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EXHIBIT 10.28
NBCi/TELOCITY OPERATING AGREEMENT
This Operating Agreement (the "Agreement") is made and entered into as
of December 10, 1999 (the "Effective Date") between NBC Internet, Inc., a
Delaware corporation, with its principal place of business at 000 Xxxx Xxxxxx,
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000 ("NBCi") and Telocity, Inc., a California
corporation, with its principal place of business at 00000 X. Xx Xxxx Xxxxxxxxx,
Xxxxxxxxx, Xxxxxxxxxx 00000-0000 ("Telocity"). Subject to the provisions of
Section 20.7, Telocity acknowledges that NBCi will fulfill its obligations under
this Agreement itself and through various of its subsidiaries, including Snap!
L.L.C. ("Snap"), a Delaware limited liability company and Xxxx.xxx, Inc.
("Xoom"), a Delaware corporation. The parties hereby agree as follows:
1. Background.
1.1. Telocity is an emerging provider of branded, broadband services,
currently and primarily provided through DSL, targeted
specifically at the residential market space. Telocity will
provide the next-generation of broadband services to consumers
by deploying the first open, end-to-end platform for delivering
digital services to, and throughout, the home.
1.2. NBCi and/or its subsidiaries operate a search and aggregation
"portal" site on the Web and a direct marketing site on the Web.
1.3. Concurrently with this Agreement, Telocity, NBCi, NBC and others
have entered into a Series C Preferred Stock Purchase Agreement
dated December 10, 1999 ("Stock Purchase Agreement").
1.4. Concurrently with this Agreement, Telocity and NBC have entered
into a Letter Agreement dated December 10, 1999 ("Letter
Agreement") whereby NBC will provide Telocity with certain
television advertising services.
1.5. Concurrently with this Agreement, Telocity and NBCi have entered
into a Letter Agreement dated December 10, 1999 ("Letter
Agreement") whereby NBCi will provide Telocity with certain
television advertising services.
2. Certain Definitions. As used in this Agreement, the terms set forth
below shall have the following meanings:
2.1. "Above the Fold" means that a particular item on a Web page is
viewable on a computer screen at an 800 x 600 pixels resolution
when the User first accesses such Web page, without scrolling
down to view more of the Web page.
2.2. "Additional Interfaces" shall have the meaning set forth in
Section 4.4.
2.3. "Affiliate" means as to any Person, (i) any other Person that
directly or indirectly controls, owns, is controlled or owned
by, or is under common control or ownership with such first
Person, (ii) any subsidiary of such first Person, and (iii) any
subsidiary of any subsidiary of such first Person. A Person
shall be
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deemed to control another Person if such Person possesses,
directly or indirectly, the power to direct or cause the
direction of the management, policies and/or decision making of
such other Person, whether through the ownership of voting
securities, by contract or otherwise.
2.4. "Co-Branded Site" means the co-branded version of the Enhanced
Site that will be created in accordance with Section 4 below.
2.5. "Content Portal(s)" means the specific aggregations of linked
content within areas of the Co-Branded Site, which are organized
around the Telocity Content.
2.6. "Enhanced Site" means the enhanced, high-speed version of the
NBCi Sites focused on rich media content, together with any
successor site(s) thereof and any co-branded editions of such
service that have been or may be developed for NBCi's third
party distribution partners and licensees.
2.7. "Impression" means the display of any Promotion on any NBCi
Site.
2.8. "Intellectual Property Right(s)" means any patent, copyright,
trademark, trade secret, trade dress, mask work, moral right,
right of attribution or integrity or other intellectual or
industrial property rights or proprietary rights arising under
the laws of any jurisdiction (including, without limitation, all
claims and causes of action for infringement, misappropriation
or violation thereof and all rights in any registrations and
renewals).
2.9. "Interfaces" means the Front Door Interfaces and the Additional
Interfaces.
2.10. "Last Mile Technologies" means all technologies used to provide
the last, short-distance link of broadband Internet
functionality to and from consumers' residences to and from the
broad telecommunications infrastructure.
2.11. "Last Mile Technologies Expenses" means the following Telocity
expenses incurred in providing Last Mile Technologies as part of
the Telocity Services through the Co-Branded Site; including,
without limitation, recurring monthly line cost (which are the
monthly fees Telocity incurs for last mile connectivity services
from carriers), nonrecurring telecommunications costs (i.e. RBOC
costs) and nonrecurring inside wiring costs.
2.12. "Launch Date" means the date on which the Co-Branded Site
functions properly and is made accessible to Users.
2.13. "Look and Feel" means the graphical user interface and flow of
User experience of an Internet site.
2.14. "Market Deployment Plan" means the introduction of the Telocity
Platform in at least thirty-two (32) markets covering
eighty-five percent (85%) of the DSL-ready homes of Telocity's
last mile providers in those markets by the end of 2000 and
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fifty-one (51) markets covering eighty-five percent (85%) of the
DSL-ready homes of Telocity's last mile providers in those
markets by the end of 2001.
2.15. "NBC" means the National Broadcasting Company, Inc., a Delaware
corporation with its principal place of business at 00
Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000.
2.16. "NBCi Competitor" means any entity or Affiliate thereof listed
in Exhibit C. NBCi may update this list of competitors
periodically with the prior written approval of Telocity.
2.17. "NBCi's Core Business" means (a) information, navigation and
content aggregation services distributed primarily through the
Internet that provide, across more than several topics of
general interest that do not relate to each other or to a common
topic, a combination of all or substantially all of the
following: Internet searching, content aggregation, topical
interest categories and web directories (a "Portal Service");
(b) community services distributed, primarily through the
Internet that offer its members, at a minimum, homepages, e-mail
and chat rooms (a "Community Service"); or (c) selling or
marketing a broad range of third party products and services
primarily through the Internet (an "e-Commerce Service").
2.18. "NBCi Aggregate User Data" means any aggregate data collected by
NBCi or any NBCi subsidiary about Users of broadband services or
promotions.
2.19. "NBCi Marks" means any trademarks, trade names, service marks
and logos that may be delivered by NBCi to Telocity hereunder.
2.20. "NBCi Member" means a User who has registered to become a member
of one of NBCi's, or one of NBCi's subsidiary's, registration
based services, including without limitation, the NBCi Sites and
the free email service available at xxx.xxxxx.xxx.
2.21. "NBCi Product Manager" means an NBCi employee or independent
contractor holding editorial authority and responsibility for a
portal, site, collection, area, center or page on the NBCi
Sites.
2.22. "NBCi Properties" means the NBCi Sites and the Co-Branded Site.
2.23. "NBCi Services" means the Web-based services offered by NBCi
through the Co-Branded Site.
2.24. "NBCi Sites" means: (i) subject to the "Distributor" (as defined
in Section 8.1) exclusion in Section 8.1, any and all search and
aggregation "portal," direct marketing, and commerce Web sites,
whether operated by NBCi, a subsidiary of NBCi, or a third party
under an "NBCi" brand, including, without limitation, the Web
sites located at xxxx://xxx.xxxx.xxx, xxxx://xxx.xxxx.xxx,
xxxx://xxx.xxx.xxx, and xxxx://xxx.xxxxxxxxxxx.xxx, together
with any mirror sites, any co-branded editions of such site that
have been or may be developed for
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Distributors (other than the Co-Branded Site), and successors to
the foregoing; (ii) the Enhanced Site, and successors to the
foregoing; (iii) the International Editions if the parties
mutually agree in writing pursuant to Section 8.2; (iv) any
third party Web sites hosted by NBCi; and (v) if NBCi so elects
within its sole discretion, the Web site located at
xxxx://xxx.xxxx.xxx and successors thereto, and NBC's network of
affiliate Web stations' Web sites, as updated from time to time
by NBCi in its sole discretion.
2.25. "NBCi Wires" means NBCi's email newsletters sent by NBCi or an
subsidiary to NBCi Members.
2.26. "Network Operation Expenses" means fees and monthly depreciation
cost of network equipment related to the Telocity Services
including, cost of tail circuits, co-location fees, bandwidth
capacity costs, POP driven costs, and other network costs (which
are NOC capital costs, subscriber driven costs, transit costs,
fixed data exchange costs and monthly backbone costs).
2.27. "OSS" means Telocity's operational service and support system
described in Exhibit B plus the modifications that may be made
from time to time to such operational service and support
system.
2.28. "Overlapping Services" means those products and services
each party offers to its customers (e.g., utility and communication
products and services) that share a significant degree of commonality.
2.29. "Person" means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof,
or any other legal entity.
2.30. "Promotions" means (i) banners, buttons, windows, portals,
front door windows, text links, and other promotions that are offered by
NBCi now or in the future and link directly to the Telocity Sites and/or
Co-Branded Site from the NBCi Sites; and/or (ii) text links within email
newsletters distributed by NBCi (including, without limitation, NBCi
Wires) and other promotions that are offered by NBCi now or in the
future and link directly to the Telocity Sites and/or Co-Branded Site.
2.31. "Shipping and Handling Expenses" means all of Telocity's
shipping and handling expenses incurred in shipping the Gateway to
Subscribers.
2.32. "Subscriber Fees" means all fees paid by Subscribers for a
Telocity Service.
2.33. "Telocity Aggregate User Data" means any aggregate data
collected by Telocity or any Telocity subsidiary about Users of
broadband services or promotions.
2.34. "Telocity Competitor" means any entity listed in Exhibit
D. Telocity may update this list of competitors periodically with the
prior written approval of NBCi.
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2.35. "Telocity Content" means Telocity's and its licensors' text
links, logos, graphic links, and other materials, tools,
content, or text that are delivered by Telocity to NBCi
hereunder.
2.36. "Telocity's Core Business" means the provision of next
generation, Subscriber-based broadband services to consumers
emphasizing convenience, utility and ease of use. Telocity is
deploying the first open, end-to-end platform for delivering
these services to its Subscribers, both to the home and
throughout the home which provides an infrastructure for
delivering value-added services to Subscribers.
2.37. "Telocity Database" means User Profile Data and any other
information relating to Users of the Telocity Sites or the
Co-Branded Site or other customers of Telocity or purchasers of
Telocity Services who have had information about them collected
or otherwise obtained by Telocity, or for Telocity's use or
benefit, for the purpose of direct marketing or other
communication activities, and all updates or additional
information that may be added to such database during the Term.
2.38. "Telocity Fraction" for a quarter means (a) the total number of
pages displayed by the Co-Branded Site for during the quarter,
divided by (b) the total number of pages displayed by the entire
NBCi Properties for such period; provided, however, that at such
time as NBCi distinguishes between broadband and narrow band
editions in its ad serving accounting, item (b) shall be limited
to the pages displayed by the broadband editions of the NBCi
Properties for such period.
2.39. The "Telocity Gateway" (or the "Gateway") means the gateway
described in Exhibit B, plus the modifications that may be made
from time to time to such gateway.
2.40. "Telocity Marks" means Telocity's and its licensors' trademarks,
trade names, service marks and logos that may be delivered by
Telocity to NBCi hereunder.
2.41. "Telocity Network" means Telocity's network described in Exhibit
B plus the modifications that may be made from time to time to
such network.
2.42. "Telocity Only Service" means a Telocity service that is not an
Overlapping Service.
2.43. "Telocity Services" means any and all services and products
offered through the Telocity Platform.
2.44. "Telocity Sites" means the Internet site operated by Telocity at
xxxx://xxx.xxxxxxxx.xxx, together with any mirror sites, which
shall not provide products or services competitive with those
offered on the Co-Branded Site.
2.45. "Telocity Users" means all Users described in the Telocity
Database.
2.46. "Telocity Window" means a window on the Front Door Interfaces as
described in Section 4.3.
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2.47. "Term" means the term of this Agreement as defined in Section
12.1.
2.48. "User" means any end-user of the Web.
2.49. "User Profile Data" means data regarding a User provided by the
User on the NBCi Sites, the Telocity Sites or the Co-Branded
Site or otherwise to NBCi or Telocity: the User's name,
password, hint question, hint answer, birthday, zip code,
country, time zone and gender.
2.50. "Web" means the World Wide Web part of the Internet.
3. Telocity Platform.
3.1. Proprietary Technology. Telocity and/or (to the best of
Telocity's knowledge) its licensors own, and over the
course of the Term shall own pursuant to Section 13.8,
various patents and other Intellectual Property Rights
in certain technology that enable Telocity to create and
operate the Telocity Platform and provide the Telocity
Services (the "Proprietary Technology"), including, but
not limited to, the following:
3.1.1 the automated personal computer/telephone-based loop
qualification for a customer's DSL line qualification,
Web-based customer sign-up, and Web-based system for
deployment, provisioning and customer support.
3.1.2 The Gateway combines a DSL modem, an analog modem, and a
microprocessor unit that automates installation,
customer support and service upgrades. The Gateway
allows a consumer who subscribes to a Telocity Service
(a "Subscriber") to split the broadband Internet
connection to multiple devices within the home. The
Gateway allows for the measuring, metering and billing
of both subscription and value added services provided
to the Subscriber.
3.2. Telocity Platform Described. Telocity has developed and is using
the Proprietary Technology to provide to consumers a broadband
Internet distribution platform consisting of the Gateway, the
Telocity Network, and OSS (collectively, the "Telocity
Platform") that will facilitate the delivery of broadband
Internet access services to, and throughout, the home. The
Telocity Platform is an "always on", automated broadband service
platform that is available to consumers utilizing the Gateway.
Telocity will use the Telocity Platform to deploy broadband
Internet service to the home initially via DSL, but also via
other means of high data rate connections to the home such as
cable, wireless local loop, satellite and any such delivery
platforms that may emerge as reasonably accepted industry
standards in the future.
3.3. Modifications. Telocity agrees to consider in good faith any
reasonable requests of NBCi to modify the Telocity Platform from
time to time to improve the Telocity Platform's ability to work
with the Co-Branded Site and the Interfaces. For purposes of
this Agreement, all modifications to the Telocity Platform,
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including those made pursuant to this Section 3.3, shall be
deemed to be included within the defined term Telocity Platform.
4. Co-Branded Site.
4.1. Co-Branded Site Described. NBCi will develop the Co-Branded Site
for use with the Telocity Platform in accordance with this
Section 4, and Telocity will provide reasonable assistance in
connection therewith. The Co-Branded Site will be a co-branded
version of the Enhanced Site focused on instant access to
information, communications, utility, and entertainment/media
content and will include, among other things, content and
services tailored to capitalize on the always on, broadband
environment. The parties will jointly develop the specifications
for the Co-Branded Site, and NBCi will create the Co-Branded
Site according to the joint specifications developed by the
parties. NBCi, however, will have ultimate decision making
authority over all aspects of the Co-Branded Site, including the
content contained therein, subject to compliance with the
mutually agreed upon specifications.
4.2. Front Door Interfaces. NBCi will develop interfaces to the
Co-Branded Site for: (i) the personal computer; (ii) the
television; and (iii) devices with flat panel displays in which
the presentation of information will be similar to that of a
personal computer (e.g. information appliances), specifically
designed for the broadband delivery of high-speed Internet
access over the Telocity Platform (collectively, the "Front Door
Interfaces"). The parties will collaborate to provide input to
the development of specifications for the Front Door Interfaces,
and the specifications will detail a User experience that is
compatible with the Co-Branded Site. NBCi will create the Front
Door Interfaces according to the joint specifications developed
by the parties. NBCi, however, will have ultimate decision
making authority over all aspects of the Front Door Interfaces
(other than the Telocity Window), subject to compliance with the
mutually agreed upon specifications.
4.3. Telocity Window. The Telocity Window will appear on the Front
Door Interfaces at any time there is Telocity Content, Telocity
Services or Telocity technologies (i.e., technologies and/or
access to technologies which may appear in an Additional
Interface) that cannot be effectively integrated into the Front
Door Interface. The Telocity Window may contain only Telocity
Content, Telocity Services and Telocity technologies (i.e.,
technologies and/or access to technologies which may appear in
an Additional Interface) that cannot be effectively integrated
into the Front Door Interface at that time. The parties will
collaborate to provide input to the development of
specifications for the Telocity Window, including which party
will host the Telocity Window, and the specifications will
detail a User experience that is compatible with the Co-Branded
Site. NBCi will create the Telocity Window according to the
joint specifications developed by the parties. Telocity,
however, will have ultimate decision making authority over all
aspects of the Telocity Window, subject to compliance with the
mutually agreed upon specifications.
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4.4. Additional Interfaces. The parties anticipate that over time
different interfaces to the Co-Branded Site or other information
in addition to the Front Door Interfaces ("Additional
Interfaces") will be created for other devices (e.g. flat-panel
displays other than those included within Front Door Interfaces,
wireless devices (WAP format and future format standards that
may emerge), personal digital assistants, cordless phones,
cellular phones, information appliances which do not present
information in a similar manner to that of a personal computer,
and other devices that may emerge in the future) (the "Other
Devices") for use in the home and "on the go" which will
necessitate that content from the Co-Branded Site or other
sources be displayed in different formats. For Additional
Interfaces designed and created by NBCi as set out in Section
4.5, the parties will jointly develop the specifications for the
Additional Interfaces with the intention of creating a
consistent and cohesive User experience across the various
features and applications offered on the Co-Branded Site. The
goal with such Additional Interfaces will be to mix the
functional requirements of the Other Device while maintaining a
consistent Look and Feel to the Co-Branded Site. However, for
such Additional Interfaces designed by a party, ultimate
decision making authority will reside with a party, subject to
compliance with the mutually agreed upon specifications.
4.5. Review and Implementation of Content for Other Devices and
Additional Interfaces. NBCi and Telocity will jointly develop
the Top Level Specifications for the design of Additional
Interfaces. Both parties agree to make good faith efforts to
analyze the cost and revenue potential for each Other Device and
share information pertaining to market research, consumer
behavior, emerging business models, and other such relevant
information. Prior to beginning the process itself or with a
third party, Telocity agrees to give NBCi at [*] days after
delivery of a written request to NBCi to determine whether NBCi
will provide content from the Co-Branded Site to an Additional
Interface for an Other Device and design and create the
Additional Interface for such Other Device. NBCi may, in its
sole discretion, determine that the aggregation, packaging, and
design of content from the Co-Branded Site for delivery to a
specific Other Devices is not commercially and/or strategically
viable to pursue.
4.5.1 Should NBCi elect to provide content designed for the
Other Device in a manner that is compatible with an
Additional Interface and implement the joint
specifications for the Additional Interface, NBCi will
make commercially reasonable efforts to deliver the
content and the Additional Interface within a mutually
agreed upon period of time.
4.5.2 Should NBCi elect to provide content designed for the
Other Device in a manner that is compatible with an
Additional Interface but not design and create such
Additional Interface, (i) NBCi will make commercially
reasonable efforts to deliver the content within a
mutually agreed upon period and (ii) Telocity may
contract with an independent third party, who is not an
NBCi Competitor, to provide such Additional Interface
design and creation services, provided that such
services are delivered to the
[*] The Registrant has requested confidential treatment for certain portions of
this exhibit. The omitted portions have been separately filed with the
Commission.
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Subscriber in such a manner that the Subscriber
experiences the same Look and Feel of the Co-Branded
Site across the various Interfaces.
4.5.3 Should NBCi decide to neither provide such content nor
design and create such Additional Interface, Telocity
shall ask NBCi, for a mutually agreed fee, for NBCi to
provide additional resources needed to provide content
and create and design such Additional Interface, and if
the parties are unable to reach agreement with respect
to such fee within ten (10) days, then Telocity may
contract with an independent third party, who is not an
NBCi Competitor, to provide such services, provided that
such services are delivered to the Telocity Subscriber
in such a manner that the User experiences the same Look
and Feel of the Co-Branded Site, to the extent
reasonable, across the various Interfaces.
4.6. Co-Branding Features. Each page on the Co-Branded Site will
include branding for NBCi and Telocity so that the NBCi Marks
and Telocity Marks are both Above the Fold and are of
substantially equivalent value and prominence to each other.
Telocity Services and the customer care features for such
services will also be prominently displayed on the Co-Branded
Site. The parties shall mutually agree on the branding for
content delivered from the Co-Branded Sites to Other Devices and
the Additional Interfaces.
4.7. Launch Date. NBCi and Telocity will use diligent efforts to
achieve a Launch Date for the Co-Branded Site before [*].
4.8. Hosting. Except as expressly set forth in this Agreement, NBCi
will host the Co-Branded Site and the Front Door Interfaces on
its servers, on servers within its control, or servers of a
third party under contract with NBCi and will provide all
computer hardware, software and personnel necessary to operate
and maintain the Co-Branded Site as a functional site accessible
to Users.
4.9. Advertising. NBCi shall own and have the right to use or sell
all of the advertising inventory on the Co-Branded Site, except
that neither NBCi or any NBCi subsidiary shall display on the
Co-Branded Site any window or banner advertisements for Telocity
Competitors. Moreover, other than as expressly set forth herein,
NBCi shall have the right to display any third party links,
media, banner advertisements, other promotions, and/or paid or
unpaid editorial content anywhere on the NBCi Sites.
4.10. DNS Redirecting. Except as expressly set forth in this
Agreement, using Domain Name System redirection, the URL for the
Co-Branded Site will begin with xxxx://xxxxxxxx.xxxx.xxx.
Telocity agrees that NBCi will be entitled to count all page
views of the Co-Branded Site towards NBCi's traffic as measured
by Media Metrics and other Internet traffic-auditing firms.
4.11. Harvesting. Telocity shall provide all Telocity Content as
required herein pursuant to NBCi's harvesting technical
specifications, as updated in NBCi's sole
[*] The Registrant has requested confidential treatment for certain portions of
this exhibit. The omitted portions have been separately filed with the
Commission.
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discretion from time to time, including those set forth at
xxxx://xxxxxxxxxxxxxxxx.xxxx.xxx/xxxxx/xxxxxxxxxxx.xxxx
(Standard HTML Harvest Specifications),
xxxx://xxxxxxxxxxxxxxxx.xxxx.xxx/xxxxx/xxxxxxxxxx.xxxx (Sample
of HTML harvested content);
xxxx://xxxxxxxxxxxxxxxx.xxxx.xxx/Xxxx/xxxxx_xxxxxxx.xxxx (Rich
Media Harvesting Specifications), or any other successor URLs
designated by Snap. Harvested Telocity Content will maintain the
Enhanced Sites' Look and Feel and will include branding for
Telocity using Telocity Marks, in such form and placement as a
NBCi Product Manager shall determine in his or her sole
discretion. Telocity shall ensure that all Telocity Content
remains at all times current by continually providing NBCi with
timely updates to the Telocity Content. Furthermore, under no
circumstances shall Telocity Content include any content of a
NBCi Competitor, reference an NBCi Competitor or a service which
conflicts with an offering of NBCi.
4.12. Exclusivity. During the Term, except as expressly provided
otherwise in this section, NBCi shall be the exclusive Internet
content provider to Telocity for the Telocity Platform for
utility, communications, media and entertainment content
(collectively, the "Exclusive Content"). In addition, Telocity
may not enter into any other agreement with third parties for
provision of Portal Services, Community Service or E-Commerce
Services on the Telocity Platform during the Term. Further,
during the Term, Telocity may not own any material equity
interest in, loan any monies to, or enter into any joint venture
or partnership with any NBCi Competitor without the consent of
NBCi. If Telocity identifies a category of products or a content
area within the Exclusive Content that is then currently not
provided by NBCi ("Unavailable Content"), Telocity shall notify
NBCi in writing of such deficiency; provided, however, that
Telocity may not request a product or content specific to a
particular vendor. If NBCi does not notify Telocity in writing,
within [*] of NBCi's receipt of Telocity's notification, of
NBCi's election to deliver, or is not able to deliver, within a
mutually agreeable time period from such notification, the
Unavailable Content, Telocity shall have the right to contract
with an independent third party for development services to
produce the Unavailable Content, provided that (i) NBCi is not
obligated to pay for such incremental services, and (ii) no NBCi
Competitors may be chosen by Telocity unless the desired product
or content is only available from an NBCi Competitor. Telocity
shall select third party content providers that are consistent
with the same level of quality, experience, and reliability
offered on the combined Telocity Platform and Co-Branded Site.
4.13. Promotional Exclusivity. During the first three (3) years of the
Term, NBCi will not promote, through co-branded, on-air
television marketing, any Telocity Competitors offering
broadband delivery of Internet services. However, NBCi shall
have the right to terminate the promotional exclusivity set out
in this section under the following circumstances: (a) Telocity
fails to launch the Telocity Platform in more than fifty percent
(50%) of the service markets on an annual basis as designated in
the Market Deployment Plan, (b) in the event that Xxxxx
Xxxxxx-Xxxx should leave the employ of Telocity for any reason
during the first
[*] The Registrant has requested confidential treatment for certain portions of
this exhibit. The omitted portions have been separately filed with the
Commission.
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three (3) years of the Term, or (c) within eighteen (18) months
following the Effective Date, Telocity fails to complete a
Qualifying Offering (as defined in Telocity's Third Amended and
Restated Articles of Incorporation) or a private placement of
its debt or equity securities (not including the private
placement contemplated by the Stock Purchase Agreement) that
results in net proceeds to Telocity of an amount that will
enable the continued expansion of the Subscriber base for the
Telocity Platform at least fifty percent (50%) of the rates set
forth in the Market Deployment Plan for a period of six (6)
months following the closing of such Qualifying Offering or
private placement, as applicable.
4.14. Satellite Delivery. Telocity agrees to grant NBCi's Affiliate,
GE AmeriCom, a right of first negotiation for the delivery of
the Telocity Service via satellite. This right is strictly for
the carriage of Telocity Service via satellite. This right does
not pertain to any content distribution on the Telocity Service.
Beginning after thirty (30) days following the date that
Telocity provides GE Americom with written notice of its desire
to begin such discussions, which shall not be sent by Telocity
before Telocity is prepared to begin good faith negotiations,
Telocity shall be free to begin discussions with third parties
regarding the satellite delivery of the Telocity Services. The
parties agree that time is of the essence with respect to this
Section 4.14.
4.15. Video Programming and Channels. In the event that, during the
Term, Telocity or NBCi desires to offer any new class or type of
video programming or channels (i.e., full motion video of [*] or
more in length) containing news, sports or entertainment on the
Telocity Platform or the Co-Branded Site, Telocity or NBCi, as
the case may be (the "Offering Party"), shall so notify NBC in
writing. NBC and the Offering Party shall then negotiate
exclusively and in good faith with one another for a period of
thirty (30) days following NBC's receipt of such written notice
concerning the inclusion of video programming or channels of NBC
and its affiliates (including, for example, anything broadcast
on the NBC Television Network, all television stations owned and
operated by NBC or any cable, digital or Internet network owned
or controlled by NBC or its affiliates). In the event that the
parties are unable to reach a final agreement during such
period, then, on the last day of such period, the Offering Party
shall submit to NBC its final offer, in writing (the "Offer"),
which offer shall be made in good faith and shall represent the
price, terms and conditions that the Offering Party reasonably
expects to receive for such programming or channel in an
arm's-length transaction with a third party. NBC shall then have
ten (10) business days to accept or reject the Offer. If NBC
rejects the Offer, the Offering Party shall be free to negotiate
with and enter into agreements with third party(s) with respect
to such video programming or channels. NBC and Telocity
acknowledge that, in accordance with Section 4.12 hereof, NBCi
shall be the exclusive Internet content provider to Telocity for
the Telocity Platform for media and entertainment content and
that this Section 4.15 does not limit such exclusivity in any
manner. This Section 4.15 shall not be amended without the
written consent of NBC.
5. Product Development; Overlapping Services.
[*] The Registrant has requested confidential treatment for certain portions of
this exhibit. The omitted portions have been separately filed with the
Commission.
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5.1. Product Development. Both parties shall mutually agree to the
top-level specifications and objectives ("Top Level
Specifications") for overall jointly developed product offerings
relating to the Telocity Network, End User Hardware and Software
Products, and associated software and utilities.
5.2. Telocity Network. The parties shall mutually develop the Top
Level Specifications and requirements of the Telocity Network,
including content distribution infrastructure, network speed,
hosting capabilities, usage monitoring and interconnect points,
for the purpose of supporting a jointly developed product
offering. Under no circumstances will such collaboration be
construed to create or grant NBCi or any NBCi Affiliate any
Intellectual Property Rights in the Telocity Platform or any
component thereof, such as the Gateway or the OSS. Telocity will
reasonably consider NBCi's comments with respect to the Telocity
Network, but Telocity will have the ultimate decision making
authority with respect to the Telocity Network, subject to
compliance with the Top Level Specifications. NBCi will
reasonably consider Telocity's comments with respect to
advertising serving and tracking, but NBCi will have the
ultimate decision making authority with respect to the with
respect to advertising serving and tracking.
5.3. End User Hardware and Software Products. The parties shall
mutually develop the Top Level Specifications and requirements
of the joint hardware and software offerings (respectively, "End
User Hardware" and "Software Products"), including Gateway
capabilities, software installer features, and integration of
software and services onto the Subscriber's operating system.
Telocity will reasonably consider in good faith NBCi's comments
with respect to End User Hardware and Software Products, but
Telocity will have the ultimate decision making authority with
respect to the End User Hardware and Software Products, subject
to compliance with the Top Level Specifications. Under no
circumstances will such collaboration be construed to create or
grant NBCi or any NBCi Affiliate any Intellectual Property
Rights in the Telocity Platform or any component thereof, such
as the Gateway or the OSS.
5.4. New Product/Service Milestones. Telocity agrees to use
commercially reasonable efforts to introduce at least one new
product or service for use on the Telocity Platform [*]
following the Effective Date.
5.5. Overlapping Services. Although NBCi's Core Business and
Telocity's Core Business are distinctly different businesses,
the parties acknowledge that there is and may nevertheless be
Overlapping Services. Each party shall share in the revenue
streams created by the Overlapping Services as set forth in
Section 10.1. In order to maximize and coordinate the collective
opportunity presented by Overlapping Services, the parties agree
as follows:
5.5.1 If either party has an existing product or service, and
the other party wishes to offer an Overlapping Service,
then the other party will be free to
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set features, pricing and revenue models for such Overlapping
Service, but will confer with the party with the existing
product or service.
5.5.2 In all instances where NBCi releases a generally
commercially available full production version of an
Overlapping Service which is similar to an existing
Telocity Service, then the existing revenue share for
the applicable Telocity Services shall be adjusted as
provided in Section 10.1. For those Overlapping Services
that are non Web-based, NBCi shall design such
Overlapping Service to include materially enhanced
features and functionality to distinguish the product
from the Overlapping Service offered by Telocity.
5.5.3 In all instances where Telocity releases a generally
commercially available full production version of an
existing NBCi Service, Telocity shall design such
Overlapping Service to include materially enhanced
features and functionality to distinguish the product
from the Overlapping Service offered by NBCi.
5.5.4 If an Overlapping Service is identified by either party,
then the parties will work together to develop the
specifications for integrating the product or services
into the Telocity Platform and the Co-Branded Site, as
appropriate.
5.5.5 Any disputes concerning Overlapping Services will be
subject to the negotiation procedures described in
Section 19. If the negotiation procedures detailed in
Section 19 fail, then both parties agree that such
"Overlapping Services" will be placed within the
Telocity Window. The purpose of such placement will be
to minimize the confusion to the Subscriber caused by
the placement of two (2) similar products that do not
offer distinctly differentiated features or
functionality.
6. Account Management.
6.1. Service Quality Milestones. Both parties will mutually agree in
writing on an annual basis on appropriate performance criteria
for the Telocity Services and Co-Branded Site.
6.2. Billing. Telocity shall be solely responsible for all billing,
collection services and customer support services with respect
to all products and services delivered by the parties to
Subscribers via the Telocity Platform.
6.3. Account Management.
6.3.1. Account and Contact Managers. For the purposes of this
Agreement, [*] shall be NBCi's account manager for
Telocity and [*] shall be Telocity's contact manager for
NBCi (collectively, the "Managers"). Subject to Section
20.12, the Managers shall be the primary
[*] The Registrant has requested confidential treatment for certain portions of
this exhibit. The omitted portions have been separately filed with the
Commission.
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points of contact for inquiries and requests and
information related to the activities conducted by
either party pursuant to this Agreement. Each Manager
shall provide the other with such information and
assistance as may be reasonably requested by the other
from time to time. Either party to this Agreement may
change its designated Manager by giving the other party
written notice of such change provided in accordance
with Section 20.12.
6.3.2. Meetings. Each party shall designate a team of
individuals for specific responsibilities of the party
under this Agreement, such as technical integration and
marketing (collectively, the "Teams"). Each party's Team
shall include the active participation of at least one
(1) officer at the vice president level. The individuals
on the initial Teams are outlined in Exhibit F. Each
team will meet on a frequency determined to be necessary
by the applicable team, but no less than once per month
during the first three (3) years of the Term and
approximately at least once per quarter during each year
thereafter; each of those Teams shall meet separately at
the offices of Telocity or NBCi (with the location to
alternate between the two) to monitor and manage the
relationship of the parties and any items under this
Agreement either party wishes to bring to the attention
of the other party.
6.3.3. Annual Review. Beginning three (3) years after the
Effective Date, the parties will meet on an annual basis
to review the business arrangement set out in this
Agreement in light of changed industry conditions and
other business considerations and mutually agree upon
certain milestones to be set forth for the remainder of
the Term with respect to both parties' continued
performance under this Agreement. Any modifications or
amendments to this Agreement relating to such milestones
will require the written consent of both Telocity and
NBCi.
6.3.4. Board Review. NBCi and Telocity agree to review the
status of the activities specified in this Agreement at
least twice a year during each party's respective board
meetings.
7. Advertising, Marketing and Promotion.
7.1. Email Solicitations. During the Term, NBCi will have the
exclusive right to transmit all direct marketing email
solicitations to Subscribers as provided in Section 9, except as
provided in Section 9.4.
7.2. Marketing by Telocity. Subject to Section 13.5, Telocity shall
use commercially reasonable efforts to market the Telocity
Services in the relevant local markets of the United States, by
direct marketing to Subscribers by means other than email
solicitations, including, without limitation, voice messaging in
the message inbox, print advertising, direct physical mail,
outdoor, radio and television, and other means of marketing that
may emerge in the future; provided, however, Telocity
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shall not use email in any such marketing activities except as
provided in Section 9.4. All third party messages included in
such marketing efforts will contain no content of or reference
to NBCi Competitors. The third party messages shall not be on
behalf of any third parties and shall be solely for the purpose
of promoting or upselling Telocity Services and the Telocity
Platform; provided, however, that such third party messages may
include third party products and services (for example, in
connection with Telocity's affinity program) without NBCi's
approval from entities that are not NBCi Competitors so long as
the third party product or service is not in a category for
which NBCi has an express contractual relationship (of which
Telocity has notice) with respect to the direct marketing of
such product or service. NBCi will provide Telocity with a list
of such relationships within thirty (30) days of the Effective
Date and will update the list from time to time. Telocity will
be responsible for all marketing expenses for the Telocity
Services with the exception of the Promotions described in
Section 7.5.
7.3. Promotional Events. Both parties shall make good faith efforts
to identify additional promotional events to support the
Telocity Services (e.g. special product and marketing
announcements ) and the Co-Branded Site through the use of the
Co-Branded Site to deliver exclusive broadband content for such
promotional events to Telocity Subscribers.
7.4. Online Promotion Design. Telocity will design and create all
Telocity Content required for the Promotions in accordance with
NBCi's technical and editorial guidelines, as updated in NBCi's
sole discretion from time to time, including those set forth at
xxxx://xxx.xxxx.xxx/xxxxx/ or any successor URL designated by
NBCi.
7.5. Online Promotions. Beginning on the Effective Date, NBCi will
use commercially reasonable efforts to deliver a total value of
online promotional value in the aggregate dollar amount of Five
Million Dollars ($5,000,000) during the first three (3) years of
the Term through the delivery of Impressions on the NBCi Sites;
provided, however, that at least fifty percent (50%) of all
Impressions delivered hereunder shall be delivered to the
locations of the NBCi Sites as mutually agreed in writing by the
parties. Except as specified in the foregoing sentence, the
delivery of the Impressions hereunder and the format of the
Promotions will be based on a schedule and placement guidelines
selected by NBCi, in its sole discretion and at the rates set
forth in the applicable NBCi standard rate card. Any Impression
not listed in the applicable NBCi standard rate card shall be
assigned the value of a comparable Impression on such rate card
by NBCi. If NBCi fails to deliver the required number of
Impressions during the first three (3) years of the Term,
Telocity agrees that NBCi shall have an additional six (6)
months to deliver such Impressions.
8. Co-Branded and International Editions.
8.1 Co-Branded Editions. Telocity acknowledges that NBCi produces
co-branded editions of the NBCi Sites for various resellers,
distributors, other licensees and/or
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joint venture partners (collectively the "Distributors"). In
some cases, such Distributors are entitled to replace NBCi's
default content with other content within their own co-branded
editions of any NBCi Site. Notwithstanding any other provisions
of this Agreement, if any such Distributor has exercised its
right to replace Telocity Content with other content, then NBCi
will not be required to display the Promotions or Telocity
Content within such Distributor's co-branded edition of the NBCi
Sites. If NBCi does display the Promotions or Telocity Content
within a co-branded edition of any NBCi Site, such display will
be governed by this Agreement.
8.2 International Editions. NBCi is currently considering creating
one (1) or more international editions of the NBCi Sites to
reflect appropriate localized and local partner content
("International Editions") and may desire to include localized
Telocity Content within such International Editions. Upon NBCi's
request, Telocity agrees to negotiate in good faith regarding
the terms under which Telocity would agree to amend this
Agreement to grant NBCi the right to include Telocity Content
and Promotions on one (1) or more International Editions.
9. User Profile Data and Direct Marketing.
9.1. Data Ownership. Each Subscriber whose User Profile Data is
collected by a party or its subsidiaries through the Co-Branded
Site, the Telocity Site or the Telocity Platform, shall be asked
to consent to the provision of such User Profile Data to the
other party. Each party shall in its reasonable discretion,
place and word such consent request on the Co-Branded Site, the
Telocity Sites and the Telocity Platform, as applicable, and
shall consider comments from the other party with respect to
such consent requests. The User Profile Data for each Subscriber
who so consents shall be provided to the other party and shall
be jointly owned by NBCi and Telocity. Any data collected
through the Co-Branded Site for all other Users, except for the
Telocity Aggregate User Data, shall remain owned solely by NBCi.
At all times, NBCi will be the sole owner of all User data that
is collected from the NBCi Sites and Telocity will be the sole
owner of all User data that is collected from the Telocity
Sites. NBCi Aggregate User Data and Telocity Aggregate User Data
shall be jointly owned by NBCi and Telocity. Before a User is
permitted to become a Subscriber, the User must consent (e.g.,
in the Telocity terms of service) to the provision of the User's
User Profile Data to NBCi.
9.2. Use of Information and Confidentiality. Each party will have the
right to use any information provided by the other party subject
to the confidentiality restrictions set forth in Section 20.4.
All data collected from Users through the Co-Branded Site, the
Telocity Sites and the Telocity Platform will be kept
confidential and not disclosed to non-affiliated third parties
by each party in accordance with the privacy policy and
standards established by that party's respective privacy policy.
9.3. Direct Marketing. During the Term, NBCi, shall have the
exclusive right to use (or allow an Affiliate to use, in which
case all references to "NBCi" in this Section 9 shall refer to
such Affiliate) the information contained in Telocity
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Database for email-based direct marketing purposes as set forth
in this Section (with the exception of customer correspondence
specifically pertaining to non-commercial communications with
Subscribers, including, but not limited to, customer service,
billing and technical support). NBCi shall have a right to
execute, or cause to be executed, promotional email offers to
all or some of the Users described in the Telocity Database.
Such email offers shall be drafted by NBCi following a mutually
agreed upon template, approved by Telocity (and such approval
shall not be unreasonably withheld) and will appear to come from
"Telocity and Snap"; provided, however, each email will not be
subject to Telocity's approval. Such email messages may have
links to the NBCi Sites or the Co-Branded Site, as NBCi shall
decide in its sole discretion. Products offered in such emails
may include NBCi's products or services or third party products
and/or services that NBCi has the right to offer, and NBCi shall
select all of such products to be offered in its sole
discretion. NBCi agrees that any direct marketing solicitations
to Subscribers will not include advertisements or commercial
messages for Telocity Competitors. NBCi may choose to distribute
emails to some or all Users in Telocity Database. NBCi shall
also have the option to create and host "sell" pages for any
marketing campaign, arrange for purchase orders to be processed
and fulfilled, and for customer service and inventory matters to
be coordinated in relation to the products offered in emails
distributed pursuant to this Section, as NBCi shall determine in
its sole discretion. All direct marketing solicitations will
afford the User with an easy and accessible means to
unsubscribe. NBCi agrees that co-branded advertisements will not
include advertisements or commercial messages for Telocity
Competitors.
9.4. Telocity Promotional Offers. Notwithstanding Section 9.3,
Telocity shall have the right to send (i) emails to Users
described in Telocity Database solely with respect to the
billing and administration of the Telocity Services; and (ii)
periodic email newsletters related to the Telocity Services, but
such emails and newsletters may not promote services provided by
an NBCi Competitor. Further, Telocity may present promotional
offers to its Subscribers with their xxxx or newsletter (the
"Promotional Offers"). The Promotional Offers shall not be on
behalf of any third parties and shall be solely for the purpose
of promoting or upselling Telocity Services; provided that,
however, such Promotional Offers may include third party
products and services (for example, in connection with
Telocity's affinity program) without NBCi's approval from
entities that are not NBCi Competitors so long as the third
party product or service is not in a category for which NBCi has
an express contractual relationship with respect to such product
or service. NBCi will provide Telocity with a list of such
relationships and will update the list from time to time. With
the exception of the aforementioned emails and newsletters, all
other emails to Users described in Telocity Database will be
delivered by NBCi in order to ensure a consistent marketing
message.
9.5. Telocity Database Management. Subject to Telocity's agreements
with Subscribers, on or before the Launch Date, Telocity will
electronically send NBCi all User Profile Data then contained in
the Telocity Database to one (1) or more FTP addresses
designated by NBCi in a mutually agreed upon format. In the
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event that such agreements prohibit the foregoing, Telocity will
make best efforts to obtain consent of the Subscribers to the
transfer of the User Profile Data to NBCi. Beginning one (1)
month following the Launch Date, on a monthly basis, Telocity
will send NBCi updates of the User Profile Data. Such updates
will be provided in a mutually agreed-upon format. Both parties
will use commercially reasonable efforts to implement NBCi's
universal User registration process by the Launch Date so that
Users who have registered to become Subscribers do not need to
again enter their personal data to become NBCi Members. Telocity
will provide NBCi, on a monthly basis, Telocity's standard
report containing the Telocity Aggregate User Data.
9.6. NBCi Aggregate User Data Management. NBCi will provide Telocity,
on a monthly basis, NBCi's standard report containing the NBCi
Aggregate User Data.
10. Payments and Credits.
10.1. Revenue Sharing.
10.1.1 Telocity Only Services. Beginning on the Launch Date,
Telocity shall pay to NBCi, on a quarterly basis, ten
percent (10%) of the net revenues actually received by
Telocity for the basic Telocity internet access service.
For purposes of this Section 10.1.1, net revenues shall
mean gross revenues less a cost of goods sold figure
based on the following items: (i) Last Mile Technologies
Expenses, (ii) Shipping and Handling Expenses, and (iii)
Network Operations Expenses, but excluding all Gateway
rebate expenses, which shall be treated as customer
acquisition costs by Telocity.
10.1.2 Value-Added Services. Telocity will pay, on a quarterly
basis, ten percent (10%) of the net revenues actually
received by Telocity for value-added services, which are
Telocity subscriber services other than internet access.
For the first eighteen (18) months after the Effective
Date, net revenues shall mean gross revenues less a cost
of goods sold figure based on the following items: (i)
Last Mile Technologies Expenses, (ii) Shipping and
Handling Expenses, and (iii) Network Operations
Expenses, but excluding all Gateway rebate expenses,
which shall be treated as customer acquisition costs by
Telocity. After eighteen (18) months from the Effective
Date, net revenues for value-added services will be
calculated as gross revenues less a cost of goods sold
figure arrived at in accordance with generally accepted
accounting principles.
10.1.3 Overlapping Services. At such time as a value-added
service is an Overlapping Service, Telocity will pay
NBCi, on a quarterly basis, forty percent (40%) of the
net revenues referenced in Section 10.1.2 actually
received from revenues generated by the Overlapping
Service provided by Telocity.
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10.1.4 NBCi Services. NBCi shall pay Telocity, on a quarterly
basis, forty percent (40%) of the net revenues actually
received by NBCi or its subsidiaries derived from (i)
all revenue from advertising running on the Co-Branded
Site (including, but not limited to, banner ads and
windows) multiplied by the Telocity Fraction; (ii)
anchor tenancies and other tenancies that are solely on
the Co-Branded Site; (iii) e-Commerce Services
(including but not limited to, targeted e-mails and
product sales, fees for "host and sell" pages, and
transaction fees from national online merchants)
attributable to Subscribers (NBCi will make best efforts
to ensure that such revenues can be attributed to
Telocity Subscribers); and (iv) subscription and pay per
view media (including but not limited to, music, video,
gaming, and other media services) attributable to
Telocity Users. For purposes of this Section 10.1.4,
"net revenues" shall mean gross revenues actually
received by NBCi or its subsidiaries, less, as
applicable, agency fees, selling expenses, returns, bad
debt expenses, revenue sharing expenses payable to third
parties, content fees, licensing fees, fraud,
commissions and service fees. After eighteen (18) months
from the Effective Date, net revenues for NBCi Services
will be calculated as gross revenues less a cost of
goods sold figure arrived at in accordance with
generally accepted accounting principles.
10.1.5 Unavailable Content. In the event that Telocity chooses
to contract with an independent third party for
Unavailable Content, NBCi shall receive forty percent
(40%) of the gross revenues actually received from the
placements of such Unavailable Content within the
Telocity Platform, less, as applicable, agency fees,
selling expenses, returns, bad debt expenses, revenue
sharing expenses payable to third parties, content fees,
licensing fees, fraud, commissions and service fees.
10.2. Bundled Services. Telocity may offer bundled services from time
to time that will be priced less than the aggregate price for
all the component parts. In order to calculate the net revenues
due NBCi for purposes of Section 10.1 based on the sale of the
bundled Telocity Services, the parties will jointly determine
the appropriate net revenue share for each item in the bundle,
determine the ratio of the relative value of each item in the
bundle based on the price of all items when purchased
individually and apply such ratio to the revenue generated by
the bundled offering. For example, assume a bundled Telocity
Service package consisting of ten (10) discrete Telocity
Services (seven (7) of which are Telocity Only Services and
three (3) are Overlapping Services that meet the criteria of
Section 5.5.2) costs a Subscriber One Hundred Dollars ($100) a
month. Purchasing these ten (10) discrete Telocity Services
individually would cost the Subscriber Two Hundred Dollars
($200) a month. If the three (3) Overlapping Services
individually priced cost Fifty Dollars ($50) per month, the
ratio would be twenty-five percent (25%) for the Overlapping
Services. Therefore the net revenue share payable to NBCi by
Telocity for the three (3) Overlapping Services would be 40% of
25% of the net revenues for such $100 and the net revenue share
payable to NBCi by Telocity for the 7 Telocity Only Services
would be 10% of
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75% of the net revenues for such $100. NBCi shall have the
right, exercisable in its reasonable discretion, to permit
Telocity to bundle NBCi Services (such as pay-per-view movies)
with Telocity Services; provided, however, that NBCi will have
the right in its sole discretion to establish the price to
Telocity for such bundled NBCi Services, and Telocity shall have
the right in its sole discretion to price the overall bundle to
the Subscriber.
10.3. Payment. Payments under this Agreement will be made by check or
wire transfer of immediately available funds. All amounts due
from one party to another party hereunder shall be due and
payable [*] in which such amount can be reasonably accrued in
accordance with generally accepted accounting principles.
10.4. Warrants. Upon execution of this Agreement, Telocity will issue
to NBCi a warrant to purchase 1,039,122 shares of Series C
Preferred Stock, in the form attached hereto as Exhibit G and,
to NBC, a warrant to purchase 850,191 shares of Series C
Preferred Stock, in the form attached hereto as Exhibit G.
11. Records and Audits.
11.1. Accounting Standards. It is expressly understood and agreed by
the parties that all computations relating to the determination
of the amounts due and payable pursuant to this Agreement shall
be made in accordance with nationally recognized and generally
accepted accounting principles and practices that are recognized
as such by the American Institute of Certified Public
Accountants acting through its Accounting Principles Board or by
the Financial Accounting Standards Board ("F.A.S.B.") or through
other appropriate boards or committees thereof and shall be
consistently applied for all periods after the Effective Date.
The parties will recognize topline revenues related to this
Agreement based generally upon principles for revenue
recognition used by F.A.S.B. for accounting practices, and the
SEC for reporting practices.
11.2. Audit Rights. Each party agrees to keep accurate books of
account and records at its principal place of business covering
all transactions relating to this Agreement. Each party or any
duly authorized representative shall have the right, at all
reasonable hours of the day, but no more than once a year, to
audit, each of the other party's books of account and records
and all other documents and material in the possession or under
the control of such other party, whether in electronic format or
otherwise, with respect to the subject matter and the terms of
this Agreement and to make copies and extracts thereof; provided
that no such audit may include any periods more than three years
prior to the date of audit. In the event that any such audit
reveals an underpayment by the audited party, the audited party
shall immediately remit payment to appropriate party in the
amount of such underpayment plus interest calculated at a rate
of one and one-half (1 1/2%) per month, or the maximum rate
allowed by law, compounded daily, calculated from the date such
payments were actually due until the date when such payment is
in fact actually made. Further, in the event that any such
[*] The Registrant has requested confidential treatment for certain portions of
this exhibit. The omitted portions have been separately filed with the
Commission.
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underpayment is greater than [*] of the amount due for the
period being audited, the audited party shall reimburse the
party conducting the audit for the reasonable costs and expenses
of such audit. All books of account and records of each party
covering all transactions relating to this Agreement shall be
retained by such party for at least three (3) years after the
expiration or termination of this Agreement, as the case may be,
for possible inspection and/or audit by the other parties.
12. Term; Termination.
12.1. Term. The term of this Agreement will begin on the Effective
Date and end on the last day of the fifteenth (15TH) year after
the Effective Date, unless otherwise terminated as set forth in
this Agreement (the "Term").
12.2. Termination for Cause. Either NBCi or Telocity may terminate
this Agreement at any time by giving written notice of
termination to the other party if any other party commits a
material breach of its obligations hereunder, including a
material breach of a relevant party's privacy policy, that is
not cured within sixty (60) days after notice thereof from the
non-breaching party.
12.3. Termination for Insolvency. Either party may terminate this
Agreement upon sixty (60) days notice, and shall have no further
obligation under this Agreement, if the other party becomes
insolvent; makes an assignment for the benefit of creditors;
makes or sends notice of a bulk transfer; calls a meeting of its
creditors with respect to its inability to pay its obligations
owed to such creditors on customary terms; defaults under any
agreement, document or instrument relating to the party's
indebtedness for borrowed money; or ceases to do business as a
going concern; or if a petition is filed by or against the party
under any bankruptcy or insolvency laws which is not dismissed
within ninety (90) days of the date of filing.
12.4. Competitor Termination. NBCi may terminate this Agreement at any
time by giving written notice of termination to Telocity if
Telocity experiences a change in its ownership, such that an NBC
Competitor (as defined in the Stock Purchase Agreement) or an
NBCi Competitor, directly or indirectly, holds an equity
interest greater than thirty-three (33) percent in Telocity, or
otherwise acquires control of Telocity, or if Telocity is
acquired by or merges with an NBCi Competitor. NBCi shall have
the right to exercise the termination right set forth in this
Section 12.4 for up to three (3) months after the occurrence of
the event that triggered such a termination right.
12.5. Termination by NBCi. NBCi may terminate this Agreement at any
time by giving written notice of termination to Telocity if
within eighteen (18) months following the Effective Date,
Telocity fails to complete a Qualifying Offering (as defined in
Telocity's Third Amended and Restated Articles of Incorporation)
or a private placement of its debt or equity securities (not
including the private placement contemplated by the Stock
Purchase Agreement) that results in net proceeds to
[*] The Registrant has requested confidential treatment for certain portions of
this exhibit. The omitted portions have been separately filed with the
Commission.
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Telocity of an amount that will enable the continued expansion
of the Subscriber base for the Telocity Platform at least fifty
percent (50%) of the rates set forth with the Market Deployment
Plan for a period of six (6) months following the closing of
such Qualifying Offering or private placement, as applicable.
12.6. Consequences of Termination. Upon the termination or expiration
of this Agreement, all licenses granted hereunder shall
immediately terminate and each party shall return or destroy all
Confidential Information of the other party in its possession.
Neither party shall be liable to the other for damages of any
sort resulting solely from any termination of this Agreement in
accordance with its terms.
13. Intellectual Property.
13.1 Ownership.
13.1.1 Telocity Materials. NBCi acknowledges that Telocity and
its licensors own and shall own all rights, title and
interest in the Telocity Marks, Telocity Content, the
Telocity Window and its specifications, Additional
Interfaces developed by Telocity without NBCi (except as
provided in Section 13.4), Telocity Sites, Proprietary
Technology (collectively referred to as "Telocity
Materials"). NBCi acknowledges that it has no, and shall
receive under this Agreement no, ownership rights in the
Telocity Materials. In the event NBCi or any of its
subsidiaries, by operation of law or otherwise obtains
any Intellectual Property Rights in the Telocity
Materials, NBCi shall, or cause its subsidiaries to,
irrevocably assign to Telocity and its successors and
assigns any of NBCi's or its subsidiaries' right, title
and interest thereto, including without limitation, any
and all worldwide copyrights and patent rights and all
renewals and extensions and divisionals, continuations
in part and foreign applications and registrations
thereof and for all uses and purposes whatsoever.
13.1.2 NBCi Materials. Telocity acknowledges that NBCi, and its
licensors own and shall own all rights, title and
interest in the NBCi Marks, the NBCi Sites, Co-Branded
Site (except the Telocity Content contained therein),
the Front Door Interfaces, the specifications to such
Front Door Interfaces, the Additional Interfaces
developed by NBCi without Telocity (except as provided
in Section 13.4), and the specifications to such
Additional Interfaces (collectively referred to as "NBCi
Materials"). Telocity acknowledges that it has no, and
shall receive under this Agreement no, ownership rights
in the NBCi Materials. In the event Telocity by
operation of law or otherwise obtains any Intellectual
Property Rights in the NBCi Materials, Telocity shall
irrevocably assign to NBCi and its successors and
assigns of any and all of Telocity's right, title and
interest thereto, including without limitation any and
all worldwide copyrights and any and all renewals and
extensions thereof and for all uses and purposes
whatsoever.
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13.1.3 Jointly Developed Additional Interfaces. Except for (i)
Additional Interfaces developed by Telocity without
NBCi, (ii) Additional Interfaces developed by NBCi
without Telocity and (iii) Section 13.4, each party
acknowledges that the other party jointly owns all
jointly developed Additional Interfaces and all
specifications to such Additional Interfaces, and
neither party shall have an obligation of accounting to
the other with respect to such jointly developed
Additional Interfaces and specifications thereto.
13.2 Telocity Marks and Content. Telocity hereby grants to NBCi and
its subsidiaries a non-exclusive, non-transferable, royalty-free
license, effective throughout the Term, (i) to use, display and
publish the Telocity Marks and Telocity Content, and (ii)to
modify and create derivative works of the Telocity Content,
solely for purposes of rescaling. In the event the International
Editions are deemed included within this Agreement pursuant to
Section 8.2, Telocity hereby further grants to NBCi and its
subsidiaries a non-exclusive, non-transferable, royalty-free
license, effective throughout the Term, to modify and create
derivative works of the Telocity Content solely as permitted
hereunder. In the event the International Editions are deemed
included within this Agreement pursuant to Section 8.2, Telocity
shall in good faith modify the Telocity Marks to incorporate
changes reasonably suggested by NBCi for the relevant target
audience (e.g., complying with local laws or avoiding the use of
offensive terms in the local language). Any use of the Telocity
Marks by NBCi must comply with any reasonable usage guidelines
communicated by Telocity to NBCi from time to time. Nothing
contained in this Agreement will give NBCi any right, title or
interest in or to the Telocity Content, Telocity Marks or the
goodwill associated therewith, except for the limited usage
rights expressly provided above. Telocity will have the right to
approve all marketing materials used by NBCi that use the
Telocity Marks in any way. NBCi acknowledges that Telocity is
the sole and exclusive owner of the Telocity Marks. NBCi shall
use Telocity Marks so that they create a separate and distinct
impression from any other trademark that may be used on
materials bearing the Telocity Marks. NBCi agrees that all use
of the Telocity Marks by NBCi shall inure to the benefit of and
be on behalf of Telocity and its licensors.
13.3 Proprietary Technology. Telocity hereby grants NBCi and its
subsidiaries (and, to the extent necessary for NBCi to perform
hereunder, to subcontractors designated by NBCi, which are not
Telocity Competitors) a non-exclusive, non-transferable
royalty-free right and license during the Term to access and/or
use the Proprietary Technology, including related documentation,
methodology and tools, whether existing as of the Effective Date
or developed by Telocity after the Effective Date, to enable
NBCi to fulfill its obligations hereunder. Any subcontractors
who receive a license under this provision shall first have
signed a written agreement at least as protective of Telocity's
rights as the terms and conditions of Section 20.4.
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13.4 Integration Technologies. Telocity acknowledges that NBCi and
its licensors own and shall own all rights, title and interest
in the technology used to integrate the Telocity Window into the
Front Door Interfaces and that such technology shall constitute
NBCi Materials for purposes of this Agreement; provided,
however, if NBCi has to develop specific technology to integrate
the Telocity Window into the Front Door Interfaces, then the
parties shall jointly own such technology. If in designing and
creating an Additional Interface, NBCi has to develop specific
technology to design and create the Additional Interface, then
the parties shall jointly own such technology. With respect to
any such jointly owned technology neither party shall have an
obligation to accounting to the other.
13.5 NBCi's License Grants. NBCi hereby grants to Telocity a
non-exclusive, non-transferable, royalty free license, effective
throughout the Term, to use, display and publish the NBCi Marks
as permitted in Section 7.2 and to use, reproduce and display
the NBCi Marks in advertising, marketing and promotion of the
Co-Branded Site, the Telocity Platform and the Telocity
Services. Any use of the NBCi Marks by Telocity must comply with
any reasonable editorial and usage guidelines communicated to
Telocity by NBCi from time to time. Telocity shall submit for
approval to NBCi, and NBCi shall have the sole right of approval
over any uses of the NBCi Marks; provided that NBCi shall use
the same standard of approval as it applies to any proposed use
by NBCi or its subsidiaries and provided, further, that
following approval of a particular format and purpose of use,
Telocity shall be deemed to have continuing approval in the
specific manner and for the format and purpose of use approved
without the necessity of seeking specific approvals for each
additional use. Nothing contained in this Agreement will give
Telocity any right, title or interest in or to the NBCi Marks or
the goodwill associated therewith, except for the limited usage
rights expressly provided above. Telocity acknowledges and
agrees that, as between Telocity and NBCi, NBCi or its licensors
are the sole owners of all rights in and to the NBCi Marks. NBCi
will have the right to approve all marketing materials used by
Telocity that use the NBCi Marks in any way. Telocity agrees
that all use of the NBCi Marks by Telocity shall inure to the
benefit of and be on behalf of NBCi and its licensors.
13.6 General Limitation. Neither party will use the other party's
proprietary marks in a manner that disparages the other party or
its products or services, or portrays the other party or its
products or services in a false, competitively adverse or poor
light. If a party is authorized to use the other party's
proprietary marks, the party will comply with the other party's
requests as to the use of the other party's proprietary marks
and will avoid any action that diminishes the value of such
marks. Either party's unauthorized use of the other's
proprietary marks is strictly prohibited.
13.7 General Reservation. Neither party grants any license to the
other except as specifically set forth in this Section 13.
Except as is expressly set forth under this
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Section 13, both parties expressly reserve all of their right,
title and interest in their respective Intellectual Property
Rights.
13.8 Protection of Telocity Platform. Telocity agrees to use
commercially reasonable efforts to protect the Telocity Platform
through owning and/or licensing all Intellectual Property Rights
therein and to use commercially reasonable efforts to maintain
and enforce the same.
14. Responsibility for the Sites and Products. Telocity acknowledges and
agrees that, as between Telocity and NBCi, Telocity will be solely
responsible for any claims or other losses associated with or resulting
from the marketing or operation of the Telocity Platform and the
Telocity Sites and the offer or sale of any Telocity Services by
Telocity or through Telocity Sites or Co-Branded Site, or through emails
delivered for Telocity by NBCi. NBCi acknowledges and agrees that, as
between NBCi and Telocity, NBCi will be solely responsible for any
claims or other losses associated with or resulting from the marketing
or operation of the NBCi Properties and the NBCi Services and the offer
or sale of any NBCi Services by Telocity or by NBCi.
15. Telocity Representations and Warranties.
15.1 Telocity represents and warrants: (i) Telocity possesses
sufficient right, title, interest and license in or to all
Intellectual Property Rights embodied in or used in connection
with the Telocity Marks, the Telocity Content, the Telocity
Platform, and the Telocity Site to perform its obligations
hereunder; (ii) Telocity has full power and authority to grant
the licenses in Sections 13.2 and 13.3 above; (iii) Telocity's
use of the Co-Branded Site, the Telocity Platform and the
Telocity Services pursuant to the license granted it in Section
13.5 above shall in no way constitute an infringement or other
violation of an Intellectual Property Right or any other right
of any third party; and (iv) the execution of this Agreement by
Telocity, and the performance by Telocity of its obligations and
duties hereunder, do not and will not violate any agreement to
which Telocity is a party or by which it is otherwise bound.
15.2 EXCEPT AS EXPRESSLY SET FORTH IN SECTION 15.1 ABOVE, TELOCITY
MAKES NO REPRESENTATIONS OR WARRANTIES, AND HEREBY SPECIFICALLY
DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES, EXPRESS, IMPLIED OR
STATUTORY, REGARDING THE TELOCITY CONTENT, TELOCITY MARKS,
TELOCITY PLATFORM, TELOCITY SERVICES AND TELOCITY SITES,
INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR NON-INFRINGEMENT OF THIRD PARTY RIGHTS AND
IMPLIED WARRANTIES ARISING FROM COURSE OF DEALING OR COURSE OF
PERFORMANCE, OR AS MAY BE SET FORTH IN EXHIBIT B.
16. NBCi Representations and Warranties.
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16.1 NBCi represents and warrants to Telocity: (i) NBCi possesses
sufficient right, title, interest and license in or to all
Intellectual Property Rights (excluding rights to third party
content, for example, user-generated content) embodied in or
used in connection with the Front Door Interface and the
Co-Branded Site to perform its obligations hereunder; (ii) NBCi
has full power and authority to grant the licenses in Sections
13.5 above; (iii) NBCi's use of the Telocity Marks, Telocity
Content and Proprietary Technology pursuant to the license
granted it in Sections 13.2 and 13.3 above shall in no way
constitute an infringement or other violation of an Intellectual
Property Right or any other right of any third party; and (iv)
the execution of this Agreement by NBCi, and the performance by
NBCi of its obligations and duties hereunder, do not and will
not violate any agreement to which NBCi is a party or by which
it is otherwise bound.
16.2 EXCEPT AS EXPRESSLY SET FORTH IN SECTION 16.1 ABOVE, NBCi MAKES
NO REPRESENTATIONS OR WARRANTIES, AND HEREBY SPECIFICALLY
DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES, EXPRESS, IMPLIED OR
STATUTORY, REGARDING THE NBCi MARKS, NBCi PROPERTIES AND NBCi
SERVICES, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT OF THIRD
PARTY RIGHTS AND IMPLIED WARRANTIES ARISING FROM COURSE OF
DEALING OR COURSE OF PERFORMANCE.
17. LIMITATION OF DAMAGES. EXCEPT FOR SECTION 18, NO PARTY WILL BE LIABLE
FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR INCIDENTAL DAMAGES ARISING
OUT OF OR RELATED TO THIS AGREEMENT, HOWEVER CAUSED AND ON ANY THEORY OF
LIABILITY (INCLUDING NEGLIGENCE), AND EVEN IF SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
18. Mutual Indemnification.
18.1. Indemnification by NBCi. NBCi shall indemnify, defend and hold
Telocity and its officers, directors, employees and agents
harmless from and against any costs, losses, liabilities and
expenses, including all court costs, reasonable expenses and
reasonable attorney's fees (collectively, "Losses") that
Telocity may suffer, incur or be subjected to by reason of any
legal action, proceeding, arbitration or other claim by a third
party, whether commenced or threatened, arising out of or as a
result of (i) the operation of the NBCi Properties, (ii) the
transmission of emails or other solicitations by NBCi or any
NBCi subsidiary to a Subscriber in violation of any applicable
privacy policy or legislation or anti-spamming statutes, (iv)
Telocity's use of the NBCi Marks in accordance with this
Agreement, (v) any claim that the intellectual property of NBCi
or any NBCi subsidiary infringes an Intellectual Property Right
of any third party (except in cases where Telocity is required
to indemnify NBCi under Section 18.2), and (vi) the use or
disclosure of User Profile Data in violation of this Agreement
or any applicable law or regulation.
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18.2. Indemnification by Telocity. Telocity shall indemnify, defend
and hold NBCi, and its Affiliates, officers, directors,
employees and agents, harmless from and against any Losses that
NBCi or its Affiliates may suffer, incur or be subjected to by
reason of any legal action, proceeding, arbitration or other
claim by a third party, whether commenced or threatened, arising
out of or as a result of (i) the use of the Telocity Content,
Telocity Marks or Proprietary Technology by NBCi and/or its
Affiliates in accordance with this Agreement; (ii) the operation
of the Telocity Sites or Telocity Platform; (iii) the offer or
sale of Telocity Services by Telocity on or through Telocity
Sites or the Co-Branded Site or any emails sent by NBCi or a
third party pursuant to Section 9.3, (iv) any claim that the
intellectual property of Telocity or any Telocity subsidiary or
provided by Telocity hereunder (including the Proprietary
Technology), Telocity Sites or Telocity Content infringes an
Intellectual Property Right of any third party, (v) the use or
disclosure of User Profile Data in violation of this Agreement
or any applicable law or regulation, or (vi) the violation of
any telecommunications laws, rules or regulations by Telocity.
18.3. Indemnification Procedures. If any party entitled to
indemnification under this Section (an "Indemnified Party")
makes an indemnification request to the other, the Indemnified
Party shall permit the other party (the "Indemnifying Party") to
control the defense, disposition or settlement of the matter at
its own expense; provided that the Indemnifying Party shall not,
without the consent of the Indemnified Party enter into any
settlement or agree to any disposition that imposes an
obligation on the Indemnified Party that is not wholly
discharged or dischargeable by the Indemnifying Party, or
imposes any conditions or obligations on the Indemnified Party
other than the payment of monies that are readily measurable for
purposes of determining the monetary indemnification or
reimbursement obligations of Indemnifying Party. The Indemnified
Party shall notify the Indemnifying Party promptly of any claim
for which Indemnifying Party is responsible and shall cooperate
with the Indemnifying Party in every commercially reasonable way
to facilitate defense of any such claim; provided that the
Indemnified Party's failure to notify Indemnifying Party shall
not diminish Indemnifying Party's obligations under this Section
except to the extent that Indemnifying Party is materially
prejudiced as a result of such failure. An Indemnified Party
shall at all times have the option to participate in any matter
or litigation through counsel of its own selection and at its
own expense.
19. Alternative Dispute Resolution. Unless the parties otherwise agree in
writing and except as qualified in Section 5.5.5, any dispute,
controversy, disagreement or claim, regardless of the legal or equitable
theory involved, arising out of or with reference to this Agreement
(each, a "Dispute") shall be settled in accordance with the terms of
this Section 19. Other than as expressly provided otherwise in this
Agreement, the parties will act in good faith and use commercially
reasonable efforts to resolve any Dispute between the parties or any of
their respective subsidiaries under or related to this Agreement or any
document executed pursuant to this Agreement or any of the transactions
contemplated hereby within ten (10) days of notice by one party to the
other of a specific dispute. Upon the expiration of such initial ten
(10) day period, if a Dispute
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has not been resolved by the parties, the parties shall submit such
Dispute to the parties' chief executive officers, who shall meet within
an additional ten (10) day period to discuss the resolution of such
Dispute in good faith. Such meeting shall continue for a minimum of two
(2) business days, unless the dispute is resolved prior to the
expiration of such two (2) day period. Except as provided in Section
5.5.5, upon the expiration of the second ten (10) day period, if such
Dispute remains unresolved, each party may seek any remedy available to
it at law or otherwise. Neither party will seek, nor will be entitled to
seek, outside resolution of the Dispute until after expiration of the
second ten (10) day period.
20. Miscellaneous.
20.1. Assignment. NBCi shall have the right to assign all of its
rights and liabilities hereunder to an Affiliate or to any
person or entity that (i) acquires all or substantially all of
NBCi's operating assets (whether by asset sale, stock sale,
merger or otherwise) or (ii) results from a merger or
reorganization of NBCi pursuant to any plan of merger or
reorganization. Telocity shall have the right to assign all of
its rights and liabilities hereunder to any person or entity
that (i) acquires all or substantially all of Telocity's
operating assets (whether by asset sale, stock sale, merger or
otherwise) or (ii) results from a merger or reorganization of
Telocity pursuant to any plan of merger or reorganization;
provided, however, that such person or entity is not an NBCi
Competitor.
20.2. Relationship of Parties. This Agreement will not be construed to
create a joint venture, partnership or the relationship of
principal and agent between any of the parties hereto, nor to
impose upon any party any obligations for any losses, debts or
other obligations incurred by another party except as expressly
set forth herein.
20.3. Applicable Law. This Agreement will be construed in accordance
with and governed by the laws of the State of California,
without regard to principles of conflicts of law. Litigation of
disputes under this Agreement shall be conducted in the state or
federal courts for the Northern District of California. The
parties hereto consent to the jurisdiction of any local, state
or federal court in which an action is commenced and located in
accordance with the terms of this Section 20.3 and that is
located in the Northern District of California. The parties
further agree not to disturb such choice of forum, and if not
residing in such state, waive the personal service of any and
all process upon them, and consent that such service of process
may be made by certified or registered mail, return receipt
requested, addressed to the parties as set forth herein.
20.4. Confidentiality. In connection with the activities contemplated
by this Agreement, each party may have access to confidential or
proprietary technical or business information of another party,
including without limitation (i) proposals, ideas or research
related to possible new products or services; (ii) financial
statements and other financial information; (iii) any reporting
information in Section 11 herein; and (iv) the terms of this
Agreement and the relationship among the parties; (collectively,
"Confidential Information"). Each party will
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take reasonable precautions to protect the confidentiality of
each of the other party's Confidential Information, which
precautions will be at least equivalent to those taken by such
party to protect its own Confidential Information. Except as
required by law or as necessary to perform under this Agreement,
no party will knowingly disclose the Confidential Information of
any other party or use such Confidential Information for its own
benefit or for the benefit of any third party. Each party's
obligations in this Section with respect to any portion of
another party's Confidential Information shall terminate when
the party seeking to avoid its obligation under such Section can
document that: (i) it was in the public domain at or subsequent
to the time it was communicated to the receiving party
("Recipient") by the disclosing party ("Discloser") through no
fault of Recipient; (ii) it was rightfully in Recipient's
possession free of any obligation of confidence at or subsequent
to the time it was communicated to Recipient by Discloser; (iii)
it was developed by employees or agents of Recipient
independently of and without reference to any information
communicated to Recipient by Discloser; (iv) it was communicated
by the Discloser to an unaffiliated third party free of any
obligation of confidence; or (v) the communication was in
response to a valid order by a court or other governmental body,
was otherwise required by law or was necessary to establish the
rights of either party under this Agreement.
20.5. Press Release. No party will make any public statement or other
announcement (including without limitation, issuing a press
release) or pre-briefing any member of the press or other third
party) relating to the terms or existence of this Agreement
without the prior written approval of the other parties.
Notwithstanding the foregoing and Section 20.4, the parties
shall issue an initial joint press release, the timing and
wording of which will be subject to each party's reasonable
approval (which shall not be unreasonably withheld or delayed),
regarding the relationship between the parties.
20.6. Injunctive Relief. Each party agrees that in the event of a
breach or alleged breach of Sections 20.4 or 20.5 above that the
other parties shall not have an adequate remedy at law,
including monetary damages, and that the other parties shall
consequently be entitled to seek a temporary restraining order,
injunction, or other form of equitable relief against the
continuance of such breach, in addition to any and all remedies
to which any other party shall be entitled.
20.7. Subsidiaries. Each party unconditionally guarantees to the other
party the performance of all obligations by any of its
subsidiaries under the Agreement (including, without limitation,
payment obligations), as amended from time to time, or any other
obligation of any subsidiary to the other party, now existing or
hereafter arising. If either party's subsidiary does not perform
such obligation, such party shall immediately perform such
obligation.
20.8. Captions and Section Headings. Captions and section headings
used in this Agreement are for convenience only and are not a
part of this Agreement and shall not be used in construing it.
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20.9. Survival. Termination or expiration of this Agreement for any
reason shall not release any party from any liabilities or
obligations set forth in this Agreement which (i) the parties
have expressly agreed shall survive any such termination or
expiration, or (ii) remain to be performed or by their nature
would be intended to be applicable following any such
termination or expiration.
20.10. Force Majeure. If any party shall be delayed in its performance
of any obligation hereunder or be prevented entirely from
performing any such obligation due to causes or events beyond
its reasonable control, including without limitation any act of
God, fire, strike or other labor problem, such delay or
non-performance shall be excused and the time for performance
shall be extended to include the period of such delay or
non-performance.
20.11. Consents and Approvals. Except where expressly provided as being
in the sole discretion of a party, where agreement, approval,
acceptance, consent, confirmation, notice or similar action by
either party is required under this Agreement, such action shall
not be unreasonably delayed or withheld. An approval or consent
given by a party under this Agreement shall not relieve the
other party from responsibility for complying with the
requirements of this Agreement, nor shall it be construed as a
waiver of any rights under this Agreement, except as and to the
extent otherwise expressly provided in such approval or consent.
20.12. Notices. All notices or other communications that shall or may
be given pursuant to this Agreement, shall be in writing, in
English, shall be sent by certified or registered air mail with
postage prepaid, return receipt requested, by facsimile,
overnight express mail, or by hand delivery. Such communications
shall be deemed given and received upon confirmation of receipt,
if sent by facsimile; the day after delivery if by overnight
express mail; or upon delivery if hand delivered; or upon
receipt of mailing, if sent by certified or registered mail; and
shall be addressed to the parties as set forth above on the
first page of this Agreement and to the attention of the Legal
Department, with a Copy to the Office of the President, if to
Telocity; and to the attention of the Legal Department, with a
copy to the Office of the President, if to NBCi; or to such
other addresses or persons as the parties may designate in
writing from time to time.
20.13. Third Party Beneficiary. The parties hereto agree that NBC shall
be a third party beneficiary of this Agreement for purposes of
Section 4.15.
20.14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed a duplicate original
and all of which, when taken together, shall constitute one and
the same document.
20.15. Entire Agreement. This Agreement constitutes and contains the
entire agreement between the parties with respect to the subject
matter hereof and supersedes any prior or contemporaneous oral
or written agreements. This Agreement may not be amended except
in writing signed by all parties. Each party acknowledges and
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agrees that the other has not made any representations,
warranties or agreements of any kind, except as expressly set
forth herein. All exhibits attached to this Agreement are
incorporated hereby and shall be treated as if set forth herein.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives on the dates indicated below.
NBC INTERNET, INC. TELOCITY, INC.
By: /s/ XXXXXX XXXXXXX By: /s/ XXXXX XXXX
---------------------------------- ----------------------------------
(Signature) (Signature)
Name: Xxxxxx Xxxxxxx Name: Xxxxx Xxxx
-------------------------------- --------------------------------
(Please print) (Please print)
Title: Title:
------------------------------- -------------------------------
Date: Date:
-------------------------------- --------------------------------
FOR PURPOSES OF SECTION 4.14 AND 10.4:
NATIONAL BROADCASTING COMPANY, INC.
By: /s AUTHORIZED SIGNATORY
----------------------------------
(Signature)
Name: Authorized Officer
--------------------------------
(Please print)
Title:
-------------------------------
Date:
--------------------------------
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EXHIBIT A
[INTENTIONALLY LEFT BLANK]
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EXHIBIT B
OSS, NETWORK, GATEWAY
OSS
Telocity's back-end operational system is a customer focused web-enabled
business process that ties together all of the Company's functional departments
including sales, customer service, marketing, billing, accounting, line
qualification and order fulfillment. It is technically based on a best-of-breed
approach utilizing standard products for customer relationship management,
billing, for network monitoring and order processing. Using Telocity's automated
back office process, customers can self-subscribe for service without requiring
interaction. Once an order has been placed, the customer information is
populated in real-time to information technology systems within the Company.
After the customer completes the automated line test to determine if the phone
line qualifies for the broadband service, the Telocity back office system can
handle order provisioning for the central office cross connect. Simultaneously,
Telocity's residential gateway modem is automatically sent to the customer. With
these internal information systems, Telocity is able to retrieve real-time order
status, customer and financial information.
Telocity's OSS design is based on "best-of-breed" approach. The Company has
selected the best packages from order entry to billing and integrated them with
the customer as the focus point. [*].
NETWORK
The Company is in the process of deploying a high performance network
IP-based network backbone starting at OC-3 capacity.
The Telocity network features the following:
o A nationwide, managed delivery platform for broadband content, based on
open Internet standards, with QoS between consumers and partners, including
local caching, proxy and media server support. Four levels of QoS from
Internet access to voice based quality.
o Peering and transit arrangements with major backbone partners
o Local media distribution centers with caching via satellite feed and local
media servers for high speed distribution. Extensible to support new
caching mechanism and media distribution schemas.
o IP-protocol based high-speed connectivity to the Internet and to Telocity's
nationwide backbone for partners, supporting various carrier mechanisms
from ATM, xDSL up to point-to-point high-speed circuits.
[*] The Registrant has requested confidential treatment for certain portions of
this exhibit. The omitted portions have been separately filed with the
Commission.
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The Company has negotiated agreements for long-haul capacity from national
carriers to form the basis of its nationwide backbone. In addition, the Company
has executed last-mile interconnection agreements with major last mile
providers.
Telocity's network and OSS are managed and monitored on a 24x7 basis. The
Company's network operations center is located in Cupertino, California. From
this center, Telocity provides end-to-end network monitoring and management
using advanced network management tools 24 hours a day, 7 days a week. This
enhances Telocity's ability to address performance issues before they affect the
end-user experience and allows the Company to remotely install and/or upgrade a
customer's requested suite of products. During first half of 2000, Telocity
intends to establish a back-up data center in a low cost region within the
United States. The network operations center, customer service center and the
data center have a back-up generator and a battery back-up.
GATEWAY
Telocity's residential gateway, which includes the DSL modem, provides for
a simple installation. Once a phone line has been DSL activated in the home, the
residential gateway is shipped to the customer. It does not require installation
of any special cards in the computer or require a site visit by a computer
technician. To activate the DSL service, the customer simply plugs a phone line
into the modem, plugs the modem into the back of the computer and then follows
the automated instructions on the computer screen.
The simplicity behind Telocity's next-generation broadband services is
embodied in its intelligent device called the Telocity residential gateway. The
device combines a DSL modem, an analog modem and a microprocessor unit that
automates installation, customer support and service upgrades. The residential
gateway is a small standalone unit that operates independent of the user's
computer's operating system and does not require a network interface card to be
installed in the computer. As a result, the always-on Internet connection of the
DSL service remains in operation even if the computer crashes or shuts down. The
gateway and Telocity's integrated back office system combine to fully automate
installing, configuring, and upgrading service, including service level upgrades
and the addition of new features and services.
Key benefits of the residential gateway design include:
o Automated broadband residential gateway
o Advanced application and service offerings through automated software
downloading
o Interoperability with industry standard DSLAMs for ADSL, SDSL and G.Lite
o Intelligence to download the necessary software to support future advanced
applications
o Flexible PC connectivity with universal Parallel, Ethernet and USB ports
o Speeds scale from 320 Kbps to 1.1 Mbps for SDSL, and up to 8 Mbps for ADSL
The Company expects to extend services throughout the home with the following
features:
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o Home networking through the existing telephone wire
o Wireless home connectivity
o Automation through X10 integration
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EXHIBIT C
[*]
[*] The Registrant has requested confidential treatment for certain portions of
this exhibit. The omitted portions have been separately filed with the
Commission.
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EXHIBIT D
TELOCITY COMPETITORS
[*]
[*] The Registrant has requested confidential treatment for certain portions of
this exhibit. The omitted portions have been separately filed with the
Commission.
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EXHIBIT E
[INTENTIONALLY LEFT BLANK]
38
39
EXHIBIT F
TEAMS
The parties shall mutually agree in writing on the contents of this Exhibit F
within thirty (30) days of the Effective Date of the Agreement.
39
40
EXHIBIT G
FORM OF WARRANTS
40
41
THE SECURITIES EVIDENCED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH
SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE
COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF SUCH SECURITIES
REASONABLY SATISFACTORY TO THE COMPANY STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SUCH ACT.
No.____________
WARRANT TO PURCHASE PREFERRED STOCK
of
TELOCITY, INC.
(void after December 13, 2004)
1. Number of Shares Subject to Warrant. FOR VALUE RECEIVED, on and after
the Commencement Date (as defined below), and subject to the terms and
conditions herein set forth, the Holder (as defined below) is entitled to
purchase from Telocity, Inc., a California corporation (the "Company"), at any
time before 5:00 p.m. California time on December 13, 2004 ("Termination Date"),
at a price per share equal to the Warrant Price (as defined below), the Warrant
Stock (as defined below and subject to adjustments as described below) upon
exercise of this Warrant pursuant to Section 6 hereof.
2. Definitions. As used in this Warrant, the following terms shall have
the definitions ascribed to them below:
a. "Commencement Date" shall mean December 13, 1999.
b. "Holder" shall mean NBC Internet, Inc.
c. "Securities" shall mean fully paid and non-assessable shares
of Series C Preferred Stock of the Company, or after an initial public offering
in which all outstanding shares of Preferred Stock convert into Common Stock,
Common Stock of the Company.
d. "Warrant Price" shall be equal to $5.24 per share.
e. "Warrant Stock" shall mean the Securities purchasable upon
exercise of this Warrant or issuable upon conversion of this Warrant. The total
number of shares to be issued upon exercise of the Warrant, subject to
adjustment as described in Section 3 below, shall equal 1,039,122 shares.
2. Adjustments and Notices. The Warrant Price shall be subject to
adjustment from time to time in accordance with the following provisions:
42
a. Subdivision, Stock Dividends or Combinations. In case the
Company shall at any time subdivide the outstanding shares of the Securities or
shall issue a stock dividend with respect to the Securities, the Warrant Price
in effect immediately prior to such subdivision or the issuance of such dividend
shall be proportionately decreased, and in case the Company shall at any time
combine the outstanding shares of the Securities, the Warrant Price in effect
immediately prior to such combination shall be proportionately increased,
effective at the close of business on the date of such subdivision, dividend or
combination, as the case may be.
b. Reclassification, Exchange, Substitution, In-Kind
Distribution. Upon any reclassifications, exchange, substitution, or other event
that results in a change of the number and/or class of the securities issuable
upon exercise or conversion of this Warrant or upon the payment of a dividend in
securities or property other than Securities, the Holder shall be entitled to
receive, upon exercise or conversion of this Warrant, the number and kind of
securities and property that the Holder would have received for the Securities
if this Warrant had been exercised immediately before the record date for such
reclassification, exchange, substitution, or other event or immediately prior to
the record date for such dividend. The Company or its successor shall promptly
issue to the Holder a new Warrant for such new securities or other property. The
new Warrant shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 3 including,
without limitation, adjustments to the Warrant Price and to the number of
securities or property issuable upon exercise of the new Warrant. The provisions
of this Section 3(b) shall similarly apply to successive reclassifications,
exchanges, substitutions, or other events and successive dividends.
c. Reorganization, Merger etc. In case of any merger or
consolidation of the Company into or with another corporation, the Company, or
such successor or purchasing corporation, as the case may be, shall, as a
condition to closing any such reorganization, merger or sale, duly execute and
deliver to the Holder hereof a new warrant so that the Holder shall have the
right to receive, at a total purchase price not to exceed that payable upon the
exercise of the unexercised portion of this Warrant, and in lieu of the shares
of the Securities theretofore issuable upon exercise of this Warrant, the kind
and amount of shares of stock, other securities, money and property receivable
upon such reorganization, merger or sale by the Holder of the number of shares
of Securities then purchasable under this Warrant. Such new warrant shall
provide for adjustments that shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 3. The provisions of this
subparagraph (c) shall similarly apply to successive reorganizations, mergers
and sales.
d. No Impairment. The Company shall not, by amendment of its
Articles of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this Warrant by the Company, but
shall at all times in good faith assist in carrying out of all the provisions of
this Section 3 and in taking all such action as may be necessary or appropriate
to protect the Holder's rights under this Section 3 against impairment. If the
Company takes any action affecting the Securities other than as described above
that adversely affects the Holder's rights under this Warrant, the Warrant Price
shall be adjusted downward by an amount equal to the diminution in value of the
Warrant (including any unrealized gain) as a result of such action.
43
e. Notice. Upon any adjustment of the Warrant Price and any
increase or decrease in the number of shares of the Securities purchasable upon
the exercise or conversion of this Warrant, then, and in each such case, the
Company, as promptly as practicable thereafter, shall give written notice
thereof to the Holder of this Warrant at the address of such Holder as shown on
the books of the Company which notice shall state the Warrant Price as adjusted
and the increased or decreased number of shares purchasable upon the exercise or
conversion of this Warrant, setting forth in reasonable detail the method of
calculation of each. The Company further agrees to notify the Holder of this
Warrant in writing of a reorganization, merger or sale in accordance with
Section 3(c) hereof at least forty-five (45) days prior to the effective date
thereof. The Company also agrees to notify the Holder of this Warrant in writing
of a proposed public offering at least thirty (30) days prior to the effective
date thereof.
f. Fractional Shares. No fractional shares shall be issuable upon
exercise or conversion of the Warrant and the number of shares to be issued
shall be rounded to the nearest whole share.
3. No Shareholder Rights. This Warrant, by itself, as distinguished from
any shares purchased hereunder, shall not entitle its Holder to any of the
rights of a shareholder of the Company.
4. Reservation of Stock; Taxes.
a. On and after the Commencement Date, the Company will reserve
from its authorized and unissued Securities a sufficient number of shares to
provide for the issuance of Warrant Stock upon the exercise or conversion of
this Warrant and shall reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of Common Stock upon the
conversion of the Warrant Stock. Issuance of this Warrant shall constitute full
authority to the Company's officers who are charged with the duty of executing
stock certificates to execute and issue the necessary certificates for shares of
Warrant Stock issuable upon the exercise or conversion of this Warrant.
b. The Company covenants that all Securities that may be issued
upon the exercise of rights represented by this Warrant will, upon exercise, be
fully paid and nonassessable and free from all taxes, liens and charges in
respect of the issue (other than taxes in respect of any transfer occurring
contemporaneously with such issue). The Company shall pay any and all United
States federal, state and local taxes and other charges that may be payable in
connection with the preparation, issuance and delivery of the certificates
representing Securities issued hereunder.
5. Exercise of Warrant. This Warrant may be exercised in whole or part
by the Holder, at any time after the date hereof prior to the termination of
this Warrant, by the surrender of this Warrant, together with the Notice of
Exercise and Investment Representation Statement in the forms attached hereto as
Attachments 1 and 2, respectively, duly completed and executed at the principal
office of the Company, specifying the portion of the Warrant to be exercised and
accompanied by payment in full of the Warrant Price in cash or by check with
respect to the shares of Warrant Stock being purchased. This Warrant shall be
deemed to have been exercised immediately prior to the close of business on the
date of its surrender for exercise as provided
44
above, and the person entitled to receive the shares of Warrant Stock issuable
upon such exercise shall be treated for all purposes as Holder of such shares of
record as of the close of business on such date. As promptly as practicable
after such date (but no later than fifteen (15) days after such date), the
Company shall issue and deliver to the person or persons entitled to receive the
same a certificate or certificates for the number of full shares of Warrant
Stock issuable upon such exercise. If the Warrant shall be exercised for less
than the total number of shares of Warrant Stock then issuable upon exercise,
promptly after surrender of the Warrant upon such exercise (but no later than
fifteen (15) days after such surrender), the Company will execute and deliver a
new Warrant, dated the date hereof, evidencing the right of the Holder to the
balance of the Warrant Stock purchasable hereunder upon the same terms and
conditions set forth herein.
6. Conversion.
a. In lieu of exercising this Warrant or any portion hereof, the
Holder hereof shall have the right to convert this Warrant or any portion hereof
into Warrant Stock by executing and delivering to the Company at its principal
office the written Notice of Conversion and Investment Representation Statement
in the forms attached hereto as Attachments 2 and 3, specifying the portion of
the Warrant to be converted, and accompanied by this Warrant. The number of
shares of Warrant Stock to be issued to the Holder upon such conversion shall be
computed using the following formula:
X = (P)(Y)(A-B)/A
where X = the number of shares of Securities to be issued to
the Holder for the portion of the Warrant being
converted.
P = the portion of the Warrant being converted
expressed as a decimal fraction.
Y = the total number of shares of Securities issuable
upon exercise of the Warrant in full.
A = the Fair Market Value of one share of Warrant
Stock.
B = the Warrant Price on the date of conversion.
b. For purposes of this Section 6, "Fair Market Value" shall
mean:
(i) the closing price of shares of the Company's common
stock quoted on the Nasdaq National Market or the closing price
quoted on any exchange on which such shares are listed, whichever
is applicable, on the trading day immediately preceding the date
of delivery of the notices pursuant to this Section 3 (it being
understood that the original Warrant may be surrendered on the
subsequent day if such original Warrant is provided to an
overnight courier service (eg, Federal Express) on the date of
delivery of such notices), or
(ii) if the Company's common stock is not listed on the
Nasdaq National Market or on an exchange, the fair market value
of one share of common
45
stock as determined in good faith by the Company's Board of
Directors.; provided, however, that if the Holder shall dispute
the market price as determined by the Board, the Holder and the
Company may retain an independent expert mutually agreed upon in
good faith by the Holder and the Board (an "Independent Expert").
The determination of market price by the Independent Expert shall
be final, binding and conclusive on the Company and the Holder.
All costs and expenses of the Independent Expert shall be borne
by the Holder unless the determination of fair market value is
more favorable to such Holder by 5% or more, in which case, all
such costs and expenses shall be borne by the Company.
c. Any portion of this Warrant that is converted shall be
immediately canceled. This Warrant or any portion hereof shall be deemed to have
been converted immediately prior to the close of business on the date of its
surrender for conversion as provided above, and the person entitled to receive
the shares of Warrant Stock issuable upon such conversion shall be treated for
all purposes as the Holder of such shares of record as of the close of business
on such date. As promptly as practicable after such date (but no later than
fifteen (15) days after such date), the Company shall issue and deliver to the
person or persons entitled to receive the same a certificate or certificates for
the number of full shares of Warrant Stock issuable upon such conversion. If the
Warrant shall be converted for less than the total number of shares of Warrant
Stock then issuable upon conversion, promptly after surrender of the Warrant
upon such conversion (but no later than fifteen (15) days after such surrender),
the Company will execute and deliver a new Warrant, dated the date hereof,
evidencing the right of the Holder to the balance of the Warrant Stock
purchasable hereunder upon the same terms and conditions set forth herein.
Notwithstanding anything to the contrary contained herein, the Holder may elect
to receive a net issuance of Securities pursuant to this Section 6 when
converting this Warrant in part.
7. Transfer of Warrant. This Warrant may be transferred or assigned by
the Holder hereof in whole or in part to an affiliate of the Holder if (i) the
transferee agrees in writing to be subject to the terms of this Warrant; and
(ii) the transferee delivers written notice of such transfer to the Company.
Upon any partial transfer, the Company will at its expense issue and deliver to
the Holder a new Warrant of like tenor, in the name of the Holder, which shall
be exercisable for such number of Securities that were not so transferred.
8. Representations and Warranties. The Company hereby makes all the
representations and warranties set forth in Section 3 of the Series C Preferred
Stock Purchase Agreement dated as of the date hereof among the Company, the
Holder and certain other investors (the "Series C Preferred Stock Purchase
Agreement"). The Holder hereby makes all the representations and warranties set
forth in Section 4 of the Series C Preferred Stock Purchase Agreement.
9. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by
the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will make
and deliver a new Warrant of like tenor and dated as of such cancellation or
delivery, in lieu of this Warrant.
46
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday in San
Francisco, California, then such action may be taken or such right may be
exercised on the next succeeding day not a legal holiday in San Francisco,
California.
11. Termination. This Warrant shall terminate on 5:00 p.m. California
time on the Termination Date.
12. Miscellaneous. This Warrant shall be governed by the laws of the
State of California, as such laws are applied to contracts to be entered into
and performed entirely in California. The headings in this Warrant are for
purposes of convenience and reference only, and shall not be deemed to
constitute a part hereof. Neither this Warrant nor any term hereof may be
changed or waived orally, but only by an instrument in writing signed by the
Company and the Holder of this Warrant. The terms and provisions of this Warrant
shall inure to the benefit of, and be binding upon, the Company, the Holder and
their respective successors and assigns. All notices and other communications
from the Company to the Holder of this Warrant shall be delivered personally or
mailed by first class mail, postage prepaid, to the address furnished to the
Company by the Holder in the Series C Preferred Stock Purchase Agreement, or to
such other address as the Holder or any transferee or assignee thereof shall
have furnished to the Company in writing, and if mailed shall be deemed given
three days after deposit in the United States mail.
ISSUED:December 13, 1999
TELOCITY, INC.
By:
-------------------------------------
Xxxxx Xxxx, President
47
Attachment 1
NOTICE OF EXERCISE
TO: TELOCITY, INC.
1. The undersigned hereby elects to purchase shares of the Warrant Stock
of Telocity, Inc. pursuant to the terms of the attached Warrant, and tenders
herewith payment of the purchase price in full.
2. Please issue a certificate or certificates representing said shares
of Warrant Stock in the name of the undersigned or in such other name as is
specified below:
----------------------------------------
(Name)
----------------------------------------
(Address)
------------------------- ----------------------------------------
(Date) (Name of Warrant Holder)
By:
------------------------------------
Title:
----------------------------------
48
Attachment 2
INVESTMENT REPRESENTATION STATEMENT
Shares of the Securities
(as defined in the attached Warrant) of
TELOCITY, INC.
In connection with the purchase of the above-listed securities, the
undersigned hereby represents to Telocity, Inc. (the "Company") as follows:
(a) The securities to be received upon the exercise of the Warrant (the
"Securities") will be acquired for investment for its own account, not as a
nominee or agent, and not with a view to the sale or distribution of any part
thereof, and the undersigned has no present intention of selling, granting
participation in or otherwise distributing the same, but subject, nevertheless,
to any requirement of law that the disposition of its property shall at all
times be within its control. By executing this Statement, the undersigned
further represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer, or grant participations to such
person or to any third person, with respect to any Securities issuable upon
exercise of the Warrant.
(b) The undersigned understands that the Securities issuable upon
exercise of the Warrant at the time of issuance may not be registered under the
Securities Act of 1933, as amended (the "Act"), and applicable state securities
laws, on the ground that the issuance of such securities is exempt pursuant to
Section 4(2) of the Act and state law exemptions relating to offers and sales
not by means of a public offering, and that the Company's reliance on such
exemptions is predicated on the undersigned's representations set forth herein.
(c) Except for a transfer by the undersigned, in the event the
undersigned is a partnership, to a limited or general partner of such
partnership, the undersigned agrees that in no event will it make a disposition
of any Securities acquired upon the exercise of the Warrant unless and until (i)
it shall have notified the Company of the proposed disposition, and (ii) it
shall have furnished the Company with an opinion of counsel reasonably
satisfactory to the Company and Company's counsel to the effect that (A)
appropriate action necessary for compliance with the Act and any applicable
state securities laws has been taken or an exemption from the registration
requirements of the Act and such laws is available, and (B) the proposed
transfer will not violate any of said laws. Notwithstanding the foregoing, no
opinion of counsel shall be required for any transfer to an affiliate (as such
term is defined in Rule 405 of the Act) of the undersigned.
(d) The undersigned acknowledges that an investment in the Company is
highly speculative and represents that it is able to fend for itself in the
transactions contemplated by this Statement, has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investments, and has the ability to bear the economic risks
(including the risk of a total loss) of its investment. The undersigned
represents that it has had the opportunity to ask questions of the Company
concerning the Company's business and assets and to obtain any additional
information which it considered necessary to verify the
49
accuracy of or to amplify the Company's disclosures, and has had all questions
which have been asked by it satisfactorily answered by the Company.
(e) The undersigned acknowledges that the Securities issuable upon
exercise of the Warrant must be held indefinitely unless subsequently registered
under the Act or an exemption from such registration is available. The
undersigned is aware of the provisions of Rule 144 promulgated under the Act
which permit limited resale of shares purchased in a private placement subject
to the satisfaction of certain conditions, including, among other things, the
existence of a public market for the shares, the availability of certain current
public information about the Company, the resale occurring not less than one
year after a party has purchased and paid for the security to be sold, the sale
being through a "broker's transaction" or in transactions directly with a
"market makers" (as provided by Rule 144(f)) and the number of shares being sold
during any three-month period not exceeding specified limitations.
Dated:
----------------------
----------------------------------------
(Typed or Printed Name)
By:
-------------------------------------
(Signature)
----------------------------------------
(Title)
50
Attachment 3
NOTICE OF CONVERSION
TO: TELOCITY, INC.
1. The undersigned hereby elects to acquire shares of the Securities of
Telocity, Inc. pursuant to the terms of the attached Warrant, by conversion of
percent ( %) of the Warrant.
2. Please issue a certificate or certificates representing said shares
of Securities in the name of the undersigned or in such other name as is
specified below:
----------------------------------------
(Name)
----------------------------------------
(Address)
------------------------- ----------------------------------------
(Date) (Name of Warrant Holder)
By:
------------------------------------
Title:
----------------------------------
51
THE SECURITIES EVIDENCED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH
SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE
COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF SUCH SECURITIES
REASONABLY SATISFACTORY TO THE COMPANY STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SUCH ACT.
No.____________
WARRANT TO PURCHASE PREFERRED STOCK
of
TELOCITY, INC.
(void after December 13, 2004)
1. Number of Shares Subject to Warrant. FOR VALUE RECEIVED, on and after
the Commencement Date (as defined below), and subject to the terms and
conditions herein set forth, the Holder (as defined below) is entitled to
purchase from Telocity, Inc., a California corporation (the "Company"), at any
time before 5:00 p.m. California time on December 13, 2004 ("Termination Date"),
at a price per share equal to the Warrant Price (as defined below), the Warrant
Stock (as defined below and subject to adjustments as described below) upon
exercise of this Warrant pursuant to Section 6 hereof.
2. Definitions. As used in this Warrant, the following terms shall have
the definitions ascribed to them below:
a. "Commencement Date" shall mean December 13, 1999.
b. "Holder" shall mean National Broadcasting Company, Inc.
c. "Securities" shall mean fully paid and non-assessable shares
of Series C Preferred Stock of the Company, or after an initial public offering
in which all outstanding shares of Preferred Stock convert into Common Stock,
Common Stock of the Company.
d. "Warrant Price" shall be equal to $5.24 per share.
e. "Warrant Stock" shall mean the Securities purchasable upon
exercise of this Warrant or issuable upon conversion of this Warrant. The total
number of shares to be issued upon exercise of the Warrant, subject to
adjustment as described in Section 3 below, shall equal 850,191 shares.
2. Adjustments and Notices. The Warrant Price shall be subject to
adjustment from time to time in accordance with the following provisions:
52
a. Subdivision, Stock Dividends or Combinations. In case the
Company shall at any time subdivide the outstanding shares of the Securities or
shall issue a stock dividend with respect to the Securities, the Warrant Price
in effect immediately prior to such subdivision or the issuance of such dividend
shall be proportionately decreased, and in case the Company shall at any time
combine the outstanding shares of the Securities, the Warrant Price in effect
immediately prior to such combination shall be proportionately increased,
effective at the close of business on the date of such subdivision, dividend or
combination, as the case may be.
b. Reclassification, Exchange, Substitution, In-Kind
Distribution. Upon any reclassifications, exchange, substitution, or other event
that results in a change of the number and/or class of the securities issuable
upon exercise or conversion of this Warrant or upon the payment of a dividend in
securities or property other than Securities, the Holder shall be entitled to
receive, upon exercise or conversion of this Warrant, the number and kind of
securities and property that the Holder would have received for the Securities
if this Warrant had been exercised immediately before the record date for such
reclassification, exchange, substitution, or other event or immediately prior to
the record date for such dividend. The Company or its successor shall promptly
issue to the Holder a new Warrant for such new securities or other property. The
new Warrant shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 3 including,
without limitation, adjustments to the Warrant Price and to the number of
securities or property issuable upon exercise of the new Warrant. The provisions
of this Section 3(b) shall similarly apply to successive reclassifications,
exchanges, substitutions, or other events and successive dividends.
c. Reorganization, Merger etc. In case of any merger or
consolidation of the Company into or with another corporation, the Company, or
such successor or purchasing corporation, as the case may be, shall, as a
condition to closing any such reorganization, merger or sale, duly execute and
deliver to the Holder hereof a new warrant so that the Holder shall have the
right to receive, at a total purchase price not to exceed that payable upon the
exercise of the unexercised portion of this Warrant, and in lieu of the shares
of the Securities theretofore issuable upon exercise of this Warrant, the kind
and amount of shares of stock, other securities, money and property receivable
upon such reorganization, merger or sale by the Holder of the number of shares
of Securities then purchasable under this Warrant. Such new warrant shall
provide for adjustments that shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 3. The provisions of this
subparagraph (c) shall similarly apply to successive reorganizations, mergers
and sales.
d. No Impairment. The Company shall not, by amendment of its
Articles of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this Warrant by the Company, but
shall at all times in good faith assist in carrying out of all the provisions of
this Section 3 and in taking all such action as may be necessary or appropriate
to protect the Holder's rights under this Section 3 against impairment. If the
Company takes any action affecting the Securities other than as described above
that adversely affects the Holder's rights under this Warrant, the Warrant Price
shall be adjusted downward by an amount equal to the diminution in value of the
Warrant (including any unrealized gain) as a result of such action.
53
e. Notice. Upon any adjustment of the Warrant Price and any
increase or decrease in the number of shares of the Securities purchasable upon
the exercise or conversion of this Warrant, then, and in each such case, the
Company, as promptly as practicable thereafter, shall give written notice
thereof to the Holder of this Warrant at the address of such Holder as shown on
the books of the Company which notice shall state the Warrant Price as adjusted
and the increased or decreased number of shares purchasable upon the exercise or
conversion of this Warrant, setting forth in reasonable detail the method of
calculation of each. The Company further agrees to notify the Holder of this
Warrant in writing of a reorganization, merger or sale in accordance with
Section 3(c) hereof at least forty-five (45) days prior to the effective date
thereof. The Company also agrees to notify the Holder of this Warrant in writing
of a proposed public offering at least thirty (30) days prior to the effective
date thereof.
f. Fractional Shares. No fractional shares shall be issuable upon
exercise or conversion of the Warrant and the number of shares to be issued
shall be rounded to the nearest whole share.
3. No Shareholder Rights. This Warrant, by itself, as distinguished from
any shares purchased hereunder, shall not entitle its Holder to any of the
rights of a shareholder of the Company.
4. Reservation of Stock; Taxes.
a. On and after the Commencement Date, the Company will reserve
from its authorized and unissued Securities a sufficient number of shares to
provide for the issuance of Warrant Stock upon the exercise or conversion of
this Warrant and shall reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of Common Stock upon the
conversion of the Warrant Stock. Issuance of this Warrant shall constitute full
authority to the Company's officers who are charged with the duty of executing
stock certificates to execute and issue the necessary certificates for shares of
Warrant Stock issuable upon the exercise or conversion of this Warrant.
b. The Company covenants that all Securities that may be issued
upon the exercise of rights represented by this Warrant will, upon exercise, be
fully paid and nonassessable and free from all taxes, liens and charges in
respect of the issue (other than taxes in respect of any transfer occurring
contemporaneously with such issue). The Company shall pay any and all United
States federal, state and local taxes and other charges that may be payable in
connection with the preparation, issuance and delivery of the certificates
representing Securities issued hereunder.
5. Exercise of Warrant. This Warrant may be exercised in whole or part
by the Holder, at any time after the date hereof prior to the termination of
this Warrant, by the surrender of this Warrant, together with the Notice of
Exercise and Investment Representation Statement in the forms attached hereto as
Attachments 1 and 2, respectively, duly completed and executed at the principal
office of the Company, specifying the portion of the Warrant to be exercised and
accompanied by payment in full of the Warrant Price in cash or by check with
respect to the shares of Warrant Stock being purchased. This Warrant shall be
deemed to have been exercised immediately prior to the close of business on the
date of its surrender for exercise as provided
54
above, and the person entitled to receive the shares of Warrant Stock issuable
upon such exercise shall be treated for all purposes as Holder of such shares of
record as of the close of business on such date. As promptly as practicable
after such date (but no later than fifteen (15) days after such date), the
Company shall issue and deliver to the person or persons entitled to receive the
same a certificate or certificates for the number of full shares of Warrant
Stock issuable upon such exercise. If the Warrant shall be exercised for less
than the total number of shares of Warrant Stock then issuable upon exercise,
promptly after surrender of the Warrant upon such exercise (but no later than
fifteen (15) days after such surrender), the Company will execute and deliver a
new Warrant, dated the date hereof, evidencing the right of the Holder to the
balance of the Warrant Stock purchasable hereunder upon the same terms and
conditions set forth herein.
6. Conversion.
a. In lieu of exercising this Warrant or any portion hereof, the
Holder hereof shall have the right to convert this Warrant or any portion hereof
into Warrant Stock by executing and delivering to the Company at its principal
office the written Notice of Conversion and Investment Representation Statement
in the forms attached hereto as Attachments 2 and 3, specifying the portion of
the Warrant to be converted, and accompanied by this Warrant. The number of
shares of Warrant Stock to be issued to the Holder upon such conversion shall be
computed using the following formula:
X = (P)(Y)(A-B)/A
where X = the number of shares of Securities to be issued to
the Holder for the portion of the Warrant being
converted.
P = the portion of the Warrant being converted expressed
as a decimal fraction.
Y = the total number of shares of Securities issuable
upon exercise of the Warrant in full.
A = the Fair Market Value of one share of Warrant Stock.
B = the Warrant Price on the date of conversion.
b. For purposes of this Section 6, "Fair Market Value" shall
mean:
(i) the closing price of shares of the Company's common
stock quoted on the Nasdaq National Market or the closing price
quoted on any exchange on which such shares are listed, whichever
is applicable, on the trading day immediately preceding the date
of delivery of the notices pursuant to this Section 3 (it being
understood that the original Warrant may be surrendered on the
subsequent day if such original Warrant is provided to an
overnight courier service (eg, Federal Express) on the date of
delivery of such notices), or
(ii) if the Company's common stock is not listed on the
Nasdaq National Market or on an exchange, the fair market value
of one share of common
55
stock as determined in good faith by the Company's Board of
Directors.; provided, however, that if the Holder shall dispute
the market price as determined by the Board, the Holder and the
Company may retain an independent expert mutually agreed upon in
good faith by the Holder and the Board (an "Independent
Expert"). The determination of market price by the Independent
Expert shall be final, binding and conclusive on the Company and
the Holder. All costs and expenses of the Independent Expert
shall be borne by the Holder unless the determination of fair
market value is more favorable to such Holder by 5% or more, in
which case, all such costs and expenses shall be borne by the
Company.
c. Any portion of this Warrant that is converted shall be
immediately canceled. This Warrant or any portion hereof shall be deemed to have
been converted immediately prior to the close of business on the date of its
surrender for conversion as provided above, and the person entitled to receive
the shares of Warrant Stock issuable upon such conversion shall be treated for
all purposes as the Holder of such shares of record as of the close of business
on such date. As promptly as practicable after such date (but no later than
fifteen (15) days after such date), the Company shall issue and deliver to the
person or persons entitled to receive the same a certificate or certificates for
the number of full shares of Warrant Stock issuable upon such conversion. If the
Warrant shall be converted for less than the total number of shares of Warrant
Stock then issuable upon conversion, promptly after surrender of the Warrant
upon such conversion (but no later than fifteen (15) days after such surrender),
the Company will execute and deliver a new Warrant, dated the date hereof,
evidencing the right of the Holder to the balance of the Warrant Stock
purchasable hereunder upon the same terms and conditions set forth herein.
Notwithstanding anything to the contrary contained herein, the Holder may elect
to receive a net issuance of Securities pursuant to this Section 6 when
converting this Warrant in part.
7. Transfer of Warrant. This Warrant may be transferred or assigned by
the Holder hereof in whole or in part to an affiliate of the Holder if (i) the
transferee agrees in writing to be subject to the terms of this Warrant; and
(ii) the transferee delivers written notice of such transfer to the Company.
Upon any partial transfer, the Company will at its expense issue and deliver to
the Holder a new Warrant of like tenor, in the name of the Holder, which shall
be exercisable for such number of Securities that were not so transferred.
8. Representations and Warranties. The Company hereby makes all the
representations and warranties set forth in Section 3 of the Series C Preferred
Stock Purchase Agreement dated as of the date hereof among the Company, the
Holder and certain other investors (the "Series C Preferred Stock Purchase
Agreement"). The Holder hereby makes all the representations and warranties set
forth in Section 4 of the Series C Preferred Stock Purchase Agreement.
9. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by
the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will make
and deliver a new Warrant of like tenor and dated as of such cancellation or
delivery, in lieu of this Warrant.
56
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday in San
Francisco, California, then such action may be taken or such right may be
exercised on the next succeeding day not a legal holiday in San Francisco,
California.
11. Termination. This Warrant shall terminate on 5:00 p.m. California
time on the Termination Date.
12. Miscellaneous. This Warrant shall be governed by the laws of the
State of California, as such laws are applied to contracts to be entered into
and performed entirely in California. The headings in this Warrant are for
purposes of convenience and reference only, and shall not be deemed to
constitute a part hereof. Neither this Warrant nor any term hereof may be
changed or waived orally, but only by an instrument in writing signed by the
Company and the Holder of this Warrant. The terms and provisions of this Warrant
shall inure to the benefit of, and be binding upon, the Company, the Holder and
their respective successors and assigns. All notices and other communications
from the Company to the Holder of this Warrant shall be delivered personally or
mailed by first class mail, postage prepaid, to the address furnished to the
Company by the Holder in the Series C Preferred Stock Purchase Agreement, or to
such other address as the Holder or any transferee or assignee thereof shall
have furnished to the Company in writing, and if mailed shall be deemed given
three days after deposit in the United States mail.
ISSUED:December 13, 1999
TELOCITY, INC.
By:
-------------------------------
Xxxxx Xxxx, President
57
Attachment 1
NOTICE OF EXERCISE
TO: TELOCITY, INC.
1. The undersigned hereby elects to purchase _________ shares of the
Warrant Stock of Telocity, Inc. pursuant to the terms of the attached Warrant,
and tenders herewith payment of the purchase price in full.
2. Please issue a certificate or certificates representing said shares
of Warrant Stock in the name of the undersigned or in such other name as is
specified below:
----------------------------------------
(Name)
----------------------------------------
(Address)
------------------------------- -------------------------------
(Date) (Name of Warrant Holder)
By:
----------------------------
Title:
-------------------------
58
Attachment 2
INVESTMENT REPRESENTATION STATEMENT
Shares of the Securities
(as defined in the attached Warrant) of
TELOCITY, INC.
In connection with the purchase of the above-listed securities, the
undersigned hereby represents to Telocity, Inc. (the "Company") as follows:
(a) The securities to be received upon the exercise of the Warrant (the
"Securities") will be acquired for investment for its own account, not as a
nominee or agent, and not with a view to the sale or distribution of any part
thereof, and the undersigned has no present intention of selling, granting
participation in or otherwise distributing the same, but subject, nevertheless,
to any requirement of law that the disposition of its property shall at all
times be within its control. By executing this Statement, the undersigned
further represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer, or grant participations to such
person or to any third person, with respect to any Securities issuable upon
exercise of the Warrant.
(b) The undersigned understands that the Securities issuable upon
exercise of the Warrant at the time of issuance may not be registered under the
Securities Act of 1933, as amended (the "Act"), and applicable state securities
laws, on the ground that the issuance of such securities is exempt pursuant to
Section 4(2) of the Act and state law exemptions relating to offers and sales
not by means of a public offering, and that the Company's reliance on such
exemptions is predicated on the undersigned's representations set forth herein.
(c) Except for a transfer by the undersigned, in the event the
undersigned is a partnership, to a limited or general partner of such
partnership, the undersigned agrees that in no event will it make a disposition
of any Securities acquired upon the exercise of the Warrant unless and until (i)
it shall have notified the Company of the proposed disposition, and (ii) it
shall have furnished the Company with an opinion of counsel reasonably
satisfactory to the Company and Company's counsel to the effect that (A)
appropriate action necessary for compliance with the Act and any applicable
state securities laws has been taken or an exemption from the registration
requirements of the Act and such laws is available, and (B) the proposed
transfer will not violate any of said laws. Notwithstanding the foregoing, no
opinion of counsel shall be required for any transfer to an affiliate (as such
term is defined in Rule 405 of the Act) of the undersigned.
(d) The undersigned acknowledges that an investment in the Company is
highly speculative and represents that it is able to fend for itself in the
transactions contemplated by this Statement, has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investments, and has the ability to bear the economic risks
(including the risk of a total loss) of its investment. The undersigned
represents that it has had the opportunity to ask questions of the Company
concerning the Company's business and assets and to obtain any additional
information which it considered necessary to verify the
59
accuracy of or to amplify the Company's disclosures, and has had all questions
which have been asked by it satisfactorily answered by the Company.
(e) The undersigned acknowledges that the Securities issuable upon
exercise of the Warrant must be held indefinitely unless subsequently registered
under the Act or an exemption from such registration is available. The
undersigned is aware of the provisions of Rule 144 promulgated under the Act
which permit limited resale of shares purchased in a private placement subject
to the satisfaction of certain conditions, including, among other things, the
existence of a public market for the shares, the availability of certain current
public information about the Company, the resale occurring not less than one
year after a party has purchased and paid for the security to be sold, the sale
being through a "broker's transaction" or in transactions directly with a
"market makers" (as provided by Rule 144(f)) and the number of shares being sold
during any three-month period not exceeding specified limitations.
Dated:
-------------------------------
-------------------------------
(Typed or Printed Name)
By:
----------------------------
(Signature)
-------------------------------
(Title)
60
Attachment 3
NOTICE OF CONVERSION
TO: TELOCITY, INC.
1. The undersigned hereby elects to acquire _________ shares of the
Securities of Telocity, Inc. pursuant to the terms of the attached Warrant, by
conversion of ____ percent (__%) of the Warrant.
2. Please issue a certificate or certificates representing said shares
of Securities in the name of the undersigned or in such other name as is
specified below:
------------------------------------
(Name)
------------------------------------
(Address)
Dated:
-------------------------------
-------------------------------
(Typed or Printed Name)
By:
---------------------------
(Signature)
-------------------------------
(Title)
