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EXHIBIT 10.4
FORM OF SERVICE AGREEMENT
THIS SERVICE AGREEMENT (this "Agreement") is entered into as of _________,
2000 (the "Effective Date") by and between BRE Properties, Inc., a Maryland
corporation ("Owner"), and VelocityHSI, INC., a Delaware corporation
("Provider"). Owner and Provider are each referred to as a "Party" or
collectively as the "Parties." All capitalized terms have the meanings set forth
herein unless otherwise indicated.
R E C I T A L S
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A. Provider provides an assortment of high speed data and localized
multiple dwelling unit ("MDU") services, including high speed Internet access
through its VelocityHSI(TM) service, community specific portals through its
KlickLANE(TM) service and e-mail services and Web pages individualized for
particular communities through its ZippityKlik(TM) service (collectively, the
"VelocityHSI Services");
B. Owner owns, operates, leases and manages the MDU(s) detailed on Exhibit
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"A" attached hereto (each a "Complex" and collectively, the "Complexes");
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C. Provider and Owner desire to provide for the provision of VelocityHSI
Services to the Complexes on the basis of, and subject to the terms and
conditions set forth below.
A G R E E M E N T
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NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein, and other good and valuable consideration, the Parties hereto
agree as follows:
1. Term of Agreement. This Agreement shall commence as of the Effective Date
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and shall continue until terminated by either Party (the "Term"). Owner may
terminate the Agreement at any time after the earlier of (i) six (6) months
from the date hereof or (ii) thirty (30) days after completion of the
initial installation described in Section 2.1, upon thirty (30) days prior
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written notice to Provider and Provider may terminate the Agreement at any
time upon one hundred eighty (180) days prior written notice to Owner.
2. Provider Obligations. During the Term, Provider will perform each of the
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following obligations:
2.1 Initial Installation. As soon as practicable after the Effective
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Date, Provider shall install the Infrastructure, as hereafter defined,
in each Complex. The exact configuration of the Infrastructure for
each complex shall be determined by Provider based upon the factors
unique to each Complex, including but not limited to, the construction
style, size, existing data and telecommunications systems and Complex
amenities. Provider shall provide Owner with a description
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of the system to be installed. It is anticipated that this process
will take thirty (30) to forty-five (45) days.
2.2 VelocityHSI Services. Upon substantial completion of the
Infrastructure, and for the entire Term, Provider shall, consistent
with the terms and conditions contained in this Agreement and subject
to a resident's compliance with Provider's generally applicable
Subscriber's agreement, Provider shall provide any of the generally
available VelocityHSI Services to any Complex resident so requesting.
All VelocityHSI Services shall be provided in compliance with the
standards detailed on Exhibit "B" and consistent with industry
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standards. The Parties agree that the exact package of services
included with the VelocityHSI Services may be modified from time to
time in Provider's discretion due to system upgrades and changes in
technology, in accordance with the terms of this Agreement.
2.3 Web Portal Service. Provider will design, host and maintain a
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Complex specific community web portal for each Complex (each a "Web
Portal"). The Web Portal will provide information regarding the
Complex amenities and special programs, links and access to Complex
maintenance service requests and messaging to and from the Complex
management for the Complex residents. Provider shall be responsible
for periodically revising and providing such reasonable modifications,
and maintenance as Owner may request, including, updating and posting
current events, notices, and information for the Complex residents;
provided that the exact design, layout and content at the Web Portal
shall be determined by Provider.
(a) Each Web Portal shall be co-branded with Provider's and Owner's
marks, logo's and/or name, and may contain such other banners,
advertising, content or links as Provider may determine, in its
discretion.
(b) Notwithstanding the foregoing:
(i) Provider shall comply with all reasonable requests of Owner
regarding inclusion of content specific to the Complex,
Owner, or other Complexes, including without limitation,
current events, notices, promotions and similar information.
Provider shall consult with Owner, and consider all
reasonable requests regarding the initial lay out and design
of each Web Portal.
(ii) Provider shall not knowingly permit or use any (1) content
which contains obscene material, sexual explicit adult
programming, or indecent material as defined in 47 C.F.R.
76.701(g); (2) any material soliciting or promoting unlawful
activity; or (3) content that may or could have been subject
to the telecommunications act of 1996, relating to the
scrambling of sexually explicit adult video service
programming.
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(c) Each Web Portal will be segmented into one or more areas as
Provider determines. The basic area, containing information and
basic services related to the Complex shall be accessible to all
Subscribers at no charge. Additional portions of the Web Portal
may be accessible on a restricted basis, whether by upgraded
subscription, pay-per-view, or otherwise, as Provider determines,
provided, however, that any such services shall be made available
to all residents of the Complex upon the same terms and
conditions.
2.4 Owner Internet Connection and Services. Provider shall provide Owner
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with one high speed Internet connection for each Complex during the
entire Term for use by Owner's employees and agents in connection with
management and operation of the Complexes. Provider shall include a
dedicated, password protected, portion of each Complex's Web Portal
for use by Owner's employees.
2.5 Subscriber Support. Provider will provide reasonable onsite technical
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support for Subscribers, at reasonable times designated by Provider
and as detailed in Exhibit "C", including assistance with initial or
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subsequent configuration of Subscriber supplied equipment and 24-7
toll-free telephone subscriber assistance.
2.6 Permits Licenses, etc. Provider shall possess and maintain during the
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entire Term all material permits, including, without limitation, any
building or use permits relating to the Infrastructure, licenses,
franchise rights, trademarks, trademark rights, trade names, trade
name rights, copyrights, and all other intellectual property rights,
including requisite licenses or rights from third parties which are
required to provide the VelocityHSI Services to each Complex in
accordance with this Agreement.
2.7 Insurance Obligations. Provider shall procure and maintain the
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following insurance policies in no less than the following minimum
policy amounts (or such other minimum amounts, if higher, as are
required by law):
(a) All risk property insurance covering the full replacement cost of
the Infrastructure and all other personal property and
improvements installed or placed in or on the Complexes by
Provider.
(b) Commercial General Liability Insurance with policy limits of at
least one million dollars ($1,000,000) per occurrence, and two
million dollars ($2,000,000) aggregate.
(c) Workman's compensation insurance with limits in compliance with
the laws of the State in which each Complex is located.
(d) Vehicular liability insurance with personal injury limits of not
less than five hundred thousand dollars ($500,000) for one person
and one million dollars ($1,000,000) for two or more persons and
vehicular liability property damage insurance with a limit of not
less than fifty thousand dollars ($50,000) to cover all vehicle
accidents.
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(e) The liability and property policy shall each name Owner as an
additional insured, insure on an occurrence and not a claims made
basis, be issued by companies licensed to do business in the
state in which each Complex is located, provided that the insurer
will endeavor to provide thirty (30) days written notice to Owner
prior to cancellation, and contain a cross liability/
severability of interests clause and a contractual liability
endorsement (any policy issued to Owner providing duplicate or
similar coverage shall be deemed excess over Provider's
policies). Any all risk property insurance obtained by Owner and
Provider shall include a waiver of subrogation by the insurers
and all rights based upon an assignment from its insured against
Owner or Provider, their officers, trustees, directors,
employees, agents, invitees and contractors in connection with
any loss or damage thereby insured against.
(f) Provider warrants that it meets or exceeds all insurance
requirements stated herein and those that are required by the
laws in the State in which each Complex is located.
2.8 Marketing Support. Provider shall provide each Complex on-site
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training, reference material and telephone support for the Complex
staff, marketing and sales support materials, and a demonstration
Kiosk for display in the Complex's common area.
3. Owner Obligations. During the entire Term, Owner will perform and observe
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each of the following obligations:
3.1 Use of Equipment Room. Owner shall allow Provider access and use of a
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lockable equipment room in each Complex as reasonably required for the
Infrastructure.
3.2 Access to Property. Owner shall, at no cost to Provider, provide
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Provider and Provider's employees, authorized agents and contractors
with reasonable access to all portions of the Complexes as may be
necessary to fulfil Provider's obligations hereunder, including
without limitation all installation, service, maintenance and repair
obligations. Such access shall include on demand access to mechanical
rooms or similar areas of the Complex. To the extent that access to
any leased unit is required, Provider agrees to comply with any policy
or requirement generally applicable to Owner's maintenance personnel,
including any advanced notice procedures. As to all other portions of
each Complex, Provider agrees to comply with all of Owner's reasonable
access and security policies such as contacting a Complex manager when
on site.
3.3 Permit/Information Assistance. Owner shall provide Provider with
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access to all information and plans regarding the Complexes reasonably
required for the installation of the infrastructure and providing of
services hereunder, including, without limitation any "as built" or
architectural information of the Complexes and access to any
individuals or entities who regularly perform service work on
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the Complexes' systems, including electrical, HVAC, and
telecommunications systems. Furthermore, Owner shall, at Provider's
sole cost and expense, take all reasonable actions, including
executing permit and/or use applications, to assist Provider in
obtaining all permits or governmental approvals associated with the
installation, and maintenance of the Infrastructure, and provision of
the VelocityHSI Services.
3.4 Marketing/Promotion. Owner agrees to use its best efforts to maximize
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the use of VelocityHSI Services by residents of the Complexes. These
efforts will include, but not be limited to, promotional activities
such as the display of print advertising and newsletters, allowing
Provider use of common areas for promotional functions and such other
efforts and activities as Provider may reasonably request. Owner
shall, as condition to leasing a unit, require all tenants to execute
the "Free Services" portion of the standard form Subscription
Agreement.
3.5 Cooperation with Inventory. Owner shall use its best efforts to
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assist Provider in preventing theft and destruction of all portions of
the Infrastructure including Infrastructure located in the
Subscriber's unit, such as set top access units, and wireless
keyboards. Such efforts shall include, without limitation verifying
that all Infrastructure in a residential unit is accounted for and
free from obvious damage after a Subscriber vacates a unit.
3.6 Cooperation to Prevent Fraudulent Use. If Owner becomes aware of any
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illegal access of the VelocityHSI Services, Owner agrees to advise
Provider about residents who are illegally obtaining such service. If
access to an individual unit is needed to confirm such illegal use,
Owner shall cooperate to the extent permitted by state and Federal
laws governing the access to an individual unit.
4. Revenue Allocation. Owner shall be entitled to receive the following
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payments relating to the VelocityHSI Services.
4.1 Subscriber Fees. Provider shall pay Owner ten percent (10%) of all
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gross revenue received by Provider from residents of the Complexes who
subscribe for the VelocityHSI Services (each a "Subscriber"), subject
to the limitations set forth in Section 6.3. Additionally, for each
new Subscriber enrolled by Owner or Owner's designee, Provider shall
pay Owner or such designee twenty-five ($25) dollars.
4.2 Advertising and Commission Revenue. Provider shall pay Owner ten
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percent (10%) of all gross revenue received by Provider attributable
to the Complexes' Web Portal from (i) advertising displayed on the Web
Portal or (ii) any commission, referral fee, or similar payment from
any unaffiliated vendor or service provider received by reason of a
Subscriber's use or purchase of such third party's good or services
(collectively the "Third Party Revenue").
4.3 Payment Procedures.
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(a) To the extent that Third Party Revenue is generated as a result
of advertisements or the use/sale of, goods or services offered
or displayed on the Web Portal of apartment projects other than
the Complexes, Owner shall be entitled to receive a pro rata
portion of the gross revenue on a per project, per "hit," per
display or any other reasonable basis so long as such method is
consistently applied to all Complexes receiving a portion of a
particular revenue source. To the extent commercially reasonable,
it is Provider's intention to allocate Third Party Revenue to the
complex generating the revenue.
(b) For purposes of this Section 4, "gross revenue" shall mean, as it
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relates to Section 4.2, any third party revenue actually received
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by Provider from third parties, other than Subscribers, net of
sales commissions, discounts, returns, allowances, or similar
adjustments, sales, use or similar taxes, or other reasonable
out-of-pocket expenses incurred in procuring such revenue but
exclusive of any other expenses, including programming, hosting,
hardware or administrative costs and, as to Section 4.1, any
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revenue actually received by Provider for fees paid by
Subscribers for the use of, or access to the VelocityHSI
Services, plus the tax gain on any hardware sold or leased to a
Subscriber less discounts, returns, allowances or similar
adjustments.
(c) Provider shall remit to Owner all payments due under this Section
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4, allocable to the immediately preceding month, together with a
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detailed accounting thereof on or before the twenty-fifth of each
month. Such accounting shall detail:
(i) The total Subscriber revenue by major category from each
Complex (such as subscription, pay-per-use, non-recurring
fees, pass through expenses).
(ii) A breakdown of the advertising revenue detailing the revenue
allocable to each advertiser and any calculations described
in Section 4.3(a).
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4.4 Maintenance and Inspection of Records.
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(a) Provider shall keep complete and accurate books and records and
related documentation in accordance with generally accepted
accounting principles and this contract to support and document
all amounts becoming payable to Owner hereunder and concerning
revenues described in Sections 4.1 and 4.2. Provider shall
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promptly, upon written request from Owner, notify Owner of the
location at which such records are currently located. Provider
shall maintain its books and records for such period or periods
of time as may be required by the rules and regulations of the
Internal Revenue Service applicable to the retention of business
records.
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(b) From time to time during the Term and for a period of one (1)
year thereafter, Owner shall have the right, to be exercised by
Owner or its designee upon thirty (30) days notice to Provider,
but not more often than annually, to audit the books and records
of Provider as necessary to verify amounts payable to Owner under
this Agreement. Provider shall make available to Owner or its
designee such books and records as are relevant to the payments
due Owner under this Agreement or as may be reasonably requested
by Owner to perform such audit. Provider shall immediately pay to
Owner any unpaid amounts due to Owner disclosed by such audit. If
the audit indicates Provider overpaid Owner, Provider shall be
entitled to deduct such amounts from future payments due
hereunder. If the audit discloses an underpayment to Owner for a
calendar quarter of more than two percent (2%) of the total
amount payable to Owner in that calendar quarter, as verified by
an independent auditing firm, Provider shall pay all reasonable
costs and expenses of such independent auditor that relate to
such audit; otherwise Owner shall pay such costs.
5. Infrastructure Ownership Operation and Repair.
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5.1 Infrastructure. Provider shall, at its sole cost and expense, install,
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operate and maintain all hardware and on-site equipment, up to the
point of connection with the Subscriber's hardware, necessary for, or
associated with, providing the VelocityHSI Services (all such Provider
equipment is collectively referred to as the "Infrastructure"). All
Infrastructure will be installed at mutually agreed upon location(s)
and utilizing agreed upon methods. The Infrastructure, and any personal
property on any Complex belonging to Provider, shall be there at the
sole risk of Provider, and Owner shall not be liable for damage thereto
or theft, misappropriation or loss thereof, except due to Owner's gross
negligence or willful misconduct. Provider shall perform all
construction and maintenance of the Infrastructure in a safe, good and
workmanlike manner in such a way as to minimize interference with the
operation of the Complex;
5.2 Operation, Maintenance and Repair.
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(a) Provider shall provide the Infrastructure, the VelocityHSI
Services and otherwise perform its obligations hereunder in
accordance with, in all material respects, federal, state and
local laws, if any, which may be applicable thereto. Provider, at
its sole cost and expense, shall promptly repair all damage to the
Complex and all improvements thereon caused by Provider and its
agents, employees and contractors to substantially original
condition, to the reasonable satisfaction of Owner.
(b) Provider agrees to keep the Infrastructure in good working order,
repair and condition throughout the term of the Agreement, and not
to materially disrupt or interfere with other providers of
services in the Complex or with any resident's use and enjoyment
of their leased premises or the common areas of the Complexes or
with Owner's operation of the Complex except
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to the extent Provider is in compliance, and subject to, the
provisions of Section 3.2 this Section 5.
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5.3 Removal of Infrastructure upon Termination. Upon expiration or
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earlier termination of this Agreement, Provider shall have the right (subject to
Provider's obligation to repair damage to the Complex as set forth in Section
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5.2(a) above), at its expense, to remove the Infrastructure, if any, from the
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Property within sixty (60) days from the date of such expiration or termination.
6. Provision of VelocityHSI Services to Subscribers.
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6.1 Resident Support and Installation. Support and installation services
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provided by Provider shall at all times conform with the service
levels specified in Exhibit "C". All such responses and support
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provided by Provider shall be in material compliance with governmental
laws and/or regulations and within general industry standards.
Requests for individual installations of VelocityHSI Services shall be
completed within a reasonable timeframe. Provider shall not enter a
leased unit except in compliance with Section 3.2. Provider will have
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its employees, agents and contractors carry identification badges when
on any Complex, in order that on-site management and residents of the
Complex may confirm that such persons are on the Complex on behalf of
Provider pursuant to this Agreement.
6.2 Subscriber Access Pricing. The initial price for subscriptions to the
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VelocityHSI Services and for ancillary changes is set forth in Exhibit
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"D". This pricing may be modified in Provider's sole and absolute
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discretion provided, however, that Provider shall not, without Owner's
prior written approval, increase or decrease the price of any
subscription package by more than the greater of (I) ten dollars ($10)
per month or (ii) twenty five percent (25%) in the aggregate during
any twelve (12) month period. Such access shall be provided at a
price, service quality and content comparable to the services of other
companies which provide similar high-speed data access technologies
and services similar to the VelocityHSI Services. Subscribers will be
charged and billed individually by Provider for any VelocityHSI
Services they receive, and Provider shall be solely responsible for
all billing and collection therefor.
6.3 Real Estate Investment Trust Protections. Notwithstanding any
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provision to the contrary in this Agreement:
(a) (i) Provider shall not provide any services to Subscribers
unless such services are also available to such Subscribers from
other telecommunications service providers, (ii) Provider shall
not provide any services to any Subscribers that it does not also
provide to other customers who are not Subscribers, (iii) any
services provided by Provider to a Subscriber will not be
customized to fit the specific needs of such Subscriber, (iv)
this Agreement is a bona fide agreement, negotiated at arm's
length between Owner and Provider, and is of a type customarily
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entered into by landlords and service providers in the geographic
area in which Owner's Complexes are located, (v) the services
offered or provided by Provider to Subscribers will be selected
by Subscribers from a menu of services, all of which are
generally available to other customers of Provider, (vi) Provider
shall not provide any services to residents of a Complex unless
such services are of a type which are customarily rendered to
tenants of residential apartment buildings in the geographic
areas in which the Complex is located and (vii) Provider shall
not charge any Subscribers an amount for Services which is based
on the net income or profits of any person. Provider shall not
provide any services (the "Outside Services") to residents of the
Complexes which are beyond the scope of the VelocityHSI Services
described in this Agreement, subject to the limitations set forth
in this Section 6.3(a), without Owner's permission, which
permission may be given or withheld in Owner's sole discretion.
(b) For any Outside Services provided by Provider to residents beyond
those VelocityHSI Services described in Section 6.3(a) and
approved by Owner, or any services provided to nontenants through
the Complex, except as otherwise agreed to by Owner and Provider
(i) the cost of the additional services must be borne by
Provider, (ii) a separate charge must be made for such services
pursuant to a separate service agreement with the service
recipient, (iii) the amount of the separate charge must be
received and retained only by Provider and shall not be included
in the calculation of the amount of gross revenues payable to
Owner, and (iv) Provider must be adequately compensated for such
services ((i) through (iv) above are referred to below as the
"Outside Service Requirements"). If Owner permits Provider to
perform an Outside Service subject to the Outside Service
Requirements, and outside tax counsel selected by Owner
subsequently concludes that Owner's participation in the gross
revenues generated by such Outside Service should not jeopardize
the tax status as a real estate investment trust of Owner or the
qualification of its revenues as "rents from real property" for
federal income tax purposes, Owner may request that such gross
revenues thereafter be included in the determination of
Provider's gross revenues for purposes of calculating the amount
payable to Owner pursuant to this Agreement. If Provider does not
agree to any such request, Owner shall be entitled to retract the
approval it granted to Provider to provide such Outside Service,
in which case Provider shall cease to provide such Outside
Service. Outside Services offered by Provider pursuant to the
terms of this Section 6.3(b) shall be set forth in written
addendum to this Agreement.
7. Grant of Exclusive License. Owner shall not accept or agree to accept any
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commission, fee or other compensation from any other party providing
services similar to the VelocityHSI Services to the Complexes, nor shall
Owner provide or allow for the
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providing of marketing, promotion, sales, or support of marketing or sales
of services similar to the VelocityHSI Services in or on the Complexes.
8. Public Announcements. Neither Party shall make or allow any media releases,
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public announcements, and/or public disclosures by either Party or its
employees, agents or representatives relating to this Agreement or the
subject matter hereof without the express written consent of the other
Party. The disclosing Party shall provide the other Party with the proposed
text and medium of the announcement at least five (5) business days prior to
release. If the non-disclosing Party has not objected to the release within
three (3) business days, it shall be deemed approved. This restriction shall
not apply to any announcement beyond the control of this disclosing Party,
or that is otherwise permitted pursuant to Section 12.
9. Complex Title Matters.
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9.1 Execution and Recording of Memorandum. Concurrently with the
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execution of this Agreement, Owner shall execute, and Provider shall
be entitled to record, a Memorandum of Existence of VelocityHSI
Services and Right of Entry Agreement in substantially the terms
attached hereto as Exhibit "E" (the "Memorandum") for each Complex.
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The Memorandum shall be prepared and executed in a form acceptable for
filing in the appropriate local recorder's office. The Parties agree
that the purpose of the Memorandum is solely to provide notice of this
Agreement. In the event of a conflict between the Agreement and the
Memorandum, this Agreement shall control.
9.2 Execution and Recording of Quit Claim Deed. Concurrently with the
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execution of this Agreement, Owner and Provider shall execute and
acknowledge a quit claim deed in the form of Exhibit "F" attached
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hereto (the "Quit Claim Deed") for each Complex. The Quit Claim Deed
shall be prepared and executed in a form acceptable for filing in the
appropriate local recorder's office. Upon termination or expiration of
this Agreement, and no sooner, Owner may, but only in good faith and
concurrently with giving written notice to Provider, (1) file the
executed Quit Claim Deed in the appropriate recorder's office, or (2)
file any other document in such recorder's office, which states, among
other things, that this Agreement is terminated and the easement and
rights of access, and any other interests in the Complex (exclusive of
Provider's ownership of the Infrastructure), granted to Provider, are
terminated.
9.3 Subordination and Non-Disturbance. Provider agrees that, subject to
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the concurrent execution of a non-disturbance agreement in favor of
Provider, Provider will cause this Agreement and all rights hereunder
to be subject and subordinate to all leases, mortgages, and/or deed of
trust which may now or hereafter affect the Complex, and to all
renewals, modifications, consolidations, replacements and extensions
thereof. Provider shall execute such documents as may be reasonably
required to effect the provisions of this Section.
10. Ownership of Property.
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<PAGE>
10.1 Owner acknowledges and agrees that as between Owner and Provider,
Provider owns all right, title and interest in and to the VelocityHSI
Services and related products, including and not limited to
trademarks, service marks, proprietary information and all other
intellectual property, including, without limitation, all compilation
copyrights with respect to VelocityHSI (to the extent not
copyrightable by a third party) and other content relating to
VelocityHSI Services as the same may be modified, adjusted or added
to at any time and from time to time. Except as otherwise expressly
provided herein, Owner shall not have or acquire any ownership
interest in or to the Infrastructure or any property relating to the
VelocityHSI Services.
10.2 The foregoing Section 10.1 shall not apply to the content provided by
Owner for display on, or incorporation in, the Web Portal. Owner
represents and warrants that it has full authority, through ownership
or otherwise, to display and utilize and cause Provider to display
and utilize all content provided to Provider for incorporation in any
Web Portal.
10.3 Neither Party shall use the trademarks, service marks or trade names
of the other or its affiliates in any advertising or promotional
material or otherwise without the express prior written permission of
the other Party, and except as otherwise specifically contemplated by
this Agreement.
11. Taxes. Provider shall pay any taxes, assessments and other governmental
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charges or fees, attributable to its use of the Complexes or provision of
the Services, including any increase in real property taxes, use and
occupancy taxes, sales or other taxes applicable to its payments pursuant
to this Agreement (other than Owner's franchise, income taxes or estate
taxes), and any applicable taxes or assessments against the personal
property owned by Provider located in the Building. Upon request, Provider
shall provide Owner with timely evidence satisfactory to Owner that all
taxes due and payable for its property have been paid.
12. Confidentiality Obligations.
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12.1 Confidential Information. The receiving Party shall hold all
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Confidential Information in confidence. "Confidential Information"
shall mean (a) any information clearly marked "Proprietary" or
"Confidential"; (b) any information which by its nature or character
is clearly of the type the disclosing Party considers confidential;
and (c) any information regarding Owner's residents. Information
which is conveyed orally and does not meet the requirements of
Subsections (b) or (c), above, shall be deemed confidential only if
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prior to disclosure it is indicated as being confidential and written
confirmation identifying the confidential or proprietary information
is provided to the receiving Party within ten (10) business days
after it was discussed orally.
12.2 Restrictions. Each Party shall use reasonable efforts and
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procedures, and at least the same efforts and procedures as are used
with such Party's own Confidential
<PAGE>
Information, to maintain the confidentiality of Confidential
Information disclosed to it and not show or otherwise disclose such
Confidential Information without the prior written consent of the
disclosing Party. Each Party shall use the Confidential Information
solely for purpose of performing its obligations under this
Agreement. Unless approved in advanced by the non-disclosing Party,
except for the existence of this Agreement, the terms and provisions
of this Agreement shall remain strictly confidential and shall not be
disclosed to any third party other than a Party's attorneys,
accountants, other professional advisers, potential purchasers of the
Properties, and unless otherwise required by law.
12.3 Authorized Disclosures. Notwithstanding the obligations described in
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Section 12.2, above, neither Party shall have any obligation to
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maintain the confidentiality of any Confidential Information which:
(a) based upon advice of legal counsel, the Party is required to
disclose to comply with any applicable law or regulation;
(b) is or becomes publicly available by other than unauthorized
disclosure by the receiving Party;
(c) is independently developed by the receiving Party;
(d) is received from a third party who has lawfully obtained such
Confidential Information without a confidentiality restriction;
or
(e) if required by any court of competent jurisdiction or other
governmental authority, the receiving Party may disclose to such
authority, data, information or material involving or pertaining
to Confidential Information to the extent required by such
order, provided that the receiving Party shall first have used
its reasonable efforts to notify the disclosing Party so that
the disclosing Party may seek to maintain the confidentiality of
such data, information or materials.
13. VelocityHSI Services Warranty and Limitation of Liability.
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13.1 Limitations of Liability. EXCEPT FOR CERTAIN PRODUCTS AND SERVICES
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SPECIFICALLY IDENTIFIED AS BEING OFFERED BY PROVIDER, PROVIDER DOES
NOT CONTROL ANY MATERIALS, INFORMATION, PRODUCTS OR SERVICES ON THE
INTERNET. THE INTERNET CONTAINS UNEDITED MATERIALS, SOME OF WHICH IS
SEXUALLY EXPLICIT OR MAY BE OFFENSIVE. PROVIDER HAS NO CONTROL OVER
AND ACCEPTS NO RESPONSIBILITY FOR SUCH MATERIALS. PROVIDER ASSUMES NO
RESPONSIBILITY AND RISK FOR USE OF THE VELOCITY SERVICES AND THE
INTERNET AND IS NOT RESPONSIBLE FOR EVALUATING THE ACCURACY,
COMPLETENESS, AND USEFULNESS OF ALL SERVICES, PRODUCTS, AND OTHER
INFORMATION, AND THE QUALITY AND MERCHANTABLENESS OF ALL MERCHANDISE
PROVIDED THROUGH THE VELOCITY SERVICES OR THE INTERNET.
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13.2 THE VELOCITY SERVICES ARE PROVIDED ON AN "AS IS" AND "AS AVAILABLE"
BASIS. PROVIDER DOES NOT WARRANT OR REPRESENT THE VELOCITY SERVICES
WILL OPERATE ON UNINTERRUPTED, ERROR-FREE BASIS OR BE FREE OF
VIRUSES, OR OTHER HARMFUL COMPONENTS. EXCEPT AS EXPRESSLY PROVIDED
OTHERWISE IN THIS AGREEMENT, PROVIDER MAKES NO EXPRESS WARRANTIES AND
OWNER WAIVES ALL IMPLIED WARRANTIES INCLUDING, BUT NOT LIMITED TO
WARRANTIES OF TITLE, NONINFRINGEMENT, MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE REGARDING ANY MERCHANDISE, INFORMATION OR
SERVICE PROVIDED THROUGH OR AS PART OF THE VELOCITY SERVICES OR THE
INTERNET GENERALLY. NO ADVICE OR INFORMATION GIVEN BY PROVIDER OR ITS
REPRESENTATIVES SHALL CREATE A WARRANTY UNLESS EXPRESSLY SET FORTH IN
THIS AGREEMENT.
13.3 Limitation of Remedies. NOTWITHSTANDING ANY OTHER PROVISION OF THIS
----------------------
AGREEMENT, NEITHER PROVIDER NOR OWNER SHALL BE LIABLE FOR ANY REASON
FOR INCIDENTAL, SPECIAL, PUNITIVE, INDIRECT, EXEMPLARY, MULTIPLE OR
CONSEQUENTIAL DAMAGES, INCLUDING, BUT NOT LIMITED TO, LOST PROFITS OF
ANY NATURE WHATSOEVER.
14. Indemnification. Each Party (the "Indemnifying Party") agrees to indemnify,
---------------
protect, defend and hold the other Party, and its successors, officers,
directors, employees, agents and assigns (the "Indemnified Party") harmless
from and with respect to any loss or damage (including reasonable
attorney's fees and costs), arising out of or relating to any suit or
proceeding brought against the Indemnified Party insofar as such suit or
proceeding shall be based upon a claim by a third party alleging facts or
circumstances or based upon a claim of wrongdoing by the Indemnifying
Party, provided the Indemnified Party gives the Indemnifying Party prompt
written notice of any such claim and provides the Indemnifying Party such
reasonable cooperation and assistance as the Indemnifying Party may request
from time to time in the defense thereof. The Indemnifying Party shall have
the right to assume defense of the claim with counsel reasonably acceptable
to the Indemnified Party. The Indemnified Party shall be entitled to
participate in the defense of the claim with its own counsel at its sole
expense. Neither Party shall enter into a settlement that imposes liability
on the other without the other Party's consent, which consent shall not be
unreasonably withheld, delayed or conditioned.
15. Default, Termination
--------------------
15.1 Default. Upon the occurrence of any of the following events, a Party
--------
shall be deemed to be in default under this Agreement:
(a) Material failure to perform the defaulting Party's obligations
hereunder, including but not limited to, Provider's failure to
(i) maintain the service standards set forth in Section 6
---------
hereof,(ii) make the payments to Owner set
<PAGE>
forth in Section 4 hereof and (iii) comply with the service
---------
limits set forth in Section 6.3;
(b) The defaulting Party's insolvency, the making of a general
assignment for the benefit of its creditors, suffering or
permitting the appointment of a receiver or similar officer for
its business or assets or availing itself of, or becoming
subject to, any proceeding under the United States Federal
Bankruptcy Laws or any federal or state statute relating to
solvency or the protection of the rights of creditors; or
(c) Making of any warranty, representation, statement or response in
connection with this Agreement which was untrue in any material
respect on the date it was made by the defaulting Party.
15.2 Remedies. In the event the defaulting Party fails to cure any
--------
default set forth hereunder within thirty (30) days, except for (a)
defaults under Section 15.1(b) which shall have a cure period of
---------------
ninety (90) days, and (b) defaults under Section 6 which shall have a
---------
cure period of five (5) days, and after written notice of such
default by the nondefaulting Party, the nondefaulting Party may
terminate this Agreement without further obligation on the part of
the nondefaulting Party, and pursue any claims at law or in equity
permitted under this Agreement against the defaulting Party.
16. Dispute Resolution Procedures. Any dispute arising out of or in connection
------------------------------
with this Agreement shall be resolved only by binding arbitration by a
panel of three arbiters, by the American Arbitration Association in
accordance with the Rules for Commercial Disputes Resolution in San
Francisco, California. Written notice of the demand for arbitration shall
be served on the other Party to this agreement and filed with the
arbitration service. The demand for arbitration shall be made within a
reasonable time after the dispute has arisen, and in no event shall it be
made after the date upon which it would have been barred by the terms of
this agreement or applicable law. Each arbitrator must be experienced in
the subject matter of the arbitration. Arbitration shall be completed not
later than 180 days following its initiation. In reaching their award, the
arbitrators shall follow and be bound by substantive California law.
However, arbitrators shall in no manner award punitive damages, damages
calculated by applying a multiplier, or any other damages excluded pursuant
to Section 15.3. The award shall be in writing and shall contain findings
------------
of fact and conclusion of law and shall set forth the nature, amount and
manner of calculation of all damages. The award shall be final and binding,
and judgment may be entered upon it in any court having jurisdiction. This
provision has been expressly agreed to by the Parties with full
understanding that it acts to waive their respective constitutional rights
to a trial by judge or jury and their respective rights to punitive or
emotional distress damages.
17. Notices. Any notice or other communication required or permitted under
-------
this Agreement shall be in writing and may be personally delivered or sent
by a nationally-recognized overnight courier or by Certified mail return
receipt requested, postage pre-paid. All notices personally delivered shall
be effective at the time of such delivery. All notices
<PAGE>
sent by Certified mail shall be effective five (5) days after deposited in
the US mail. All notices sent by overnight courier shall be effective one
(1) business day after delivery to such courier service. All notices
transmitted by any other means shall only be effective forty-eight (48)
hours after actual receipt. All notices shall be addressed as follows:
If to Provider at:
VelocityHSI, Inc. at:
Attn:
44 Montgomery Street, 36th Floor
San Francisco, CA 94104-4809
Facsimile: 415-445-6534
If to Owner at:
BRE Properties, Inc.
Attn: LeRoy E. Carlson
44 Montgomery Street, 36th Floor
San Francisco, CA 94104
Facsimile: 415-445-6577
Any Party may designate a change of address, or require that notices be
provided to duplicate locations, upon ten (10) days written notice.
18. Attorneys' Fees. The prevailing Party of the dispute or controversy
---------------
resolved by arbitration or court action shall recover its attorney's fees
and costs (including costs of experts) associated with such arbitration or
court action from the other Party.
19. Assignment. Owner may assign its rights and obligations under this
----------
Agreement, in whole or in part, to an affiliate without consent of
Provider.
20. Miscellaneous.
--------------
20.1 Entire Agreement/Severability. This Agreement, together with all
-----------------------------
attachments and exhibits hereto, constitutes the entire Agreement of
the Parties and supersedes all prior and contemporaneous agreements,
representations and understandings between the Parties. In the event
that any provision contained in this Agreement should, for any
reason, be held to be invalid or unenforceable in any respect, such
unenforceable provisions shall be reduced in scope or duration to the
extent necessary in order to make the same enforceable.
20.2 Amendment; Modification. The Agreement may not be supplemented,
-----------------------
amended, modified or otherwise altered except by written instrument
executed by all the Parties hereto and no course of dealing or trade
usage among or between the Parties shall be effective to supplement,
amend, modify or alter this Agreement.
<PAGE>
20.3 Survival. Each Party's obligations under Section 12, Confidentiality
-------- ----------
Obligations, and Section 16, Dispute Resolution Procedures, shall
----------
survive the termination of this Agreement.
20.4 Choice of Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California applicable to
contracts entered into and to be performed entirely within the State
of California by residents of the State of California.
20.5 Captions. The captions appearing in this Agreement are included
--------
solely for convenience of reference and shall not be construed or
interpreted to affect the meaning or interpretation of this
Agreement.
20.6 Hiring Prohibited. During the term of this Agreement and for a
-----------------
period of one (1) year thereafter, no personnel of either Party who
was directly involved in the performance of this Agreement shall
solicit for hire or hire any employee of the other Party who was
directly involved in the performance of this Agreement.
20.7 Relationship of the Parties. The Parties do not intend for this
---------------------------
Agreement or the relationship established thereby to be considered
anything other than one between independent contractors, and shall
not be construed as the formation of a joint venture or partnership
between the Parties for any purpose.
20.8 No Third Party Beneficiaries. The Parties do not intend to create,
----------------------------
and this Agreement does not create, any rights in any entities or
individuals who are not Parties to this Agreement.
20.9 Counterparts. This Agreement may be signed in counterparts, each of
------------
which shall be deemed an original and all of which together shall be
deemed to be one and the same document.
In witness of their agreement, the Parties have caused the Agreement to be
executed below by their authorized representatives as of the date first written
above.
PROVIDER
VelocityHSI, Inc.
By:
-------------------------
Name:
-----------------------
Title:
----------------------
OWNER
BRE Properties, Inc.
By:
-------------------------
<PAGE>
Name:
-----------------------
Title:
----------------------
Exhibits:
Exhibit A: Description of Complexes
Exhibit B: Service Reliability Standards
Exhibit C: Subscriber Support Standards
Exhibit D: Schedule of Initial Pricing
Exhibit E: Sample Memorandum of Existence
of Service Agreement
Exhibit F: Quit Claim Deed
<PAGE>
EXHIBIT A
Description of Complexes
<PAGE>
EXHIBIT B
VelocityHSI Services Reliability Standards
PERCENT OF NETWORK AVAILABILITY
This parameter is generally indicative of the availability of the network
for Subscribers to transport and download data to and from the Internet or, in
the event that the Subscriber data is to be fulfilled by computers within
Provider's systems, generally indicative of the ability to transport data to
Provider's servers and the availability of the servers.
This parameter is calculated by dividing the number of seconds that the
network is available for each Subscriber by the total number of Subscriber-
seconds in each calendar month and multiplying by 100.
Specifically excluded from the Network Availability calculation shall be
regularly scheduled maintenance windows or ad hoc maintenance windows scheduled
and announced 24 hours in advance by Provider through the Front Page. Also,
specifically excluded from the Network Availability calculation shall be periods
of time where the access or availability is limited or prevented through Owner's
actions, intentional or otherwise, including a failure to maintain electrical
service to the Infrastructure.
Provider shall exhibit greater than 98% Network Availability per month.
<PAGE>
EXHIBIT C
Subscriber Support/Installation Standards and Procedures
This Exhibit sets out the Subscriber support and Subscriber installation
requirements associated with the VelocityHSI Services and Provider's obligations
under the Agreement. Subject to the terms and provisions of the Agreement, the
Subscriber support and Subscriber installation procedures shall meet the
operations specification and requirements stated herein, which are generally
stated in terms of events or outcomes, rather than terms of specific hardware,
software or procedural requirements.
A. Telephone Support Centers. Provider shall establish and maintain a toll
-------------------------
free customer support number which will be capable of answering questions
regarding each of the following matters:
. Inquiries about the VelocityHSI Services
. Ordering and scheduling installation or maintenance of VelocityHSI Services
. Billing inquiries
. Initial technical support inquires
. Technical support for all VelocityHSI Services and VelocityHSI Hardware
The Telephone Support Center shall respond to calls consistent with the
following guidelines:
. All calls shall be answered consistent with the Provider/Owner cobranding.
. Operate the support center on a 24x7 basis.
. Maintain sufficient customer service staff and call center capacity to
connect to Subscribers within ___ minutes of call entering processing
operation.
. Develop and publish escalation procedure for Customer Service Representatives
related to network issues.
. Resolve billing issues within 24 hours 95% of time, on a monthly basis.
. Resolve connection issues within 24 hours 95% of time, on a monthly basis.
. Resolve technical issues within 24 hours if a phone call is required 95% of
time, on a monthly basis.
. Resolve technical issues within 48 hours if a truck roll is required 95% of
time, on a monthly basis.
. Develop and publish procedures for Owner to contact Provider regarding
technical issues related to the VelocityHSI Services.
B. Subscriber Installation Standards and Procedures.
-------------------------------------------------
Provider shall be responsible for all aspects of assisting Subscribers with
installing the necessary hardware and software associated with utilizing the
VelocityHSI services. In order to satisfy this
<PAGE>
obligation, Provider shall perform each of the following services and comply
with the following guidelines.
. Verify that potential Subscriber' personal computers meets Provider's
established minimum requirements for the supplied software and utilization of
the VelocityHSI Services;
. Make an appointment with each new Subscriber to meet the installation
personnel for the installation of the VelocityHSI Services in the
Subscriber's unit;
. Collect the Subscriber information required to install, provision and
complete the set up of Subscriber's VelocityHSI Services. Provider will
develop an appropriate paper-form-based system or automated system to
facilitate this process;
. Provide, or cause to be provided, necessary in unit connections to the
Infrastructure using the most appropriate methods, all as previously agreed
to with Owner pursuant to Section 5.1.;
------------
. Maintain a sufficient inventory of all software and hardware required to
install the VelocityHSI Services as may be required to complete Subscriber
installations;
. Issue, on either a rental or purchase basis, and install hardware or software
which may generally be required to be installed on Subscriber's system (such
as network cards or other specialized interfaces) for the service requested
by the Subscriber;
. Meet the Subscriber at the Subscriber's location at the scheduled time within
the tolerances and limits as defined in accordance with the Customer Service
Standards discussed above;
. Offer the Subscriber, at the time of installation, a brief introduction to
the VelocityHSI Services. This introduction will include how to launch the
service, how to find the training material and the subscriber support section
on the Complex Font Page, how to find the on Provider's Web site and how to
call Subscriber Support Center for technical assistance or support;
. Obtain signatures required to verify that each Subscriber installation was
executed properly and to the satisfaction of the Subscriber; and
. Provide Owner with a copy of the installation transaction documentation
verifying that the completed installation is ready for billing.
C. Support/Installation Performance Ratios and Reporting.
------------------------------------------------------
1. Percent Subscriber Service Order Commitments Timely Met
This parameter is generally indicative of the timely beginning of work on orders
from Subscribers for new service or orders to make changes in, or repairs to,
their existing service and the successful fulfillment of agreed upon service
appointments. The parameter is calculated by dividing the total Subscriber
service orders begun on or before the date and within the hour range promised to
the Subscriber that the service order would be started by the total number of
service orders initiated in each calendar month and multiplying by 100.
Provider shall exhibit greater than 90% Subscriber Service Order Commitments
Timely Met per month.
2. Percent Subscriber Service Order Completion Commitments Timely Met
This parameter is generally indicative of the timely completion of work on
orders from Subscribers for new service or orders to make changes in or repairs
to their existing service and the timely completion of those service orders. The
timely completion parameter is calculated by
<PAGE>
dividing the total Subscriber Service Orders completed on or before the date and
time promised to the Subscriber that the service order would be completed by the
total number of service orders initiated in each calendar month and multiplying
by 100. Provider shall exhibit greater than 90% Subscriber Service Order
Completion Commitments Timely Met per month.
3. Percent Subscriber Support Calls Timely Answered
This parameter is based upon the number of Subscriber calls to the telephone
support center answered within 15 seconds by a human operator or by an automated
response system, and if answered by the automated system, answered by a human
operator within 45 seconds of selecting to be connected to a human operator.
This parameter is calculated by dividing the number of calls answered with the
above time frames by the total number of telephone support center calls answered
in each calendar month and multiplying by 100. Provider shall exhibit greater
than 90% of Subscriber Support Calls Timely Answered within the above
parameters.
4. Percent of Trouble Reports Resolved Timely
For purposes of this item, Trouble refers to problems or errors in the
Infrastructure, or other parts of Provider's system, but shall exclude
Subscriber error, defects in Subscriber's equipment (including cabling, computer
or other hardware or software) or defects in public data distribution, including
the Internet, or other utility systems.
This parameter is related to the number of Trouble Reports resolved within the
following windows: For Trouble Reports received by Provider at the telephone
support center prior to 1:00 p.m. Pacific Time, Monday through Friday, excepting
holidays, such reports will be cleared by the end of the next business day.
This parameter is calculated by dividing the total trouble reports cleared on or
before the date and clock hour promised to the Subscriber by the total number of
trouble reports resolved in each calendar month and multiplying by 100.
Provider shall exhibit greater than 90% Trouble Reports Resolved Timely per
month, according to the terms of this section for trouble that can be resolved
by Provider alone.
5. Percent of Subscriber Bills Prepared Timely
This parameter is related to the generation of Subscriber Bills for delivery to
Subscribers by mail, electronic mail or credit card billing. This parameter is
calculated by dividing the number of Subscriber Bills generated and sent to
Subscribers within twenty (20) business days of the end of the billing cycle by
the total number Subscriber Bills generated in each calendar month and
multiplying by 100. Provider shall exhibit greater than 95% Subscriber Bills
Prepared Timely per month.
6. Percent of Subscriber Bills Prepared Accurately
This parameter is related to the accuracy of Subscriber Bills for delivery to
Subscribers by mail, electronic mail or credit card billing. This parameter is
calculated by dividing the number of Subscriber generated that do not require an
adjustment due to a billing error caused Provider by
<PAGE>
the total number Subscriber Bills generated in each calendar month and
multiplying by 100. Provider shall exhibit greater than 95% Subscriber Bills
Prepared Accurately per month.
7. Reports
Provider shall provide to Owner reports within thirty (30) business days of the
end of each calendar month, the reports listed below in this section, each of
which may be provided separately or provided on a consolidated basis:
A report depicting total Subscribers, gross new Subscribers and gross
Subscribers terminated separated by product tier and Complex.
New service orders, trouble reports opened and closed or cleared as appropriate
separated by date and Complex, and compliance with items 1, 2 and 4 above.
Aggregate Provider telephone support center data depicting the distribution of
call waiting time in general and the percent calls answered and calls abandoned
respectively, and compliance with item 3, above
Billing summaries describing the date(s) bills were sent to Subscribers, and
compliance with items 5 and 6 above.
<PAGE>
EXHIBIT D
Schedule of Initial Pricing
[to be reviewed and revised based on final pricing]
I. RECURRING VELOCITY SERVICE ACCESS REVENUE
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Type of Subscription Plan Monthly Access Fee
------------------------- --------------------
---------------------------------------------------------------------------------------
<S> <C>
Free Services (includes use of set top box and wireless No Charge
keyboard to access certain limited Complex intranet services;
no internet access)
---------------------------------------------------------------------------------------
Gold Plan (Same as above with basic high speed Internet access $34.95/month
for one personal computer.)
---------------------------------------------------------------------------------------
Platinum Plan (Same as Gold Plan for up to three personal $59.95/month
computers)
---------------------------------------------------------------------------------------
</TABLE>
II. ONE-TIME CHARGES AND/OR PASS-THROUGH CHARGES
Installation fee $49.95
Installation fee will be waived for Free Service package and may be waived for
all other packages at Provider's discretion.
Subscriber Equipment Required for Interface
With VelocityHSI Services:
Service Calls $______/ hour
<PAGE>
EXHIBIT E
Sample Memorandum of Existence of VelocityHSI Services
Agreement
Execution copy to be formatted in compliance with local
filing requirements.
MEMORANDUM OF EXISTENCE OF
VELOCITYHSI SERVICES AGREEMENT
A license has been granted by ______________________________, on behalf of
itself ("Grantor") to VelocityHSI, Inc., a Delaware corporation ("Grantee"),
under a certain VelocityHSI Services Agreement effective
_______________________, 2000 by and between Grantor and Grantee (the
"Agreement"). The license permits Grantee, among other things, the right to
provide certain data transmission and communications services, as described in
the Agreement, and to engage in any other act or activity contemplated by the
Agreement at the Complex described herein.
As used in the Agreement, the term "Complex" means that the real property
consisting of approximately ______ apartment units located in the city of
________, County of _______, State of ______, at the address commonly known as
[Name and Address of Apartment Community]. Whose legal description is as
follows:
In the event of any conflict between the terms and conditions of this
Memorandum of Existence of VelocityHSI Services Agreement and the terms and
conditions of the Agreement, the terms and conditions of the Agreement shall
control. The Parties agree that the sole purpose of this Memorandum of Velocity
Services Agreement is to provide notice of the Agreement.
Executed this ______ day of _________, 200_.
<PAGE>
EXHIBIT F
Quit Claim Deed
Execution copy to be formatted in compliance with local
filing requirements.
FOR GOOD AND VALUABLE CONSIDERATION, receipt of which is hereby
acknowledged, the undersigned hereby quit-claims to ______________________, a
_________ _______________, ("Owner") without representation or warranty, its
entire right, title and interest in the property described on Attachment 1
attached hereto and incorporated by this reference (the "Complex").
By this Quit Claim Deed, the undersigned further agrees (i) the VelocityHSI
Services Agreement (the "Agreement"), dated as of ________________________ 20__,
between the undersigned and Owner, as evidenced by the Memorandum of Existence
of VelocityHSI Services Agreement Easement recorded on _________________, 200__,
as Instrument No. _________________, in the County of __________, __________ has
expired or been terminated, and (ii) the easement and rights of access, and any
other interests in the Property granted to the undersigned therein have expired
or been terminated.
Nothing in this QuitClaim Deed shall in any way serve as a transfer or
waiver of the undersigned's rights to personal property, defined in the
Agreement as "Infrastructure," stored or installed in or on the Complex
DATED this __ day of _________, 20__.
