EXCLUSIVE MARKETING AGREEMENT
This Exclusive Marketing Agreement (herein "Agreement") is entered into
this 26th day of August, 1998 by and between FirstLink Communications, Inc.,
an Oregon corporation ("Company"), and WEB Service Company, Inc., a California
corporation ("WEB").
WITNESSETH:
WHEREAS, Company is an integrated telecommunications service company
providing local telephone, long distance telephone, enhanced calling features
and cable television services to residents of multi-family apartment and
condominium complexes, and
WHEREAS, WEB is an operator of coin-operated laundry equipment and
ancillary services to residents of multi-family apartment and condominium
complexes, and
WHEREAS, The parties desire to enter into this Agreement regarding an
exclusive marketing arrangement whereby WEB will, in the Exclusive
Territories, market Company Services.
NOW, THEREFORE, for and in consideration of the mutual premises,
agreements and covenants hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which is acknowledged
by each party hereto, the parties do hereby agree as follows:
ARTICLE I
Exclusive Marketing Agreement
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1.1 EXCLUSIVE MARKETING AGREEMENT. In the following territories
("Exclusive Territories"), WEB and Company will exclusively work together to
jointly develop, offer and market Services (as defined herein) to tenants of
apartment complexes with 150 or more living units ("Properties").
The Exclusive Territories to which this Agreement shall initially apply
shall be Xxxxxxx, XX, Xxxxxx, XX, Xxxxxx, XX, and the San Francisco Bay Area,
CA., as defined in Exhibit A.
Additional Exclusive Territories shall be added by amendment to this
Agreement, from time to time upon the mutual decision of WEB and Company.
An Exclusive Territory may be removed from the list of Exclusive
Territories at any time upon the mutual agreement of WEB and the Company or,
if either party has not met its performance requirements as defined in Exhibit
B.
1.2 SERVICES. For the purposes of this Agreement the term "Company
Services" shall mean:
The provision of any telecommunications services to Properties having at
least 150 living units. Telecommunications services include but are not
limited to: telephone, long distance telephone, Internet access, cable or
satellite television services, television internet access, cellular or other
personal communication service, prepaid calling cards, television, radio,
electronic surveillance or security, Specifically excluded from this
definition is the right to provide payphone services to a Property.
1.3 DUTIES OF THE PARTIES. Pursuant to this Agreement, the respective
duties of the parties shall be as follows:
A. WEB. WEB shall conduct all sales and marketing activities for
Company Services to Properties and tenants within each of the
Exclusive Territories. Such sales and marketing activities
shall include all responsibilities for obtaining signed
telecommunications services agreements which shall be between
FirstLink and the property owner (the "Telecommunication
Services Agreements"), supporting tenant sign-ups, including
but not limited to initial tenant promotion, training, support
and incentives to the leasing agents, managing and compensating
the sales and marketing personnel in the Exclusive Territories,
and the supply and distribution of certain sales and marketing
materials, as further described in Exhibit C, related to the
acquisition of properties and customers.
B. FIRSTLINK. Company shall be responsible for providing and
maintaining all equipment and negotiating all contracts
necessary for providing the Company Services, managing and
compensating all personnel responsible for fulfillment of the
Company Services, including but not limited to, managing and
compensating all personnel associated with billing and customer
care, providing the billing and customer care system, the
purchase and distribution of certain sales and marketing
materials, as further defined in Exhibit C, and paying the
property commission share to the party specified by the
Telecommunication Services Agreements.
1.4 COMMISSIONS TO WEB. WEB shall be paid a commission of 1.75% of all
collected revenues (excluding taxes, regulatory fees and surcharges) generated
from the provision of Company Services to a Property pursuant to this
Agreement. Such commission rate shall increase to 2.25% for any service at a
Property with a Penetration Rate(defined herein) exceeding 60%. Penetration
Rate shall be defined as the number of Customer Subscriptions (defined herein)
in a building complex expressed as a percentage of the total number of living
units in the building complex. Such commission shall continue to be paid for
the entire duration of a signed Telecommunication Services Agreement provided
that Services are being provided to a Property. Commissions shall be payable
quarterly, for each calendar quarter, no later than thirty (30) days after the
last day of the quarter.
1.5 EARNOUT SHARES. The Company will issue to WEB a warrant entitling
WEB to purchase up to 2,000,000 shares of the common stock of the Company
("Earnout Warrant") subject to adjustment as set forth in the Earnout Warrant.
The exercise price per share shall be $5.40.
The Earnout Warrant shall be subject to the following vesting schedule:
The Earnout Warrant shall vest at the rate of 25 shares of Company Common
Stock per Customer Subscription obtained from a Property in an Exclusive
Territory marketed by WEB pursuant to this Agreement. As used in this
Agreement, a "Customer Subscription" is equal to 1/3 of a cable
television subscription; that is, each three cable television
subscriptions equals one Customer Subscription. Additionally, each
Customer Subscription is equal to 2/3 of a telephone subscription; that
is, each three telephone subscriptions equals two Customer Subscriptions.
The Earnout Warrant will be subject to a minimum vesting schedule as
follows:
Minimum Required Vested
Vesting Date Shares for Period
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December 31, 1999 100,000
December 31, 2000 150,000 additional
December 31, 2001 200,000 additional
December 31, 2002 300,000 additional
December 31, 2003 500,000 additional
May 22, 2004 750,000 additional
Any portion of the minimum required vested shares for each year that is
not vested by the Vesting Date for that year is lost and may never be
exercised.
Notwithstanding the foregoing, the maximum number of vested shares that
can be exercised is the lesser of twenty percent (20%) of the Company's
issued and outstanding Common Stock as of the Vesting Date or 2,000,000
shares (as adjusted pursuant to the Earnout Warrant) less any previously
vested shares. Any shares which may not be exercised by reason of the
foregoing limitation shall remain exercisable until such time as, by
reason of additional issuances, the shares may be exercised. The Earnout
Warrant must be exercised as to each share within five (5) years of the
date the share is vested or the Earnout Warrant will expire as to that
share. The Earnout Warrant shall be in substantially the form attached
hereto as Exhibit E. Notification of vested Earnout Warrants for each
calendar quarter will be sent by the Company to WEB no later than thirty
(30) days after the last day of the quarter.
1.6 BUYOUT PROTECTION. In the event that, at any time during the term
of this Agreement there is (i) a merger of the Company or its parent or (ii)
an event resulting in a change of the ownership of at least fifty percent
(50%) of the outstanding voting securities of the Company or its parent or
(iii) the individuals who constitute the board of directors as of the date
hereof cease, for any reason, to constitute a majority of the board and,
following any of the foregoing, this Agreement is terminated, WEB, at its
election and sole discretion, shall be entitled to either option "A" or "B"
set forth below. In addition to the aforementioned choice, WEB will also be
entitled to option "C" set forth below:
A. Immediate vesting of shares exercisable under the Earnout
Warrant in an amount equal to 2,000,000 shares times the number
of units in Properties signed by WEB at the date the contract
if rescinded divided by 120,000 units, less any previously
vested shares; for example, if an acquisition is consummated in
the ninth month of the Agreement and the Agreement is
rescinded, and if WEB has signed Properties with 12,000 units,
and if 40,000 Shares have previously vested, then 160,000
Shares (12,000/120,000 x 2,000,000 = 200,000 - 40,000 =
160,000) will vest immediately,
B. A lump sum payment of $200,000.00;
C. A buyout of future commissions equal to $0.55 per unit in each
housing complex under contract multiplied by the number of
months remaining under the term of each property contract,
discounted at an annual rate of 8%. For purposes of this
calculation, "unit in each housing complex" shall mean the
total number of units at a property, not the number of
FirstLink subscribers.
ARTICLE II
SECURITIES COMPLIANCE
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2.1 OREGON SECURITIES LAW AND CALIFORNIA SECURITIES ACT. The parties
acknowledge that the offer, sale and issuance of the Earnout Warrant, shares
obtainable upon exercise thereof and Shares to WEB and the delivery by Company
of Securities to WEB is intended to be exempt from the registration
requirements of the Oregon Securities Law pursuant to one or more exemptions
therefrom, including, but not limited to, the transactional exemption provided
by ORS 59.035(2) and from the qualification requirements of the California
Corporate Securities Act pursuant to Section 25102(f) of the California
Corporations Code.
2.2 SECURITIES ACT OF 1933. The parties acknowledge that the offer,
sale, issuance, and delivery of the Securities is intended to be exempt from
the registration requirements of the Securities Act of 1933 ("1933 Act"), by
virtue of one or more exemptions therefrom.
2.3 LEGEND REQUIREMENTS. All certificates representing the Company
Shares issued pursuant to the Earnout Warrant to WEB shall be stamped or
otherwise imprinted with a legend substantially in the following form:
"Any securities represented hereby have not been registered under
the Securities Act of 1933, as amended ("1933 Act"). Such
securities have been acquired by the holder for investment and may
not be pledged, hypothecated, sold, transferred or otherwise
disposed of in the absence of (1) an effective Registration
Statement as to the securities under the 1933 Act; (2) an opinion of
counsel satisfactory to Company that such registration is not
required or (3) a 'no action' letter is received from the Securities
and Exchange Commission to the effect that the Staff of the
Commission will not recommend that any action be taken under the
1933 Act against Company or the holder if such proposed sale is
consummated without registration under the 1933 Act.
"In addition, the securities represented by this certificate are
subject to restrictions on transfer under the provisions of the
Oregon Securities Law, and any attempted pledge, hypothecation, sale
or other transfer of these securities must be in compliance with an
exemption or registration under the Oregon Securities Law."
Proper stop transfer instructions will be issued by Company to the
transfer agent with respect to the Company Shares issued to WEB in accordance
with this Agreement.
2.4 SECURITIES COMPLIANCE. The Company Shares to be acquired by WEB are
being acquired for investment purposes only, and not with a view toward the
resale or distribution of any part thereof. The Earnout Warrant and Company
Shares are being acquired for WEB's own account and not as nominee or agent
for any other person or entity, and WEB has no present intention of selling,
granting any right or participation in, or otherwise distributing or disposing
of the Company Shares. WEB further represents that it is aware that the
Company Shares are subject to restrictions under state and federal securities
laws and that it must bear the economic risk of this investment indefinitely.
In particular, WEB is aware that the Company Shares may not be sold pursuant
to Rule 144 promulgated under the 1933 Act unless all of the conditions of
that Rule are met at the time of an attempted sale. WEB is an accredited
investor as that term is used in Rule 501 under the Securities Act of 1933.
ARTICLE III
MISCELLANEOUS
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3.1 TERMINATION. This agreement shall expire on May 22, 2004 unless
extended by mutual consent of the Parties. Anything herein or elsewhere to
the contrary notwithstanding, this Agreement may be terminated as follows:
(a) At any time by mutual written consent of both the Company and
WEB; or
(b) In the event that, at any time during the term of this
Agreement (i) a merger of the Company or its parent, or (ii) there is a
change of fifty percent (50%) of the outstanding voting securities of the
Company or its parent or (iii) the individuals who constitute the board of
directors as of the date hereof cease, for any reason, to constitute a
majority of the board subject to the Buyout Protection provision of Section
1.6 hereof.
(c) May 22, 2004
In the event of termination of this Agreement as provided in this
Paragraph, written notice shall be given forthwith to the other party; and
this Agreement shall become null and void with no further effect, and, other
than as provided elsewhere herein, there shall be no liability on the part of
any party hereto or their respective officers, directors, employees, agents or
stockholders.
3.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of any party to this Agreement shall survive any investigation by
another party and the execution hereof.
3.3 NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and if by facsimile
transmission, telecopy, telex, or personal delivery shall be deemed to have
been given when sent; if sent by Federal Express or Express Mail shall be
deemed to have been given the next succeeding day; and if mailed shall be
deemed to have been given three days after the date when sent by registered or
certified mail, postage prepaid and addressed to a party at its address as
shown below:
(a) If to Company, to:
FirstLink Communications, Inc.
000 XX Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
Fax: (000)000-0000
Attn: Chief Financial Officer
(b) If to WEB to:
WEB Service Company, Inc.
0000 Xxxxxxx Xxxxx Xxx.
Xxxxxxx Xxxxx, XX 00000-0000
Attn: President
Copy to: General Counsel
Fax: (000) 000-0000
or to such other address as it may, by written notice received by the other
parties, have designated as its address for such purpose. The failure of any
person to give a notice or copy thereof required hereunder to all parties
entitled to receive such notice shall not constitute valid notice for purposes
of commencement of an option period under this Agreement, and, in such event,
any party hereto may give such notice or copy thereof in lieu of the person
required to give the notice stating the requisite information to the extent
known. Any party hereto shall be entitled to assume upon receipt of a notice
commencing an option period that all required notices and copies thereof have
been given unless he or it shall actually receive notice prior to the closing
of any purchase pursuant to the exercise of an option hereunder that all
required notices shall not have been given. Any person giving notice shall
provide evidence of the mailing of all required notices and copies thereof to
any party hereto promptly upon demand.
3.4 APPLICABLE LAW. This Agreement shall be construed under the laws of
the State of Oregon.
3.5 ARBITRATION. Except as expressly provided elsewhere in this
Agreement or any Exhibit hereto, any controversy or claim arising out of or
relating to this Agreement, or the breach hereof or thereof, shall be resolved
by binding arbitration in accordance with the rules applicable to arbitration
by JAMS or any other private arbitration service mutually acceptable to the
Company and WEB (except the rules relating to appeal), as such rules shall
exist at the date of the controversy or claim and except as such rules may be
modified herein or as otherwise agreed by the parties in such controversy.
The forum for arbitration shall be San Francisco, California and the
governing law for such arbitration shall be the laws of the State of Oregon.
Following thirty (30) days' written notice by any party of intention to
invoke arbitration, any dispute arising under this Agreement or other exhibits
hereto and not mutually resolved within such thirty (30) day period shall be
determined by a single arbitrator upon whom the parties agree or, if the
parties cannot agree on a single arbitrator within five (5) business days
following such thirty (30) day period, then by a board of three (3)
arbitrators, which arbitrator(s) shall be selected for each such controversy
so arising hereunder. If three (3) arbitrators are necessary, each party
shall have the right to pick one arbitrator and the two arbitrators so chosen
shall have the right to select a third arbitrator. Any party who is unable or
unwilling to so select an arbitrator in a timely manner, shall forfeit its
right to participate in the selection process. If a selected arbitrator is
unable or unwilling to act, or if for any other reason an appointment of the
requisite number or arbitrators cannot be made, then any party, on behalf of
all the parties, may request appointment of arbitrator(s) by the presiding
judge of the Multnomah County, Oregon Courts.
The arbitrator or arbitrators shall be guided, but not bound, by the
Rules of Evidence then in effect in the Circuit Courts of Oregon and by the
discovery rules of the Rules of Civil Procedure then in effect in the Circuit
Courts of Oregon. Any discovery shall be limited to information directly
relevant to the controversy or claim in arbitration.
The arbitrator or board of arbitrators shall determine the matters
submitted pursuant to the provisions of this Agreement and render a decision
thereon no later than sixty (60) days after such board (or single arbitrator,
as the case may be) has been appointed. The action of the sole arbitrator, or
of a majority of the members of the board of arbitrators, as the case may be,
shall govern and their decisions in writing shall be final, nonappealable, and
binding on the parties hereto.
Any decisions by the arbitrator or arbitrators shall include, a written
statement specifying the basis for the decision and the computation of any
monetary award. The prevailing party, as designated by the arbitrator or
arbitrators shall be awarded costs and attorneys fees as shall be determined
by the arbitrator or arbitrators. Judgment upon the arbitration award shall
be entered in the Multnomah County, Oregon courts.
3.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.7 ENTIRE AGREEMENT. This Agreement (including the exhibits) sets
forth the entire understanding of the parties with respect to the subject
matter of this Agreement and supersedes any and all prior understandings and
agreements, whether written or oral, between the parties with respect to such
subject matter.
3.8 AMENDMENT. This Agreement may be amended only by a written
instrument signed by each party hereto.
3.9 GENDER AND NUMBER. Whenever required by the context of this
Agreement, the singular includes the plural, and the masculine includes the
feminine.
3.10 SEVERABILITY. This Agreement is intended to be performed in
accordance with, and only to the extent permitted by, all applicable laws,
ordinances, rules and regulations. If any provision of this Agreement, or the
application thereof to any person or circumstance, is for any reason or to any
extent invalid or unenforceable, the remainder of the Agreement and the
application of such provision to the other persons or circumstances shall not
be affected thereby, but rather is to be enforced to the greatest extent
permitted by law.
3.11 LIMITATION. No provision of this Agreement shall be construed to
apply in any case where its application would be void under any applicable
rule against perpetuities, rule limiting suspension of the power of alienation
or other similar rules.
3.12 CAPTIONS. The captions used in this Agreement are for convenience
only and are not to be construed in interpreting this Agreement.
3.13 NO ASSIGNMENT. The rights and obligations of any party hereto under
this Agreement may not be assigned without the prior written consent of all
parties hereto subject to the continuing obligation under section 1.6.
3.14 NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the
exclusive benefit of the parties to this Agreement and their respective
personal representatives, successors and permitted assigns, and nothing
contained in this Agreement shall be construed as creating any rights or
benefits in or to any third party.
3.15 EXPENSES. Each party shall bear its own expenses in connection with
this Agreement and the transactions contemplated by this Agreement.
3.16 EXHIBITS. The exhibits referenced in this Agreement are a part of
this Agreement as if fully set forth in this Agreement.
3.17 TIME IS OF THE ESSENCE. Unless times and dates specified herein are
modified in writing, said times and dates shall be binding on the parties.
Time is of the essence of this Agreement.
3.18 LIMITATION OF REMEDY. Notwithstanding any other provision of this
Agreement, in the event of nonperformance or breach, including willful
nonperformance or breach, of any provision of this Agreement, the sole and
exclusive remedy of the aggrieved party shall be the removal of the Exclusive
Territory or Territories, as applicable, from the provisions of this
Agreement, and the aggrieved party shall have no other right as a result of
any such non-performance or breach to pursue any other remedy at law or equity
including, without limitation, any action for negligent or willful breach in
tort or contract, or any action for damages or specific performance.
IN WITNESS WHEREOF, the parties hereto having read, adopted, approved,
ratified and consented to the provisions contained herein, have executed this
Agreement effective as of the date and year first above written.
Company: WEB:
FirstLink Communications, Inc. WEB Service Company, Inc.
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By: A. Xxxxx Xxxxx, By: Xxxxxxx X. Xxxxxxxxxx, Xx.,
Chief Executive Officer President
