Exhibit 10.6
TAX ALLOCATION AGREEMENT
This TAX ALLOCATION AGREEMENT (this "Agreement") is entered into as of the
7th day of August, 2000, by and between BRE Properties, Inc., a Maryland
corporation ("BRE") and VelocityHSI, Inc., a Delaware corporation
("VelocityHSI").
WHEREAS, BRE and VelocityHSI have entered into that Contribution and
Distribution Agreement dated as of August 7, 2000 which provides for the
transfer of certain assets by BRE to VelocityHSI in exchange for capital stock
of VelocityHSI representing 100% of the outstanding stock of VelocityHSI
("VelocityHSI Stock");
WHEREAS, certain employees and service providers of BRE and VelocityHSI
(the "Employees") will purchase or receive VelocityHSI Stock and/or options to
purchase such stock;
WHEREAS, the parties understand that some or all of the Employees intend to
make elections pursuant to Section 83(b) of the Internal Revenue Code of 1986,
as amended, with respect to the receipt of such VelocityHSI Stock, including as
a result of the exercise of options to purchase such stock;
WHEREAS, in connection with the issuance of the VelocityHSI Stock, and the
options to purchase VelocityHSI Stock, as well as any stock in BRE ("BRE
Stock"), the parties wish to set forth the terms upon which the parties will
report and allocate deductions and income, if any, with respect to such
issuances;
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Definitions.
"Contribution Time" shall mean the first time at which BRE owns stock of
VelocityHSI which constitutes less than 100% of VelocityHSI's outstanding
capital stock.
"Post-Contribution Time Straddle Period" shall mean, with respect to any
Straddle Period, the portion thereof beginning concurrently with the
Contribution Time and ending on the last day of such Straddle Period.
"Post-Contribution Time Taxable Period" shall mean a Taxable Year that
begins concurrently with the Contribution Time.
"Straddle Period" shall mean any Taxable Year beginning before and ending
after the Contribution Time.
"Taxable Year" shall mean a taxable year (which may be shorter than a full
calendar or fiscal year), year of assessment or similar period with respect to
which any tax may be imposed.
2. Reporting. Each of BRE and VelocityHSI shall be responsible for making
all reports required to be made to any relevant taxing authority with respect to
any grants or exercises of stock options with respect to such party's capital
stock in any Post-Contribution Time Straddle Periods or Post-Contribution Time
Taxable Periods.
3. Allocation of Deductions. BRE shall be entitled to the economic
benefit of, and to the extent permitted by applicable law shall take, any income
tax deductions arising by reason of exercises of the options to purchase shares
of BRE Stock, other acquisitions of such stock or dispositions of such stock.
VelocityHSI shall be entitled to the economic benefit of, and to the extent
permitted by applicable law, shall take any income tax deductions arising by
reason of exercises of the options to purchase VelocityHSI Stock, other
acquisitions of such stock or dispositions of such stock.
4. Allocation of Income. To the extent that any of the options to
purchase VelocityHSI Stock, options to purchase BRE Stock, or shares of
VelocityHSI Stock or BRE Stock are forfeited by an Employee and returned to
VelocityHSI or BRE, as the case may be, the party who received a deduction with
respect to such property under Section 3 of this Agreement will be entitled to
any income, gain or loss resulting from such forfeiture.
5. Entire Agreement; Construction. This Agreement shall constitute the
entire agreement between the parties with respect to the subject matter hereof
and shall supersede any previous negotiations, commitments and writings with
respect to such subject matter.
6. Confidentiality. Each of BRE and its affiliates and VelocityHSI and
its affiliates shall not use or permit the use of (without the consent of the
other) and shall hold, and shall cause its consultants and advisors to hold, in
strict confidence, all information concerning the other party in its possession,
its custody or under its control (except to the extent that (A) such information
has been in the public domain or becomes part of the public domain through no
fault of such party, (B) such information has been later lawfully acquired by
such party, without an obligation of confidence, from a third party who is
legally free to disclose such information, (C) this Agreement or any other
agreement entered into pursuant hereto permits such use or disclosure of such
information or (D) such information is independently developed by such party
without reference to such information) to the extent such information relates to
the period up to the Contribution Time, and each party shall not (without the
prior written consent of the other) otherwise release or disclose such
information to any other person, except such party's auditors, attorneys and
other representatives, unless compelled to disclose such information by judicial
or administrative process or unless such disclosure is required by law and such
party has used commercially reasonable efforts to consult with the other
affected party or parties prior to such disclosure. To the extent that a party
hereto is compelled by judicial or administrative process to disclose such
information under circumstances in which any evidentiary privilege would be
available, such party agrees to assert such privilege in good faith prior to
making such disclosure. Each of the parties hereto agrees to consult with each
relevant other party in connection with any such judicial or administrative
process, including, without limitation, in determining whether any privilege is
available, and further agrees to allow each such relevant party and its counsel
to participate in any hearing or other proceeding (including, without
limitation, any appeal of an initial order to disclose) in respect of such
disclosure and assertion of privilege.
7. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other parties.
8. Notices. Notices shall be sent to the Parties at the following
addresses:
BRE Properties, Inc.
00 Xxxxxxxxxx Xxxxxx, 00/xx/ Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: XxXxx X. Xxxxxxx
Facsimile: 000-000-0000
VelocityHSI, Inc.
0000 Xxxxx Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx
Facsimile: 000-000-0000
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.
9. Amendments; Waivers. No modification or amendment to this Agreement,
or waiver of any right or remedy herein provided, shall be effective for any
purpose unless such modification, amendment or waiver is 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 occasion shall not be
deemed a waiver of such right or remedy with respect to such occurrence on any
other occasion.
10. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns. This Agreement shall not be assigned without the express written
consent of each of the parties hereto.
11. Termination. This Agreement may not be terminated, except by an
agreement in writing signed by the parties.
12. No Third Party Beneficiaries. This Agreement is solely for the benefit
of the parties hereto and their respective subsidiaries and affiliates and
should 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 reference to this Agreement.
13. Titles and Headings. Titles and headings to sections herein are
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.
(signature page follows)
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
BRE PROPERTIES, INC., a Maryland corporation
/s/ XxXxx Xxxxxxx
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By: XxXxx Xxxxxxx
Its: Executive Vice President and Chief Operating
Officer
VELOCITYHSI, INC., a Delaware corporation
/s/ Xxxxxxx X. Xxxxxxx
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By: Xxxxxxx X. Xxxxxxx
Its: Senior Vice President and Chief Financial
Officer
