EXHIBIT (e)(18)
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
1
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
2
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
3
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.
4
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.
5
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,
6
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.
7
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 least sixty (60) 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
8
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 June 30, 2000.
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
9
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 forty-five (45)
days 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 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
10
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 four minutes 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.
-----------------------------------------
11
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 once a quarter during the two year
period 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
12
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, Xxx Xxxxx shall be NBCi's account manager for
Telocity and Xxxxx Xxxxxxxx shall be Telocity's contact
manager for NBCi (collectively, the "Managers"). Subject to
Section 20.12, the Managers shall be the primary
13
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
14
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
15
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
16
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
17
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.
18
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
19
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 on a
quarterly basis by the forty-fifth (45/th/) day following the
quarter 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
20
underpayment is greater than five percent (5%) 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 (15/TH/) 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
21
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.
22
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.
23
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
24
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.
-----------------------------------
25
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.
26
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
27
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
28
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.
29
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
30
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 X. Xxxx
------------------------------ ----------------------------
(Signature) (Signature)
Name: Xxxxxx Xxxxxxx Name: Xxxxx X. Xxxx
------------------------------ ----------------------------
(Please print) (Please print)
Title: President & COO Title: President & CEO
------------------------------ ----------------------------
Date: 1/13/00 Date: ____________________________
------------------------------
FOR PURPOSES OF SECTION 4.14 AND 10.4:
NATIONAL BROADCASTING COMPANY, INC.
By: Xxxxxx Xxxxxxxxx
--------------------------------
(Signature)
Name: Xxxxxx Xxxxxxxxx
--------------------------------
(Please print)
Title: President NBC Interactive Media
--------------------------------
Date: 1/18/00
--------------------------------
31
December 14, 2000
Xx. Xxxxx Xxxxxx-Xxxx
President and Chief Executive Officer
Telocity, Inc.
00000 Xxxxx Xx Xxxx Xxxxxxxxx
Xxx Xxxx, XX 00000
Re: Waiver of Right of First Negotiation
------------------------------------
Dear Xx. Xxxx:
Reference is made to the Second Amended and Restated Inventors' Rights
Agreement, dated as of December 13, 1999 by and among Telocity and certain
stockholders of Telocity, including NBC Internet, Inc. (the "Rights Agreement").
In connection with and conditional upon the execution of the Agreement and
Plan of Merger (the "Acquisition") between Xxxxxx Electronics Corporation,
DIRECTV Broadband, Inc. and Telocity Delaware, Inc., a Delaware corporation (the
"Company") by Xxxxxx or one of its subsidiaries NBC Internet, Inc. hereby waives
-------
its Right of First Negotiation as set forth in Section 6.2.2 of the Rights
Agreement, with respect to the Acquisition only; provided that such acquisition
be completed by June 1, 2001 and be for a per share purchase price of no less
than $2.00. Neither (i) the Right of First Negotiation of NBC Internet, Inc.
with respect to any subsequent proposed acquisition of the Company nor (ii) any
other rights of NBC Internet, Inc. pursuant to the Rights Agreement shall be
affected by the waiver set forth herein.
If you are in agreement with the above terms and conditions of this
Amendment/Waiver, please indicate you're acceptance by signing in the space
provided below, and return one original to me.
Very truly yours,
NBC INTERNET, INC.
By: /s/ Xxx Xxxxxxxxx
---------------------------
Name: Xxx Xxxxxxxxx
Title: Sr V.P., Bus. Dev.
Accepted and Agreed:
TELOCITY, INC.
By: /s/ Xxxxx X. Xxxx
---------------------------
Name:
Title:
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by
their duly authorized representation on the dates indicated below:
NBC INTERNET, INC. TELOCITY DELAWARE, INC.
By: /s/ Xxx Xxxxxxxxx By: /s/ Xxxx Xxxxxxxxx
-------------------------------- --------------------------------
Name: Xxx Xxxxxxxxx Name: XXXX XXXXXXXXX
------------------------------ ------------------------------
(please print) (please print)
Its: SVP Business Development Its: SVP Legal Affairs
------------------------------- -------------------------------
Date: 12-21-00 Date: 12-21-00
------------------------------ ------------------------------
DIRECTV, Inc. acknowledges that if the Transaction Event takes place, a DIRECTV
entity or its parent company will be successor to Telocity Delaware, Inc., and
is signing this document solely to acknowledge this fact.
DIRECTV, INC.
By: /s/ Xxxxx X. Xxxxxx
------------------------------
Name: Xxxxx X. Xxxxxx
----------------------------
(Please print)
Its: Vice President
-----------------------------
Date: 12-21-00
----------------------------
AMENDMENT AGREEMENT
This Amendment Agreement ("Agreement"), effective as of December 2l, 2000
(the "Amendment Effective Date"), is entered into by NBC Internet, Inc., a
Delaware corporation ("NBCi") and Telocity Delaware, Inc., a Delaware
corporation and the successor to Telocity, Inc. (together with its successors
and assigns, "Telocity"). This Agreement hereby amends and/or terminates (as
set forth below) the NBCi/Telocity Operating Agreement between NBCi and Telocity
entered into as of December 10, 1999 and attached hereto as Exhibit B (the
---------
"Operating Agreement") and the letter Advertising Agreement entered into by NBCi
and Telocity and dated December 14, 1999 and attached hereto as Exhibit C (the
---------
"Advertising Agreement"). Telocity acknowledges that NBCi may fulfill its
obligations under this Agreement itself or through various of its subsidiaries.
If there is any conflict between the terms of the Operating Agreement or the
Advertising Agreement and the terms of this Agreement, the terms of this
Agreement shall govern. The parties hereby agree as follows:
1. Defined Terms.
-------------
1.1 "Transaction Event" means consummation of an acquisition
according to the Agreement and Plan of Merger (the "Acquisition") between Xxxxxx
Electronics Corporation, DIRECTV Broadband Inc., and Telocity Delaware, Inc. at
a per share price for shares of Telocity, Inc. of no less than $2.00.
1.2 "Advertiser-Branded Spot" means, for purposes of this Agreement
and notwithstanding the definition in the Advertising Agreement, a spot that
promotes solely Telocity's (or its successor's) multi-channel video services
and/or high speed Internet services (including, but not limited to, services
under the "DIRECTV" brand); provided, however, that such spot does not include
any brand of an NBCi Competitor (as "NBCi Competitor" is defined in the
Operating Agreement and updated in Exhibit D hereto). For avoidance of doubt,
---------
the parties acknowledge that the "DIRECTV" brand, even if DIRECTV or its parent
company is owned by an NBCi Competitor, shall not be considered to be the brand
of an NBCi Competitor.
1.3 All other capitalized terms used but not defined herein shall
have the meaning set forth in the Operating Agreement and/or Advertising
Agreement (notwithstanding the termination of any parts of such agreements).
2. Contingency. If the Transaction Event does not take place pursuant to
-----------
the terms of the Agreement and Plan of Merger described in Section 1.1 of this
Agreement, then this Agreement shall terminate and shall have no further effect.
Notwithstanding such termination of this Agreement, all online and on-air
promotions delivered pursuant to this Agreement and Schedule A hereto shall
----------
count toward the total value of promotions required to be delivered by NBCi
under the Operating Agreement and the Advertising Agreement.
3. Termination of Operating Agreement.
----------------------------------
3.1 Termination and Survival.
------------------------
3.1.1 Termination. If the Transaction Event takes place, the
-----------
Operating Agreement will terminate on the date of the Transaction Event, and all
rights and obligations
thereunder, except as specifically set forth below in Section 3.1.2, shall
cease. All outstanding amounts pursuant to revenue sharing owed by either party
under Section 10 of the Operating Agreement will be forgiven upon termination of
the Operating Agreement hereunder.
3.1.2 Survival. Notwithstanding the termination described in
--------
Section 3.1.1 hereof, Sections 6.3.1, 7.4, 7.5, 13.6, 15, 16, 17, 18, 19 and 20
of the Operating Agreement (and any definitions in the Operating Agreement
relevant to such sections or to this Agreement) will survive such termination
and are hereby incorporated into this Agreement as amended herein to the extent
the terms in such sections do not conflict with the terms of this Agreement.
3.2 Rebranding. Telocity acknowledges that NBCi is currently re-
----------
branding and redesigning some or all of the NBCi Sites (including the site
operating under the "Snap" brand), and NBCi's rights and obligations under the
provisions of the Operating Agreement that survive as set forth in Section 3.1.2
above, will be applied to such re-branded and redesigned sites subject to NBCi's
discretion.
3.3 Online Promotions.
-----------------
3.3.1 Delivery of Impressions. NBCi will deliver the
-----------------------
Impressions required to be delivered pursuant to Section 7.5 of the Operating
Agreement substantially in accordance with the schedule attached hereto as
Exhibit A, subject to Section 6.2 hereof. The type and placement of Impressions
---------
required to be delivered under Section 7.5 of the Operating Agreement, and the
timing of delivery of Impressions (subject to the schedule in Exhibit A), shall
---------
be at NBCi's sole discretion during the period from the Amendment Effective Date
until the Transaction Event, and shall be at 100% of the rates in NBCi's current
standard rate card. At NBCi's discretion and subject to availability, some of
the value of the online Promotions deliverable pursuant to Section 7.5 of the
Operating Agreement may be delivered as Spots or Advertiser-Branded Spots
(subject to the applicable terms and conditions of Section 4 hereof).
3.3.2 Content for Promotions. Telocity will design and create
----------------------
the content required for the Promotions in accordance with NBCi's technical and
editorial guidelines and will deliver such content to NBCi via email no later
than fifteen business days before the first day on which such Promotions are
scheduled to be first delivered by NBCi. If such content is delivered to NBCi
later than fifteen business days before a Promotion is scheduled to be
delivered, then for each day in which such materials have not been delivered
NBCi shall be deemed to have delivered the value of Impressions required to be
delivered under this Agreement on a straight line, daily pro-rata basis.
3.4 Co-Branded Site. The Co-Branded Site created under the Operating
---------------
Agreement will remain in place until the Transaction Event. Following the
Transaction Event and notwithstanding the termination of the Operating
Agreement, subject to Telocity's discretion, the parties may continue to use the
Co-Branded Site as contemplated under the Operating Agreement. In such event,
upon advance notice of 10 business days from Telocity, NBCi will use
commercially reasonable efforts to rebrand the Co-Branded Site to include
branding for Telocity's successor entity.
2
3.5 User Data. Before the Transaction Event, each party will
---------
provide to the other party all such User data collected before the date of the
Transaction Event as may be required to be provided under Sections 9.1, 9.5 and
9.6 of the Operating Agreement. Restrictions on the use of such data as set
forth in the Operating Agreement are incorporated herein by reference.
4. Amendment to Advertising Agreement.
----------------------------------
4.1 On Air Promotions.
-----------------
4.1.1 Delivery of Spots. All Spots and Advertiser-Branded Spots
-----------------
required to be delivered by NBCi under the Advertising Agreement will be
delivered substantially in accordance with the schedule attached hereto as
Exhibit A, subject to Section 6.2 hereof; provided that Telocity will provide
---------
timely and reasonable cooperation with the scheduling and delivery of such Spots
and Advertiser-Branded Spots, including timely approval of logo treatment and
providing content required for such promotions. Spots will consist of a logo
display and up to ten seconds of co-branded voice-over message. All Spots and
Advertiser-Branded Spots shall be subject to NBCi's approval, which shall not be
unreasonably withheld. Subject to the mutual agreement of the parties, Spots and
Advertiser-Branded Spots delivered under this Agreement and/or the Advertising
Agreement may be delivered on NBC TV or on local radio stations owned by Clear
Channel Broadcasting, Inc. Spots and Advertiser-Branded Spots on radio will
consist of up to ten seconds of voice-over message (which message will be co-
branded in the case of Spots). The first sentence of Section 8 of the
Advertising Agreement is hereby deleted and shall have no further effect.
4.1.2 Value Rate of Spots. The value rate of on air
-------------------
advertisements delivered under this Agreement and/or the Advertising Agreement
will be (i) 42.5% of the Scatter Market Rate for Spots and (ii) 100% of the
Scatter Market Rate for Advertiser-Branded Spots. "Scatter Market Rate" means
the rate reasonably assigned by NBC to a television spot when the spot is
broadcast by NBC, or by Clear Channel Broadcasting, Inc. to a radio spot when
the spot is broadcast by a radio station owned by Clear Channel Broadcasting,
Inc. NBC and Clear Channel Broadcasting, Inc. do not publish a rate card on the
Scatter Market Rate, as rates vary per quarter and per advertiser.
4.1.3 Content for Spots. Telocity will provide timely and
-----------------
reasonable cooperation with respect to logo approval and voice over suggestions
for the Spots or Advertiser-Branded Spots to be delivered by NBCi, and will
provide Telocity logos required for such advertisements. The content for Spots
and Advertiser-Branded Spots will be subject to NBCi's approval, which will not
be unreasonably withheld. If Telocity content or approval required for the Spots
or Advertiser-Branded Spots is delivered to NBCi by Telocity later than fifteen
business days before a Spot or Advertiser-Branded Spot is scheduled to be
delivered, then for each day in which such materials have not been delivered
NBCi shall be deemed to have delivered the value of Spots and/or Advertiser-
Branded Spots required to be delivered under this Agreement on a straight line,
daily pro-rata basis. Telocity will be responsible for 25% of all production
costs for the Spots and 100% of all production costs for the Advertiser-Branded
Spots, and will reimburse NBCi for any such costs incurred by NBCi within thirty
days of receiving an invoice from NBCi.
3
4.1.4 Advertiser-Branded Spots. Following the Transaction
------------------------
Event, at Telocity's discretion NBCi shall deliver Advertiser-Branded Spots in
place of Spots required to be delivered under the Advertising Agreement.
5. Additional Media Buy.
--------------------
5.1 Delivery of Promotions. In addition to the online and on air
----------------------
promotions to be delivered pursuant to the Operating Agreement and Advertising
Agreement, Telocity will purchase an additional $3,600,000 in promotions for
delivery in the third quarter and fourth quarter of 2002 as set forth in Exhibit
-------
A, subject to Section 6.2 hereof. NBCi shall deliver $1,980,000 of such
-
additional promotions as online Promotions (valued at 100% of the rates in
NBCi's current standard rate card), and $1,620,000 of such additional promotions
as Spots or Advertiser-Branded Spots at Telocity's discretion on local radio
stations owned by Clear Channel Communications, Inc. (valued at 42.5% of the
Scatter Market Rate for Spots and 100% of the Scatter Market Rate for
Advertiser-Branded Spots). The creation and delivery of all promotions under
this Section 5 will be subject to all applicable provisions of this Agreement.
5.2 Payment. Telocity will pay NBCi monthly for the promotions
-------
delivered in the previous month pursuant to Section 5.1, payable by check or
wire transfer of immediately available funds promptly upon receipt of invoice
from NBCi.
6. Additional Terms.
----------------
6.1 Ongoing Relationship. Between the Amendment Effective Date and
--------------------
the Transaction Event, NBCi and Telocity will have good faith discussions
regarding the possibility of an ongoing commercial relationship. Such
discussions shall include, but not be limited to, NBCi's Portal Service, default
start page service, Community Service, E-Commerce Services, enhanced television
services, interactive television services, and list management services.
Provided that the parties meet for such good faith discussions no later than
sixty days after the date of the Transaction Event, nothing herein regarding
good faith discussions may be construed to obligate any of the parties to a
commitment as to the nature or outcome of such discussions or to give rise to
any cause of action based on the nature, conduct or outcome of such discussions.
6.2 Acceleration of Media. If the parties do not enter into a long
---------------------
term agreement pursuant to the discussions under Section 6.1 hereof on or before
June 1, 2001, then, starting in the first quarter of 2002, the schedule under
Exhibit A for delivery of all remaining media by NBCi in each quarter will be
---------
accelerated by six months as set forth in Exhibit A.
---------
6.3 Messaging. NBCi may send an email message no later than five
---------
business days before the Transaction Event to all Users of the Telocity Services
explaining how such Users may continue to use the NBCi Core Business. The
content of such email messages shall be determined by NBCi with Telocity's
approval, which approval shall not be unreasonably withheld. No later than ten
business days before the Transaction Event, at NBCi's request, Telocity shall
provide NBCi with any commercially reasonable technical or other information
necessary for NBCi to provide the above instructions.
4
7. Miscellaneous.
--------------
7.1 Term. The term of this Agreement will begin on the Amendment
----
Effective Date and end on December 31, 2002, unless otherwise terminated as set
forth herein.
7.2 Termination.
-----------
7.2.1 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 the other party commits a material breach of its obligations
hereunder and such breach is not cured within thirty days after notice thereof
from the non-breaching party; provided, however, that no cure period shall be
allowed where the relevant breach is not susceptible to cure within such cure
period.
7.2.2 Termination for Insolvency. Either party may terminate
--------------------------
this Agreement immediately, and shall have no further obligation under this
Agreement, if the other party adopts a plan of complete liquidation or
dissolution; 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.
7.2.3 Competitor Termination. NBCi may terminate this Agreement
----------------------
and the Advertising Agreement at any time by giving written notice of
termination to Telocity if Telocity experiences a change of ownership such that
a direct competitor of NBCi 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 a direct competitor of NBCi. In the event
of termination by NBCi under this Section 7.2.3, such termination shall be
NBCi's sole remedy and NBCi and Telocity will have no further obligations
hereunder or under the Advertising Agreement.
7.3 Telocity Content. Telocity hereby grants to NBCi and its
----------------
subsidiaries a nonexclusive, non-transferable, royalty-free license, effective
throughout the Term, to use, display and publish Telocity Content and Telocity
Marks provided to NBCi by Telocity solely as permitted hereunder in any medium
or through any technology now known or hereafter devised. Any use of the
Telocity Content and Telocity Marks by NBCi must comply with any reasonable
usage guidelines communicated by Telocity to NBCi from time to time.
7.4 General. Upon the execution of this Agreement, each reference in
-------
the Operating Agreement and Advertising Agreement to "this Agreement,"
"hereunder," "hereof," "herein," or words of like import, and each reference in
any document related thereto, or executed in connection therewith, shall mean
and be a reference to the such agreements as amended hereby, and such agreements
and this Agreement shall be read together and construed as one single
instrument.
5
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
by their duly authorized representatives on the dates indicated below.
NBC INTERNET, INC. TELOCITY DELAWARE, INC.
By: /S/ By: /S/
--------------------------------- --------------------------------
Name: Xxx Xxxxxxxxx Name: Xxxx Xxxxxxxxx
------------------------------- ------------------------------
(Please print) (Please print)
Its: SVP Business Development Its: SVP Legal Affairs
-------------------------------- -------------------------------
Date: 12/21/00 Date: 12/21/00
------------------------------- ------------------------------
DIRECTV, Inc. acknowledges that if the Transaction Event takes place, a
DIRECTV entity or its parent company will be successor to Telocity Delaware,
Inc., and is signing this document solely to acknowledge this fact.
DIRECTV, INC.
By: /S/
----------------------------------
Name: Xxxxx X. Xxxxxx
--------------------------------
(Please print)
It's: Vice President
--------------------------------
Date: 12/21/00
--------------------------------
6