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Strategic Development And Marketing Agreement

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CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT
ASTERISKS (*) DENOTE SUCH OMISSIONS


STRATEGIC DEVELOPMENT AND MARKETING AGREEMENT


This Strategic Development and Marketing Agreement (this "Agreement") is made and entered into this 23rd day of November, 1998, by and between America Online, Inc. ("AOL") and Sun Microsystems, Inc. ("Sun").


Certain terms used in this Agreement are defined in Section 24 hereof. This agreement is confidential between the parties, provided that either party may disclose the terms of this Agreement, and any associated collateral documents, in order to comply with applicable laws and regulations, including securities laws and regulations, and further provided that either party may disclose information regarding portions of the financial provisions of this Agreement after consulting with and obtaining the approval of the other party's Executive Representative, which consent will not be unreasonably withheld or delayed. AOL and Sun hereby agree as follows:


1.0 OBJECTIVES. AOL and Sun intend to cooperate in the development and marketing of software and services in the area of electronic commerce and extended communities and connectivity ("EC(2)") to businesses worldwide. The parties intend to offer together an integrated, end-to-end solution including consumer traffic, dial-up connectivity, network services, client software, server software, computer systems, computer hardware, professional services, help desk and service and support, but, subject to the terms and conditions herein, each party would be free to offer its components in conjunction with competitive components from third-parties. As described in this Agreement, some components of such solution will be collaboratively developed, and some will be developed principally or entirely by AOL or Sun. The solution offered by the parties is expected to include traffic from AOL's multiple brands and related directory services, configurable Netcenter or AOL.Com services and information, AOL network access services, AOL instant messaging functionality, Sun support services, Sun or AOL consulting services and Netscape or AOL outsourcing services. As described in this Agreement, some components of such solution will be marketed and sold by both parties pursuant to collaborative marketing and sales plans, and some components would be marketed and sold by AOL or Sun only. The business objectives of the parties include the following:


1.1 Establish a cooperative relationship between AOL, the world's
leading internet content provider, and Sun, the world's leading network
computing platform supplier, to create and deliver the best, integrated,
end-to-end enterprise commerce solutions using, where appropriate, the
Java and Jini technology from Sun.


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1.2 Sustain and grow leadership in the browser marketplace for both
consumers and the enterprise to deeply penetrate the enterprise desktop
environment.


1.3 Accelerate revenues from merchants and build deep relationships with
top merchants by speeding their adoption of electronic commerce.


1.4 Create more value from relationships with electronic commerce
merchants and customers by *** creating new services revenues.


1.5 Sustain and grow a strong electronic commerce and enterprise
middleware software and services business, including developing a
leading commerce software and service platform that enables powerful
turnkey and customized solutions.


1.6 Sustain and grow the Sun Solaris, SPARC, Java and Jini business
technologies, as the choice for enterprises and service providers
worldwide.


1.7 *** APPROXIMATELY 3 LINES OMITTED ***


1.8 Establish and operate productive research and development,
marketing, sales and services to support this strategy.


2.0 SOFTWARE TO BE DEVELOPED. The parties intend to develop the following products:


2.1 AOL DISTRIBUTED COMMUNICATOR CLIENT. The "AOL Distributed
Communicator Client" will be a client application that will include the
fullest and most robust set of features and functions of any of the
client applications to be developed pursuant to this Section 2,***
APPROXIMATELY 2 LINES OMITTED ***. The AOL Distributed Communicator
Client *** will include the initial Release of the AOL Distributed
Communicator Client and all subsequent Releases of such application. ***
APPROXIMATELY 9 LINES OMITTED ***


2.2 THIRD PARTY COMMUNICATOR CLIENT. The "Third Party Communicator
Client" will be a client application.*** APPROXIMATELY 6 LINES OMITTED
*** The specification of the features and functions included in the
Third Party Communicator Client may be modified from time to time by
AOL, after consultation with Sun. The Third Party Communicator Client
*** will include the initial Release of the Third Party Communicator
Client and all subsequent Releases of such application that are
commercially released during the term of this Agreement.


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2.3 OEM COMMUNICATOR CLIENT. The "OEM Communicator Client" will be a
client application incorporating a browser component, with features and
functions as set forth in the Collaborative Work Plans. The OEM
Communicator Client will include the initial Release of such application
and all subsequent Releases of such application that are commercially
released during the term of this Agreement.


2.4 NEW BROWSER. The "New Browser" will consist of a basic browser with
functions for browsing, rendering display of and accessing the Internet,
including enabling access to a portal, *** APPROXIMATELY 4 LINES OMITTED
***. The functions and features to be included in the New Browser will
be described in more detail in the Collaborative Work Plans. The New
Browser will include the initial Release of such application and all
subsequent Releases of such application that are commercially released
during the term of this Agreement. *** APPROXIMATELY 3 LINES OMITTED ***


2.5 NETWORK APPLICATION AND SERVER SOFTWARE. The "Network Application
and Server Software" will consist of network applications and server
software as specified in the Collaborative Development Work Plans, and
will include, without limitation, an application server, email server,
commerce server and directory software, as well as other software
specified in the Collaborative Development Work Plans.


2.6 COMMENCEMENT OF DEVELOPMENT. No collaborative development work shall
commence pursuant to this Agreement, and Sun shall not be provided with
access to any Netscape or AOL code, prior to the Closing Date.


3.0 DEVELOPMENT RESPONSIBILITIES.


3.1 AOL DISTRIBUTED COMMUNICATOR CLIENT. AOL will develop the AOL
Distributed Communicator Client, *** APPROXIMATELY 4 LINES OMITTED ***


3.2 THIRD PARTY COMMUNICATOR CLIENT. AOL will, with assistance from Sun,
develop the Third Party Communicator Client, *** APPROXIMATELY 6 LINES
OMITTED ***


3.3 OEM COMMUNICATOR CLIENT. AOL will, with assistance from Sun, develop
the OEM Communicator Client,*** APPROXIMATELY 6 LINES OMITTED ***


3.4 NEW BROWSER. AOL will, with assistance from Sun, develop the New
Browser, *** APPROXIMATELY 8 LINES OMITTED ***


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3.5 NETWORK APPLICATION AND SERVER SOFTWARE. AOL and Sun will
collaboratively develop the Network Application and Server Software, ***
APPROXIMATELY 3 LINES OMITTED ***. AOL and Sun shall cooperate and
coordinate their development efforts so that, to the extent commercially
reasonable, the Client Software shall be compatible with and support the
interfaces, protocols and APIs of the Network Application and Server
Software in the Product Suites and vice versa.


3.6 JAVA TECHNOLOGY. The parties agree to use reasonable efforts to
modify the existing Netscape browser to develop the New Browser to
incorporate, for each System Platform, the most current release
available of the complete Java Runtime Environment (JRE) on all System
Platforms for which Sun has a JRE available. The parties agree to use
all reasonable efforts to ensure that Java code executing on the JRE so
invoked has the same access privileges and capabilities as Java code
running native on the operating system and can display user interfaces
within the browser window consistent with the user experience of running
Java applets today, provided that Sun provides such JRE to AOL, *** in
binary form in a fully operational and commercially viable form. Without
limiting the foregoing, AOL shall have no obligation to incorporate into
any browser any JRE provided by Sun that fails to operate properly on
the applicable System Platform for such version of such browser due to
the fault of Sun or any party other than AOL, or *** or which would
cause a material degradation in the performance characteristics of such
browser relative to competitive browsers in the marketplace, or which
cannot ***APPROXIMATELY 8 LINES OMITTED*** Without limiting the
foregoing, with respect to the *** AOL shall have no obligation to
***APPROXIMATELY 3 LINES OMITTED*** Sun agrees to provide error
corrections and bug fixes for the JREs on all supported System Platforms
pursuant to its standard terms of support (but without fee to AOL). In
the event Sun fails to provide such error corrections and bug fixes in a
timely commercially reasonable manner, Sun shall, pursuant to the TLDA
entered into between AOL and Sun, provide AOL with the source code, test
suites and related development tools for such JREs and the right to use
such source code, test suites and related development tools for the
purpose of supporting and maintaining such JREs in accordance with the
TLDA. Sun agrees to use reasonable efforts to *** In order to permit the
binary JRE to be integrated into such browsers, AOL agrees to use
reasonable efforts to incorporate and support the Open Java Interface in
such browsers. AOL and Sun agree to collaborate and consult with one
another and to cooperate with one another in good faith in an effort to
define and integrate this interface into such browsers for use by the
JREs in such browsers. AOL further agrees that if such incorporation of
the JRE is successfully implemented in a version of such browser for any
applicable System Platform, AOL will incorporate such version of such
browser in the versions of the OEM Communicator Client, Third Party


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Client and AOL Distributed Communicator Client for such System Platform
*** If the JRE is so incorporated in the OEM Communicator Client, Third
Party Client or AOL Distributed Communicator Client, and AOL elects to
distribute any version of such product via download, such version shall
either be the JRE enabled version of such product, or AOL will make the
JRE enabled version of such product available for download in addition
to any non-JRE enabled version of such product made available for
download. If the JRE is so incorporated in the OEM Communicator Client,
Third Party Client or AOL Distributed Communicator Client, and AOL
elects to distribute any version of such product via CD-ROM, the version
of the product distributed by AOL via CD-ROM will be such JRE-enabled
version, to the extent contractually permissible and subject to size
limitations, and provided that AOL shall have no obligation to require
that its OEMs include the JRE-enabled version. AOL shall have the right
to distribute via download a smaller version of the New Browser without
the JRE, provided such version has hooks that permit the user optionally
to download and install the JRE. AOL will consider as part of the
Collaborative Development Work Plans whether to expose to the JRE all
public and private developer interfaces within the browser (including,
without limitation those in NSHTML.DLL), but shall have no obligation to
do so. AOL's obligations pursuant to this Section 3.6 are conditioned
upon Sun's granting to AOL *** any rights to Java technology necessary
to comply with this Section 3.6. In the event of any inconsistency or
conflict between this Section 3.6 or Section 9.8.1 of this Agreement and
the TLDA entered into between Sun and AOL, the terms of this Section 3.6
and the terms of Section 9.8.1 shall control.


3.7 INTENT TO DEVELOP LEADING PRODUCTS. The parties agree to use their
reasonable efforts to maintain the existing Netscape browser and the New
Browser as competitive alternatives to the browser component of Internet
Explorer from Microsoft, and agree that it is their intention to make
all products developed and distributed pursuant to this Agreement
leading and competitive products in their respective product categories.


3.8 JRE BUNDLING ON CD-ROMS. On any CD-ROMs on which AOL ships the AOL
classic client and on which AOL provides installation options permitting
third party software other than AOL classic client software to be a
separate installable item, ***APPROXIMATELY 3 LINES OMITTED*** AOL
agrees, subject to any third party contractual limitations, to use
reasonable efforts to co-package the latest version of the JRE with such
client and to offer to users an installation option to install such JRE,
provided that the JRE meets commercially reasonable standards making it
suitable for inclusion and installation, including without limitation
reasonable quality assurance and size limitations. AOL shall have no
obligation to display such installation option until after


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the user has gone through any included registration process for any AOL
Service Offering. AOL will also consider including*** APPROXIMATELY 6
LINES OMITTED ***


3.9 DESIGN OF CLIENTS. *** APPROXIMATELY 7 LINES OMITTED ***.


3.10 THIRD PARTY COMPONENTS AND PROTOCOLS; DIVERGENCE OF DEVELOPMENT. In
the event AOL (i) elects to use third party software or technology for
core functionality and features of the browser component of any of the
Client Software, (ii) adopts and maintains protocols or interfaces that
are inconsistent with Sun's reasonable server-dictated requirements; or
(iii) fails to support protocols or interfaces that are reasonably
required by Sun's server-dictated requirements, Sun shall have the
right, but not the obligation, to have AOL provide to Sun the source
code, test suites, and related development tools reasonably required for
Sun to pursue independent development of a browser based on the Existing
Netscape Software and/or Collaborative Software and to create client
applications incorporating such independently developed Sun browser. Any
resulting products developed by Sun shall be deemed to constitute
Designated Collaborative Software for purposes of this Agreement.


4.0 SALES AND MARKETING.


4.1 CUSTOMERS.


4.1.1 GENERAL. In accordance with the Marketing and Sales
Plan, the parties will work together to actively market
Product Suites, as well as other related products,
including Sun, Netscape, and AOL products and services,
to customers.


4.1.2 AOL COMMITTED SALES FORCE. Sun acknowledges that AOL
intends to commit an AOL sales force to target sales by
AOL to AOL EC Service Opportunities. Such sales force
may consist of (i) AOL interactive marketing sales
personnel and (ii) the current Netscape Netcenter sales
personnel. AOL shall bear all costs of such committed
sales force. Sun shall provide reasonable assistance to
AOL, as reasonably requested by AOL from time to time,
in connection with this AOL committed sales effort. Sun
shall provide such assistance through the sales and
marketing resources that Sun is required to provide
pursuant to the provisions of Section 4.1.3 and the
Marketing and Sales Plan, which may include access to
and participation of Sun employees who are not part of
the collaborative


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sales team, such as Sun technical personnel. Sun also
acknowledges that AOL intends to maintain a professional
services group to support AOL EC Services Opportunities
independent of any persons providing collaborative
services pursuant to this Agreement.


4.1.3 COLLABORATIVE SALES. AOL and Sun shall each form their
own respective sales forces targeting sales of the
Product Suites to non AOL EC Service Opportunities. The
AOL collaborative sales force shall consist of AOL and
Netscape enterprise sales and marketing, professional
services and technical support personnel selected by
AOL. The Sun collaborative sales force shall consist of
Sun sales personnel selected by Sun. The AOL and the Sun
collaborative sales forces shall both sell only off a
common pricelist and on standard terms and conditions,
with such pricelist and terms and conditions to be
designated by the Lead Executive for marketing and
sales. Each of AOL and Sun will, as specified in the
Marketing and Sales Plan, commit specified target levels
of sales and marketing resources (personnel and a
portion of marketing budget) to the staffing and support
of their respective collaborative sales forces and
coordinate the efforts of their respective collaborative
sales forces. In addition, Sun will support the
collaborative sales activities of the AOL collaborative
sales force with respect to any Sun products and
services, which may include access to and participation
of Sun employees who are not part of the collaborative
team, such as Sun technical personnel, and AOL will
support the collaborative sales activities of the Sun
collaborative sales force with respect to AOL Services
Offerings, which may include access to and participation
of AOL employees who are not part of the collaborative
team, such as AOL technical personnel.


4.1.4 SHARING OF REVENUES COLLECTED FROM CUSTOMERS. Subject to
the provisions of Section 4.2, revenues from the sale or
license of products or services shall be shared as set
forth below. Each party acknowledges that these
provisions are intended to reflect how revenues are
allocated and are not controlling as to which revenues
are recognized by which parties, which recognition shall
be at the sole discretion of each party in accordance
with Generally Accepted Accounting Principles.


4.1.4.1 AOL AND NETSCAPE SOFTWARE AND ASSOCIATED
SERVICES. AOL will receive 100% of the revenues
(and pay all of the associated cost of goods)
collected from any sale or license of AOL and
Netscape products and Associated Services,
including without limitation from sales or
licenses of the AOL Distributed Communicator
Client and Associated Services (but excluding


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Existing Netscape Software and Existing Netscape
Software Upgrades and Associated Services), less
a sales commission equal to *** of such revenues
which shall be payable to Sun if a Sun
salesperson was primarily responsible for making
the sale of the AOL products or Associated
Services.


4.1.4.2 THIRD PARTY COMMUNICATOR AND EXISTING NETSCAPE
SOFTWARE AND ASSOCIATED SERVICES. AOL will
receive 100% of the revenues (and pay all of the
associated cost of goods) collected from any
sale or license of the Third Party Communicator
and Associated Services and Existing Netscape
Software and Existing Netscape Software Upgrades
and Associated Services, less a sales commission
equal to *** of such revenues, which shall be
payable to Sun if a Sun salesperson not on the
collaborative marketing and sales force was
primarily responsible for making the sale of the
AOL products or Associated Services.


4.1.4.3 SUN SOFTWARE AND SERVICES. Sun will receive 100%
of the revenues collected (and pay all of the
costs of goods) from any sale or license of Sun
software and professional services, less a sales
commission equal to *** of such revenues, which
shall be payable to AOL if an AOL salesperson
was primarily responsible for making the sale of
the Sun products or Associated Services. This
Section 4.1.4.3 shall not apply to "Sun
Products" as defined in the Service Provider
Agreement between the parties of even date
herewith.


4.1.4.4 DESIGNATED COLLABORATIVE SOFTWARE AND SERVICES.
AOL will receive *** of the Gross Margin
collected from any sale or license of Designated
Collaborative Software products and Associated
Services and Sun will receive *** of the Gross
Margin collected from such sales or licenses.
Whichever party to this Agreement enters into
the sales contract with the customer will
receive the revenues from such contract and
remit *** of the Gross Margin to the other party
as provided in this Section.


4.1.4.5 SALES BONUS. To the extent the amounts payable
to AOL in any quarter that are applied to the
Minimum Commitment exceed one


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