Retail ISP Service) so long as the Prodigy Marks
are appreciably less prominent than the identifying marks of the Retail ISP
Service and do not create an impression of sponsorship or ownership of such
Retail ISP Service.
(b) Subject to the terms and conditions of this Agreement, at the Closing
SBC shall grant to each of Prodigy and Operating Partnership a non-
transferable, royalty-free, fully-paid, non-exclusive license for the term of
this Agreement to use the SBC Marks in the United States in connection with the
identification, rendering, operation, Marketing and Delivery of the Prodigy
Service, including the Prodigy Portal and product bundles including the Prodigy
Service. Following the Closing, SBC shall not grant or permit any Third Party to
use the SBC Marks to identify, render, operate, Market or Deliver a Retail ISP
Service in the United States, provided that SBC may license third parties to use
the SBC Marks in connection with any separate SBC products or services (other
than those that in the aggregate constitute a Retail ISP Service) so long as the
SBC Marks are appreciably less prominent than the identifying marks of the
Retail ISP Service and do not create an impression of sponsorship or ownership
of such Retail ISP Service.
(c) Following the Closing, each of SBC, its Affiliates and its distributors
of the Prodigy Service, on the one hand, and Prodigy and Operating Partnership,
on the other hand, shall enter into such agreements, with respect to usage
guidelines, quality standards, quality control monitoring and other matters as
Prodigy and Operating Partnership and SBC, respectively, may reasonably request
in order to protect their ownership interest in the Prodigy Marks and SBC Marks.
SBC and Prodigy and Operating Partnership agree that they shall, at their own
expense, bring and control legal proceedings or other actions to eliminate any
infringement, misappropriation or other violation of its respective marks and
that the other Party may not bring any such proceedings or take any such action
unless Prodigy and Operating Partnership or SBC, as the case may be, has failed
after a written request to do so to protect its interests and, in the case of
Prodigy and Operating Partnership, such failure would materially disadvantage
Prodigy or Operating Partnership (as determined in accordance with the
Escalation Process).
(d) Each of Prodigy and Operating Partnership jointly and severally
represents and warrants to SBC with respect to the Prodigy Marks and each of SBC
and SBC Sub represents and warrants to Prodigy and Operating Partnership with
respect to the SBC Marks that (i) it or its Affiliate is the sole and exclusive
owner of such marks and has the full right and authority to grant the licenses
hereunder, (ii) such Marks do not infringe the trademark, trade name, service
mark, logo or copyright rights or other intellectual property right of any Third
Party and (iii) there are not any pending or threatened material claims of
infringement, misappropriation or dilution against such marks.
(e) SBC agrees to indemnify and hold harmless Operating Partnership, its
Affiliates and permitted sublicensees, and the respective partners, directors,
officers, employees and agents of any of the foregoing from and against any and
all Losses that may be incurred by them to the extent arising out of or relating
to Third Party claims that Operating Partnership's use of the SBC Marks as
authorized or licensed by SBC hereunder infringes such Third Party's
Intellectual Property rights.
(f) Operating Partnership agrees to indemnify and hold harmless SBC, its
Affiliates and permitted sublicensees, and the respective partners, directors,
officers, employees and agents of any of the foregoing from and against any and
all Losses that may be incurred by them to the extent arising out of or relating
to Third Party claims that SBC's use of the Prodigy Marks as authorized or
licensed by Prodigy or Operating Partnership hereunder infringes such Third
Party's Intellectual Property rights.
(g) Operating Partnership and SBC recognize and agree that the Prodigy
Service, including the Prodigy Portal, and certain Internet sites of SBC and its
Affiliates, will be available globally on the Internet and accordingly agree
that each of Prodigy and Operating Partnership and SBC shall not be in breach of
their respective licenses granted hereunder as a result of access by end users
to material containing the Marks on the Internet outside of the United States,
incidental communications with persons located outside of the United States and
the unintentional dissemination of Marketing materials outside the United
States.
(h) The licenses granted under this Section 3.1 shall commence on the
Closing Date and continue for the term of this Agreement.
3.2 Portal Intellectual Property. (a) Each of Prodigy and Operating
Partnership acknowledges that ownership of all proprietary rights in and to the
SBC Content shall remain the property of SBC or its information provider,
licensor or supplier. Each of Prodigy and Operating Partnership shall include
any Intellectual Property notices, legends, symbols or labels appearing in the
SBC Content on all copies thereof in the same manner as they appear in the SBC
Content.
(b) SBC acknowledges that ownership of all proprietary rights in and to the
Prodigy Portal and Prodigy Content shall remain the property of Prodigy,
Operating Partnership or their respective information provider, licensor or
supplier.
(c) Each of Prodigy and Operating Partnership shall enter into such
agreements with respect to usage guidelines, quality standards and other matters
as SBC may reasonably request in order to protect its ownership or other
interest in the SBC Content.
3.3 Future Products.
(a) Following the Closing Date, any Work Products developed in connection
with Development Projects paid for by Prodigy or Operating Partnership
("Category I Work Product") shall be owned by and are the exclusive property of
Prodigy or Operating Partnership, except that if SBC contracts to perform a
Development Project on behalf of Prodigy or Operating Partnership, SBC shall
reserve the perpetual right to use the methods, techniques, algorithms,
knowledge, underlying design and architectural elements and reusable subroutines
contained or used in Category I Work Products developed in connection with such
Development Projects that are of general applicability, but not any actual code
included therein.
(b) For the term of this Agreement, each of Prodigy and Operating
Partnership shall grant SBC on the Closing Date an irrevocable, fully- paid
(except as expressly provided herein), worldwide, non-exclusive, transferable
license to use, reproduce (in any medium), adapt, distribute, perform, display,
modify and create derivative works of any such Category I Work Product, which
license shall include the right to grant sublicenses, such license to be
effective after final acceptance of such Category I Work Product by Prodigy or
Operating Partnership in accordance with the terms of this Agreement and any
agreement relating to a particular project; provided, that in connection with
the grant of sublicenses, SBC shall pay Prodigy or Operating Partnership, as the
case may be, on a quarterly basis not later than 30 days after the end of the
quarter in which such royalties accrue, a royalty equal to a percentage of its
revenues, net of direct costs, relating to the sublicensee's use of such
Category I Work Product, such percentage to be mutually agreed by Prodigy or
Operating Partnership, as the case may be, and SBC; provided, further, that if
Prodigy or Operating Partnership, as the case may be, and SBC are unable to
agree on such percentage, such percentage shall be determined in accordance with
the Escalation Process; provided, however, that SBC shall not grant such
sublicenses to a Retail ISP Service.
(c) To the extent SBC and Prodigy or Operating Partnership agree that SBC
shall undertake a Development Project at SBC's expense (a "Category II Work
Product") then all Work Products developed by SBC in connection with such
Development Project shall be owned by and will be the exclusive property of SBC.
In addition, to the extent SBC develops any product or service at its own
expense that would be useful for the Prodigy Service, SBC shall make such
product or service available to Prodigy and Operating Partnership, on
commercially reasonable terms not later than the time it makes such product or
service available for resale by any Third Party.
(d) For the term of this Agreement, on the Closing Date SBC shall grant to
Prodigy and Operating Partnership an irrevocable, fully-paid (except as
expressly provided herein), worldwide, non-exclusive, transferable license to
use, reproduce (in any medium), adopt, distribute, perform, display, modify and
create derivative works of such Category II Work Products and distribute such
Category II Work Products to Prodigy Subscribers, which license shall include
the right to grant sublicenses to facilitate the business of Prodigy and
Operating Partnership; provided, that in connection with the grant of
sublicenses, Prodigy or Operating Partnership, as the case may be, shall pay
SBC, on a quarterly basis not later than 30 days after the end of the quarter in
which such royalties accrue, a royalty equal to a percentage of its revenues,
net of direct costs, relating to the sublicensee's use of such Category II Work
Product, such percentage to be mutually agreed by Prodigy or Operating
Partnership, as the case may be, and SBC; provided, further, that if Prodigy or
Operating Partnership, as the case may be, and SBC are unable to agree on such
percentage, such percentage shall be determined in accordance with the
Escalation Process; provided, however, that neither Prodigy nor Operating
Partnership shall grant such sublicenses to any provider of Telecommunications
Services or its Affiliates.
Article IV
PRODUCT DEVELOPMENT; PORTAL
4.1 Development of Client Software.
(a) Licensed Client; Connectivity. Following the Closing, each of Prodigy
and Operating Partnership agrees that prior to obtaining a Commercial Client it
shall contract for the ability to remove (including by disabling access to, or
the user interface of, without actually removing the code for) functionality,
advertising, trademarks and other references from such Commercial Client,
including any Upgrades thereto, if such items would violate the exclusive rights
granted to SBC in Section 2.8 of this Agreement. In the event Operating
Partnership is unable to contract for the ability to remove such functionality,
advertising, trademarks and other references from such Commercial Client
including any Upgrades thereto, Operating Partnership shall not enter into a
contract with such Commercial Client without the prior written consent of SBC
(which consent shall not be unreasonably withheld). Operating Partnership shall
obtain Documentation to reflect the removal of such functionality from such
Commercial Client. Operating Partnership shall utilize Connectivity Software to
Deliver the Prodigy Service.
(b) Support. Operating Partnership shall provide the back-end technical
support and assistance reasonably required by SBC for the Licensed Client,
Licensed Tools and Customized Client on commercially reasonable terms.
4.2 Prodigy Portal.
(a) Provision of Prodigy Portal. The intent of the Parties is to enable
Prodigy and Operating Partnership to Deliver a Portal, within 90 days of the
Closing Date, that is comparable in respect of quality, depth of content, and
ability to generate revenue as the Portals used by other Retail ISPs and that
takes advantage of the functionality afforded by DSL access.
(b) Telecommunications and Value Added Data Services Advertisements and
Products. Following the Closing, subject to Pre-existing Commitments set forth
on Schedule 4.2(b), SBC shall have the exclusive right to sell and to place all
of the Telecommunications Advertisements and Value Added Data Services
Advertisements on the Prodigy Portal (subject to payment by SBC to Operating
Partnership of rates that are the best rates offered by Operating Partnership to
any unaffiliated Third Party for similar Advertisements on the Prodigy Portal on
a non-exclusive basis) and provide all products for the provision of
Telecommunications Services to Subscribers of the Prodigy Service except to the
extent such sale, placement or provision materially disadvantages Operating
Partnership (either financially or competitively) as determined in accordance
with the Escalation Process. Notwithstanding SBC's exclusive right to sell and
place all of the Value Added Data Services Advertisements on the Prodigy Portal
as described above, Operating Partnership may sell and place Advertisements on
the Prodigy Portal relating to Prodigy's or its Subsidiaries' Web hosting
services (shared or dedicated) that are provided directly by Prodigy or its
Subsidiaries to its customers. In the event SBC does not offer a
Telecommunications Service, Value Added Data Service, electronic yellow or white
pages which the Prodigy Board determines that Operating Partnership should
provide, Operating Partnership shall notify SBC in writing that Operating
Partnership wishes to provide such Telecommunications Service, Value Added Data
Service, electronic yellow or white pages. SBC shall have 60 days from receipt
of such notification within which to provide or procure such service on a basis
that does not materially disadvantage Operating Partnership (as determined in
accordance with the Escalation Process) relative to competitive alternatives and
if SBC fails to provide such service on such basis Operating Partnership shall
be permitted to carry such services of a Third Party; provided, that, Operating
Partnership in consultation and cooperation with SBC, shall first use its
commercially reasonable efforts to procure such services from a Person that is
not an SBC Designated Entity. In the event that Operating Partnership is unable
to procure such services from a Person that is not an SBC Designated Entity,
Operating Partnership may procure such services from an SBC Designated Entity so
long as the term of the agreement pursuant to which Operating Partnership agrees
to do so is limited to one year or less or is otherwise terminable by Prodigy in
its sole discretion on 60 days' or less notice. If SBC subsequently obtains the
ability to provide such services then, subject to the Pre-existing Commitments
set forth in Schedule 4.2(b)(i) of this Agreement or other commitments entered
into in accordance with this Section 4.2(b) after the date hereof, Operating
Partnership will give SBC an opportunity to match the terms upon which any Third
Party is providing such services and replace the Third Party as promptly as is
commercially practicable if SBC does match such terms.
(c) Distribution of Smart Pages and City Guides.
(i) Following the Closing, the Parties agree that, except as required
by the Pre-existing Commitments set forth in Schedule 4.2(b)(ii) of this
Agreement, the Prodigy Portal shall Deliver Smart Pages and any city guide
services provided by SBC or its Affiliates (at SBC's sole expense) as the
exclusive yellow and white pages and city guide offerings of the Prodigy
Portal with no sharing by SBC of revenue with Prodigy or Operating
Partnership (subject to payment by SBC to Operating Partnership of rates
that are the best rates offered by Prodigy or Operating Partnership to any
unaffiliated Third Party for the Delivery of similar services on the
Prodigy Portal on a non-exclusive basis); provided, that, the foregoing
exclusivity shall terminate to the extent and for so long as (x) Operating
Partnership determines, based on objective criteria, that Smart Pages or a
city guide, as the case may be, functionality has become inferior to
competitive products in ways that materially disadvantages Operating
Partnership (either financially or competitively) as determined in
accordance with the Escalation Process and SBC has failed to correct such
competitive or financial inferiority within six months after written notice
from Operating Partnership of such inferiority and intention to add an
additional electronic yellow or white pages or city guide or (y) neither
SBC nor any of its Affiliates are able to provide such Smart Pages or city
guide services.
(ii) Following the Closing, in no event shall the Prodigy Portal cease
to Deliver Smart Pages or any city guide services of SBC or its Affiliates
on the Prodigy Portal. The Parties agree that the operation of Smart Pages
and city guide services by SBC (including any future development as an e-
commerce mall or other functionality) shall not violate any exclusivity or
other obligations of SBC under this Agreement.
(d) Performance Standards.
Following the Closing, the Prodigy Portal must demonstrate compliance with
the following performance standards (the "Performance Standards"), to be
measured on a quarterly calendar basis. The Prodigy Portal shall comply with the
following performance standards, to be measured on a quarterly calendar basis:
(i) nonsubcriber revenue per Subscriber will be substantially equivalent to or
exceed the nonsubscriber revenue per subscriber of other competitive ISPs,
taking into account the relative size of subscriber base, access mix and other
relevant factors to be mutually determined, and (ii) the Prodigy Portal will be
accessible to Subscribers on average of at least ninety-eight (98%) of the time,
(excluding planned outages).
(e) Remedies for Failure to Meet Performance Standards.
(i) Quarterly Failure. In the event that the Performance Standards
are not met in any quarter, then representatives of Prodigy and SBC shall
meet to discuss such underperformance and seek to identify ways to improve
the performance of the Prodigy Portal. In the event that the Performance
Standards are not met in any two consecutive quarters or any two quarters
out of four consecutive quarters, then Prodigy and SBC shall meet to
develop corrective actions and Prodigy and Operating Partnership shall use
commercially reasonable efforts to implement such corrective actions.
(ii) Three Consecutive Quarters. The Prodigy Portal's failure to meet
the Performance Standard in any three or more consecutive quarters after
the Transition Date shall be an Exclusivity Termination Event.
4.3 Product Development Details.
(a) Development Plan. On or before the Closing Date (for the calendar year
of the Closing Date), and annually thereafter on a calendar year basis during
the term of this Agreement, in consultation with SBC, Operating Partnership
shall prepare and adopt a twelve month plan, which plan shall be approved by the
Prodigy Board (the "Development Plan") of the software and other development and
related integration, support and maintenance activities that desires to
undertake, and other operating services each desires to obtain from SBC or Third
Parties, in connection with the Prodigy Service during such twelve month period
which shall be implemented through individual projects (the "Development
Projects"). Each Development Plan shall be approved by the Prodigy Board prior
to the adoption and implementation of such Development Plan and shall be updated
quarterly. Each Development Plan shall include reasonable detail such as
personnel requirements, budget and description of work to be done. Once approved
by the Prodigy Board, the Development Plan may only be modified in any material
respect with the approval of the Prodigy Board, provided that Prodigy Board
approval of modifications shall not be required so long as the Development Plan
is being implemented within the budget and general strategy set forth therein.
Operating Partnership shall manage Development Projects substantially in
accordance with the Development Plan.
(b) Designation of Client Software. Following the Closing, Operating
Partnership shall have the rights to designate client software and SBC shall
provide or designate any required Connectivity Software.
(c) Similar Software. Following the Closing, subject to the restrictions
contained herein, SBC may develop software that is similar to software it has
developed for Operating Partnership provided that such software is developed
without reference to, or using any confidential information of Operating
Partnership unless otherwise agreed in writing between SBC and Operating
Partnership.
Article V
NETWORK SERVICES
5.1 SBC Preference for Network Services. Subject to the Pre-existing
Commitments set forth in Schedule 5.1(i) of this Agreement, following the
Closing, each of Prodigy and Operating Partnership shall offer SBC the first
opportunity to provide all Network Services for Delivery via analog dial-up,
ISDN and DSL of the Prodigy Service and shall, subject to Section 5.2, utilize
such Network Services provided by SBC.
5.2 Qualifications on Preference. The rights granted to SBC in Section 5.1
shall only apply to the extent SBC provides Network Services on terms that do
not materially disadvantage Prodigy or Operating Partnership (as determined in
accordance with the Escalation Process) as compared to terms available from a
Third Party and with a service quality level competitive, in the aggregate, with
that of Third Parties.
5.3 Favored Pricing; Third Party Agreements. To the best of its knowledge,
following the Closing, SBC shall always offer Network Services to Operating
Partnership at the best price that it offers such particular Network Service to
any other similarly situated non-governmental Third Party purchaser of a similar
type and quantity of such Network Services. To the extent SBC offers any Third
Party Retail ISP Service access to any cable Broadband Access networks that are
owned by Affiliates of SBC for the purpose of providing a Retail ISP Service,
following the Closing, SBC shall make such cable Broadband Access available to
Operating Partnership on at least equivalent terms and conditions. Each of
Prodigy and Operating Partnership agrees that it shall not enter into any
exclusive contracts with Third Parties for the provision of Network Services
following the Closing. Following the Closing, each of Prodigy and Operating
Partnership agrees that it shall not enter into any long-term contracts with
Third Parties for the provision of Network Services without the consent of SBC
(which consent shall not be unreasonably withheld).
5.4 Day-to-Day Business Operations of Prodigy. Subject to the Pre- existing
Commitments as set forth in Schedule 4.2(b) and Schedule 5.4(i), or as
contemplated by Section 4.2(b), following the Closing, each of Prodigy and
Operating Partnership shall use commercially reasonable efforts to acquire the
Telecommunications Services for its day-to-day business operations (other than
for the Delivery of the Prodigy Service) from SBC to the extent such
Telecommunications Services are available to be provided by SBC; provided, that,
Prodigy shall not be required to connect its current in-house security system to
SBC's security system, if any. Subject to compliance with applicable law,
following the Closing, SBC shall offer such Telecommunications Services to
Prodigy and Operating Partnership on terms that are no less favorable than those
offered by SBC to other comparable Retail ISPs.
5.5 Technical Assistance by SBC. Following the Closing, SBC shall provide
on terms at least as favorable as those offered to any other similarly situated
unaffiliated Third Party the technical support and assistance reasonably
required by Prodigy and Operating Partnership in connection with the use by
Prodigy and Operating Partnership of the Network Services.
5.6 Global Services Provider. Following the Closing, SBC shall provide
Network Services to Prodigy and Operating Partnership consistent with such SBC's
GSP obligations. Nothing in this Agreement shall require SBC to modify its
existing, or enter into new, GSP contractual arrangements. Each of Prodigy,
Operating Partnership and SBC, where required, shall comply with applicable GSP
legal requirements. Subject to applicable legal requirements, SBC agrees to
cooperate with the reasonable requests of Operating Partnership in connection
with the management of GSP relationships. Each of Prodigy and Operating
Partnership agrees that promptly after the date hereof it shall diligently
pursue the actions necessary to satisfy all applicable GSP obligations prior to
the Closing Date. Following the Closing Date, each of Prodigy and Operating
Partnership agrees that it will continue to comply with such GSP obligations, if
applicable.
Article VI
DISPUTE RESOLUTION
6.1 Negotiation. In the event of any controversy or claim arising from or
relating to this Agreement or the breach thereof (each, a "Claim"), SBC and SBC
Sub, on the one hand, and Prodigy and Operating Partnership, on the other hand,
shall use commercially reasonable efforts to resolve the Claim. To this end,
representatives (or persons to be representatives, if before the Closing) on the
Prodigy Board of parties having an interest in the Claim (collectively, the
"Participating Parties"), shall consult and negotiate with each other in good
faith and, recognizing their mutual interests, attempt to reach a just and
equitable solution satisfactory to all Participating Parties. If they do not
reach such solution within a period of 30 Business Days from the date of their
first meeting, then the Participating Parties shall commence an arbitration in
accordance with this Article VI.
6.2 Arbitration. If the Claim is not resolved by negotiation by the
conclusion of the negotiation period referred to above, such Claim shall be
resolved by final and binding arbitration administered by the American
Arbitration Association (AAA) in accordance with its Commercial Arbitration
Rules and Title 9 of the U.S. Code. Judgment on the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
(a) Any Participating Party desiring to commence arbitration shall send a
written notice (an "Arbitration Notice") to the other Participating Parties and
to the AAA describing the dispute and setting forth the matters to be resolved
by the arbitration. Within ten Business Days of the date of such notice (the
"Notice Period"), any other Participating Party may, if such Participating Party
does not agree with the description or statement of matters to be resolved, send
an Arbitration Notice to the other Participating Parties and to the AAA
describing the dispute and setting forth the matters to be resolved by the
arbitration. Within ten Business Days of the end of the Notice Period, the
Participating Parties shall, if they can agree, select an arbitrator to resolve
the dispute. In the event that the Participating Parties have not selected an
arbitrator within ten Business Days of the end of the Notice Period, then the
dispute shall be resolved by majority decision of a panel of three arbitrators,
selected by the AAA in accordance with its rules.
(b) In selecting arbitrators, the Participating Parties or the AAA shall
select persons who are experienced in and knowledgeable about the information
technology and telecommunications industries and are rendering no advice or
services to, and within the past two years have rendered no material advice or
services to, any party to this Agreement.
(c) The place of arbitration shall be New York, New York.
(d) The arbitrator(s) shall have no authority to award punitive damages or
any other damages not measured by the prevailing party's actual damages, and may
not, in any event, make any ruling, finding or award that does not conform to
the terms and conditions of this Agreement.
(e) At any time after the commencement of a proceeding hereunder, any Party
may make an application to the arbitrators seeking injunctive relief until such
time as the arbitration award is rendered or the controversy is otherwise
resolved. Any Participating Party may also apply to any court having
jurisdiction hereof at any time to seek injunctive relief until such time as the
arbitration award is rendered or the controversy is otherwise resolved.
(f) The award shall be made within four months of filing of the Arbitration
Notice, and the arbitrator(s) shall agree to comply with this schedule before
accepting appointment. However, this time limit may be extended by agreement of
the parties or by the arbitrator(s) if necessary. The failure to meet these time
limits shall not invalidate the award when rendered.
(g) Except as required by law or by regulation, or with the consent of all
parties involved in the proceeding, no party hereto shall disclose or
disseminate any information relating to a Claim or to the dispute resolution
proceedings called for hereby except for disclosure to those of its officers,
employees, accountants, attorneys and agents whose duties reasonably require
them to have access to such information.
(h) The Participating Parties in the arbitration shall share equally the
costs and expenses of the arbitration. Each Participating Party shall otherwise
bear its own fees and expenses.
Article VII
ADDITIONAL AGREEMENTS
7.1 Additional Agreements. (a) Each of Prodigy and Operating Partnership
acknowledges that the transactions contemplated by this Agreement create a
strategic relationship with SBC and in order to facilitate the fullest possible
cooperation between Prodigy and Operating Partnership, on the one hand, and SBC
and SBC Sub, on the other hand, each of Prodigy and Operating Partnership agrees
for itself and its Subsidiaries that:
(i) they shall not issue or sell, or facilitate the issuance or sale, to
any SBC Designated Entity of any equity or other voting securities of
Prodigy or any Affiliate of Prodigy, or make any investment in the
securities of or enter into any joint venture with any SBC Designated
Entity;
(ii) they shall not enter into any agreement, arrangement or
understanding with any SBC Designated Entity that includes any Co-Branding,
co-Marketing, co-funded advertising or bundling of any Prodigy or Prodigy
Affiliate name, product or service provided that the prohibitions in this
Section 7.1(a)(ii), shall not prohibit Prodigy and its Affiliates from: (y)
including the Prodigy Service in a bundle with any SBC Designated Entity
products so long as the Prodigy Service is just one of several products in
the bundle, the Prodigy Brand is used materially less prominently than that
of the SBC Designated Entity and there is no Co- Branding or co-Marketing
or co-funded advertising of the bundle or (z) agreeing to "ingredient
branding" of a unique function which requires ingredient branding as a
condition to its availability, that is competitively significant for
Operating Partnership to offer its Subscribers and which function Prodigy
or Operating Partnership has been unable to obtain after 60 days of
commercially reasonable efforts from SBC or any non-SBC Designated Entity;
and
(iii) they shall not utilize any method of Internet access (e.g., cable,
satellite or broadband wireless) obtained from any SBC Designated Entity
unless such access is non-exclusive and available (by law or otherwise) to
all Internet service providers, including Operating Partnership, on a
non-discriminatory basis on the same terms and conditions.
(b) Except as otherwise provided in Section 10.19(a), Operating Partnership
and Prodigy, on the one hand, and SBC and SBC Sub, on the other hand, shall each
bear their own Transaction Expenses.
(c) Prodigy shall, as soon as practicable after the execution and delivery
of this Agreement, prepare with SBC a transition plan (the "Transition Plan")
covering the period from the date of this Agreement through the Closing Date,
which will include, among other things, strategies consistent with this
Agreement relating to Network Services, the transitioning of the Legacy
Subscribers to the Prodigy Service, customer care services, the implementation
of interim marketing arrangements and the implementation of the Business Plan.
The Parties agree, in the context of the Transition Plan, to discuss the
feasibility of SBC's provisioning of billing services to Prodigy Subscribers
located in the SBC Territory.
Article VIII
TERMINATION
8.1 Termination of Agreement.
(a) This Agreement shall terminate upon the earliest to occur of the
following: (i) the termination of the Investment Agreement in accordance with
its terms; (ii) the mutual written consent of SBC and Prodigy by action of their
respective boards of directors to so terminate this Agreement; and (iii) the
Exclusivity Termination Date; provided, that, following the occurrence of an
event referred to in clause (x) of the definition of Exclusivity Termination
Event that SBC does not utilize to declare an Exclusivity Termination Date,
Article V shall survive until the later of the fifth anniversary of the date of
this Agreement and the second anniversary of such event.
(b) (i) In the event one Party materially breaches or fails to perform any
of its material obligations under this Agreement, the other Party (the
"Notifying Party") may notify the allegedly breaching Party (the "Receiving
Party") of such breach or failure (a "Breach Notice") and the Parties shall
first meet in good faith to try to determine whether a material breach has
occurred, and if so, an appropriate manner for correcting or otherwise
addressing such breach or failure, with a preference where appropriate for a
remedy other than termination, and establish a plan for the prevention of
similar breaches or failures in the future. The Receiving Party shall use
commercially reasonable efforts to remedy promptly any such breach or failure.
(ii) In the event the Parties disagree over whether such breach or
failure has occurred or such breach or failure is not cured within 30 days
after the Receiving Party's receipt of such breach notice, or, in the case
of a breach or failure that is not capable of being remedied, the Parties
cannot reach agreement on an appropriate manner for addressing such breach
or failure, other than termination, either of the Parties may request in
writing that such matter be referred to senior management officers of each
of the Parties for an appropriate resolution. Upon such a request, senior
management officers of each of the Parties shall meet in good faith to
determine an appropriate manner for addressing such breach or failure, with
a preference where appropriate for a remedy other than termination.
(iii) In the event such breach or failure is not cured within 30 days
after the referral of the matter to senior management officials, or, in the
case of a breach or failure that is not capable of being remedied, the
Parties cannot reach agreement on an appropriate manner for addressing such
breach or failure, other than termination, within such 30 day period, the
Notifying Party shall have the right to commence an action affirming the
existence of such breach or failure and may terminate this Agreement only
upon receipt of a final arbitral award pursuant to Article VI of this
Agreement affirming the existence of such breach or failure; provided,
however, that for purposes of this Section 8.1(b)(iii), any award to be
made pursuant to Article VI shall be made within one month of filing of the
Arbitration Notice notwithstanding anything to the contrary contained in
Section 6.2(f) of this Agreement.
(iv) Notwithstanding the foregoing, in the event that any such breach
or failure occurs again within 120 days of the Receiving Party's receipt of
a Breach Notice for the first such breach or failure, the Notifying Party
shall have the right to terminate this Agreement immediately only upon
receipt of a final arbitral award pursuant to Article VI of this Agreement
affirming the existence of such breach or failure and that such breach or
failure was material; provided, however, that for purposes of this Section
8.1(b)(iv), any award to be made pursuant to Article VI shall be made
within one month of filing of the Arbitration Notice notwithstanding
anything to the contrary contained in Section 6.2(f) of this Agreement.
Termination in accordance with Section 8.1(b)(iii) or 8.1(b)(iv) shall be
immediately effective upon the receipt by the Receiving Party of written
notice of the final arbitral award affirming the existence of such breach
or failure and termination from the Notifying Party. This Section 8.1(b)
shall not in any way limit any Party's right to seek injunctive relief or
any other remedy available at law or in equity prior to any termination of
this Agreement.
Article IX
REPRESENTATIONS AND WARRANTIES
9.1 Representations and Warranties of Prodigy and Operating Partnership.
Each of Prodigy and Operating Partnership jointly and severally hereby makes the
following representations and warranties to SBC and SBC Sub:
(a) Authorization; Enforcement. Each of Prodigy and Operating Partnership
has all requisite corporate power and authority to execute and to deliver this
Agreement and to perform its obligations under this Agreement in accordance with
its terms. Each of Prodigy and Operating Partnership has taken all necessary
action to authorize the execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby. This Agreement is a valid
and legally binding obligation of each of Prodigy and Operating Partnership,
enforceable against each of them in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles (the "Bankruptcy and Equity Exception").
(b) Compliance with Law and Obligations. The execution and delivery by each
of Prodigy and Operating Partnership of this Agreement do not and the
performance by each of Prodigy and Operating Partnership of its respective
obligations under this Agreement and the consummation by each of Prodigy and
Operating Partnership of the transactions contemplated hereby will not, violate
any provision of any law or regulation, or any existing writ or decree of any
court or Governmental Entity applicable to Prodigy or Operating Partnership, or
violate, conflict with or constitute a breach of, or a default under, the
certificate of incorporation or bylaws of Prodigy, the Amended and Restated
Certificate of Incorporation of Prodigy or the Amended and Restated By-Laws of
Prodigy or the Certificate of Limited Partnership of Operating Partnership or
the comparable governing instruments of any of their respective Subsidiaries, or
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation, modification or acceleration) (whether after the giving of notice
or the passage of time or both) under any material contract to which Prodigy or
Operating Partnership is a party or which is binding on it or its assets, and
will not result in the creation of any Lien on, or security interest in, any of
the assets or properties of Prodigy or Operating Partnership or any of their
Subsidiaries. Schedule 9.1(b) sets forth a correct and complete list of material
Contracts of Prodigy and its Subsidiaries pursuant to which consents or waivers
are or may be required prior to consummation of the transactions contemplated by
this Agreement.
(c) Consents and Approvals. All notices, reports or other filings required
to be made by Prodigy or Operating Partnership, and all consents, registrations,
approvals, permits, authorizations and orders of Governmental Entities or other
third parties required to be obtained by Prodigy or Operating Partnership, in
connection with the execution and delivery of this Agreement by each of Prodigy
and Operating Partnership, the performance by each of Prodigy and Operating
Partnership of its respective obligations under this Agreement and the
consummation by each of Prodigy and Operating Partnership of the transactions
contemplated hereby have been made or obtained.
9.2 Representations and Warranties of SBC and SBC Sub. Each of SBC and SBC
Sub jointly and severally hereby makes the following representations and
warranties to Prodigy and Operating Partnership:
(a) Authorization; Enforcement. Each of SBC and SBC Sub has all requisite
corporate power and authority to execute and deliver this Agreement and to
perform its obligations under this Agreement in accordance with its terms. Each
of SBC and SBC Sub has taken all necessary action to authorize the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby. This Agreement is a valid and legally binding obligation of each of SBC
and SBC Sub, enforceable against each of them in accordance with its terms,
subject to the Bankruptcy and Equity Exception.
(b) Compliance with Law and Obligations. The execution and delivery by each
of SBC and SBC Sub of this Agreement do not, and the performance by each of SBC
and SBC Sub of its respective obligations under this Agreement and the
consummation by each of SBC and SBC Sub of the transactions contemplated hereby
will not, violate any provision of any law or regulation, or any existing writ
or decree of any court or Governmental Entity applicable to SBC or SBC Sub, or
violate, conflict with or constitute a breach of, or a default under, the
certificate of incorporation or bylaws of SBC or SBC Sub, or result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation,
modification or acceleration) (whether after the giving of notice or the passage
of time or both) under any material Contract to which SBC or SBC Sub is a party
or which is binding on it or its assets, and will not result in the creation of
any Lien on, or security interest in, any of the assets or properties of SBC or
any of its Subsidiaries.
(c) Consents and Approvals. All notices, reports or other filings required
to be made by SBC or SBC Sub, and all consents, registrations, approvals,
permits, authorizations and orders of Governmental Entities or other third
parties required to be obtained by SBC or SBC Sub in connection with the
execution and delivery of this Agreement by each of SBC and SBC Sub, the
performance by each of SBC and SBC Sub of its respective obligations under this
Agreement and the consummation by each of SBC and SBC Sub of the transactions
contemplated hereby, have been made or obtained.
Article X
MISCELLANEOUS
10.1 Assignment. Neither this Agreement nor any rights or obligations
hereunder may be assigned by any Party without the prior written consent of the
other Parties hereto. Any attempted assignment that does not comply with this
Section 10.1 shall be void.
10.2 Governing Law; Venue; Waiver of Jury Trial. THIS AGREEMENT AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH AND SUBJECT TO THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO CONFLICTS OF LAWS PRINCIPLES.
The parties hereby irrevocably submit to the jurisdiction of the courts of
the State of New York and the Federal court of the United States of America
located in the State of New York solely in respect of the interpretation and
enforcement of the provisions of this Agreement, and hereby waive, and agree not
to assert, as a defense in any action, suit or proceeding for the interpretation
or enforcement hereof or of any such document, that it is not subject thereto or
that such action, suit or proceeding may not be brought or is not maintainable
in said courts or that the venue thereof may not be appropriate or that this
Agreement or any such document may not be enforced in or by such courts, and the
parties hereto irrevocably agree that all claims with respect to such action or
proceeding shall be heard and determined in such a New York State or Federal
court. The parties hereby consent to and grant any such court jurisdiction over
the person of such parties and over the subject matter of such dispute and agree
that mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 10.4 of this Agreement or in such
other manner as may be permitted by Law shall be valid and sufficient service
thereof.
EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 10.2.
10.3 Counterparts. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and may be executed by facsimile signature. All counterparts shall collectively
constitute one and the same Agreement.
10.4 Notices. In any case where any notice or other communication is
required or permitted to be given hereunder, such notice or communication shall
be in writing and deemed to have been duly given and delivered: (a) if delivered
in person, on the date of such delivery; (b) if sent by overnight express or
registered or certified mail (with return receipt requested), on the date of
receipt of such mail; or (c) if sent by confirmed facsimile transmission (with
answer back received), on the date of such facsimile transmission provided that
notice is also sent on the same day by one of the methods set forth in (a) or
(b) above. Such notice or other communication shall be sent to the following
address(es) (or such other address(es) as a Partner may designate from time to
time in writing):
If to SBC or SBC Sub:
James S. Kahan
Senior Vice President
Corporate Development
SBC Communications Inc.
175 East Houston Street
San Antonio, Texas 78705
Telecopy: (210) 351-5034
Telephone: (210) 351-5030
With copies, which shall not constitute notice, to:
Senior Counsel - M&A
SBC Communications Inc.
175 East Houston Street
San Antonio, Texas 78705
Telecopy: (210) 351-3488
Telephone: (210) 351-3445
Joseph B. Frumpkin, Esq.
Keith A. Pagnani, Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Telecopy: (212) 558-3588
Telephone: (212) 558-4000
If to Prodigy or Operating Partnership:
Prodigy Communications Corporation
44 South Broadway
White Plains, New York 10601
Telecopy: (914) 448-8198
Telephone: (914) 448-8000
Attention: Andrea S. Hirsch
Executive Vice President
Business Development
and General Counsel
With a copy, which shall not constitute notice, to:
David A. Westenberg, Esq.
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Telecopy: (617) 526-5000
Telephone: (617) 526-6000
10.5 Entire Agreement. The terms and conditions contained in this Agreement
(including the exhibits and/or schedules attached hereto) constitute the entire
agreement between or among the Parties relating to the subject matter of this
Agreement and shall supersede all previous communications between the Parties
with respect to the subject matter of this Agreement. No Party has entered into
this Agreement in reliance upon any representation, warranty, covenant or
undertaking of any other Party that is not set out or referred to in this
Agreement.
10.6 Amendment. Except as expressly provided otherwise in this Agreement,
this Agreement may be varied, amended or extended only by the written agreement
executed and delivered by duly authorized officers or representatives of the
respective Parties.
10.7 Severability. In the event that any provision of this Agreement is
held to be illegal, invalid or unenforceable in a final, unappealable Order or
judgment (each such provision, an "invalid provision"), then such provision
shall be severed from this Agreement and shall be inoperative, and the Parties
promptly shall negotiate in good faith a lawful, valid and enforceable provision
that is as similar to the invalid provision as may be possible and that
preserves the original intentions and economic positions of the Parties as set
forth herein to the maximum extent feasible, while the remaining provisions of
this Agreement shall remain binding on the Parties hereto. Without limiting the
generality of the foregoing sentence, in the event a change in any applicable
Law, rule or regulation makes it unlawful for a Party to comply with any of its
obligations hereunder, the Parties shall negotiate in good faith a modification
to such obligation to the extent necessary to comply with such Law, rule or
regulation that is as similar in terms to the original obligation as may be
possible while preserving the original intentions and economic positions of the
Parties as set forth herein to the maximum extent feasible.
10.8 Headings; Recitals. The descriptive headings of the articles and
sections of this Agreement and its Schedules and Exhibits and the recitals
herein are inserted for convenience only and do not constitute a part of this
Agreement.
10.9 No Waiver of Rights. No failure or delay on the part of a Party in the
exercise of any power or right hereunder shall operate as a waiver thereof. No
single or partial exercise of any right or power hereunder shall operate as a
waiver of such right or of any other right or power. The waiver by any Party of
a breach of any provision of this Agreement shall not operate or be construed as
a waiver of any other or subsequent breach hereunder. No waiver shall be
effective unless in writing signed by the waiving Party.
10.10 Remedies Cumulative. Unless expressly provided otherwise herein, all
rights and remedies granted to each Party under this Agreement are cumulative
and in addition to, and not in lieu of, any other rights or remedies otherwise
available to such Party at law or in equity.
10.11 No Agency. Each of the Parties hereto is an independent contractor
and shall have no right, power or authority to assume or create any obligation
or responsibility on behalf of any of the other Parties. This Agreement shall
not create or imply, or be construed to create or imply, any partnership,
association, agency, or joint venture between or among the Parties.
10.12 No Third Party Beneficiaries. This Agreement is entered into solely
among, and may be enforced only by, the Parties hereto. This Agreement shall not
be deemed to create any rights in any Third Parties, including suppliers,
customers and employees of any Party, or to create any obligations of a Party to
any such Third Parties.
10.13 Force Majeure. If any circumstance beyond the reasonable control of
any Party occurs which delays or renders impossible the performance of that
Party's obligations under this Agreement on the dates herein provided, such
obligation shall be postponed for such time as such performance necessarily has
had to be suspended or delayed on account thereof, provided such Party shall
notify the other Parties in writing as soon as practicable, but in no event more
than ten days, after the occurrence of such force majeure. In such event, the
Parties shall meet promptly to determine an equitable solution to the effects of
any such event, provided that such Partner who fails because of force majeure to
perform its obligations hereunder shall use commercially reasonable efforts to
implement work-arounds or otherwise minimize the length of the delay and to
resume promptly performance upon the cessation of the force majeure. Events of
force majeure shall include war, revolution, invasion, insurrection, riots, mob
violence, sabotage or other civil disorders, power outages, and acts of God;
provided, however, that, in the event that a change in any applicable Law, rule
or regulation makes it unlawful for a Party to comply with any of its
obligations hereunder and could be considered an event of force majeure, the
characterization of such change in Law, rule or regulation as an event of force
majeure shall be without prejudice to the obligations of the Parties under
Section 10.7 above.
10.14 Further Assurances; Affiliates. In addition to any other obligations
set forth in the Agreement, each Party agrees to take such action (including,
but not limited to, the execution, acknowledgment and delivery of documents) as
may reasonably be requested by the other Party for the implementation or
continuing performance of this Agreement. Unless otherwise expressly set forth
herein, any agreement by a Party to take or refrain from taking any action shall
constitute an agreement by such Party to cause each of its Subsidiaries, and to
use all reasonable best efforts to cause each of its Affiliates, to so act or
refrain from acting.
10.15 Export Controls. Each Party agrees to comply fully with all relevant
export laws and regulations of the United Sates to ensure that no information or
technical data provided pursuant to this Agreement is exported or re-exported
directly or indirectly in violation of law.
10.16 Negotiated Terms. Each Party acknowledges that the provisions of this
Agreement were negotiated to reflect an informed, voluntary allocation between
the Parties of all risks (both known and unknown) associated with the
transactions contemplated by this Agreement.
10.17 Principles Of Construction. In this Agreement and all other attached
Schedules, Exhibits or Attachments to this Agreement, unless otherwise expressly
indicated or required by the context:
(a) reference to and the definition of any document shall be deemed a
reference to such document as it may be amended, supplemented, revised, or
modified, in writing, from time to time but disregarding any amendment,
supplement, replacement or novation made in breach of this Agreement;
(b) references in this Agreement to any statute, decree or regulation
shall be construed as a reference to such statute, law, decree or
regulation as re-enacted, redesignated, amended or extended from time to
time and references herein or in this Agreement to any document or
agreement shall be deemed to include references to such document or
agreement as amended, varied, supplemented or replaced from time to time in
accordance with such document's or agreement's terms;
(c) defined terms in the singular shall include the plural and vice
versa, and the masculine, feminine or neuter gender shall include all
genders;
(d) the words "including" or "includes" shall be deemed to mean
"including without limitation" and "including but not limited to" (or
"includes without limitation" and "includes but is not limited to")
regardless of whether the words "without limitation" or "but not limited
to" actually follow the term;
(e) accounting terms used herein but not defined herein shall have
their respective meanings provided under U.S. GAAP;
(f) the words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement or its Schedules or Exhibits shall refer
to this Agreement and its Schedules and Exhibits as a whole and not to any
particular provision hereof or thereof, as the case may be; and
(g) any reference herein to a time of day means the time of day in New
York, New York.
10.18 Confidentiality. The Parties shall maintain the confidentiality of
this Agreement and of any provisions of this Agreement in accordance with any
applicable laws, rules and regulations.
10.19 Taxes.
(a) Payments. All payments under this Agreement shall be made exclusive of
any applicable taxes and shall be made free and clear of, and without reduction
for (and the payor shall be responsible for and shall indemnify the payee
against), any applicable federal, state, local or foreign sales, use or
value-added taxes pertaining to the payments under this Agreement (but
specifically excluding taxes based upon the net income of the payee). At the
payee's request, the payor shall promptly furnish the payee with receipts
evidencing the payment of any taxes referred to in the preceding sentence. The
payor and the payee shall cooperate with each other in minimizing any applicable
tax and in obtaining any exemption from or reduced rate of tax available under
any applicable law.
10.20 Treatment in Accordance with Future Transactions. Each of Prodigy and
Operating Partnership agrees that it shall provide SBC with copies of all
agreements and documentation relating to the Marketing or Delivery of a Retail
ISP Service within the United States that it enters into with any Third Party
("Third Party Agreement"). If SBC reasonably believes that any such Third Party
Agreement materially disadvantages SBC with respect to its obligations and
rights under this Agreement, SBC may request a determination, pursuant to the
Escalation Process, whether SBC has been or will be materially disadvantaged as
a result of such Third Party Agreement and seek appropriate remedies therefor.
IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to
be duly executed in its name and on its behalf, all as of the date first above
written.
SBC COMMUNICATIONS INC.
By: /s/ James S. Kahan
------------------------
Name: James S. Kahan
Title: Senior Executive Vice President --
Corporate Development
SBC INTERNET COMMUNICATIONS, INC.
By: Stephen A. McGaw
-----------------------
Name: Stephen A. McGaw
Title: President
PRODIGY COMMUNICATIONS
CORPORATION
By: /s/ Andrea S. Hirsch
------------------------
Name: Andrea S. Hirsch
Title: Executive Vice President
PRODIGY COMMUNICATIONS LIMITED
PARTNERSHIP
By: Prodigy Communications Corporation, as
general partner of Prodigy Communications
Limited Partnership
By: /s/ Andrea S. Hirsch
-----------------------
Name: Andrea S. Hirsch
Title: Executive Vice President
<PAGE>
Schedule 2.7(b)(i)
------------------
SBC Sub would receive the retail subscription fee directly from the
Subscriber. Expenses associated with the functions for which SBC Sub retains
responsibility would be netted against retail revenue to derive the wholesale
fee paid to Operating Partnership. For example:
Retail Subscription Fee (revenue
from Subscriber to SBC Sub): $18.00
Billing Expense (expense borne
by SBC Sub): (0.50)
Bad Debt Expense (2% -- expense
borne by SBC Sub): (0.36)
=======
Wholesale Subscription Fee (expense
borne by SBC Sub; revenue for Prodigy) $17.14
This example assumes that only billing and bad debt expenses are the
responsibility of SBC Sub. Other expenses of this general nature may be
incurred, however, which would affect this calculation. If any such other
expenses are incurred by SBC Sub, SBC Sub will notify Operating Partnership in
writing of these expenses prior to the time of payment by SBC Sub. In the event
Operating Partnership disagrees with SBC Sub's determination to deduct such
other expenses from the retail revenue received by SBC Sub, such expenses will
not be deducted from the retail revenue received by SBC Sub and such
disagreement will be resolved in accordance with the Escalation Process. If as a
result of the Escalation Process it is determined that such expenses should have
been deducted from the retail revenue received by SBC Sub, Operating Partnership
shall refund SBC Sub for such expenses. The figures provided in this example are
for illustrative purposes only and do not represent actual revenues and
expenses.
EXHIBIT 8
DIRECTORS AND EXECUTIVE OFFICERS
OF CARSO GLOBAL TELECOM, S.A. de C.V. and
TELEFONOS DE MEXICO, S.A. de C.V.
The name, present principal occupation or employment, and the name of any
corporation or other organization in which such employment is conducted, of each
of the directors and executive officers of Carso Global Telecom, S.A. de C.V.
("Carso") and Telefonos de Mexico, S.A. de C.V. ("Telmex") is set forth below.
Each of the directors and executive officers listed below is a citizen of
Mexico, unless otherwise indicated. An asterisk (*) indicates citizens of the
United States, a cross (+) indicates citizens of France. The business address of
each director and officer of Carso is: Insurgentes Sur 1500 Col. Pena Pobre
Tlalpan, Mexico, D.F., 14060. The business address of each director and officer
of Telmex is: Parque Via 190, Colonia Cuauhtemoc, 06599 Mexico, D.F., Mexico.
Carso Global Telecom, S.A. de C.V.
----------------------------------
Name and Business Present Principal Occupation or Employment
- ----------------- ------------------------------------------
Directors
- ---------
Carlos Slim Helu Chairman of the Board of the Carso and Telmex
Isidoro Ambe Attar Sales Director of Telmex
Fernando G. Chico Pardo President of Promecap, S.C.
Jaime Chico Pardo CEO of Telmex
Arturo Elias Ayub Regulatory Officer of Telmex
Claudio X. Gonzalez Laporte CEO and Chairman of the Board of Kimberly Clark
de Mexico
Humberto Gutierrez-Olvera CEO of Condumex
Zubizarreta
Daniel Hajj Aboumrad CEO of Radio Movil Dipsa, S.A. de C.V.
Alfredo Sanchez Alcantara President of Consorcio Red Uno, S.A. de C.V.
Gerardo Sanchez Alcantara Private Investor
Carlos Slim Domit President of Grupo Carso, S.A. de C.V.
Name and Business Present Principal Occupation or Employment
- ----------------- ------------------------------------------
Marco A. Slim Domit President of Grupo Financiero Inbursa, S.A.
de C.V.
Patricio Slim Domit President of Industrias Nacobre
Eduardo Valdes Acra Vice-President of Grupo Financiero Inbursa, S.A.
de C.V.
Andres Vasquez del Mercado Marketing Director of the Company
Executive Officers
- ------------------
Roberto Isaac Rodriguez Galvez CEO
Telefonos de Mexico, S.A. de C.V.
---------------------------------
Name and Business Present Principal Occupation or Employment
- ----------------- ------------------------------------------
Directors
- ---------
Carlos Slim Helu Chairman of the Board of the Telmex and Carso
David Antonio Ibarra Munoz Consultant
Claudio X. Gonzalez President of the Board of Kimberly Clark de
Mexico
Jaime Chico Pardo CEO of Telmex
Antonio Cosio Arino General Manager, Cia. Industrial De Tepeji Del
Rio, S.A. de C.V.
Amparo Espinosa Rugarcia Director, Centro de Documentacion y Estudios de
Mujeres, A.C.
Elmer Franco Macias President and Director, Grupo Infra, S.A.
de C.V.
Angel Losada Moreno Executive Vice-President, Gigante, S.A. de C.V.
Romulo O'Farrill Jr. Chairman and General Manager, Novedades
Editores, S.A. de C.V.
Juan Antonio Perez Simon Vice Chairman of the Board of Telmex
Name and Business Present Principal Occupation or Employment
- ----------------- ------------------------------------------
Bernardo Quintana Isaac Executive Vice-President, Empresas ICA Sociedad
Controladora, S.A. de C.V.
Carlos Slim Domit General Manager, Sanborns Hnos., S.A.
John H. Atterbury III* President and CEO, SBC International Operations
Richard C. Dietz* President, SBC International Inc. (Mexico)
Claude Benmussa+ Director of Accounting and Financial Control,
France Telecom/Resources
Pierre Fortin+ President, France Cable et Radio Mexico, S.A.
de C.V.
Michel Hirsch+ Director, International Affairs, France Telecom
J. Cliff Eason* President, SBC International
Jean-Pierre Achouche+ Director of Public Networks, France Cables et
Radio de Mexico
Thierry Zylberberg+ General Manager, France Cables et Radio de
Mexico
Bernard Perillon+ CFO, France Cables et Radio de Mexico
Executive Officers
- ------------------
Pedro Cerisola y Weber Divisional Director, Metro West Region
Rafael Mendoza Ortiz Divisional Director, Metro East Region
Gerardo Leal Garza Divisional Director, Metro South Region
Jorge L. Suategui Esquivel Divisional Director, Central Region
Jose M. Pacheco Gamboa Divisional Director, Southeast Region
Javier Coca Muniz Divisional Director, Gulf-Pacific Region
Leopoldo Muro Pico Divisional Director, Western Region
Facundo Alonso Garcia Divisional Director, Northeast Region
Raymundo Paulin Velasco Divisional Director, Northwest Region
Name and Business Present Principal Occupation or Employment
- ----------------- ------------------------------------------
Miguel Angel Vera Garcia Divisional Director, North Region
Isidoro Ambe Attar Director, Retail Marketing
B. Andres Vazquez del Mercado Director, Residential Marketing
Arturo Elias Ayub Director, Commercial, Regulations and New
Technologies
Roberto I. Rodriguez Director of International Markets
Eduardo Gomez Chibli Technical Director and Director of
Long-Distance Services
Hector Slim Seade Director of Procurement
Oscar von Hauske Solis Director of Systems and Procedures
J. Adolfo Cerezo Perez Director of Finance and Administration
Javier Elguea Solis Director of Human Resources
Sergio Medina Noriega General Counsel
