Exhibit (e) (19)
NBCi Confidential
12/14/99
December 14, 1999
Patti Hart
Chief Executive Officer
Telocity, Inc.
10355 North De Anza Boulevard
San Jose, CA 94014
Advertising Agreement
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Dear Ms. Hart:
This letter sets forth the agreement between NBC Internet, Inc. ("NBCi")
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and Telocity, Inc. ("Advertiser") with respect to NBCi's agreement to provide
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Advertiser with the right to use certain of NBCi's advertising inventory on NBC
Television Network and its owned and operated television stations (collectively,
"NBC TV") to promote NBCi and Advertiser only, subject to the following terms
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and conditions:
1. Spots. (a) NBCi shall develop and produce fifteen (15) and thirty (30)
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second co-branded advertising spots to promote the next generation Internet
services available on the Co-Branded site accessible through Advertiser's high-
speed Internet services (the "Spots"). Advertiser shall reimburse NBCi 25% of
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all production expenses for each Spot within thirty (30) days of the completion
of such Spot. Use of Telocity marks in each Spot will be subject to
Advertiser's approval, not to be withheld or delayed unreasonably. NBCi will
instruct NBC TV to telecast the Spots on NBC TV on the Dates, Days and Times
mutually agreed by NBCi and Advertiser (subject to NBCi's available inventory
and prior sales commitments); provided, however, that in the event that no such
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agreement is reached with regard to the number or value of Spots to be broadcast
in any calendar quarter or year, NBCi may propose and implement a reasonable
schedule for the broadcast of Spots in accordance with the terms of Section 2
below and based upon Advertiser's reasonable request for such schedule. An
initial schedule for the first quarter of 2000 shall be determined as soon as
practicable following the date hereof. All spots run by Advertiser pursuant to
this Letter Agreement shall be subject to NBC TV's standard terms and conditions
for such advertising which are described in the "Participating Sponsorship
Agreement" attached hereto as Exhibit A (the "Standard Terms") and which are
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made a part of this Letter Agreement in their entirety; provided, however, that
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in the case of a conflict between the terms of this Letter
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Agreement and the terms of the Standard Terms, the terms of this Letter
Agreement shall govern. For purposes of the Standard Terms, Advertiser shall be
both the "Advertiser" and the "Agency" as such terms are used therein.
(b) With respect to the placement or telecast of Advertiser's Spots in any
particular Program, Advertiser acknowledges that NBC TV may reject such
placement or telecast if such placement or telecast would compete with or
violate the rights of any other advertiser, sponsor or supplier of such Program
or program category, as determined by NBC TV in its sole discretion and in good
faith; it being understood that NBCi's aggregate commitments set forth in
Section 2 below shall not be affected by any such rejection.
(c) Advertiser may elect to substitute up to 15% of the value of Spots to
be provided by NBCi in any given financial quarter with an equivalent value of
on-line advertising at 100% of the applicable NBCi standard rate card, subject
to the restrictions set forth in Section 7.5 ("Online Promotions") of the
Operating Agreement among NBCi, NBC TV, and Advertiser dated December 13th__,
1999 (the "Operating Agreement"), provided that Advertiser gives NBCi three-
months prior written notice.
2. Value of Spots. NBCi shall telecast Spots with a total spot value of
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$13,000,000 (the "Total Spot Value") during the thirty-six (36) months
commencing on January 1, 2000 (the "Effective Date"). The value of each Spot
for purpose of this Letter Agreement shall be calculated at 42.5% of the scatter
market rate in effect at the time such Spot is ordered. The parties agree that
no agency fees or other expenses may be deducted by Advertiser in any way in
connection with determining the number of Shares (as defined below) to be paid
to NBCi pursuant to Section 3 hereof at any time.
3. Payment for the Spots. (a) Advertiser shall deliver to NBCi
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__2,480,916______ shares of Series C Preferred Stock of Advertiser pursuant to
the terms and conditions of that certain Series C Preferred Stock Purchase
Agreement dated as of the date hereof between Advertiser and certain investors
(the "Purchase Agreement").
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(b) NBCi shall provide Advertiser with a written report within 10 business
days after the end of each calendar month after the Effective Date during which
Advertiser's Spots have been telecast and setting forth the aggregate value of
Advertiser's Spots telecast by NBCi in the preceding month.
4. Representations and Warranties. NBCi and Advertiser each represent and
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warrant that this Letter Agreement has been duly authorized, executed and
delivered by such party and that this Letter Agreement constitutes the legal,
valid and binding obligations of such party, enforceable against it in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
by general principles of equity.
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5. Termination. (a) Notwithstanding any other remedy available to NBCi, in
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the event that:
(i) NBCi notifies Advertiser in writing (with specificity) that
Advertiser has materially breached this Letter Agreement and Advertiser has
not cured such alleged breach within thirty (30) days of its receipt of
such notice; or
(ii) upon the occurrence of a Change of Control (as hereinafter
defined); or
(iii) Advertiser admits in writing its inability to pay its debts
generally; makes a general assignment for the benefit of creditors; has any
proceeding instituted by or against it seeking to adjudicate it as bankrupt
or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of Advertiser
or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, or similar official for
it or any substantial part of its property; provided, in the case where
such proceeding is involuntarily instituted against Advertiser, such
proceeding remains undismissed after thirty (30) days,
then, in any such case, NBCi shall have the right, but not the obligation, to
terminate this Letter Agreement, without prejudice to the rights of the parties
hereunder and, in the event of a termination after NBCi's receipt of the Shares
pursuant to Section 3(a) hereof, NBCi shall pay Advertiser a cash amount equal
to the difference, if positive, between the Total Spot Value and the value of
the Spots already telecast (or deemed telecast), as determined and calculated
pursuant to Sections 1 and 2 above. Notwithstanding the foregoing, the terms
contained in Sections 5, 6, 7 and 8 shall survive the termination hereof. Any
such termination right in connection with a Change of Control shall be
exercisable no later than the later to occur of (x) ten (10) business days prior
to the consummation of such Change of Control and (y) ten (10) business days
after receipt by NBCi of notice (which notice shall identify the third party
having or acquiring Control over Advertiser, be in writing, explicitly state
that it is being delivered in accordance with this Section 5 and provide NBCi
with such additional information as has been provided to the other stockholders
of Advertiser) from Advertiser of such Change of Control (which termination
shall become effective, at NBCi's discretion, upon the consummation of such
Change of Control or following receipt of such notice from Advertiser). For
purposes of this Section 5, the following terms shall have the following
meanings:
"Change of Control" shall mean (A) any consolidation, reorganization
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or merger of Advertiser with any third party, other than a transaction
resulting in the holders of the capital stock of Advertiser (prior to such
consolidation, reorganization or merger) having Control over the surviving
or resulting entity, (B) any third party having Control over Advertiser or
(C) any sale, transfer or other disposition by Advertiser of all or
substantially all of its assets to any third party; and
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"Control" means the possession, directly or indirectly, of the power
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to direct or cause the direction of the management and policies of
Advertiser, whether through ownership of voting securities, as trustee or
executor, by contract or credit arrangement or otherwise.
(b) Notwithstanding any other remedy available to Advertiser, in the event
that:
(i) Advertiser notifies NBCi in writing (with specificity) that
NBCi has materially breached this Letter Agreement and NBCi has not cured
such alleged breach within thirty (30) days of its receipt of such notice;
or
(ii) NBCi admits in writing its inability to pay its debts
generally; makes a general assignment for the benefit of creditors; has any
proceeding instituted by or against it seeking to adjudicate it as bankrupt
or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of NBCi or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, or similar official for it or any
substantial part of its property; provided, in the case where such
proceeding is involuntarily instituted against NBCi, such proceeding
remains undismissed after thirty (30) days,
then, in any such case, Advertiser shall have the right, but not the obligation,
to terminate this Letter Agreement, without prejudice to the rights of the
parties hereunder and, in the event of a termination after NBCi's receipt of the
Shares pursuant to Section 3(a) hereof, require NBCi to pay Advertiser a cash
amount equal to the difference, if positive, between the Total Spot Value and
the value of the Spots already telecast (or deemed telecast), as determined and
calculated pursuant to Sections 1 and 2 above. Notwithstanding the foregoing,
the terms contained in Sections 5, 6, 7 and 8 shall survive the termination
hereof.
(c) In the event that the Operating Agreement is terminated pursuant to Section
12 ("Term; Termination") thereof, NBCi in its sole discretion may (i) terminate
its obligations under this Letter Agreement and provide Advertiser with cash in
lieu of the unused portion of the advertising; or (ii) telecast spots which
promote solely Advertiser and its high-speed Internet services only
("Advertiser-Branded Spot") in lieu of the unused portion of the advertising,
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provided that such Advertiser-Branded Spots shall be valued at 100% of the
scatter market rate of a similar spot charged by NBC TV at the time that each
Advertiser-Branded Spot is scheduled by NBCi. In the event that NBCi terminates
the promotional exclusivity set forth in Section 4.12 ("Promotional
Exclusivity") of the Operating Agreement, NBCi will telecast Advertiser-Branded
Spots in lieu of the unused portion of the advertising, provided that such
Advertiser-Branded Spots shall be valued at 100% of the scatter market rate of a
similar spot charged by NBC TV at
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the time that each Advertiser-Branded Spot is scheduled by NBCi. Advertiser
shall bear the total cost of the production of all Advertiser-Branded Spots.
Advertiser agrees that it will comply with NBCi's then-current policies
regarding the timely delivery of commercial materials related to the Advertiser-
Branded Spots.
6. Miscellaneous. This Letter Agreement, the Purchase Agreement, the
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Operating Agreement, and the exhibits and schedules hereto and thereto
constitute the entire agreement and understanding of the parties relating to the
subject matter hereof and supersede all prior and contemporaneous agreements,
negotiations, and understandings between the parties, both oral and written
relating thereto. No waiver or modification of any provision of this Letter
Agreement shall be effective unless in writing and signed by both parties. The
terms of this Letter Agreement shall apply to parties hereto and any of their
successors or assigns; provided, however, that this Letter Agreement may not be
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transferred or assigned by Advertiser, including, without limitation, the right
to receive Spots to be telecast by NBC TV, without the prior written consent of
NBCi which shall not be unreasonably withheld. This Letter Agreement may be
executed in counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement.
7. Governing Law and Jurisdiction. This Letter Agreement shall be governed by
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and construed under the laws of the State of New York applicable to contracts
fully performed in New York, without regard to New York conflicts law. The
parties hereto irrevocably consent to and submit to the exclusive jurisdiction
of the federal and state courts located in the County of New York. The parties
hereto irrevocably waive any and all rights to trial by jury in any proceeding
arising out of or relating to this Agreement.
8. Liability. In the event that NBC TV does not telecast Spots equal to the
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Total Spot Value during the thirty-six (36) months after the Effective Date,
then as liquidated damages and not a penalty, NBCi shall pay Advertiser in cash
an amount equal to the difference, if positive, between the Total Spot Value and
the value of the Spots actually telecast, as calculated pursuant to Section 2
above. Except for damages arising out of the gross negligence of willful
misconduct of either party hereto, no party shall be liable to the other party
or its affiliates, officers, directors, successors or assigns for any
incidental, consequential, special or punitive damages or lost profits arising
out of this Letter Agreement, whether liability is asserted in contract or tort
and irrespective of whether it has advised or been advised of the possibility of
any such loss or damage.
If you are in agreement with the above terms and conditions, please
indicate your acceptance by signing in the space provided below, and return one
original to me. This Letter Agreement shall be null and void if not signed
within two (2) days of the date set forth above.
Very truly yours,
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NBC INTERNET, INC.
By:_______________________
Name:
Title:
ACCEPTED AND AGREED:
TELOCITY, INC.
By:_____________________
Name:
Title:
[SIGNATURE PAGE TO TELOCITY ADVERTISING LETTER AGREEMENT]