Exhibit 10.2
ADMINISTRATIVE SERVICES AND REIMBURSEMENT AGREEMENT
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This ADMINISTRATIVE SERVICES AND REIMBURSEMENT AGREEMENT (this "Agreement") is
dated as of August 7, 2000, by and between BRE PROPERTIES, INC., a Maryland
corporation ("BRE"), and VELOCITYHSI, INC., a Delaware corporation
("VelocityHSI," and collectively with BRE, the "Parties").
R E C I T A L S
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A. Pursuant to a Contribution and Distribution Agreement dated as of
August 7, 2000 (the "Contribution and Distribution Agreement"), BRE will
contribute (the "Contribution") to VelocityHSI the Contributed Assets (as
defined in the Contribution and Distribution Agreement).
B. In order to continue to operate the business of providing Internet
connectivity services, e-mail services, Web pages individualized for particular
communities, community-specific portals and related services (the "Business"),
VelocityHSI wishes to obtain from BRE, and BRE wishes to provide to VelocityHSI,
financial support and administrative services, such as use of office space;
management, accounting and payroll services; administration of benefits programs
and such other administrative services upon which VelocityHSI and BRE may agree
(collectively, the "Services") until the Termination Date (as defined herein).
C. A condition to the closing of the Contribution is that BRE and
VelocityHSI enter into this Agreement pursuant to which BRE shall provide
financial support and Services, the terms of which shall be effective (the
"Effective Date") concurrently with the Distribution (as defined in the
Contribution and Distribution Agreement).
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have
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the meanings indicated below:
"Advances" shall have the meaning set forth in Section 2 hereof.
"Beneficial Ownership" shall have the meaning set forth in
Section 3 hereof.
"Business" shall have the meaning set forth in the recitals to
this Agreement.
"BRE-Related Capital Expenditures" shall mean the cost of capital
equipment and its installation installed or to be installed by VelocityHSI
in multifamily dwelling units owned by BRE.
"Change in Control of VelocityHSI" shall have the meaning set
forth in Section 3 hereof.
"Contribution and Distribution Agreement" shall mean the
agreement described in the Recitals to this Agreement.
"Effective Date" shall mean effective the date of this Agreement
as set forth in the Recitals to this Agreement.
"Exchange Act" shall have the meaning set forth in Section 3
hereof.
"Incumbent Board" shall have the meaning set forth in Section 3
hereof.
"Non-Control Acquisition" shall have the meaning set forth in
Section 3 hereof.
"Non-Control Transaction" shall have the meaning set forth in
Section 3 hereof.
"Parties" shall have the meaning set forth in the introductory
paragraph hereof.
"Person" shall have the meaning set forth in Section 3 hereof.
"Proxy Contest" shall have the meaning set forth in Section 3
hereof.
"Services" shall have the meaning set forth in the Recitals to
this Agreement.
"Subject Person" shall have the meaning set forth in Section 3
hereof.
"Surviving Corporation" shall have the meaning set forth in
Section 3 hereof.
"Termination Date" shall have the meaning set forth in Section 3
hereof.
"VelocityHSI and Third-Party Capital Expenditures" shall mean all
capital expenditures incurred by VelocityHSI other than BRE-Related Capital
Expenditures.
"Voting Securities" shall have the meaning set forth in Section 3
hereof.
2. Services and Advancement of Expenses. From the Effective Date through
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the Termination Date, BRE shall provide the Services to VelocityHSI and make
advances (the "Advances") to VelocityHSI to fund operating expenses and capital
expenditures, subject to the limits set forth in Section 5 hereof, as
VelocityHSI may reasonably request from time to time in connection with the
operation of the Business.
3. Term; Termination. This Agreement shall commence as of the Effective
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Date and continue until the date this agreement is terminated (the "Termination
Date"), which shall be September 30, 2001 unless earlier terminated by
VelocityHSI for any reason upon not less than thirty (30) days prior written
notice or by BRE by written notice after a Change in Control of VelocityHSI (as
defined below in this Section 3). For purposes of this Agreement, "Change in
Control of VelocityHSI" shall mean any of the following events:
(A) An acquisition (other than directly from VelocityHSI) of any
voting securities of VelocityHSI (the "Voting Securities") by any
"Person" (as the term person is used for purposes of Section
13(d) or 14(d) of the
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Securities Exchange Act of 1934, as amended (the "Exchange
Act")), immediately after which such Person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of thirty percent (30%) or more of the combined
voting power of VelocityHSI's then outstanding Voting Securities;
provided, however, in determining whether a Change in Control has
occurred, Voting Securities which are acquired in a Non-Control
Acquisition shall not constitute an acquisition which would cause
a Change in Control. A "Non-Control Acquisition" shall mean an
acquisition by (i) an employee benefit plan (or a trust forming a
part thereof) maintained by (A) VelocityHSI or (B) any
corporation or other Person of which a majority of its voting
power or its voting equity securities or equity interest is
owned, directly or indirectly, by VelocityHSI (for purposes of
this definition, a "Subsidiary"), (ii) VelocityHSI or its
Subsidiaries, or (iii) any Person in connection with a "Non-
Control Transaction" (as hereinafter defined);
(B) The individuals who, immediately after the Distribution are
members of the Board of Directors of VelocityHSI (the "Incumbent
Board"), cease for any reason to constitute at least two-thirds
of the members of the Board of Directors of VelocityHSI;
provided, however, that if the election, or nomination for
election by VelocityHSI's common stockholders, of any new
director was approved by a vote of at least two-thirds of the
Incumbent Board, such new director shall, for purposes of this
Agreement, be considered to be a member of the Incumbent Board;
provided, further, however, that no individual shall be
considered a member of the Incumbent Board if such individual
initially assumed office as a result of either an actual or
threatened election contest or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board of Directors of VelocityHSI (a "Proxy
Contest") including by reason of any agreement intended to avoid
or settle any election contest or Proxy Contest; or
(C) Approval by the stockholders of VelocityHSI of:
(i) A merger, consolidation or reorganization involving
VelocityHSI, unless such merger, consolidation or
reorganization is a "Non-Control Transaction." A "Non-
Control Transaction" shall mean a merger, consolidation or
reorganization of VelocityHSI where:
(a) the stockholders of VelocityHSI, immediately before
such merger, consolidation or reorganization, own
directly or indirectly immediately following such
merger, consolidation or reorganization, at least
seventy percent (70%) of the combined voting power of
the outstanding voting securities of the corporation
resulting from such merger or consolidation or
reorganization (the "Surviving
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Corporation") in substantially the same proportion as
their ownership of the Voting Securities immediately
before such merger, consolidation or reorganization,
(b) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement
providing for such merger, consolidation or
reorganization constitute at least two-thirds of the
members of the board of directors of the Surviving
Corporation, or a corporation beneficially directly or
indirectly owning a majority of the Voting Securities
of the Surviving Corporation, and
(c) no Person other than (i) VelocityHSI, (ii) any
Subsidiary, (iii) any employee benefit plan (or any
trust forming a part thereof) maintained by
VelocityHSI, the Surviving Corporation, or any
Subsidiary, or (iv) any Person who, immediately prior
to such merger, consolidation or reorganization had
Beneficial Ownership of thirty percent (30%) or more of
the then outstanding Voting Securities, has Beneficial
Ownership of thirty percent (30%) or more of the
combined voting power of the Surviving Corporation's
then outstanding Voting Securities.
(ii) A complete liquidation or dissolution of VelocityHSI; or
(iii) An agreement for the sale or other disposition of all or
substantially all of the assets of VelocityHSI to any Person
(other than a transfer to a Subsidiary).
(4) Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any Person (the "Subject Person")
acquired Beneficial Ownership of more than the permitted amount of
the then outstanding Voting Securities as a result of the
acquisition of Voting Securities by VelocityHSI which, by reducing
the number of Voting Securities then outstanding, increases the
proportional number of shares Beneficially Owned by the Subject
Person, provided that if a Change in Control would occur (but for
the operation of this sentence) as a result of the acquisition of
Voting Securities by VelocityHSI, and after such share acquisition
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by VelocityHSI, the Subject Person becomes the Beneficial Owner of
any additional Voting Securities which increases the percentage of
the then outstanding Voting Securities Beneficially Owned by the
Subject Person, then a Change in Control shall occur.
4. Statements and Service Warranty
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4.1 Statement from BRE. Promptly, and in any event not later than
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twenty days following the end of each month, BRE shall provide to
VelocityHSI a statement setting
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forth the cost of all Services provided and Advances made to VelocityHSI,
calculated as set forth in Section 6.1 hereof, itemized in the manner
reasonably requested by VelocityHSI.
4.2 Service Warranty. BRE represents and warrants that the Services
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will be timely provided, in a commercially reasonable manner, consistent
with BRE's past practices with regard to the Business. BRE agrees to
indemnify and hold harmless VelocityHSI from all claims, costs and losses
attributable to BRE's or BRE employees' negligent acts or omissions.
5. Limitation on Advances. Notwithstanding anything to the contrary
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herein, BRE shall not be obligated to make Advances to fund operating expenses
(including expenses for Services rendered by BRE pursuant to this Agreement) and
VelocityHSI and Third Party Capital Expenditures in an aggregate amount in
excess of $10,000,000. There shall be no limitation on the amount of Advances
BRE is obligated to make to VelocityHSI to fund BRE-Related Capital
Expenditures.
6. Reimbursement and Repayment by VelocityHSI.
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6.1 Payment. Within five (5) business days of the Termination Date,
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VelocityHSI shall reimburse BRE for the aggregate unreimbursed cost of all
Services rendered by BRE pursuant to this Agreement and shall repay the
aggregate unpaid amount of all Advances, together with simple interest on
the Advances from the date made to the date of repayment, at the rate of 9%
per annum. Reimbursable costs for Services rendered by BRE will be computed
based upon hourly rates assigned to the BRE employees providing the
Services which reflect the employees' salary and benefit costs to BRE, plus
35% of the hourly rate to cover indirect costs such as office space,
equipment usage, supplies and utilities.
6.2 Prepayment. At any time during the term of this Agreement,
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VelocityHSI may prepay any or all of the amounts described in Section
6.1 hereof, without penalty or premium.
7. General.
7.1 Relationship of Parties. Nothing in this Agreement shall be
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deemed or construed by the Parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between
the Parties, it being understood and agreed that no provision contained
herein, and no act of the Parties, shall be deemed to create any
relationship between the Parties other than the relationship set forth
herein.
7.2 Successors and Assigns. This Agreement shall inure to the
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benefit of and be binding upon the Parties hereto and their respective
successors and assigns. This Agreement shall not be assigned by either
Party hereto without the express written consent of the other Party hereto;
provided, however, that BRE may assign its rights and obligations under
this Agreement, in whole or in part, to an affiliate without the consent of
VelocityHSI.
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7.3 Titles and Headings. Titles and headings of sections herein are
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inserted for the convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
7.4 Severability. In the event that one or more of the terms or
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provisions of this Agreement or the application thereof in any
circumstance(s) shall, for any reason and to any extent be found by a court
of competent jurisdiction to be invalid, illegal or unenforceable, such
court shall have the power, and hereby is directed, to substitute for or
limit such invalid term(s), provision(s) or application(s) and to enforce
such substituted or limited terms or provisions, or the application
thereof. Subject to the foregoing, the invalidity, illegality or
enforceability of any one or more of the terms or provisions of this
Agreement, as the same may be amended from time to time, shall not affect
the validity, legality or enforceability of any other term or provision
hereof.
7.5 Notices. Notices shall be sent to the Parties at the following
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addresses:
BRE Properties, Inc.
44 Montgomery Street, 36/th/ Floor
San Francisco, California 94104
Attn: LeRoy E. Carlson
Facsimile: 415-445-6505
VelocityHSI, Inc.
2175 North California Boulevard, Suite 810
Walnut Creek, California 94956
Attn: Charles P. Wingard
Facsimile: 925-952-5697
Notices may be hand-delivered or sent by certified mail, return
receipt requested, Federal Express or comparable overnight delivery
service, or facsimile. Notice shall be deemed received at the time
delivered by hand, on the fourth business day following deposit in the U.S.
mail, on the first business day following deposit with Federal Express or
other delivery service, or if given by facsimile when confirmation of
transmission is indicated by the sender's facsimile machine. Any Party to
this Agreement may change its address for notice by giving written notice
to the other Party at the address and in accordance with the procedures
provided above.
7.6 Further Action. VelocityHSI and BRE each shall cooperate in good
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faith and take such steps and execute such papers as may be reasonably
requested by the other Party to implement the terms and provisions of this
Agreement.
7.7 Amendments; Waivers. No termination, cancellation, modification,
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amendment, deletion, addition or other change in this Agreement, or any
provision hereof, or waiver of any right or remedy herein provided, shall
be effective for any purpose unless specifically set forth in a writing
signed by the Party or Parties to be bound thereby. The waiver of any right
or remedy with respect to any occurrence on one
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occasion shall not be deemed a waiver of such right or remedy with respect
to such occurrence on any other occasion.
7.8 Governing Law. This Agreement and the rights and obligations of
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the Parties hereunder shall be governed by the laws of the State of
California, without regard to the principles of choice of law thereof.
7.9 Entire Agreement. Except with respect to the Contribution and
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Distribution Agreement (and the Ancillary Agreements referenced therein),
this Agreement constitutes the entire agreement and supersedes all prior
agreements, understandings, negotiations and discussions, whether written
or oral, between the Parties hereto with respect to the subject matter
hereof, so that no such external or separate agreement relating to the
subject matter of this Agreement shall have any effect or be binding,
unless the same is referred to specifically in this Agreement or is
executed by the Parties after the date hereof.
7.10 Dispute Resolution. Any dispute arising under this Agreement
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shall be resolved by binding arbitration in the manner contemplated by Article
10 of the Contribution and Distribution Agreement, including the attorneys fees
provisions referred to therein.
7.11 Counterparts. This Agreement may be executed in two or more
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counterparts, each of which together shall be deemed to be an original and
all of which together shall be deemed to constitute one and the same
agreement.
7.12 No Third Party Beneficiaries. This Agreement is solely for the
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benefit of the Parties hereto and shall not be deemed to confer upon third
parties any remedy, claim, liability, reimbursement, claim of action or
other right in excess of those existing without this Agreement.
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IN WITNESS WHEREOF, the Parties have duly executed this Administrative
Services and Reimbursement Agreement as of the date first written above.
BRE PROPERTIES, INC.
By: /s/ LeRoy E. Carlson
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LeRoy E. Carlson
Executive Vice President and Chief
Operating Officer
VELOCITYHSI, INC.
By: /s/ Charles P. Wingard
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Charles P. Wingard
Senior Vice President,
Chief Financial Officer and Secretary
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