Exhibit 10.21
FIRSTLINK [LOGO]
May 15, 1998
Xxxxxxx X. Xxxxxxxxxx, Xx.
Web Service Company, Inc.
0000 Xxxxxxx Xxxxx Xxxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000-0000
Re: LETTER OF INTENT CONCERNING EXCLUSIVE WORKING AGREEMENT AND SECURITIES
PURCHASE
Dear Xxxx:
This letter sets forth our mutual intent to proceed in good faith towards the
consummation of a transaction embodying the following basic terms.
1. PARTIES: FirstLink Communications, Inc. ("FirstLink") and Web Service
Company, Inc. ("WEB").
2. INVESTMENT: WEB will acquire 37,500 shares of FirstLink common at $2.67
per share in a private placement to be completed by May 22. We anticipate a
1.5.1 reverse stock split on the date of FirstLink's initial public offering
(IPO). As a part of the transaction WEB will receive an equal number of
warrants identical to the warrants to be issued at the IPO. These 37,500 shares
may be subject to lockup as required by the IPO underwriter. Such lockup would
be similar to that required of other significant shareholders. These shares are
unregistered shares and subject to SEC Rule 144 provisions. WEB will also
acquire 25,000 shares and related warrants at the IPO.
3. EARNOUT: FirstLink will grant WEB a warrant to purchase an additional 2.0
million shares of FirstLink common.
a. The warrant will vest at the rate of 25 shares per equivalent customer
subscribed to FirstLink services at properties delivered by WEB to
FirstLink for signing.
b. A cable subscriber counts as 1/3 equivalent customer and a telephone
customer counts as 2/3 equivalent customer.
c. the per share exercise price of the warrant will be the IPO price per
share.
d. The minimum required vesting will be:
by 12/31/99 100,000 shares
by 12/31/00 150,000 additional shares
by 12/31/01 200,000 additional shares
by 12/31/02 300,000 additional shares
by 12/31/03 500,000 additional shares
by 05/22/04 750,000 additional shares
e. Any portion of the minimum required vesting each year which is not
vested by the required date will be lost.
f. The warrant to acquire vested shares will expire five years after the
vesting date.
g. The maximum shares which can vest in any year is the lesser of 20% of
FirstLink's outstanding common shares at the vesting date or 2,000,000
shares.
Xxxxxxx X. Xxxxxxxxxx, Xx.
May 15, 1998
Page 2
4. BUYOUT PROTECTION: If, during the term of this Agreement, there is more
than a 50% change in control of FirstLink, and if the FirstLink/WEB contract is
rescinded, FirstLink will provide WEB cancellation compensation. The
compensation will be whichever of the following WEB selects:
a. Immediate vesting of shares equal to 2.0 million shares times the
number of units in properties signed by WEB at the date the contract
is 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 2.0 million =
2000,000 - 40,000) will vest immediately; or
b. $200,000.
5. MARKETS: WEB and FirstLink will work exclusively together in agreed upon
markets subject to performance requirements to be defined. The first agreed
markets are Seattle, Denver, Dallas and San Francisco. The exclusive
arrangement will be specified in the Definitive Agreement (see below).
6. COMMISSION: A commission of 1.75% will be paid to WEB on collected
revenues for communications services from all properties covered by this
Agreement; the commission percent will be 2.25% for any property in which
penetration exceeds 60%. Commissions are paid for the life of the contract on
the property.
7. PROPERTY SIZE: WEB will have rights to develop and offer services to
properties with less than 150 units.
8. OTHER SERVICES: WEB retains the rights to payphone services at all
properties.
This letter is furnished as evidence of the mutual intent of WEB and FirstLink
to move in good faith toward concluding a transaction as outlined above. It
does not constitute a binding commitment on the part of either party. Any
legally binding commitments between the parties will only be as specifically set
forth in a duly negotiated definitive agreement ("Definitive Agreement"), which
will be in a form and content satisfactory to both parties, including their
respective legal counsel.
Sincerely, Agreed to in principle this 18th day of
May, 1998.
FIRSTLINK COMMUNICATIONS, INC. WEB SERVICE COMPANY, INC.
By: By:
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X. Xxxxx Xxxxx Xxxxxxx X. Xxxxxxxxxx, Xx.
Chief Executive Officer President
