<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON , 1998.
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
FIRSTLINK COMMUNICATIONS, INC.
(Name of small business issuer in its Charter)
<TABLE>
<S> <C> <C>
OREGON 7385 93-1197477
(State or jurisdiction of (Primary Standard Industrial (IRS Employer
organization) Classification Code Number) Identification
Number)
</TABLE>
190 SW HARRISON
PORTLAND, OREGON 97201
(503) 306-4444
(Address and telephone number of Registrant's principal executive offices)
A. ROGER PEASE
190 SW HARRISON
PORTLAND, OREGON 97201
(503) 306-4444
(Name, address and telephone number of agent for service of process)
------------------------------
COPIES TO:
DAVID H. DRENNEN, ESQ. MARC J. ROSS, ESQ.
Neuman Drennen & Stone, LLC 331 Madison Avenue
5350 South Roslyn Street, Suite 380 Third Floor
Englewood, Colorado 80111 New York, New York 10017
(303) 221-4700 (212) 953-7077
(303) 694-6287 (Fax) (212) 682-7718 (Fax)
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT.
------------------------------
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE
<S> <C> <C> <C>
Common Stock(1)........................................... 1,150,000 $6.00 $6,900,000
Redeemable Common Stock Purchase Warrants(2).............. 1,150,000 $0.20 230,000
Common Stock(3)........................................... 575,000 $9.00 5,175,000
Common Stock(4)........................................... 100,000 $7.20 720,000
Redeemable Common Stock Purchase Warrants(5).............. 100,000 $0.24 24,000
Common Stock(6)........................................... 50,000 $9.00 450,000
Redeemable Common Stock Purchase Warrants(7).............. 188,889 .20 37,778
Common Stock(8)........................................... 94,445 $9.00 850,005
Common Stock(9)........................................... 935,556 6.00 5,613,336
TOTAL: $20,000,119
<CAPTION>
TITLE OF EACH CLASS OF AMOUNT OF
SECURITIES TO BE REGISTERED REGISTRATION FEE
<S> <C>
Common Stock(1)........................................... $2,036
Redeemable Common Stock Purchase Warrants(2).............. 68
Common Stock(3)........................................... 1,527
Common Stock(4)........................................... 212
Redeemable Common Stock Purchase Warrants(5).............. 7
Common Stock(6)........................................... 133
Redeemable Common Stock Purchase Warrants(7).............. 11
Common Stock(8)........................................... 251
Common Stock(9)........................................... 1,656
TOTAL: $5,900
</TABLE>
(1) Includes 150,000 shares of Common Stock subject to the Underwriters'
over-allotment option.
(2) Includes 150,000 Warrants subject to the Underwriters' over-allotment
option.
(3) Issuable upon exercise of the Redeemable Common Stock Purchase Warrants.
(4) Issuable upon exercise of a Share Purchase Option issued to the
Representative.
(5) Issuable upon exercise of a Warrant Purchase Option issued to the
Representative.
(6) Issuable upon exercise of the Warrants underlying the Representative's
Warrant Purchase Option.
(7) Registered on behalf of certain shareholders.
(8) b]Issuable upon exercise of the Shareholders' Warrants.
(9) Registered on behalf of certain shareholders.
------------------------------
Pursuant to Rule 416, there are also being registered such additional shares
and warrants as may become issuable pursuant to anti-dilution provisions upon
the exercise of the Warrants.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
CROSS-REFERENCE INDEX
<TABLE>
<CAPTION>
ITEM NO. AND HEADING
IN FORM SB-2
REGISTRATION STATEMENT LOCATION IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and outside
front cover page of Prospectus..................... Forepart of Registration Statement and outside front
cover page of Prospectus
2. Inside front and outside back cover pages of
Prospectus......................................... Inside front and outside back cover pages of
Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges.......................... Prospectus Summary; Risk Factors
4. Use of Proceeds...................................... Use of Proceeds
5. Determination of Offering Price...................... Front Cover Page; Underwriting
6. Dilution............................................. Dilution
7. Plan of Distribution................................. Underwriting
8. Legal Proceedings.................................... Business--Legal Proceedings
9. Directors, Executive Officers, Promoters and
Controlled Persons................................. Management
10. Security Ownership of Certain Beneficial Owners...... Securities Ownership of Management and Principal
Shareholders
11. Description of Securities to be Registered........... Description of Securities
12. Interest of Named Experts and Counsel................ Legal Matters
13. Disclosure of SEC Position on Indemnification for
Securities Act Liabilities......................... Management--Limitation on Directors' Liability;
Indemnification
14. Organization Within Last Three Years................. Certain Transactions
15. Description of Business.............................. Prospectus Summary; Risk Factors; Business
16. Management's Discussion and Analysis or Plan of
Operation.......................................... Management's Discussion and Analysis of Financial
Condition and Results of Operations
17. Description of Property.............................. Business
18. Certain Relationships and Related
Transactions....................................... Certain Transactions
19. Market for Common Equity and Related Stockholder
Matters............................................ *
20. Executive Compensation............................... Management--Executive Compensation
21. Financial Statements................................. Financial Statements
22. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ *
</TABLE>
- ------------------------
* Omitted from Prospectus because Item is inapplicable or answer is in the
negative.
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of Prospectus: one to be used
in connection with the offering of up to 1,150,000 shares of the Company's
Common Stock ("Common Stock") and 1,150,000 Redeemable Common Stock Purchase
Warrants ("Warrants"), including Common Stock to be issued to cover
over-allotments, if any, and Common Stock issuable upon exercise of the
Warrants, of FirstLink Communications, Inc., an Oregon Corporation (the
"Company"), for sale by the Company in an underwritten public offering (the
"Offering Prospectus"); and one to be used in connection with the sale of
Warrants and Common Stock by certain shareholders of the Company (the
"Shareholders' Prospectus"). The Offering Prospectus follows immediately after
this Explanatory Note. The Shareholders' Prospectus will be identical in all
respects except for the alternate pages for the Shareholders' Prospectus
included after the Offering Prospectus, including alternate front and back cover
pages and sections entitled "SELLING SHAREHOLDERS," "PLAN OF DISTRIBUTION" and
"PUBLIC OFFERING" to be used in lieu of the sections entitled "UNDERWRITING" and
"PRINCIPAL STOCKHOLDERS" in the Offering Prospectus. Certain sections of the
Offering Prospectus, such as "UNDERWRITING," will not be used in the Selling
Stockholders' Prospectus.
<PAGE>
PROSPECTUS
FIRSTLINK COMMUNICATIONS, INC.
1,000,000 SHARES OF COMMON STOCK
1,000,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
FirstLink Communications, Inc., an Oregon corporation (the "Company") is
offering 1,000,000 shares ("Shares") of the Company's Common Stock ("Common
Stock") and 1,000,000 Redeemable Common Stock Purchase Warrants ("Warrants").
The Common Stock and the Warrants must be purchased together in this offering on
the basis of one Share and one Warrant. The Common Stock and the Warrants will
trade separately thereafter. The offering to which this Prospectus relates is
referred to herein as the "Offering." Two Warrants entitle the holder to
purchase one share of Common Stock at a price of $ per share (150% of the
initial public offering price of the Shares) ("Warrant Exercise Price") during
the three-year period commencing on the date of this Prospectus. The Warrants
may be redeemed by the Company at any time after the date of this Prospectus at
a price of $.05 per Warrant on 45 days written notice if the last sale price of
the Common Stock exceeds 150% of the exercise price of the Warrants for at least
20 of the 30 trading days immediately preceding the notice of redemption. See
"Description of Securities." The offering prices of the Shares and the Warrants
(the "Offering Prices") are expected to be between $5.00 and $6.00, and $.10 and
$.20, respectively.
In addition, the registration statement of which this Prospectus is a part
(the "Registration Statement") covers the offering by certain shareholders of
the Company (the "Shareholders") of an additional 188,889 Warrants (the
"Shareholders' Warrants."), 94,445 Shares of Common Stock issuable upon exercise
of the Shareholders' Warrants (the "Shareholders' Warrant Stock"), and 935,556
shares of Common Stock (the "Shareholders' Stock"). The Shareholders' Warrants,
the Shareholders' Warrant Stock, and the Shareholders' Stock are sometimes
collectively referred to in this Prospectus as the "Shareholders' Securities."
The Shareholders' Warrants and the Shareholders' Warrant Stock will be available
for immediate resale, and may be offered by the Shareholders subject to certain
prospectus delivery requirements (the "Shareholders' Offering"). The
Shareholders' Stock is subject to certain lock-ups that do not permit their sale
for a period of months after the effective date of the Registration
Statement. The Company will not receive any proceeds from the sale of the
Shareholders' Stock under the Shareholders' Offering.
Prior to the Offering there has been no public market for the Common Stock
or the Warrants (hereafter collectively referred to as the "Securities"), and
there can be no assurance that such a market will develop after the
effectiveness of the Offering. The initial Offering Prices will be determined by
negotiation between the Company and Kashner Davidson Securities Corporation (the
"Representative"), as representative of the several Underwriters
("Underwriters"). For a discussion of factors considered in determining the
Share Offering Price, the Warrant Offering Price, and the Warrant Exercise
Price, see "Underwriting."
The Representative is currently negotiating with prospective underwriters
who may or may not become market makers in the Securities, but no additional
market makers for the Securities have been specifically identified at this time.
The Company has filed an application to list the Common Stock and Warrants on
the Nasdaq SmallCap Market under the symbols " " and " ," respectively.
--------------------------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK AND SUBSTANTIAL IMMEDIATE
DILUTION. SEE "RISK FACTORS" BEGINNING AT PAGE 7 AND "DILUTION."
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO PUBLIC(1) DISCOUNT (1) COMPANY (1)(2)
<S> <C> <C> <C>
Per Share................................................ $ $ $
Per Warrant.............................................. $ $ $
Total (3)................................................ $ $ $
</TABLE>
(1) Excludes a non-accountable expense allowance equal to 3% of the gross
proceeds of the Offering payable to the Representative, and five-year
warrants (the "Representative's Warrants") entitling the Representative to
purchase up to 100,000 Shares of Common Stock and 100,000 Warrants at
exercise prices equal to 120% of the Offering Prices. The Company also has
agreed to indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the "Securities
Act"). See "Underwriting."
(2) Before deducting offering expenses payable by the Company of approximately
$329,500 including the non-accountable expense allowance to the
Representative. See "Underwriting."
(3) The Company has granted the Underwriters two 45-day options to purchase up
to an additional 150,000 Shares and 150,000 Warrants on the same terms as
set forth above to cover over-allotments, if any (the "Over-allotment
Options"). If the Underwriters exercise such options in full, the total
Price to Public, Underwriting Discount, and Proceeds to Company will be "$
, $ and $ , respectively, assuming Offering Prices of $
per Share and $ per Warrant. See "Underwriting."
The Common Stock and the Warrants are being offered by the several
Underwriters on a firm commitment basis, subject to prior sale, when, as and if
delivered to and accepted by the Underwriters, and subject to withdrawal or
cancellation of the offer without notice and to their right to reject any order,
in whole or in part, and to certain other conditions. It is expected that
delivery of the certificates representing the Securities will be made on or
about , 1998.
--------------------------
KASHNER DAVIDSON SECURITIES CORPORATION
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE>
Any modification to the Offering will be made by means of an amendment to
the Prospectus. The Company reserves the right to withdraw or cancel the
Offering without notice, and to reject any orders, in whole or in part, for the
purchase of any of the offered Securities.
No dealer, salesman or other person has been authorized to give any
information or to make any representation other than those contained in this
Prospectus and, if given or made, such information or representation must not be
relied upon as having been authorized by the Company. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer in such jurisdiction, or in any jurisdiction in
which the person making such offer or solicitation is not qualified to do so.
------------------------
Upon effectiveness of the Registration Statement of which this Prospectus is
a part the Company will be subject to the reporting and other requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Company intends to furnish its stockholders with annual reports containing
financial statements audited by independent certified public accountants, as
well as quarterly financial information for each of the first three quarters of
each fiscal year. The Company will also file reports, proxy statements and other
information with the Securities and Exchange Commission ("Commission").
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON NASDAQ OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE
COMPANY'S SECURITIES ON NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. FURTHER, SUCH PERSONS MAY
ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF
THE COMPANY'S SECURITIES, INCLUDING PURCHASES OF THE COMPANY'S SECURITIES TO
STABILIZE THE MARKET PRICE, PURCHASES OF THE COMPANY'S SECURITIES TO COVER SOME
OR ALL OF A SHORT POSITION IN THE COMPANY'S SECURITIES MAINTAINED BY THE
UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE RELATED NOTES THERETO,
APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL
INFORMATION WITH REGARD TO THE CAPITAL STOCK OF THE COMPANY IN THIS PROSPECTUS,
INCLUDING SHARE AND PER SHARE INFORMATION, ASSUMES (I) NO EXERCISE OF ANY
OUTSTANDING OPTIONS OR WARRANTS OF THE COMPANY PRIOR TO THE OFFERING DESCRIBED
HEREIN, (II) NO EXERCISE OF THE WARRANTS SOLD IN THE OFFERING, AND (III) GIVES
EFFECT TO A 1-FOR-1.5 REVERSE STOCK SPLIT TO BE EFFECTED BY THE COMPANY ON THE
EFFECTIVENESS OF THE OFFERING. (SEE "DESCRIPTION OF SECURITIES" AND
"UNDERWRITING.")
THE COMPANY
The Company provides integrated telecommunications services to multi-family
apartment and condominium complexes. The Company offers a complete package of
telecommunications services including local telephone, long distance telephone,
enhanced calling features, internet access and cable television. All services
are installed prior to the tenant's move-in and one bill is rendered to the
tenant at the end of the month incorporating all services provided.
Additionally, all services are believed to be offered at or below retail market
prices. The Company's first property, the 525-unit Portland Center Apartments
complex, went on-line in September 1994. The properties under contract as of the
date of this Prospectus, consisting of 3,015 units in Portland, Oregon and 1,646
units in five other cities, represent 4,661 units. Contract terms range from
five years to 15 years.
The Company historically provided its services in the Portland, Oregon area.
As of December 31, 1997, the Company had contracts to provide services for
properties in Portland, Oregon; Vancouver, Washington; Seattle, Washington;
Denver, Colorado; Phoenix, Arizona and Oklahoma City, Oklahoma. The Company
believes that it will be able to expand its services into the aforementioned
cities as well as other areas throughout the United States.
Industry sources estimate that the market for US telecommunications services
represents approximately $210 billion. This includes local and long distance
telephone service and cable television. Management estimates that approximately
$7 billion of this is represented by the approximately 6 million apartments in
buildings of 200 units or more in the United States.
The Company provides its customers with the simplicity, convenience and
savings associated with acquiring all communication services from a single
provider. Property owners realize a new source of ancillary revenue as well as a
way to differentiate their property to residents.
The Company's executive offices are located at 190 SW Harrison, Portland,
Oregon 97201, where its telephone number is (503) 306-4444.
RISK FACTORS
An investment in the securities offered hereby involves a high degree of
risk. See "Risk Factors."
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities offered............ 1,000,000 Shares of Common share of Common Stock during the
3-year period commencing on the date of this Prospectus. The
Common Stock and the Warrants will trade separately
immediately upon the issuance of the Securities on the date
of this Prospectus. The Warrants may be redeemed under
certain circumstances. See "Description of Securities."
Common Stock outstanding
before Offering (1)......... 2,162,264
Common Stock outstanding after
Offering (1)(2)............. 3,162,264
Use of proceeds............... Capital expenditures, system enhancements, and working
capital
Proposed Nasdaq Symbols:
Common Stock................
Warrants....................
</TABLE>
- ------------------------
(1) Does not include (i) 533,333 shares of Common Stock reserved for issuance
upon exercise of options which may be granted under the Company's stock
incentive plan ("The Plan"), of which 423,333 were outstanding and
unexercised as of March 25, 1998, which have exercise prices of $1.13 per
share, and of which 235,000 were subject to future vesting; or (ii) 451,444
shares of Common Stock reserved for issuance upon exercise of other
outstanding warrants having exercise prices ranging from $.75 to $5.25 per
share. See "Management--Stock Options and Option Plans"; and "Description of
Securities-- Convertible Notes.
(2) Does not include 500,000 shares of Common Stock reserved for issuance upon
exercise of the Warrants (575,000 shares if the Over-allotment Option is
exercised in full). Assumes no exercise of (i) the Underwriters'
Over-allotment Options; and (ii) the Representative's Warrants.
SUMMARY FINANCIAL DATA
Set forth below is selected summary financial information with respect to
the Company. Financial information as of and for each of the years in the
two-year period ended December 31, 1997 is derived from the financial statements
included elsewhere in this Prospectus and is qualified by reference to such
financial statements and the notes related thereto.
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues....................................................... $ 879,903 $ 602,423
Operating expenses............................................. 1,351,524 972,767
Operating loss................................................. (471,621) (370,344)
Other expense, net............................................. 106,655 27,473
Net loss....................................................... (578,276) (397,817)
Basic and diluted loss per common share........................ $ (.50) $ (.75)
Basic and diluted weighted average common shares............... 1,162,397 533,309
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
-------------------------------------------
PRO FORMA
AS ADJUSTED
ACTUAL PRO FORMA (1) (2)
------------ ------------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 389,415 $ 776,415 $ 5,531,915
Working capital......................................... $ 59,464 $ 446,464 $ 5,201,964
Property and equipment, net............................. $ 543,053 $ 543,053 $ 543,053
Total assets............................................ $ 1,060,821 $ 1,411,967 $ 6,167,467
Current liabilities..................................... $ 408,795 $ 408,795 $ 408,795
Long term debt, net of current portion.................. $ 388,017 $ 166,350 $ 166,350
Stockholders' equity.................................... $ 264,009 $ 836,822 $ 5,592,322
</TABLE>
- ------------------------
(1) Assuming Notes that were converted in February 1998 had been converted as of
December 31, 1997; and the private placement that was completed in March
1998 had been completed as of December 31, 1997, and the net proceeds of
$387,000 had been received therefrom.
(2) Adjusted to reflect net proceeds of $4,755,500 from the sale by the Company
in this Offering of 1,000,000 Shares and 1,000,000 Warrants at the assumed
public offering prices of $5.50 per Share and $.15 per Warrant.
FORWARD-LOOKING STATEMENTS
Certain statements made in this Prospectus are "forward-looking statements"
(within the meaning of the Private Securities Litigation Reform Act of 1995)
regarding the plans and objectives of management for future operations. Such
statements involve known and unknown risks, uncertainties and other factors that
may cause actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. The forward-looking
statements made in this Prospectus are based on current expectations that
involve numerous risks and uncertainties. The Company's plans and objectives are
based, in part, on assumptions involving the growth and expansion of business.
Assumptions relating to the foregoing involve judgments with respect to, among
other things, future economic, competitive and market conditions and future
business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company. Although the
Company believes that its assumptions underlying the forward-looking statements
are reasonable, any of the assumptions could prove inaccurate and, therefore,
there can be no assurance that the forward-looking statements made in this
Prospectus will prove to be accurate. In light of the significant uncertainties
inherent in the forward-looking statements made in this Prospectus, particularly
in view of the Company's early stage of operations, the inclusion of such
information should not be regarded as a representation by the Company or any
other person that the objectives and plans of the Company will be achieved.
5
<PAGE>
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE POSSIBILITY OF THE
LOSS OF THEIR ENTIRE INVESTMENT IN THE COMPANY'S SECURITIES AND, ALONG WITH EACH
OF THE FOLLOWING FACTORS, CONSIDER THE INFORMATION SET FORTH ELSEWHERE IN THIS
PROSPECTUS.
RISK FACTORS RELATED TO THE BUSINESS OF THE COMPANY
LIMITED OPERATING HISTORY. The Company has only a limited operating history
upon which investors may base an evaluation of the likely performance of the
Company. Although certain of the directors and officers of the Company have
experience in managing businesses in related industries, they have only limited
experience in developing and operating shared tenant services. Any failure to
successfully develop or operate future properties could have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company's independent auditors have included in their audit report an
explanatory paragraph which states that the Company's recurring losses from
operations raise substantial doubt about its ability to continue as a going
concern. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
As is typical of start-up companies, the Company is subject to certain
risks, including uncertainty as to whether it will be able to generate
sufficient revenues to cover its costs and expenses. The Company and its
predecessors have generated operating revenues only since September 1994. The
continuation of the Company for an extended period is dependent upon achieving
adequate profit margins to realize profitable operations. There can be no
assurance that the Company will realize earnings from operations or net profits.
The Company has funded its operations to date through the private sale of equity
and debt securities.
DEPENDENCE ON PROCEEDS OF THIS OFFERING; NEED FOR ADDITIONAL CAPITAL. The
Company is dependent on and intends to use virtually all of the net proceeds of
the Offering to purchase switches and related equipment necessary to provide
local telephone service in the Company's new and existing markets, fund the
increased working capital requirements associated with the Company's planned
market expansion, and enhance the Company's billing and customer care systems to
support the growing customer base.
DEPENDENCE UPON TCI. Nearly all of the apartment and condominium complexes
the Company has under contract utilize TCI Communications, Inc. (TCI") to
provide cable service. The Company has negotiated agreements with TCI to provide
such service on a complex-by-complex basis. There can be no assurance that the
Company will be able to continue to negotiate cable service rates with TCI that
are economically feasible for the Company; or that it will be able to enter any
such agreements with cable companies in areas not served by TCI. If it is unable
to obtain such agreements, the Company's ability to provide its services to new
complexes may be severely adversely affected.
POTENTIAL ADVERSE EFFECT OF INSUFFICIENT CABLE PENETRATION. Under its
agreements with TCI, the Company pays TCI a monthly rate based on the number of
units in a complex, regardless of the number of subscribers to cable service in
the complex. The Company makes assumptions about the number of subscribers that
will purchase cable in the complex to determine the rate it can afford to pay
TCI. However, it is required to pay TCI regardless of the actual subscription
base of a particular complex. Accordingly, there is a risk that the Company
over-estimated the number of cable subscribers it will obtain in a complex,
which would have an adverse impact on its results of operations. See
"Business--Key Suppliers."
UNCERTAIN ABILITY TO MANAGE GROWTH. The Company intends to pursue an
aggressive growth strategy involving the development of customers in new
markets. This growth strategy will require, among other changes, expanded
operational and financial systems and the implementation of new control
procedures. The Company's future operating results will depend on its ability to
develop its infrastructure commensurate with revenues and on its ability to
attract, hire and retain skilled employees. There can be no
6
<PAGE>
assurance that the Company will be able to provide adequate services in areas in
which it wishes to expand or otherwise execute its business strategy, and its
ability to grow may be adversely affected thereby. There can be no assurance
that the Company will be able to manage any growth effectively. Failure to
manage growth effectively could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, although
the Company's management information systems ("MIS") are adequate for its
present level of business, as the Company expands it will need to up-grade such
systems. The Company will use a portion of the proceeds of this Offering to
acquire computer hardware, programming, and software to up-grade its MIS.
However, it is likely that the new systems will require a period of time for the
Company to adjust to the them and to integrate its existing future business into
such systems. The Company's billing and customer service may be adversely
affected by any delays in implementing such a system. See "Business--Management
Information Systems."
DEPENDENCE ON KEY PERSONNEL. The success of the Company is highly dependent
upon the continued services of A. Roger Pease, its President and Chief Executive
Officer, and Jeffrey S. Sperber, its Chief Financial Officer. The loss of the
services of such key personnel could adversely affect the Company's business,
financial condition and results of operations. The Company will require the
services of additional executive personnel in the future. The Company has no
employment agreements or non-compete agreements with any of its key personnel.
There can be no assurance that the Company will be successful in attracting and
retaining the personnel it requires to develop and operate its facilities or to
expand its operations. The Company does not carry key man life insurance on any
of its personnel. See "Management."
COMPETITION. General and local market conditions, including, among others,
the presence of competing companies, may materially and adversely affect the
Company's business, financial condition and results of operations. The
competition in the telecommunications services industry is intense. Competitive
factors include location and quality of facilities, price and quality of
service. Competition may increase as a result of deregulation, allowing more
companies to enter the market for local telecommunications services many of
which have held monopoly positions in the marketplace. Although the Company
believes it offers services that are superior to or more convenient than
competing services, many of the Company's existing and future competitors may
have financial, marketing and other resources that substantially exceed those
available to the Company. See "Business--Competition."
DEVELOPMENT AND CONSTRUCTION DELAYS. The Company's growth strategy is
dependent upon its ability to attract and retain additional customers. The
successful development of new customers will depend upon various factors,
including the availability of suitable sites, the ability of the Company to
successfully service contracts to meet construction schedules and budgets, and
the extent to which the Company otherwise performs in accordance with
expectations. Development and construction delays could have a material adverse
impact on the Company's business, financial condition and results of operations.
MANAGEMENT'S LACK OF VOTING INFLUENCE.
Upon consummation of the Offering, the Company's President, A. Roger Pease,
will beneficially own 186,667 shares of Common Stock, including vested options
exercisable to acquire an additional 80,000 shares of Common Stock, together
representing 5.76% of the total issued and outstanding shares of Common Stock
following completion of the Offering. All of the Company's officers and
directors as a group beneficially own only 450,630 shares of Common Stock,
including vested options. Even giving effect to the exercise of their
outstanding and vested options, the Company's officers and directors as a group
would exercise voting control over only 13.6% of the Company's outstanding
shares of Common Stock following completion of the Offering. As a result of this
lack of voting influence as stockholders, there can be no assurance that the
Company's officers and directors will be able to implement the plans and
strategies described in this Prospectus. Further, it is possible that
stockholders with greater voting influence could initiate actions which could be
adverse to those plans or hostile to current management. See "Security Ownership
of Management and Principal Stockholders."
7
<PAGE>
INDEMNIFICATION AND EXCULPATION. To the extent permitted by Oregon law the
directors of the Company will not be liable to the Company or its stockholders
for monetary damages for conduct as directors. The Company's Articles of
Incorporation permit and its Bylaws require the Company to indemnify its
directors and officers against all damages incurred in connection with the
business of the Company to the fullest extent provided or allowed by law. The
exculpation provisions may have the effect of preventing stockholders from
recovering damages against the directors of the Company caused by their
negligence, poor judgment or other circumstances. The indemnification provisions
may require the Company to use its assets to defend the directors and officers
of the Company against claims, including claims arising out of their negligence,
poor judgment, or other circumstances. The Company has also entered into
indemnity agreements with each of its directors and officers.
RELIANCE ON MANAGEMENT. All decisions with respect to the management of the
Company will be made exclusively by the management. The stockholders will not
have any right or power to take part in the management of the Company. No
prospective investor should purchase any of the Securities offered hereby unless
the investor is willing to entrust all aspects of the management of the Company
to the Management. See "Management."
COMPENSATION PAYABLE TO MANAGEMENT AND OTHERS REGARDLESS OF
PROFITABILITY. The officers of the Company will receive certain fees and other
compensation for services which will be payable to them whether or not the
Company is profitable. See "Management--Executive Compensation."
NO ASSURANCE OF PROFITS. There is no assurance that the Company will
generate profits, or that its securities will appreciate in value or that
investors will be able to sell the securities acquired in the Offering at a
profit. The marketability and value of the Company's business will depend upon
many factors beyond the control of the Company, and there is no assurance that
there will be a ready market for the business operated by the Company.
YEAR 2000 EFFECT. While the Company believes that its software applications
are year 2000 compliant, there can be no assurance until the year 2000 occurs
that all systems will then function adequately. Further, if the software
applications of local exchange carriers, long distance carriers, cable providers
or others on whose services the Company depends are not year 2000 compliant, it
could have a material adverse effect on the Company's financial condition and
results of operations and the value of the Securities.
RISK FACTORS RELATED TO THE OFFERING
DILUTION. As of the date of this prospectus, the Company has sold the
outstanding 2,162,264 shares of Common Stock at an average cost per share of
approximately $.94 which is $4.56 per share less than the Offering Price. At
December 31, 1997, the Company had a pro forma net tangible book value (total
assets less total liabilities and intangible assets) of $836,822 or $.39 per
share of Common Stock outstanding, based on 2,162,264 shares issued and
outstanding. Giving effect to the sale of 1,000,000 Shares and 1,000,000
Warrants by the Company in the Offering, after deduction of the expenses of the
Offering, the Company will have a net tangible book value of approximately
$5,592,322 or $1.77 per share. Investors in the Offering will sustain an
immediate substantial dilution of $3.73 of their price per share. See
"Dilution."
LIMITED MARKET FOR SECURITIES; ARBITRARY DETERMINATION OF PRICES. There has
been no public market for the Common Stock or Warrants of the Company prior to
the effective date of the Registration Statement of which this Prospectus is a
part, and there is no assurance that an active public trading market for the
Securities will develop or be sustained in the foreseeable future. In the
absence of a public market for those securities, the public offering price of
the Common Stock and the exercise price of the Warrants were determined by
negotiations between the Representative and the Company. Among the factors
considered in determining the public offering price and the Warrant exercise
price were the prospects for the Company, an assessment of the industry in which
the Company operates, an assessment of management, the number of shares of
Common Stock and Warrants offered, the price the purchasers of such securities
8
<PAGE>
might be expected to pay give the nature of the Company, and the general
conditions of the securities markets at the time of the Offering. Accordingly,
the offering prices set forth on the cover page of this Prospectus or the
exercise price of the Warrants should not be regarded as indications of the
actual value of the Company or the Securities or of any future market price of
the Company's Common Stock. Moreover, there can be no assurance that the market
price of the Securities will not decline following the Offering, or that
investors will be able to sell any of the Securities purchased hereunder at a
price equal to or greater than the prices paid therefor.
UNDERWRITERS' INFLUENCE ON THE MARKET. A significant number of Shares and
Warrants will be sold to customers of the Underwriters. Such customers may
subsequently engage in transactions for the sale or purchase of the Securities
through or with the Underwriters. Although they have no legal obligation to do
so, the Underwriters from time to time in the future may make a market in and
otherwise effect transactions in the Securities. To the extent the Underwriters
do so, they may be a dominating influence in any market that might develop and
the degree of participation by the Underwriters may significantly affect the
price and liquidity of the Securities. Such market making activities, if
commenced, may be discontinued at any time or from time to time by the
Underwriters without obligation or prior notice. Depending on the nature and
extent of the Underwriters' market making activities and retail support of the
Company's securities at such time, the Underwriters' discontinuance could
adversely affect the price and liquidity of the Securities.
POSSIBLE VOLATILITY OF STOCK PRICES; PENNY STOCK RULES. The
over-the-counter markets for securities such as the Securities offered hereby
historically have experienced extreme price and volume fluctuations during
certain periods. These broad market fluctuations and other factors, such as new
product developments and trends in the Company's industry and investment markets
generally, as well as economic conditions and quarterly variations in the
Company's results of operations, may adversely affect the market price of the
Company's Common Stock. Although applications have been made to have the
Securities be approved for quotation on the Nasdaq Small Cap Market, even if the
applications are initially approved, there can be no assurance that they will
remain eligible to be included on Nasdaq. In the event that the Securities were
no longer eligible to be included on Nasdaq, they could be subject to rules
adopted by the Commission regulating broker-dealer practices in connection with
transactions in "penny stocks." If the Company's Securities became subject to
the penny stock rules, many brokers may be unwilling to engage in transactions
in those Securities because of the added disclosure requirements, thereby making
it more difficult for purchasers of Securities in the Offering to dispose of
them.
SHARES ELIGIBLE FOR FUTURE SALE. As of March 25, 1998, 2,162,264 shares of
the Company's Common Stock were issued and outstanding, all of which are
"restricted securities." 935,556 of those shares are being registered by the
Company for resale by the Selling Stockholders with the Registration Statement
of which this Prospectus is a part. The remaining shares may, under certain
circumstances, in the future, be sold in compliance with Rule 144 adopted under
the Securities Act. Of these 1,226,708 restricted securities, 292,119 are
beneficially owned by officers, directors and affiliates of the Company. In
general, under Rule 144, subject to the satisfaction of certain other
conditions, a person, including an affiliate of the Company, who has
beneficially owned restricted shares of Common Stock for at least one (1) year
is entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the total number of outstanding shares of the
same class, or if the Common Stock is quoted on Nasdaq or a stock exchange, the
average weekly trading volume during the four (4) calendar weeks immediately
preceding the sale. A person who presently is not and who has not been an
affiliate of the Company for at least three (3) months immediately preceding the
sale and who has beneficially owned the shares of Common Stock for at least two
(2) years is entitled to sell such shares under Rule 144 without regard to any
of the volume limitations described above.
The Company is authorized to grant options to purchase 533,333 shares of
Common Stock pursuant to a stock option plan for key employees, officers, and
directors (the "Plan"). As of March 25, 1998, non-
9
<PAGE>
qualified stock options to purchase 423,333 shares of Common Stock have been
granted under the Plan. See "Management--Executive Compensation-Stock Options
and Option Plans." Although the Company has no present plans to register for
sale under the Securities Act shares issuable upon exercise of the options
granted pursuant to the Plan, if it should do so, when the options are exercised
and the shares issued they would be freely tradeable, except for certain
limitations imposed upon directors, officers and affiliates who exercise options
granted under the Plan.
No prediction can be made as to the effect, if any, that sales of shares of
Common Stock or the availability of such shares for sale will have on the market
prices prevailing from time to time. Nevertheless, the possibility that
substantial amounts of Common Stock may be sold in the public market may
adversely affect prevailing market prices for the Common Stock and could impair
the Company's ability to raise capital in the future through the sale of equity
securities. Actual sales or the prospect of future sales of shares of Common
Stock under Rule 144 may have a depressive effect upon the price of the Common
Stock and the market therefor.
AUTHORIZATION OF PREFERRED STOCK. The Company's Articles of Incorporation,
as amended, authorize the issuance of up to 1,000,000 shares of preferred stock,
no par value. The Board of Directors has been granted the authority to fix and
determine the relative rights and preferences of preferred shares, as well as
the authority to issue such shares, without further stockholder approval. As a
result, the Board of Directors could authorize the issuance of a series of
preferred stock which would grant to holders preferred rights to the assets of
the Company upon liquidation, the right to receive dividend coupons before
dividends would be declared to common stockholders, and the right to the
redemption of such shares, together with a premium, prior to the redemption of
Common Stock. Common stockholders have no redemption rights. The Company does
not presently intend to issue any Preferred Stock. See "Description of
Securities."
AUTHORIZATION OF ADDITIONAL SHARES. The Company's Articles of
Incorporation, authorizes the issuance of up to 20,000,000 shares of Common
Stock, of which 2,162,264 shares were outstanding on March 25, 1998. The
Company's Board of Directors has the authority to issue additional shares of
Common Stock and to issue options and warrants to purchase shares of the
Company's Common Stock without stockholder approval. Future issuance of Common
Stock could be at values substantially below the Offering Price in the Offering
and therefore could represent further substantial dilution to investors in the
Offering. In addition, the Board could issue large blocks of voting stock to
fend off unwanted tender offers or hostile takeovers without further stockholder
approval.
MARKET OVERHANG FROM OUTSTANDING OPTIONS. Immediately after the Offering
the Company will have outstanding 423,333 options to purchase shares of Common
Stock reserved for issuance under the Plan. The Company will also have Common
Stock Purchase Warrants ("Private Warrants") exercisable to purchase 451,444
shares of Common Stock at exercise prices ranging from $.75-$5.25 per share.
(The options and Private Warrants will be referred to as the "Derivative
Securities.") The Private Warrants are being registered in the Registration
Statement of which this Prospectus is a part. To the extent that such Derivative
Securities are exercised or converted, dilution to the interests of the
Company's stockholders may occur. Exercise or conversion of the Derivative
Securities, or even the potential of their exercise or conversion may have an
adverse effect on the trading price and market for the Company's Common Stock.
The holders of the Derivative Securities are likely to exercise or convert them
at times when the market price of the shares of Common Stock exceeds their
exercise price. Accordingly, the issuance of shares of Common Stock upon
exercise of the Derivative Securities may result in dilution of the equity
represented by the then outstanding shares of Common Stock held by other
stockholders. Holders of the Derivative Securities can be expected to exercise
them at a time when the Company would, in all likelihood, be able to obtain any
needed capital on terms which are more favorable to the Company than the
exercise terms provided by such Derivative Securities. See "Description of
Securities."
USE OF PROCEEDS. The proceeds to the Company from the Offering, net of the
expenses of the Offering, will be approximately $4,755,500. Management
anticipates that $3,000,000 or 63% of the
10
<PAGE>
proceeds will be applied towards capital expenditures and system enhancements;
and the balance of the proceeds will be allocated to working capital. See "Use
of Proceeds."
The amounts set forth above represent the Company's present intentions for
the use of proceeds from the Offering. However, actual expenditures could vary
considerably depending upon many factors, including changes in economic
conditions, the ability of the Company to obtain lease financing unanticipated
complications, delays and expenses, or problems relating to the development of
additional locations. Any reallocation of the proceeds of the Offering will be
made at the discretion of the Board of Directors but will be in furtherance of
the Company's strategy to achieve growth and profitable operations through the
development of additional locations.
EXERCISE OF WARRANTS; REDEEMABLE WARRANTS; NECESSITY OF CONTINUING
POST-EFFECTIVE AMENDMENTS TO THE COMPANY'S REGISTRATION STATEMENT. The Warrants
may not be exercised unless the Company maintains a current registration
statement with the SEC, which the Company has agreed to do; however, there can
be no assurance that the Company will be able to do so. The Company will be
unable to issue Common Stock to persons desiring to exercise their Warrants
unless the Warrants and the Common Stock issuable upon the exercise thereof are
qualified for sale in jurisdictions in which such purchasers reside, or an
exemption from such qualification exists in those jurisdictions. There can be no
assurances that the Company will be able to effect any required qualification.
Under certain conditions, the Warrants may be redeemed by the Company at any
time prior to their expiration, at a redemption price of $.05 per Warrant, upon
not less than 45 days' prior written notice to the Warrant holders.
Consequently, the holders may be deprived of the value of their Warrants. See
"Description of Securities--Warrants."
POSSIBLE LOSS OF INVESTMENT. Most of the net proceeds of the Offering will
be expended at or prior to receipt of significant revenues by the Company.
Consequently, stockholders will be dependent upon the performance of the
Company's business for any return of their investment and risk the entire loss
of their investment if revenues are insufficient to cover expenses. In the event
that the business does not generate sufficient revenues to pay expenses,
stockholders could lose part or all of their investment.
11
<PAGE>
DILUTION
The pro forma net tangible book value of the Company at December 31, 1997,
before giving effect to the Offering, was $836,822 or $.39 per share, based upon
2,162,264 shares outstanding. Pro forma net tangible book value per share is
determined by dividing the number of outstanding shares of Common Stock into the
pro forma net tangible book value of the Company (total assets less total
liabilities and intangible assets); and assuming (i) that the Notes which were
converted into Common Stock in February and March 1998 had been converted at
December 31, 1997; and (ii) that the private placement which was completed in
March 1998 had been completed at December 31, 1997, and the receipt of the net
proceeds therefrom. After giving effect to the sale of 1,000,000 Shares and
1,000,000 Warrants by the Company in the Offering and receipt of the estimated
net proceeds therefrom, the adjusted pro forma net tangible book value at
December 31, 1997, would have been $5,592,322 or $1.77 per share of Common
Stock. This represents an immediate increase of $1.38 per share to current
stockholders and an immediate dilution of $3.73 per share to the investors in
the Offering (assuming the allocation of the entire Offering Price to the shares
of Common Stock). The following table illustrates the per share dilution,
assuming all 1,000,000 Shares are sold in the Offering: (1)
<TABLE>
<S> <C> <C>
Assumed price Per Share of Common Stock............................... $ 5.50
Pro Forma Net Tangible Book Value Per Share of Common Stock Before
Offering (2)........................................................ $ .39
Increase in Pro Forma Net Tangible Book Value Per Share of Common
Stock Attributable to Shares Offered Hereby......................... $ 1.38
Pro Forma Net Tangible Book Value Per Share of Common Stock After
Offering............................................................ $ 1.77
Dilution of Pro Forma Net Tangible Book Value Per Share of Common
Stock to Purchasers in this Offering................................ $ 3.73
Dilution Per Share of Common Stock as a Percent of Offering Price..... 67.8%
</TABLE>
- ------------------------
(1) Does not include (i) 533,333 shares of Common Stock reserved for issuance
upon exercise of options which may be granted under the Company's Incentive
Plan, 423,333 of which are subject to outstanding and unexercised options
having an exercise price of $1.13 per share, and of which 235,000 are
subject to future vesting; and (ii) 357,000 shares of Common Stock reserved
for issuance upon exercise of outstanding warrants having a weighted average
exercise price of $1.76 per share; and 94,444 shares of Common Stock
reserved for issuance upon exercise of outstanding warrants that will be
exchanged for warrants on the effectiveness of the Registration Statement.
See "Management--Stock Options and Option Plans."
(2) Determined by dividing the number of shares of Common Stock outstanding into
the net tangible book value of the Company.
The following table sets forth, as of March 25, 1998, the number of shares
of Common Stock purchased, the percentage of total cash consideration paid, and
the average price per share paid by (i) the existing stockholders; and (ii)
investors purchasing Securities in the Offering, before deducting estimated
underwriting discounts and offering expenses payable by the Company.
<TABLE>
<CAPTION>
AVERAGE
TOTAL CASH
SHARES PURCHASED CONSIDERATION AVERAGE
--------------------- ----------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- --------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C>
Existing Stockholders......................... 2,162,264 68.4% $ 2,022,621 26.9% $ .94
New Investors(1).............................. 1,000,000 31.6% $ 5,500,000 73.1%(1) $ 5.50
---------- --------- ------------ --------- -----
Total......................................... 3,162,264 100% $ 7,522,621 100% $ 2.38
</TABLE>
- ------------------------
(1) Assumes (a) 1,000,000 Shares are sold in the Offering at an Offering Price
of $5.50 per Share; and (b) no exercise of Warrants.
12
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1997, (i) on an actual basis; (ii) on a pro forma basis which gives
effect to the conversion of the Notes, the completion of the Private Placement,
and the receipt of the net proceeds therefrom; and (iii) pro forma as adjusted
to give effect to the estimated net proceeds from the sale of the Shares and
Warrants offered hereby, based upon an assumed Offering Price of $5.50 per Share
and $.15 per Warrant. This section should be read in conjunction with the
financial statements and notes to the financial statements that are contained
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------------------------
PRO FORMA AS
ADJUSTED
ACTUAL PRO FORMA (1)(2)
------------ ------------ --------------
<S> <C> <C> <C>
Long Term Debt, net of current portion................................ $ 388,017 $ 166,350 $ 166,350
Stockholders' Equity:
Preferred Stock, no par value, 1,000,000 Shares authorized; no
shares outstanding................................................ -- -- --
Common Stock, no par value, 20,000,000 shares authorized; 1,786,708
shares issued and outstanding 12/31/97; 2,162,264 shares issued
and outstanding pro forma; 3,162,264(2) shares issued and
outstanding pro forma as adjusted................................. $ 1,240,102 $ 1,812,915 $ 6,568,415
Accumulated Deficit:.................................................. (976,093) (976,093) (976,093)
Total Stockholders' Equity:........................................... 264,009 836,822 5,592,322
Total Capitalization:................................................. $ 652,026 $ 1,003,172 $ 5,758,672
</TABLE>
- ------------------------
(1) Does not include (i) 533,333 shares of Common Stock reserved for issuance
upon exercise of options which may be granted under the Company's Stock
Option Plan, 423,333 of which are subject to outstanding and unexercised
options having exercise price of $1.13 per share, and of which 235,000 are
subject to future vesting; (ii) 357,000 shares of Common Stock reserved for
issuance upon exercise of outstanding warrants having a weighted average
exercise price of $1.76 per share; and (iii) 94,444 shares of Common Stock
reserved for issuance upon exercise of outstanding warrants that will be
exchanged for Warrants on the effectiveness of the Registration Statement.
See "Management--Stock Options and Option Plans."
(2) Assumes no exercise of the Underwriters' Over-allotment Option or the
Representatives' Options.
13
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Securities offered
hereby, assuming a combined Share and Warrant Offering Price of $5.65, are
estimated to be approximately $4,755,500, ($5,492,825 if the Over-allotment
Option is exercised in full) after deducting the underwriting discount and
offering expenses. Management anticipates that the proceeds will be applied with
the following priority during the next twelve (12) month period:
<TABLE>
<CAPTION>
DESCRIPTION OF USE AMOUNT PERCENT
- ------------------------------------------------------------------ ------------ ---------
<S> <C> <C>
Capital Expenditures.............................................. $ 2,800,000 58.9%
System Enhancements............................................... 200,000 4.2%
Working Capital (1)............................................... 1,755,500 36.9%
------------ ---------
$ 4,755,500 100.0%
------------ ---------
------------ ---------
</TABLE>
- ------------------------
(1) The proceeds allocated to working capital will be applied, to the extent
necessary, to the Company's current operations. See "Management's Discussion
and Analysis." It is an inherent part of the Company's strategic plan to
achieve long-term growth and profitable operations through marketing its
services to additional properties and developing such properties;
accordingly, a portion of such proceeds may also be used for marketing and
capital expenditures.
The amounts set forth above represent the Company's present intentions for
the use of the proceeds from the Offering. However, actual expenditures could
vary considerably depending upon many factors, including, without limitation,
changes in economic conditions, the ability of the Company to obtain lease
financing, unanticipated complications, delays and expenses, or problems
relating to the development of additional properties. Any reallocation of the
net proceeds of the Offering will be made at the discretion of the Board of
Directors but will be in furtherance of the Company's strategy to achieve growth
and profitable operations through the development of additional properties. The
Company's working capital requirements are a function of its future sales growth
and expansion, neither of which can be predicted with any reasonable degree of
certainty. As a result, the Company is unable to precisely forecast the period
of time for which proceeds of the Offering will meet its working capital
requirements. The Company may need to seek funds through loans or other
financing arrangements in the future, and there can be no assurance that the
Company will be able to make such arrangements in the future should the need
arise.
Pending use of the net proceeds of the Offering, the funds will be invested
temporarily in certificates of deposit, short-term government securities or
similar investments. Any income from these short-term investments will be used
for working capital.
DIVIDENDS
No dividends have been paid by the Company. While no decision with regard to
the payment of dividends in the future has, to date, been made, the Company does
not, as of the date of this Prospectus, intend to declare or pay any dividends
on its outstanding shares of Common Stock in the foreseeable future. Future
dividend policy is subject to the discretion of the Board of Directors, and is
dependent upon a number of factors including future earnings, capital
requirements and the financial condition of the Company. Although no shares of
Preferred Stock have been issued, in the event such shares are issued, the
rights of Common Stock stockholders to dividends shall be subject to the rights
and preferences of Preferred Stock stockholders. The Company does not presently
intend to issue any Preferred Stock.
14
<PAGE>
SELECTED FINANCIAL DATA AND STATISTICAL DATA
Set forth below is selected financial data with respect to the Company.
Financial information for the years ended December 31, 1997 and 1996, is derived
from the financial statements included elsewhere in this Prospectus and is
qualified by reference to such financial statements and the notes thereto.
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues................................................................. $ 879,903 $ 602,423
Operating expenses....................................................... 1,351,524 972,767
Operating loss........................................................... (471,621) (370,344)
Other expense, net....................................................... 106,655 27,473
Net loss................................................................. (578,276) (397,817)
Basic and diluted loss per common share.................................. $ (.50) $ (.75)
Basic and diluted weighted average common shares......................... 1,162,397 533,309
<CAPTION>
AS OF DECEMBER 31, 1997
------------------------------------
ACTUAL PRO FORMA (1)
----------------- -----------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................................ $ 389,415 $ 776,415
Working capital.......................................................... $ 59,464 $ 446,464
Property and equipment, net.............................................. $ 543,053 $ 543,053
Total assets............................................................. $ 1,060,821 $ 1,441,967
Current liabilities...................................................... $ 408,795 $ 408,795
Long term debt, net of current portion................................... $ 388,017 $ 166,350
Stockholders' equity..................................................... $ 264,009 $ 836,822
</TABLE>
- ------------------------
(1) Assuming Notes that were converted in February 1998 had been converted as of
December 31, 1997; and the private placement that was completed in March
1998 had been completed as of December 31, 1997, and the net proceeds
received therefrom.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Financial Statements and Notes thereto appearing elsewhere in this Prospectus.
The Company provides integrated telecommunications services to multi-family
apartment and condominium complexes. The Company offers a complete package of
telecommunications services including local telephone, long distance telephone,
enhanced calling features, internet access and cable television. All services
are installed prior to the tenant's move-in and one bill is rendered to the
tenant at the end of the month incorporating all services provided.
Additionally, all services are believed to be offered at or below retail market
prices. The Company's first property, the 525-unit Portland Center apartments
complex, went on-line in September 1994. The properties under contract as of the
date of this Prospectus, consisting of 3,015 units in Portland, Oregon and 1,646
units in five other cities, represent 4,661 units. Contract terms range from
five years to fifteen years.
The Company historically provided its services in the Portland, Oregon area.
As of December 31, 1997, the Company had contracts to provide services for
properties in Portland, Oregon; Vancouver, Washington; Seattle, Washington;
Denver, Colorado; Phoenix, Arizona and Oklahoma city, Oklahoma. The Company
believes that it will be able to expand its services into the aforementioned
cities as well as other areas throughout the United States.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997, COMPARED TO DECEMBER 31, 1996.
The Company reported a net loss of $578,276 for the year ended December 31,
1997 compared to a net loss of $397,817 for the year ended December 31, 1996.
The increase in net loss is attributable to the increased personnel costs,
depreciation charges and interest expense associated with the Company's growth
that was experienced between years.
Revenue increased by $277,480 or 46% for the year ended December 31, 1997
compared to the prior year. The increase in revenue is attributable to the
Company having eight properties operating by the end of 1997 compared to three
for 1996. The increase in revenue is not proportional to the increase in
properties due to the timing of when properties were brought on line during
1997.
Operating expenses increased by $210,782 or 57% for the year ended December
31, 1997 compared to the prior year. The increase in operating expenses, which
are those costs directly attributable to revenue, was due to the increase in
properties between years. Operating expenses were 66% of revenue for the year
ended December 31, 1997 compared to 61% for the prior year. The increase in
operating expense was disproportionate to the increase in revenue due to the
Company absorbing certain fixed costs associated with the new properties brought
on line during 1997 without a corresponding increase in revenue.
Selling, general and administrative expenses increased by $135,899 or 24%
for the year ended December 31, 1997 compared to the prior year. The increase
between years resulted from an increase in payroll and temporary staff expenses.
Selling, general and administrative expenses were 80% of revenue for the year
ended December 31, 1997 compared to 94% for the prior year.
Depreciation and amortization expenses increased by $32,076 or 85% for the
year ended December 31, 1997 compared to the prior year. The increase between
years is due to an increase in property and equipment resulting from the
increased number of properties on-line between years. Depreciation and
amortization expense was 8% of revenue for the year ended December 31, 1997
compared to 6% for the prior year.
Other expense increased by $79,182 or 288% for the year ended December 31,
1997 compared to the prior year. The increase between years resulted from an
increase in interest expense, which was due to an
16
<PAGE>
increase in financing activities and accreted interest thereon and capital
leases between years. Other expense was 12% of revenue for the year ended
December 31, 1997 compared to 5% for the prior year.
The Company has net operating loss carryforwards which are available to
offset future financial reporting and taxable income. Net operating loss
carryforwards for tax purposes totaled approximately $965,000 at December 31,
1997 and expire in 2011 through 2012.
A provision of the Internal Revenue Code requires the utilization of net
operating losses be limited when there is a change of more than 50% in ownership
of the Company. The Company appears to have incurred an ownership change under
IRC Section 382. This potential ownership change would limit the utilization of
any net operating losses incurred prior to the change in ownership date. The
Company intends to complete an analysis under IRC Section 382 to determine if
any ownership change has occurred.
The difference between expected tax benefit, computed by applying the
federal statutory rate of 34% to loss before taxes, and the actual tax benefit
of $-0- is primarily due to the increase in the valuation allowance for deferred
taxes.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Company had cash and cash equivalents of $389,415
compared to $15,119 at December 31, 1996. Net cash of $536,348 was used in
operating activities which approximated the Company's net loss.
Net cash of $70,090 was used in investing activities which was comprised
entirely of capital expenditures. The Company's capital expenditures consisted
primarily of switches, switch line cards and computers and resulted from the
Company's increased penetration rates in existing and new properties as well as
the increase in personnel. The majority of switches during 1997 were acquired
through capital leases and the Company is currently pursuing various leasing
alternatives to finance its anticipated future capital requirements. There is no
assurance that the Company will be able to obtain lease financing at rates that
are acceptable to the Company or in amounts that will be sufficient to fund its
requirements. Any deficiencies between the Company's leasing capabilities, if
they exist at all, and the Company's capital expenditure requirements, will have
to be financed through the issuance of common stock or debt.
Net cash of $980,734 was generated from financing activities during 1997.
This was the net result of the Company's issuance of stock and notes through two
private placements that totaled $1,008,526 offset by principal payments under
capital leases.
The Company has generated operating cash losses from its inception.
Additionally, the Company requires and will continue to require, cash to fund
the net losses and capital requirements associated with the Company's rapid
growth. It is management's expectation that the Company will enter at least five
new markets during 1998 and additional others thereafter. The cash required to
fund such activities will be substantial and beyond what the Company currently
holds in cash and cash equivalents. Management believes that the Company's cash
balance at December 31, 1997 is sufficient to fund the Company's activities for
at least six months with limited growth. The Company is currently pursuing
various financing alternatives including, but not limited to, both public and
private equity and debt financings. The Company will have to raise additional
capital in order to finance its current operations as well as its growth plans
beyond the next six months. There can be no assurance that management will be
successful in obtaining such financing.
In February-March 1998, the Company raised $425,000 in equity through a
private placement. In December 1997, the Company signed a letter of intent with
an underwriter to offer shares of the Company's common stock for sale through an
initial public offering. It is the Company's plan to raise between $5,100,000
and $6,200,000 million through the public offering. If successful, management
believes that the cash generated from the public offering will be sufficient to
meet its cash requirements for the foreseeable future.
17
<PAGE>
The Company has agreements with certain cable television operators to
purchase bulk cable signals at the Companies properties. As of December 31,
1997, the Company's commitment was $27,224 per month for such services. At
December 31, 1997, there were no material commitments for capital expenditures.
NEW ACCOUNTING PRONOUNCEMENTS
SFAS 130, "Reporting Comprehensive Income," was issued in June 1997. It
establishes standards for reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. SFAS 131,
"Disclosure about Segments of an Enterprise and Related Information," was issued
in June 1997. It establishes standards for the way public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The Company does not believe that adoption
of either of these standards will have a significant effect on its financial
statements.
18
<PAGE>
BUSINESS
GENERAL
The Company is a Portland, Oregon, based telecommunications company that
provides integrated telecommunications and entertainment services to
multi-family apartment and condominium complexes. The Company offers a variety
of services to tenants including the following:
- Local telephone
- Long distance telephone
- Enhanced calling features, such as:
<TABLE>
<S> <C>
- - Call waiting - Call forwarding
- - Conference calling - Distinctive ringing
- - Account coding - Speed dialing
- - Restricted access dialing - Wake-up service
- Voice mail
</TABLE>
- Internet access
- Telephone calling cards
- Cable television
These services are all offered under the Company's service mark to tenants
of apartment and condominium complexes (referred to collectively herein as
apartments) which are under contract with the Company. When a new tenant at a
property which has a contract with the Company signs a service agreement with
the Company, the Company assigns the tenant a telephone number; and installs all
of the services in the tenant's apartment prior to the time the tenant moves in.
All services are installed prior to tenant move-in so the tenant does not need
to arrange for multiple installations by multiple vendors. One customer service
number covers all potential service and inquiry needs. One bill is rendered to
the tenant at the end of the month integrating all services provided, and the
tenant needs only to write one check; payment is also accepted by cash, wire
transfer or credit card. In addition, all services are believed to be offered at
or below retail market prices. The tenant may retain his existing telephone
number if allowed by the incumbent local exchange carrier. There are no fees or
interruptions of service for tenants transferring to FirstLink after receiving
service from another supplier.
The Company provides additional incentives to the property manager or owner,
including the benefit of dealing with a single provider for all communication
services; the ability to offer tenants a complete, integrated package of
communication and entertainment services; and the ability to maintain or improve
occupancy rates by attracting and retaining tenants for whom communications and
entertainment services are important. The property manager or owner and leasing
agents also benefit from the receipt of commissions and further incentives for
successfully marketing the Company's service. The Company currently has
contracts with 20 residential developments in the United States, of which 11
were on-line as of the date of this Prospectus. Contract terms range from 5 to
15 years with the average term of 6.5 years.
<TABLE>
<CAPTION>
PROPERTY LOCATION UNITS UNDER CONTRACT UNITS ON LINE
- --------------------------------------------------------- --------------------- ---------------
<S> <C> <C>
Portland, OR............................................. 3,015 2,609
Seattle, WA.............................................. 351 --
Denver, CO............................................... 315 --
Oklahoma City, OK........................................ 273 --
Vancouver, WA............................................ 440 --
Phoenix, AZ.............................................. 267 --
----- -----
Total.................................................. 4,661 2,609
</TABLE>
19
<PAGE>
A portion of the proceeds of the Offering, together with Company revenues,
will be used by the Company to fulfill its obligations under its current
contracts and to embark on an aggressive expansion program to develop
significant additional customers and projects, both in Portland and other cities
throughout the United States.
COMPANY SERVICES AND EXISTING CUSTOMERS
Five main services make up the Company's integrated communications package.
They include:
- Local phone service
- Enhanced calling features
- Long distance phone service
- Cable television service
- Internet access
The Company installs telephone switching equipment within each apartment
complex. This equipment generates an internal dial tone to the apartment
complex. The same hardware and software also provides enhanced calling features
like call waiting, call forwarding, and voicemail service. The switching
equipment located at the apartment complex is then interconnected with the local
telephone company so telephone calls can be received and transmitted across the
public switched telephone network, as well as the networks of other carriers.
Long distance traffic is routed over separate dedicated lines to an
interexchange carrier who provides discounted long distance telephone service to
the Company and its customers. Cable television service is provided by the
Company in conjunction with the local cable television franchise holder. In
Portland for example, the Company has an agreement with TCI Cablevision of
Oregon, Inc. and Paragon Cable, a division of Time Warner. The Company purchases
cable service at a discount and applies a markup to cover additional costs and
contribution to profit and then resells the service to tenants at a discount
from retail rates. Internet access is provided by routing traffic through the
Company's switches to an independent internet service provider.
From the customer's perspective all of these services are provided through
the Company. The Company handles the sales, installation, customer care, and
billing of all services, thereby delivering a one-stop approach to customer
satisfaction.
The tenant is offered discounts as an enticement to take service from the
Company. Installation costs are waived when a customer transfers service to
FirstLink from another provider and the transfer is accomplished without
inconvenience to the tenant. The tenant has the option of keeping his existing
phone number. The Company guarantees its service: if the tenant is unhappy for
any reason, the Company will reconnect the tenant to the carrier of his choice.
The apartment leasing agent or condominium sales agent presents the Company
service agreement to the new tenant at the same time final apartment leasing
documents are executed.
The Company is positioned as a communications integrator and one-stop shop
for communications services, so that it can maximize its offerings to the
consumer. The Company will seek to provide other services to its customers, such
as video on demand, cellular telephone, paging, video conferencing, and others.
It is also working directly with local franchised cable companies to offer the
broadest possible range of cable television services. Many of its competitors,
build stand-alone and limited capacity satellite television systems that provide
reduced offerings to the consumer. The Company views its business as service
driven with customer satisfaction its number one priority.
In return for marketing assistance and access to their buildings and
tenants, the Company pays apartment owners a share of revenue based on services
used by each subscribing tenant. This revenue sharing can have a significant
impact not only on the revenue stream from an apartment complex but also
20
<PAGE>
through enhanced capital appreciation for the property, which this additional
revenue represents. In addition, apartments are typically rented based on the
amenity package provided to prospective tenants. The Company's integrated
communication services give a potential competitive advantage to an apartment
owner.
The Company provides the apartment tenant numerous benefits: cost savings
compared to the traditional providers of communications service; a convenient
means of subscribing to communications services; a single, integrated bill for
all communications services; instant connection to cable television, local phone
service, long distance telephone service and internet access; and simple and
competitively priced choices for long distance telephone service.
While communications markets remain regulated, limiting competition on the
national level, many states are today licensing Shared Tenant Services (STS),
known in the industry as Residential Multi-Tenant Services (RMTS). The providers
of RMTS, like the Company, are allowed to purchase dial tone from the local
telephone company on a wholesale basis and resell the dial tone to the tenant
from common telecommunications facilities. Other services are added to the
package such as long distance and cable television. The potential customers of
this service include residents within existing apartment complexes, new
multi-unit developments under construction, condominiums, and other
multi-dwelling units with telecommunications needs such as hospitals, nursing
homes, college campuses, etc. Large apartment complexes served by on-site
telecommunications equipment offer efficient use of capital.
MARKETING STRATEGY
The Company currently targets apartment complexes with 200 or more tenants.
In the Portland metropolitan area, for example, the Company estimates that there
are more than 39,000 units in existing apartment complexes of 200 units or more.
This does not include condominiums and new apartment construction. The selling
cycle for the Company's service includes proposal presentation, contract
negotiations and service implementation, a cycle that can require more than six
months to complete. In addition to the 4,661 units currently under contract, the
Company has contracts under review by other properties representing
approximately 7,997 units and proposals outstanding to properties totaling an
additional 5,199 units. No assurance can be given that those contracts with
additional properties will be entered. The Company has entered into contracts
outside the Portland area for properties in Seattle and Vancouver, Washington;
Denver, Colorado; Phoenix, Arizona; and Oklahoma City, Oklahoma.
The Company believes that there are few barriers to expanding the business
on a national basis. Unlike cable television networks or telephone networks, the
RMTS business does not require an investment in transport infrastructure like
fiber optic cable or telephone lines. Instead, it relies on purchasing that
capacity from third parties. The only significant capital expense is the
installation of telephone switching equipment in the various apartment
complexes; and this is done on a stand-alone basis. Because of this flexibility,
the Company has no ties to existing technology or infrastructure. Therefore,
with a successful engineering, marketing, and customer service formula,
expansion into other markets is simplified.
Securing new apartment contracts is the key to the Company's growth. Both
new apartment construction and existing apartment complexes will be targeted.
The Company will seek to secure new contracts through:
- One-on-one contacts
- Real Estate Investment Trusts (REITs)
- Associations
- Property management organizations
- Asset owners
21
<PAGE>
The Company will also add appropriate new telecommunications services and
enhancements to customer offerings.
The Company believes that adequate back office support systems are in place
for its present level of business. However, it will need to implement additional
systems to manage its planned growth, including effective cost accounting,
technical support, credit and collections, and customer service, supported by a
subscriber management and billing system. Part of the proceeds from the Offering
will be used to establish such systems. See "Use of Proceeds."
MARKET
The United States telecommunications industry is large and robust. The cable
television industry's annual revenues exceed $28 billion. Local and long
distance telephone traffic generates $182 billion per year. Since the break-up
of AT&T in 1984, many new businesses have developed, including cellular
telephone, alternative long distance, and competitive access providers. These
businesses and others have created dramatic growth in telecommunications.
MANAGEMENT INFORMATION SYSTEMS
Providing accurate and customized billing for customers is an integral
component of the Company's business. The Company's management information
systems ("MIS") processes calls for the services the Company provides and
combines this information with other recurring and nonrecurring customer charges
to produce monthly invoices. Customers are quoted a monthly charge for basic
telephone and cable service. In addition, customers are charged for special
services and usage, including third-party billing calls, local message units
(where applicable), directory assistance, and long-distance at a discount from
the standard rates charged by long-distance providers; and for premium cable
channels.
Enhancements to the MIS systems will also track installations and customer
requests from initial request to final collection. Each customer request will be
entered into the job order system to monitor the progress of the work as well as
keep track of the time and material requisitioned for the job.
Once the Company's MIS systems are completed, they will be able to be
expanded with minimal incremental cost to accommodate substantially more volume.
Such systems may feature backup processors and short-time response maintenance
agreements and are designed to respond to customer needs as well as support the
Company's operations.
COMPETITION
The Company believes that competition in its markets will come from smaller
companies as well as large telephone companies. Corporate cultures of the
various competing entities such as phone and cable companies differ greatly from
one another. Cable companies tend to be more entrepreneurial and telephone
companies tend toward a monopoly mentality. As a result, it has been difficult
for these large organizations to work together to actually realize the economies
of scale which a converged industry represents. At the same time, the
telecommunications industry remains highly regulated and although there are
attempts being made to open telecommunications markets, incumbent monopolies
still control the local exchange marketplace and can afford protracted
litigation to delay new entrants to the marketplace. The Company will attempt to
establish relationships with large apartment owners who influence the
telecommunications options of the building they own. There can be no assurance
that other companies who may offer services like those offered by the Company
will not be able to effectively compete with the Company in its existing or
proposed markets.
Other companies currently provide cable and telephone services to
residential complexes, including ICS Communications, Inc. (ICS) and GE
Capital-Rescom, L.P. ("Rescom"). The Company's principal competitors in the
future will include companies that provide shared tenant services to office
holdings, who
22
<PAGE>
have a significant infrastructure in place in cities to which the Company plans
to expand. For example, Shared Technologies Fairchild Communications Corp
("STF") has an agreement with ICS Rescom, L.P., to manage certain aspects of its
business.
KEY SUPPLIERS
The Company currently leases transmission facilities from U S West
Communications, Inc. ("USWC"), LDDS Worldcom and Frontier Communications. Cable
television signal is acquired by the Company from TCI Cablevision and Paragon
Cable, a Time Warner company. Switching hardware used by the Company is
manufactured by Cortelco, formerly ITT Solid State, and Digital
Telecommunications Inc. The Company believes that alternative sources are
available for all critical equipment and services that it utilizes from the
above suppliers, and that such equipment and services can be obtained at prices
comparable to those the Company is presently paying.
GOVERNMENT REGULATION
The Company is subject to regulation under both state and federal
telecommunications laws. On the state level, rules and policies are set by each
state's Public Utility Commission or Public Service Commission ("PUC" or "PSC").
On a federal level, the Federal Communications Commission ("FCC"), among other
agencies, dictates the rules and policies which govern interstate communications
providers. The FCC is also the main agency in charge of creating rules and
regulations to implement the recently enacted Telecommunications Act of 1996
("the Act"), although currently the Bell Operating Companies (BOCs) have asked
the judiciary to review and overrule the FCC and its regulations.
Nevertheless, the Act was enacted in the first quarter of 1996 with its
primary goal being to create a "competitive telecommunications marketplace." To
achieve that goal, the Act sets out a checklist of requirements that BOCs, other
local exchange carriers and long distance carriers must meet before they may
begin to compete in new telecommunications-based businesses. For example, the
Act opens a regulatory door for BOCs to enter the long-distance services market,
a door that has been closed for almost fourteen years since the Modified Final
Judgment or "Consent Decree" that broke up the old AT&T/Bell system. The Act
also allows long-distance carriers to enter the local exchange service business,
a monopoly held by the AT&T/Bell system since the turn of the Century. Equally
important, the Act opens new venues to alternative providers of video services,
thereby allowing more than the one-to-a-city cable franchisee to provide visual
entertainment and information products.
The FCC published a majority of the rules and regulations that add detail to
the Act, thereby giving to state PUCs/PSCs explicit directions and authority to
oversee, among others, such processes as 1) the way long-distance and
local-service providers "interconnect" their infrastructures and technologies;
2) the methods by which BOCs may determine their costs and revenue requirements
and pricing and rates for service; 3) how and how much non-facilities based
resellers will pay "wholesale" for retail service offerings; and 4) the degree
to which new entrants and incumbent carriers can agree as to terms, conditions,
and technical specifications for interconnection through negotiations and
arbitration.
Proceedings at state PUC's and PSC's continue, despite the BOCs court
appeals and the temporary stay of much of the FCC rules. In Oregon, for
instance, the OPUC regulates the standards, rates and terms of services offered
by Local Exchange Companies ("LECs") such as USWC, GTE and other
telecommunications carriers. Companies such as FirstLink are regulated and
certificated by the OPUC also. As a STS provider, FirstLink must operate
according to specific statutes and OPUC rules. In addition, FirstLink has
received authorization as an Alternative Local Exchange Carrier ("ALEC") in
Oregon. Applications are pending in Colorado and Washington. As an ALEC, the
Company will be able to provide local dialtone services outside the apartment
locations for which it is currently authorized, and compete with the LECs such
as USWC and GTE. At that time, FirstLink will have to comply with the OPUC rules
and regulations governing ALEC operations, service standards and state
surcharges and subsidies, as well as state policies
23
<PAGE>
affecting technical interconnection with the public switched telephone network,
for its services provided as an ALEC.
In seeking the above-referenced state certifications, however, the Company
faces a limited risk of agency and court challenges by future competitors such
as USWC. Such challenges, though unlikely, could occur before state regulatory
agencies and courts in 1998.
While most of the services provided now and in the future by FirstLink are
considered "competitive" and "unregulated," no predictions or assurances can be
given as to the effect of federal and state laws and regulations on the
Company's business.
PROPERTIES
The Company has applied to the United States Patent and Trademark office for
Lanham Act Principal Register service mark protection on the Company's service
mark "FirstLink." This service mark has been used in interstate commerce by the
Company or its predecessors continuously since 1994 and, in the Company's
opinion, has developed recognition in the Company's industry. The Company
intends to develop and aggressively protect its service mark and to develop
other service marks used in connection with its business.
The Company leases 2,100 square feet of office space at 190 SW Harrison in
Portland, Oregon, on a five-year lease expiring on October 31, 2001. It is
expected that additional space will be necessary to meet the Company's needs
during the period of the lease. The Company also maintains leased equipment,
including switching equipment, at various locations to provide local dial tone
for its customers.
EMPLOYEES
The Company employs 18 persons on a full-time basis in its Portland offices.
Of these employees, seven are administrative or management and eleven are in the
areas of customer service, billing and operations. The Company believes its
relationship with its employees to be good and none of the employees are union
members. All of the Company's employees are at will.
LEGAL PROCEEDINGS
In April 1997, LDDS World Comm (LDDS) filed a lawsuit against the Company
seeking payment of $190,000 plus attorney fees for goods and services provided
to the Company. The Company contends it was overcharged by LDDS pursuant to the
terms of its agreement and the actual amount owed is approximately $126,000. The
Company has provided LDDS with supporting documentation for the actual amount
owed and has offered a settlement proposal. A trial date has been set for April
1998. Management believes that the outcome will not have a material adverse
affect on the Company's financial position, results of operations or liquidity.
24
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The directors and executive officers of the Company, and their ages as of
the date of this Prospectus, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------- --- ----------------------------------------------------------
<S> <C> <C>
A. Roger Pease.................. 51 Chairman of the Board, President, Chief Executive Officer
Thomas E. McChesney (1)......... 50 Director
Robert F. Olsen (1)............. 49 Director
Jeffrey S. Sperber.............. 33 Chief Financial Officer
James F. Twaddell (1)........... 58 Director
</TABLE>
- ------------------------
(1) Independent directors. The Company will maintain at least two (2)
independent directors on its board of directors.
A. ROGER PEASE was appointed President and Chief Executive Officer of the
Company in January 1996. From June 1994, Mr. Pease served as Chief Executive
Officer, President or Manager of the Company's predecessors. Previously, Mr.
Pease was President and Chief Executive Officer of Payline Systems, Inc. since
1987. From 1983 to 1987, he was employed by Lattice Semiconductor Corporation
("Lattice") as Vice President of Finance, Vice President of Strategic Planning
and Administration, and as a consultant. From 1979 to 1983, Mr. Pease was a
Partner with the Portland office of the accounting firm of Touche, Ross & Co.,
where he served as Director of Management Consulting Operations. Mr. Pease, a
certified public accountant, holds a Masters of Business Administration degree
from Northwestern University (1970), and a Bachelor of Arts degree in Finance
from the University of Illinois (1968).
THOMAS E. MCCHESNEY was appointed a director in January 1996. He is a
registered representative of Blackwell Donaldson & Co., a securities
broker-dealer. From January 1996, to October 1996 Mr. McChesney was associated
with Bathgate McColley Capital Group, LLC. Previously, Mr. McChesney was an
officer and director of Paulson Investment Co. and Paulson Capital Corporation
from March 1977 to June 1995. Mr. McChesney also serves on the boards of Labor
Ready, Inc. and THISoftware, Inc.
ROBERT F. OLSEN was appointed as a director in January 1996. Mr. Olsen
previously served as Director of Payline Systems from May 1992 until May 1995.
Mr. Olsen is the Chairman and Chief Executive Officer of J. R. Roberts Corp.,
which he co-founded in 1980. J. R. Roberts Corp. is the largest construction
company in Sacramento, California, specializing in commercial, industrial and
multi-family housing projects. JR Roberts has offices in Sacramento, Seattle,
Portland, and Orange County. Mr. Olsen resides in California. From 1971 to 1980,
he served as Manager of Marketing and Director of East Coast Construction and
Special Projects for Continental Heller, a large national construction company
based in California. Mr. Olsen holds two degrees from Oregon State University: a
Bachelor of Science degree in Civil Engineering and a Bachelor of Arts degree in
Business Administration (1971).
JEFFREY S. SPERBER was appointed chief financial officer in October, 1997.
From August 1995 to September 1997 Mr. Sperber was the Controller of TCI
Wireline, Inc., a business unit of Tele-Communication, Inc., engaged in
providing local telephone service. From August 1991 to August 1995 he was
employed by Concord Services, Inc., a privately held international conglomerate
based in Denver, Colorado, where he was responsible for the accounting and
finance of both public and privately held entities, most recently, as Chief
Financial Officer of its manufacturing and processing business unit. From
September 1986 to August 1991 he was employed by Arthur Andersen and Co. in
Denver, Colorado, as a senior auditor.
25
<PAGE>
JAMES F. TWADDELL was elected a director of the Company in February 1998. He
is a member of the investment banking group of Schnieder Securities, Inc.,
located in Providence, Rhode Island. From 1974 through 1995, Mr. Twaddell served
as Chairman of Barclay Investments, Inc., a member firm of the National
Association of Securities Dealers, Inc. (the "NASD"). Mr. Twaddell also served
as Chairman of Regional Investment Brokers, Inc., a 125-member cooperative
association of regional investment bankers and broker/dealers conducting
business throughout the United States. For the 1993-1995 term, he was elected to
serve on both the NASD District 11 Committee and the District Business Conduct
Committee. He has served as Chairman of the Board of First Mutual Fund, a
30-year old publicly-traded mutual fund, since 1979. He has also served as a
Trust Manager of Grove Property Trust, a public real estate investment trust
that is engaged in the acquisition, repositioning, management and operation of
mid-priced multifamily communities in the Northeastern United States, since
1994. Mr. Twaddell received his B.A. from Brown University in 1961.
There are no family relationships among Directors or persons nominated or
chosen by the Company to become a Director, nor any arrangements or
understandings between any Director and any other person pursuant to which any
Director was elected as such. Each Director is elected to serve for a term of
one (1) year until the next annual meeting of stockholders or until a successor
is duly elected and qualified. The present term of office of each Director will
expire at the next annual meeting of stockholders.
The executive officers of the Company are elected annually at the first
meeting of the Company's Board of Directors held after each annual meeting of
stockholders. Each executive officer will hold office until his successor is
duly elected and qualified, until his resignation or until he shall be removed
in the manner provided by the Company's By-Laws.
During fiscal 1997 and 1996, the Company did not have standing Audit or
Compensation Committees of the Board of Directors. The Company formed an Audit
Committee, to be chaired by Mr. McChesney, and a Compensation Committee to be
chaired by Mr. Olsen, in February 1998. Those committees will consist of three
members each, including two outside directors. Additional members of the
committees will be appointed prior to the effectiveness of the Registration
Statement. No member of those committees will receive any additional
compensation for his service as a member of that Committee. The Audit Committee
will be responsible for providing assurance that financial disclosures made by
management of the Company reasonably portray the Company's financial condition,
results of operations, plan and long-term commitments. To accomplish this, the
Audit Committee will oversee the external audit coverage, including the annual
nomination of the independent public accountants, review accounting policies and
policy decisions, review the financial statements, including interim financial
statements and annual financial statements, together with auditor's opinions,
inquire about the existence and substance of any significant accounting
accruals, reserves or estimates made by Management, review with Management the
Management's Discussion and Analysis section of the Annual Report, review the
letter of Management representations given to the independent public
accountants, meet privately with the independent public accountants to discuss
all pertinent matters, and report regularly to the Board of Directors regarding
its activities.
DIRECTOR COMPENSATION
Directors who are also executive officers of the Company receive no
additional compensation for their services as Directors. Directors who are not
executive officers of the Company are paid a $500 fee for each board meeting
they attend. In addition, outside Directors are entitled to be reimbursed for
their expenses associated with attendance at meetings or otherwise incurred in
connection with the discharge of their duties as Directors of the Company.
In February 1997 the Board of Directors adopted the 1997 Restated Combined
Incentive Stock Option and Nonqualified Stock Option Plan (the "Plan") which
provides for granting options to key employees, officers, and directors of the
Company, and reserved 533,333 shares of Common Stock to be
26
<PAGE>
issued under the Plan. The Company granted a total of 213,333 options to
directors under this plan in 1997. See "--Stock Options and Option Plans."
EXECUTIVE COMPENSATION
The following table and discussion set forth information with respect to all
compensation earned by or paid to the Company's Chief Executive Officer ("CEO"),
its most highly compensated executive officer, for all services rendered in all
capacities to the Company for each of the Company's last three fiscal years;
provided, however, that no disclosure has been made for any executive officer,
other than the CEO, whose total annual salary and bonus does not exceed
$100,000.
TABLE 1
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -------------------
---------------------------- OTHER ANNUAL
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY ($) BONUS ($) COMPENSATION(1)($)
- -------------------------------------------------- ------------- ------------- --------------- -------------------
<S> <C> <C> <C> <C>
A. Roger Pease President & CEO.................... 1997 -0- -0- 96,000
1996 -0- -0- 96,000
<CAPTION>
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION OPTIONS/SARS
- -------------------------------------------------- -------------
<S> <C>
A. Roger Pease President & CEO.................... 160,000
--
</TABLE>
- ------------------------
(1) Amounts paid pursuant to a management agreement.
STOCK INCENTIVE PLAN
During fiscal 1997, the Company adopted the Plan. Pursuant to the Plan,
stock options granted to eligible participants take the form of Incentive Stock
Options ("ISO's") under Section 422 of the Internal Revenue code of 1986, as
amended (the "Code") or options which do not qualify as ISO's (Non-Qualified
Stock Options or "NQSO's). As required by Section 422 of the Code, the aggregate
fair market value of the Company's Common Stock with respect to its ISO's
granted to an employee exercisable for the first time in any calendar year may
not exceed $100,000. The foregoing limitation does not apply to NQSO's. The
exercise price of an ISO may not be less than 100% of the fair market value of
the shares of the Company's Common Stock on the date of grant. The exercise
price of an NQSO may be set by the administrator. An option is not transferable,
except by will or the laws of descent and distribution. If the employment of an
optionee terminates for any reason (other than for cause, or by reason of death,
disability, or retirement), the optionee may exercise his options within a
ninety day period following such termination to the extent he was entitled to
exercise such options at the date of termination. Either the Board of Directors
(provided that a majority of directors are "disinterested") can administer the
Plan, or the Board of Directors may designate a committee comprised of directors
meeting certain requirements to administer the Plan. The administrator will
decide when and to whom to make grants, the number of shares to be covered by
the grants, the vesting schedule, the type of award and the terms and provisions
relating to the exercise of the awards. An aggregate of 533,333 shares of the
Company's Common stock is reserved for issuance under the Plan. The Company
received stockholder approval of the Plan in a meeting of stockholders held on
February 24, 1998, and accordingly, can issue ISO's from such date forward.
At December 31, 1997, the Company had granted a total of 416,667 Options
under the Plan consisting entirely of Non-Qualified Stock Options (NQSO's), as
the Board of Directors had the authority to issue such options, exercisable at
$1.13 per share. All options have been issued with exercise prices at or above
market value on the date of issuance. All of the options provide that 25% of the
options issued vest on the date of grant; and 25% each vest one year, two years,
and three years after the date of grant.
27
<PAGE>
The following tables set forth certain information as of December 31, 1997,
and for the fiscal year then ended concerning non-qualified stock options
granted to and exercised by the named executive officer and the fiscal year-end
value of unexercised options on an aggregated basis:
OPTIONS/GRANTS IN FISCAL 1997
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/GRANTS TO
UNDERLYING EMPLOYEES IN
NAME OPTIONS/GRANTS(#) FISCAL YEAR EXERCISE PRICE ($/SH) EXPIRATION DATE
- ---------------------- ----------------- ----------------- ------------------------- ----------------
<S> <C> <C> <C> <C>
A. Roger Pease........ 160,000 38.4% $ 1.13 February 2007
</TABLE>
TABLE 3
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
SHARES NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED ON VALUE OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
NAME EXERCISE(#) REALIZED(1)($) FY-END(#) AT FY-END($)(2)
- ------------------------------------- ------------ --------------- ----------------------- -------------------------
<S> <C> <C> <C> <C>
A. Roger Pease....................... -- -- Exercisable-80,000 Exercisable-$90,000
-- -- Unexercisable-80,000 Unexercisable-$90,000
</TABLE>
- ------------------------
(1) Value Realized is determined by calculating the difference between the
aggregate exercise price of the options and the aggregate fair market value
of the Common Stock on the date the options are exercised.
(2) The value of unexercised options is determined by calculating the difference
between the fair market value of the securities underlying the options at
fiscal year end and the exercise price of the options. The fair market value
of the securities underlying the options, based on the last price Common
Stock was sold by the Company privately, was $2.25 per share.
LIMITATION ON DIRECTORS' LIABILITY; INDEMNIFICATION
The Company has adopted provisions in its Articles of Incorporation and
Bylaws that limit the liability of its directors to the fullest extent permitted
by the Oregon Business Corporation Act (the "OBCA"). Under the Company's
Articles and Bylaws, as permitted by the OBCA, no director is liable to the
Company or its Stockholders for monetary damages for his conduct as a director
of the Company. Such limitation of liability does not affect a director's
liability for (a) a breach of the director's duty of loyalty to the Company or
its stockholders; (b) any acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of the law; or (c) any unlawful
distribution, or a transaction from which the director receives an improper
personal benefit. Such limitation of liability also does not affect the
availability of equitable remedies such as injunctive relief or rescission.
The Company's Articles of Incorporation permit and its Bylaws require the
Company to indemnify officers and directors to the fullest extent permitted by
the OBCA. These agreements, among other provisions, provide indemnification for
certain expenses (including attorney fees), judgments, fines and settlement
amounts incurred in any action or proceeding, including any action by or in the
right of the Company.
The effect of this provision in the Company's Articles of Incorporation is
to eliminate the rights of the Company and its stockholders (through
stockholder's derivative suits on behalf of the Company) to recover monetary
damages against a director for breach of his fiduciary duty of care as a
director (including breaches resulting from negligent or grossly negligent
behavior) except in the situations
28
<PAGE>
described in clauses (a) through (c) above. This provision does not limit nor
eliminate the rights of the Company or any stockholder to seek non-monetary
relief such as an injunction or rescission in the event of a breach of a
director's duty of care. The ByLaws provide that if Oregon law is amended, in
the case of alleged occurrences of actions or omissions preceding any such
amendment, the amended indemnification provisions shall apply only to the extent
that the amendment permits the Company to provide broader indemnification rights
than the OBCA permitted the Company to provide prior to such amendment.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, the Company has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy and is, therefore, unenforceable.
29
<PAGE>
SECURITIES OWNERSHIP OF MANAGEMENT
AND PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 25, 1998, and as adjusted to
reflect the sale of the Securities offered hereby, by (i) each person who owns
beneficially more than 5% of the Company's Common Stock; (ii) each of the
Company's directors and executive officers; and (iii) all directors and
executive officers as a group. Each named beneficial owner has sole voting and
investment power with respect to the Shares held, unless otherwise stated.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED(2)
NUMBER OF SHARES ------------------------------
BENEFICIALLY PRIOR TO AFTER
NAME AND ADDRESS OF OWNER OWNED(1) OFFERING OFFERING
- ---------------------------------------------- ----------------- --------------- -------------
<S> <C> <C> <C>
A. Roger Pease(3) ............................ 186,667 8.3% 5.8%
190 SW Harrison
Portland, OR 97201
Robert F. Olsen(4) ........................... 118,679 5.5 3.7%
7745 Greenback Lane
Citrus Heights, CA 95610
Jeffrey S. Sperber(5) ........................ 16,667 < 1% < 1%
190 SW Harrison
Portland, OR 97201
Steven M. Bathgate(6)(7) ..................... 376,626 16.7% 11.5%
5350 S. Roslyn Way, #380
Englewood, CO 80111
Thomas E. McChesney(8) ....................... 128,617 5.8% 4.0%
200 SW Market Street
Portland, OR 97201
Eugene C. McColley(6)(9) ..................... 324,126 14.5% 10.0%
5350 S. Roslyn Way, #380
Englewood, CO 80111
ProFutures Bridge Fund, LP(10) ............... 212,800 9.6% 6.6%
5350 S. Roslyn Street, Suite 350
Englewood, CO 80111
James Edward McDonald(11) .................... 121,499 5.6% 3.8%
6044 E. Briarwood Drive
Englewood, CO 80112
Virginia S. McDonald(11) ..................... 121,499 5.6% 3.8%
6044 E. Briarwood Drive
Englewood, CO 80112
Caribou Bridge Fund, LLC(12) ................. 167,165 7.7% 5.3%
5350 S. Roslyn Street, Suite 380
Englewood, CO 80112
All Executive Officers and Directors as a
Group (5 persons)............................. 450,630 19.4% 13.6%
</TABLE>
- ------------------------
(1) Except as set forth in the footnotes to this table, the persons named in
this table have sole voting and investment power with respect to all shares.
Shares not outstanding but deemed beneficially owned by
30
<PAGE>
virtue of the individual's right to acquire then as of the date of this
Prospectus, or within sixty (60) days of such date, all treated as
outstanding when determining the percent of the class owned by such person
and when determining the percent owned by a group.
(2) Applicable percentage is based on 2,162,264 shares of Common Stock
outstanding on March 25, 1998 and 3,162,264 shares outstanding after the
completion of the Offering.
(3) 103,333 shares are owned by Mr. Pease in his individual retirement account.
Also includes 3,333 shares owned by Mr. Pease's wife, of which he disclaims
beneficial ownership; and presently exercisable stock options by Mr. Pease
to purchase 80,000 shares at $1.13 per share.
(4) Includes 96,653 Shares beneficially owned by JR Roberts Corporation; and
Options exercisable to purchase 13,333 shares at $1.13 per share.
(5) Consists of presently exercisable options to purchase shares.
(6) Includes 167,165 shares and warrants to purchase 14,445 shares owned by
Caribou Bridge Fund, LLC. Messrs. Bathgate and McColley own the
Administrator of Caribou. They disclaim beneficial ownership of such shares.
Also includes 25,272 shares and 4,445 shares underlying presently
exercisable warrants owned by Kiawah Capital Partners, an entity that
Messrs. Bathgate and McColley own equally. Fifty percent of those shares and
warrants are attributed to each Mr. Bathgate and Mr. McColley.
(7) Includes 18,667 shares owned by Bathgate Family Partnership II, of which Mr.
Bathgate is a general partner.
(8) Includes 5,833 shares and 4,375 shares of Common Stock underlying presently
exercisable warrants owned by Elizabeth McChesney, Mr. McChesney's wife of
which he disclaims beneficial ownership. Also includes 30,802 shares and
16,667 shares underlying presently exercisable warrants and vested options,
respectively.
(9) Includes 48,000 shares underlying presently exercisable warrants.
(10) Includes 53,333 shares of Common Stock underlying presently exercisable
warrants.
(11) Of the shares listed as being beneficially owned by James E. McDonald and
Virginia S. McDonald, 68,165 shares (including 7,778 shares underlying
presently exercisable warrants) are owned by James E. McDonald, Trustee for
the James E. McDonald Revocable Trust; and 53,333 shares (including 6,667
shares underlying presently exercisable warrants) are owned by Virginia S.
McDonald, Trustee for the Virginia S. McDonald Revocable Trust. Mr. and Mrs.
McDonald are husband and wife. They each disclaim beneficial ownership of
shares owned by their spouse's trust.
(12) Includes 14,445 shares underlying presently exercisable warrants.
CERTAIN TRANSACTIONS
In April 1994, Payline Systems, Inc. ("Payline") a publicly traded
corporation, entered into a five-year contract with Pacific Union Property
Services, the management company for Portland Center Apartments, to provide
telecommunications services to the tenants of the Portland Center Apartments.
Shortly thereafter, Payline formed FirstLink Communications, L.L.C. ("FLC"), and
assigned that contract to FLC. In January 1995, FLC signed a seven-year contract
with RiverPlace II Joint Venture to provide services to the tenants of
RiverPlace. Subsequently, FLC borrowed a total of $250,000 from three investors,
including JR Roberts Corporation and Thair Q. Schneiter, a director and major
stockholders of the Company. The investors obtained as collateral for the loan a
security interest in all assets of FLC, including the two contracts and certain
equipment. In May 1995, the investors foreclosed on their notes, which were in
default, and obtained the assets of FLC. They assigned the assets to a newly
formed limited liability company, FirstLink Tenant Services, L.L.C. On January
1, 1996, the Company acquired substantially all of the assets of FTS, in
exchange for 133,333 shares of Common Stock. The acquisition of these net assets
was accounted for using the purchase method of accounting. As the Company and
FTS were entities under
31
<PAGE>
common control, the assets and liabilities of FTS were recorded by the Company
using the carryover basis in such assets and liabilities of $82,790.
DESCRIPTION OF SECURITIES
The Company's Articles of Incorporation authorize the issuance of up to
20,000,000 Shares of Common Stock and 1,000,000 Shares of Preferred Stock
("Preferred Stock").
COMMON STOCK
Holders of Common Stock are entitled to receive dividends when and as
declared by the Board of Directors out of any funds lawfully available therefor
and, in the event of liquidation or distribution of assets, are entitled to
participate ratably in the distribution of such assets remaining after payments
of liabilities, in each case subject to any preferential rights granted to any
series of Preferred Stock that may then be outstanding. The Common Stock does
not have any preemptive rights or redemption, conversion or sinking fund
provisions. All of the issued and outstanding shares of Common Stock are, and
all shares of Common Stock to be outstanding upon completion of the Offering
will be, validly issued, fully paid and nonassessable. Holders of Common Stock
are entitled to one vote per share on all matters to be voted upon by the
stockholders. Holders of Common Stock do not have cumulative voting rights in
the election of directors, which means that the holders of more than 50% of the
shares voting can elect all directors.
PREFERRED STOCK
The Articles of Incorporation authorize 1,000,000 Shares of Preferred Stock
and permit the Board of Directors, without further stockholder authorization, to
issue Preferred Stock in one or more series and to fix the terms and provisions
of each series, including dividend rights and preferences, conversion rights,
voting rights, redemption rights and rights on liquidation, including
preferences over Common Stock. The issuance of any series of Preferred Stock
under certain circumstances could adversely affect the rights of the holders of
Common Stock. No Preferred Stock is outstanding, and the Company has no present
plans to issue any shares of Preferred Stock.
WARRANTS
Two Warrants will entitle the holder to purchase one share of Common Stock
at a price of $ during the three-year period commencing on the date of this
Prospectus. The Warrants will be redeemable upon forty-five (45) days prior
written notice at a redemption price of $.05 per Warrant if (a) the closing high
bid price of the Common Stock has exceeded $ (150% of the exercise price of
the Warrants) for at least 20 of the 30 trading days immediately preceding the
date of mailing of the notice of redemption, and (b) the Company has in effect a
current registration statement with the Commission registering the Common Stock
issuable upon exercise of the Warrants. The Warrants will contain anti-dilution
provisions for stock splits, recombinations, and reorganizations.
STATE LEGISLATION
When and if the Company has 100 or more stockholders, the Company will
become subject to the Oregon Control Share Act (the "Control Share Act"). As of
December 31, 1997, the Company had 73 stockholders. The Control Share Act
generally provides that a person (the "Acquirer") who acquires voting stock of
an Oregon corporation in a transaction which results in the Acquirer holding
more than each of 20%, 33 1/3% or 50% of the total voting power of the
corporation (a "Control Share Acquisition") cannot vote the shares it acquires
in the Control Share Acquisition ("Control Shares") unless voting rights are
accorded to the Control Shares by (i) a majority of each voting group entitled
to vote and (ii) the holders of a majority of the outstanding voting shares,
excluding the Control Shares held by the Acquirer and
32
<PAGE>
shares held by the corporation's officers and inside directors. The term
"Acquirer" is broadly defined to include persons acting as a group.
The Acquirer may, but is not required to, submit to the corporation an
"Acquiring Person Statement" setting forth certain information about the
Acquirer and its plans with respect to the corporation. The Acquiring Person
Statement may also request that the corporation call a special meeting of
stockholders to determine whether the voting rights will be restored to the
Control Shares. If the Acquirer does not request a special meeting of
stockholders, the issue of voting rights of Control Shares will be considered at
the next annual or special meeting of stockholders. If the Acquirer's Control
Shares are accorded voting rights and represent a majority or more of all voting
power, Stockholders who do not vote in favor of the restoration of such voting
rights will have the right to receive the appraised "fair value" of their
shares, which may not be less than the highest price paid per share by the
Acquirer for the Control Shares.
TRANSFER AND WARRANT AGENT
American Securities Transfer & Trust, Incorporated, 1825 Lawrence Street,
Denver, Colorado 80202 will be the transfer agent for the Common Stock and the
Warrant Agent for the Warrants.
REGISTRATION RIGHTS
The Company is a party to a Registration Rights Agreement pursuant to which
it granted to certain former holders of Convertible Promissory Notes (all of
whom have converted the Notes to Common Stock), and Common Stock, and Warrants
certain rights with respect to registration under the Securities Act of 935,556
shares of Common Stock and 188,889 warrants held by such holders, the
"Registrable Securities"). Under the Registration Rights Agreement, if the
Company files a registration statement under the Securities Act, the holders of
Registrable Securities may require the Company, subject to certain limitations,
to include all or any portion of their Registrable Securities in such
registration at the Company expense. The Company is registering the Registrable
Securities in the Registration Statement of which this Prospectus is a part.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no public market for the Common Stock
or the warrants. Future sales of substantial amounts of Common Stock in the
public market could adversely affect prevailing market prices.
Upon completion of the Offering, the Company will have 3,162,264 shares of
Common Stock outstanding. Of these shares, 1,935,556 shares registered in the
Registration Statement for this Offering and the concurrent Offering will be
freely tradeable without restriction under the Securities Act, except for any
shares purchased by affiliates of the Company, which will be subject to certain
resale limitations of Rule 144 promulgated under the Securities Act. The
remaining 1,226,708 shares and all of the shares of Common Stock issuable upon
exercise of outstanding options are "restricted securities" as defined in Rule
144. Of this amount, as of March 25, 1998, approximately 1,209,756 shares of
Common Stock held by current stockholders will be eligible for sale in the
public market pursuant to Rule 144 90 days after the date of this Prospectus.
All officers and directors of the Company and certain stockholders of the
Company have agreed with the Representative of the Underwriters not to sell,
transfer, assign, or make any other disposition of any shares owned by them for
a period of nine months after the date of this Prospectus without the prior
written consent of the Representative.
In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated) who has beneficially owned restricted securities
for at least one year is entitled to sell, within any three-month period, a
number of shares that does not exceed the greater of 1% of the then outstanding
shares of the issuer's common stock or the average weekly trading volume during
the four calendar weeks preceding such sale, provided that certain public
information about the issuer as required by Rule 144 is then
33
<PAGE>
available and the seller complies with certain other requirements. In general,
shares issued in compliance with Rule 701 promulgated under the 1933 Act may be
sold by non-affiliates subject to the manner of sale requirements of Rule 144,
but without compliance with the other requirements of Rule 144. Affiliates may
sell such shares in compliance with Rule 144, other than the holding period
requirement. A person who is not an affiliate, has not been an affiliate within
three months prior to sale, and has beneficially owned the restricted securities
for at least two years is entitled to sell such shares under Rule 144 without
regard to any of the limitations described above.
Further, upon completion of the Offering, there will be outstanding Warrants
exercisable to purchase an additional 500,000 shares of Common Stock, assuming
no exercise of the Over-allotment Option. All shares of Common Stock issuable
upon exercise of the Warrants will be free trading and immediately eligible for
sale upon issuance.
34
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, a copy of
which has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part, the Underwriters named below (the "Underwriters") have
severally agreed, through Kashner Davidson Securities Corporation as the
Representative of the Underwriters, to purchase from the Company on a firm
commitment basis, the aggregate number of Shares and Warrants set forth opposite
their names below:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITERS AND WARRANTS
- ------------------------------------------------------------------------------------- -----------------
<S> <C>
Kashner Davidson Securities Corporation..............................................
-----------------
Total.............................................................................. 1,000,000
</TABLE>
The Securities are being offered by the several Underwriters, subject to
prior sale, when, as, and if delivered to and accepted by the Underwriters and
subject to their right to reject orders in whole or in part and subject to
approval of certain legal matters by counsel and to various conditions. The
nature of the Underwriters' obligation is such that they must purchase all of
the Securities offered hereby if any are purchased.
The Company has granted the Underwriters two options for 45 days from the
date of this Prospectus to purchase up to an additional 150,000 Shares and/or
150,000 Warrants at the initial public offering prices less the underwriting
discount of $ per Share and $ per Warrant. The Underwriters may exercise
such option only for the purpose of covering any over-allotments in the sale of
the Securities being offered.
The Underwriters have advised the Company that they propose to offer the
1,000,000 Shares and 1,000,000 Warrants directly to the public at the public
offering prices set forth on the cover page of this Prospectus and to selected
dealers at that price, less a concession of not more than $ per Share and
$ per Warrant. After the initial offering of the Securities, the public
offering price and other offering terms may be changed by the Underwriters. The
Underwriters have advised the Company that they will not make sales of the
Securities offered in this Prospectus to accounts over which they exercise
discretionary authority without specific authorization.
The Company will pay the Representative a non-accountable expense allowance
from offering proceeds, including proceeds from the over-allotment options to
the extent exercised. The expense allowance will be 3% of the gross proceeds
sold in the Offering. The Representative's expenses in excess of the
non-accountable expense allowance will be borne by the Representative. To the
extent that the expenses of the Representative are less than the non-accountable
expense allowance, the excess shall be deemed to be compensation to the
Representative. The Company has advanced the Representative $25,000 of such
expense allowance.
The Company will bear all costs and expenses incident to the issuance,
offer, sale and delivery of the Securities. The Underwriters have agreed to pay
all fees and expenses of any legal counsel whom it may employ to represent it
separately in connection with or on account of the proposed offering by the
Company, mailing, telephone, travel and clerical costs and all other office
costs incurred or to be incurred by the Underwriters or by their representatives
in connection with the Offering.
35
<PAGE>
The Company, its directors, officers, and certain other stockholders have
agreed not to issue, offer, sell, transfer, assign, hypothecate or otherwise
dispose of any securities of the Company for 180 days from the date of this
Prospectus without the prior written consent of the Representative.
Until the distribution of the Securities is completed, rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase the securities. As an exception to these rules,
the Underwriters are permitted to engage in certain transactions that stabilize
the price of the securities. Such transactions consist of bids or purchases for
the purpose of pegging, fixing or maintaining the price of the securities. If
the Underwriters create a short position in the Securities in connection with
the Offering, i.e., if they sell more Securities than are set forth on the cover
page of this Prospectus, the Underwriters may reduce that short position by
purchasing Securities in the open market. The Underwriters may also elect to
reduce any short position by exercising all or part of the Over-allotment Option
described above.
The Underwriters may also impose a penalty bid on selling group members.
This means that if the Underwriters purchase Securities in the open market to
reduce the Underwriters' short position or to stabilize the price of the
Securities, it may reclaim the amount of the selling concession from the selling
group members who sold those securities as part of the Offering.
In general, purchase of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it was
to discourage resales of the security. Neither the Company nor the Underwriters
make any representation or predictions as to the direction or magnitude of any
effect that the transactions described above may have on the price of the
Securities. In addition, neither the Company nor the Underwriters make any
representation that the Underwriters will engage in such transactions, once
commenced, will not be discontinued without notice.
Prior to the Offering, there has been no public market for the Common Stock
or Warrants. Accordingly, the public offering prices of the Shares and Warrants
and the exercise price of the Warrants were determined by negotiations between
the Representative and the Company. Among the factors considered in determining
the public offering prices and the Warrant exercise price were the prospects for
the Company, an assessment of the industry in which the Company operates, the
assessment of management, the number of Securities offered, the price that
purchasers of such Securities might be expected to pay given the nature of the
Company, and the general condition of the securities markets at the time of the
Offering. Accordingly, the offering prices set forth on the cover page of this
Prospectus should not be considered an indication of the actual value of the
Company or the Common Stock or Warrants.
The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the 1933 Act, and, if such
indemnifications are unavailable or insufficient, the Company and the
Underwriters have agreed to damage contribution agreements between them based
upon relative benefits received from the Offering and relative fault resulting
in such damages. The Company also has agreed with the Underwriters that the
Company will file and cause to become effective a registration statement
pursuant to Section 12(g) of the Securities Exchange Act of 1934 no later than
the date of this Prospectus.
The foregoing does not purport to be a complete statement of the terms and
conditions of the Underwriting Agreement, copies of which are on file at the
offices of the Representative, the Company and the Commission. See "Additional
Information."
REPRESENTATIVE'S SECURITIES
Upon completion of the Offering, the Company will sell to the Representative
for $100 Warrants to purchase up to 100,000 shares of Common Stock and 100,000
Warrants (the "Representative's Warrants").
36
<PAGE>
The Representative's Warrants will be exercisable commencing one year after the
date of this Prospectus at a price equal to 120% of the public offering price,
or $ per Share and $ per Warrant, assuming an Offering Price of $ per
Share and $ per Warrant. Thereafter, for a period of four years, the
securities underlying the Representative's Warrants will be identical to the
securities sold in the Offering. The exercise price for the Representative's
Warrants is payable in cash or through the surrender of Common Stock or Warrants
having a value equal to the difference between the exercise price and the
average of the current market price of the Common Stock or Warrants for the 20
consecutive trading days commencing 21 trading days before the date the Common
Stock or Warrants are tendered for exchange.
The Representative's Warrants will be non-transferable except among the
Underwriters and by their respective officers or partners. The Representative's
Warrants and the securities underlying the Representative's Warrants (the
"Representative's Securities") will also contain anti-dilution provisions for
stock splits, combinations and reorganizations, piggyback registration rights,
one demand registration right at the expense of the Company, and one demand
registration right paid for by the holders of the Representative's Securities
(all of which expire five years from the date of the Prospectus).
The Representative's Securities are being registered in the Registration
Statement of which this Prospectus is a part. The Company has agreed to maintain
an effective Registration Statement with respect to such shares to permit their
resale at all times during the period in which the Representative's Warrants are
exercisable. The sale of the Representative's Securities could dilute the
interest of other holders of Common Stock and Warrants and the existence of the
Representative's Warrants may make the raising of additional capital by the
Company more difficult. At any time at which exercise of Representative's
Warrants might be expected, it is likely that the Company could raise additional
capital on terms more favorable than the terms of the Representative's Warrants.
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Neuman Drennen & Stone, LLC, Englewood, Colorado.
David H. Drennen, whose company is a member of the firm of Neuman Drennen &
Stone, LLC is the owner of warrants to purchase 14,000 shares of the Company's
Common Stock. Certain legal matters will be passed upon for the Representative
by Marc Ross, Esq.
EXPERTS
The financial statements of FirstLink Communications, Inc. as of December
31, 1997, and for the years ended December 31, 1997 and 1996, have been included
herein and in the registration statement in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.
The report of KPMG Peat Marwick LLP covering the December 31, 1997,
financial statements contains an explanatory paragraph that states that the
Company's recurring losses from operations raise substantial doubt about its
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of that uncertainty.
ADDITIONAL INFORMATION
The Company has filed a Registration Statement on Form SB-2 with the
Commission in Washington, D.C., in accordance with the provisions of the
Securities Act, with respect to the securities offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement,
certain portions of which have been omitted as permitted by the rules and
regulations of the Commission. For further information pertaining to the
securities offered hereby and the Company, reference is made to the Registration
Statement, including the exhibits and financial statement schedules filed as a
part thereof. Statements contained in this Prospectus concerning the provisions
of any document are not necessarily
37
<PAGE>
complete and, in each instance, reference is made to the copy of such document
filed as an Exhibit to the Registration Statement. Each such statement is
qualified in its entirety by such reference. The Registration Statement may be
obtained from the Commission upon payment of the fees prescribed therefor and
may be examined at the principal office of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. The Commission maintains a World Wide web site
that contains reports, proxy and information statements and other information
that are filed through the Commission's Electronic Data Gathering, Analysis and
Retrieval System. This web site can be accessed at http://www.sec.gov.
Upon completion of the Offering the Company will be subject to the
information requirements of the Securities Exchange Act of 1934 (the "Exchange
Act"), and in accordance with the Exchange Act files periodic reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Reports, proxy statements and other information concerning
the Company can be inspected and copied (at prescribed rates) at the
Commission's Public Reference Section, Room 1024, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, as well as at the following Regional
Offices: Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511; and Seven World Trade Center, 13th Floor, new
York, New York 10048. Copies of such material also may be obtained at prescribed
rates from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549.
The Company intends to furnish to its stockholders annual reports containing
financial statements audited by an independent public accounting firm after the
end of each fiscal year. In addition, the Company will furnish to its
stockholders quarterly reports for the first three quarters of each fiscal year
containing unaudited financial and other information after the end of each
fiscal quarter.
38
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
Financial Statements
December 31, 1997
(With Independent Auditors' Report Thereon)
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
TABLE OF CONTENTS
PAGE(s)
Independent Auditors' Report 1
Financial Statements:
Balance Sheet as of December 31, 1997 2
Statements of Operations for the years ended
December 31, 1997 and 1996 3
Statements of Stockholders' Equity (Deficit) for
the years ended December 31, 1997 and 1996 4
Statements of Cash Flows for the years ended
December 31, 1997 and 1996 5
Notes to Financial Statements 6 - 16
<PAGE>
When the transaction referred to in note 2(e) of the notes to the financial
statements has been consummated, we will be in a position to render the
following report.
KPMG PEAT MARWICK LLP
INDEPENDENT AUDITORS' REPORT
The Board of Directors
FirstLink Communications, Inc.:
We have audited the accompanying balance sheet of FirstLink
Communications, Inc. as of December 31, 1997, and the related statements of
operations, stockholders' equity (deficit), and cash flows for the years
ended December 31, 1997 and 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of FirstLink
Communications, Inc. as of December 31, 1997, and the results of its
operations and its cash flows for the years ended December 31, 1997 and 1996
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in note 1 to the
financial statements, the Company has suffered recurring losses from
operations that raise substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also
described in note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Portland, Oregon
January 21, 1998, except as to note 9 which
is as of March 18, 1998 and note 2(e) which
is as of _________, 1998
- 1 -
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
BALANCE SHEET
December 31, 1997
ASSETS
<TABLE>
<S> <C>
Current assets:
Cash and cash equivalents $ 389,415
Accounts receivable, net of allowance for
doubtful accounts of $8,716 19,617
Prepaid and other current assets 59,227
----------
Total current assets 468,259
----------
Property and equipment, net 543,053
Other assets 49,509
----------
Total assets $1,060,821
----------
----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 142,130
Accrued liabilities 99,580
Current portion of capital lease obligations 40,897
Other current liabilities 126,188
----------
Total current liabilities 408,795
----------
Long-term debt:
Capital lease obligations 166,350
Convertible notes payable 221,667
----------
Total long-term debt 388,017
----------
Commitments and contingencies (note 8)
Stockholders' equity:
Preferred stock, no par value; 1,000,000 shares
authorized; no shares issued or outstanding -
Common stock, no par value; 20,000,000
shares authorized; 1,786,708 shares issued
and outstanding 1,240,102
Retained deficit (976,093)
----------
Total stockholders' equity 264,009
----------
Total liabilities and stockholders' equity $1,060,821
----------
----------
</TABLE>
See accompanying notes to financial statements.
- 2 -
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS
Years ended December 31, 1997 and 1996
<TABLE>
1997 1996
---------- ----------
<S> <C> <C>
Revenue $ 879,903 602,423
Expenses:
Operating 580,197 369,415
Selling, general and administrative 701,372 565,473
Depreciation and amortization 69,955 37,879
---------- ----------
Total expenses 1,351,524 972,767
---------- ----------
Operating loss (471,621) (370,344)
---------- ----------
Other (income) expense:
Interest, net 107,305 25,123
Other (650) 2,350
---------- ----------
106,655 27,473
---------- ----------
Net loss $ (578,276) (397,817)
---------- ----------
---------- ----------
Per share amounts:
Basic and diluted loss per common share $ (.50) (.75)
---------- ----------
---------- ----------
Basic and diluted weighted average common shares 1,162,397 533,309
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to financial statements.
- 3 -
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Years ended December 31, 1997 and 1996
<TABLE>
Total
Common stock stockholders'
---------------------- Retained equity
Shares Amount deficit (deficit)
------ -------- ------- ---------
<S> <C> <C> <C> <C>
Balance at January 1, 1996 - $ - - -
Acquisition of net assets from FirstLink
Tenant Services 133,333 82,790 - 82,790
Sale of common stock 554,667 126,040 - 126,040
Common stock issued pursuant to
guarantor agreements 21,200 6,996 - 6,996
Common stock issued pursuant to
Promissory Notes 57,200 18,876 - 18,876
Net loss - - (397,817) (397,817)
--------- ---------- -------- --------
Balance at December 31, 1996 766,400 234,702 (397,817) (163,115)
Common stock issued pursuant to
Promissory Notes 52,800 17,424 - 17,424
Common stock issued in payment of
Promissory Note interest 3,879 4,364 - 4,364
Conversion of Promissory Notes into
common stock 217,780 245,000 - 245,000
Sale of common stock, net of stock
offering costs 728,888 721,449 - 721,449
Common stock issued pursuant to
guarantor agreements 16,961 17,163 - 17,163
Net loss - - (578,276) (578,276)
--------- ---------- -------- --------
Balance at December 31, 1997 1,786,708 $1,240,102 (976,093) 264,009
--------- ---------- -------- --------
--------- ---------- -------- --------
</TABLE>
See accompanying notes to financial statements.
- 4 -
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
Years ended December 31, 1997 and 1996
<TABLE>
1997 1996
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(578,276) (397,817)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 130,262 38,112
Provision for losses on accounts receivable 43,250 73,796
Changes in assets and liabilities:
Accounts receivable (39,196) (34,422)
Prepaid and other current assets (59,563) 7,441
Accounts payable and accrued liabilities 17,408 (52,037)
Other current liabilities (50,233) 176,421
--------- --------
Net cash used in operating activities (536,348) (188,506)
--------- --------
Cash flows from investing activities:
Capital expenditures (70,090) (48,664)
Cash acquired from FirstLink Tenant Services L.L.C. - 4,467
--------- --------
Net cash used in investing activities (70,090) (44,197)
--------- --------
Cash flows from financing activities:
Net proceeds from issuance of common stock 738,873 144,916
Proceeds from Promissory Notes 102,576 111,124
Repayments of Promissory Notes (5,000) -
Proceeds from Convertible Notes 172,077 -
Principal payments under capital leases (27,792) (8,218)
--------- --------
Net cash provided by financing activities 980,734 247,822
--------- --------
Net increase in cash and cash equivalents 374,296 15,119
Cash and cash equivalents, beginning of year 15,119 -
--------- --------
Cash and cash equivalents, end of year $ 389,415 15,119
--------- --------
--------- --------
Supplemental disclosure of cash flow information:
Cash paid for interest $ 51,791 23,446
Cash paid for income taxes - -
</TABLE>
See accompanying notes to financial statements.
- 5 -
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
Notes to Financial Statements
December 31, 1997 and 1996
(1) BUSINESS AND ORGANIZATION
FirstLink Communications, Inc. (FirstLink or the Company), an Oregon
corporation, 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. The services are provided to the
tenants in accordance with long-term operating agreements between the
Company and the property owners under which the property owners share in
the telecommunication revenues generated from their properties. The
agreements provide the tenants with the option to use either FirstLink
or the local telephone company and long distance carriers for telephone
services. Tenants desiring to subscribe to cable television must
utilize FirstLink.
From time to time, the Company will evaluate the market demand, as well
as the economic and technical feasibility, of offering new products and
services to the residents of the Company's properties. Such products
and services may include, but are not limited to, internet access,
wireless telephone and paging. The Company expects to introduce
internet access to certain properties during the first quarter of 1998.
Historically, the Company has operated in and around the Portland,
Oregon metropolitan area. As of December 31, 1997, the Company had
contracts for additional properties in Vancouver, Washington; Seattle,
Washington; Denver, Colorado; Phoenix, Arizona; and Oklahoma, City,
Oklahoma.
The Company was incorporated on December 26, 1995 and on January 1, 1996
acquired substantially all of the assets and liabilities of FirstLink
Tenant Services L.L.C. (FTS) with a net book basis of $82,790 in
exchange for 133,333 shares of the Company's common stock. The
acquisition of these net assets was accounted for using the purchase
method of accounting. As the Company and FTS were entities under common
control, the assets and liabilities of FTS were recorded by the Company
using the carryover basis in such assets and liabilities.
The Company has generated operating cash losses from its inception.
Additionally, the Company requires, and will continue to require, cash
to fund the net losses and capital requirements associated with the
Company's rapid growth. It is management's expectation that the Company
will enter at least five new markets during 1998 and additional others
beyond the coming year. The cash required to fund such activities will
be substantial and beyond what the Company holds in cash and cash
equivalents at December 31, 1997. The Company is currently pursuing
various financing alternatives including, but not limited to, both
public and private equity and debt financings. There can be no
assurance that management will be successful in obtaining such financing.
In December 1997, the Company signed a letter of intent with an
underwriter to offer shares of the Company's common stock for sale
through an initial public offering.
(Continued)
- 6 -
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
Notes to Financial Statements
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid instruments readily convertible
to known amounts of cash to be cash equivalents.
(b) PROPERTY AND EQUIPMENT
Property and equipment is stated at cost, including installation
cost. The Company provides for depreciation using the straight-line
method over estimated useful lives of three to ten years. Property
and equipment held under capital leases are amortized straight-line
over the shorter of the lease term or estimated useful life of the
asset. Repairs and maintenance are expensed as incurred.
(c) REVENUE RECOGNITION
Revenue is recognized when services are provided.
(d) USE OF ESTIMATES
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could
differ from those estimates.
(e) COMMON STOCK AND LOSS PER SHARE
The Company has adopted Statement of Financial Accounting Standards
(SFAS) No. 128, EARNINGS PER SHARE. SFAS 128 replaced the
presentation of primary and fully diluted earnings (loss) per share
(EPS) with a presentation of basic and diluted EPS. Under SFAS 128,
basic EPS excludes dilution for common stock equivalents and is
computed by dividing income or loss available to common stockholders
by the weighted average number of common shares outstanding during the
period. Diluted EPS reflects the potential dilution that could occur
if securities or other contracts to issue common stock were exercised
or converted into common stock resulted in the issuance of common
stock.
The loss per common share in the accompanying financial statements has
been computed using the weighted average number of shares of common
stock outstanding during each period giving consideration to the
effects of the Securities and Exchange Commission Staff Accounting
Bulletin No. 98 (SAB 98). Pursuant to SAB 98, issuances of common
stock, options, warrants or other potentially dilutive securities for
nominal consideration (Nominal Issuances) are to be included in the
calculation of EPS for all periods presented in the manner of a stock
split for which retroactive restatement is required. Management
believes that there have been no Nominal Issuances since the inception
of FirstLink.
(Continued)
- 7 -
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
Notes to Financial Statements
In accordance with SFAS No. 128, the calculation of basic and
diluted EPS does not assume the conversion, exercise or contingent
issuance of securities that would have an anti-dilutive effect on
earnings per share. As a result, basic and diluted loss per share
are the same in both 1997 and 1996. Additionally, common share
amounts have been adjusted to reflect the stock split of 1 for 1.5
which will occur immediately prior to the effectiveness of the
Registration Statement.
(f) STOCK-BASED COMPENSATION
The Company accounts for its stock-based employee compensation plan
using the intrinsic value based method prescribed by Accounting
Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES, and related Interpretation (APB No. 25). The Company has
provided pro forma disclosures as if the fair value based method of
accounting for these plans, as prescribed by SFAS No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION, had been applied.
(g) IMPAIRMENT OF LONG-LIVED ASSETS
Effective January 1, 1996, the Company adopted SFAS No. 121,
ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF (SFAS No. 121), which requires that the
long-lived assets and certain identifiable intangibles, held and
used by an entity be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying value of an
asset may not be recoverable. An impairment loss is recognized when
estimated undiscounted future cash flows expected to be generated by
the asset is less than its carrying value. Measurement of the
impairment loss is based on the fair value of the asset, which is
generally determined using valuation techniques such as the
discounted present value of expected future cash flows. The
adoption of SFAS No. 121 had no effect on the financial statements
of the Company.
(h) INCOME TAXES
The Company accounts for income taxes under the provisions of SFAS
No. 109, ACCOUNTING FOR INCOME TAXES (SFAS No. 109). Under the
asset and liability method of SFAS No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or
settled. Under SFAS No. 109, the effect on deferred tax assets and
liabilities of a change in tax rate is recognized in income in the
period that includes the enactment date.
(Continued)
- 8 -
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
Notes to Financial Statements
(i) NEW ACCOUNTING PRONOUNCEMENTS
SFAS 130, REPORTING COMPREHENSIVE INCOME, was issued in June 1997.
It establishes standards for reporting and display of comprehensive
income and its components in a full set of general-purpose financial
statements. SFAS 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE
AND RELATED INFORMATION, was issued in June 1997. It establishes
standards for the way that public business enterprises report
information about operating segments in annual financial statements
and requires that those enterprises report selected information
about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures
about products and services, geographic areas and major customers.
The Company does not believe that adoption of either of these
standards will have a significant effect on its financial statements.
(j) SUPPLEMENTAL CASH FLOW INFORMATION OF NON-CASH INVESTING AND FINANCING
ACTIVITIES
<TABLE>
1997 1996
-------- --------
<S> <C> <C>
Assets acquired under capital leases $ 73,694 169,563
Net working capital deficit acquired from
FirstLink Tenant Services L.L.C. - (210,553)
Property and equipment acquired from
FirstLink Tenant Services L.L.C. - 288,876
Conversion of Promissory Notes to equity 245,000 -
Other 15,024 6,996
</TABLE>
(3) PROPERTY AND EQUIPMENT
Property and equipment, including assets owned under capital leases of
$243,257 is comprised of the following:
<TABLE>
<S> <C>
Switches, installation and wiring $ 601,446
Computers and office equipment 41,117
Leasehold improvements 8,324
---------
650,887
Less accumulated depreciation, including
$30,973 applicable to assets under capital leases (107,834)
---------
Net property and equipment $ 543,053
---------
---------
</TABLE>
(Continued)
- 9 -
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
Notes to Financial Statements
(4) INCOME TAXES
The difference between expected tax benefit, computed by applying the
federal statutory rate of 34% to loss before taxes, and the actual tax
benefit of $-0- is primarily due to the increase in the valuation
allowance for deferred taxes.
The Company's deferred tax assets are comprised of the following components
at December 31, 1997:
<TABLE>
<S> <C>
Net operating loss carryforwards $ 373,480
Less valuation allowance (373,480)
---------
Net deferred tax assets $ -
---------
---------
</TABLE>
The valuation allowance for deferred tax assets as of January 1, 1997
and 1996 was $152,242 and $-0-, respectively. The net change in the
total valuation allowance for the years ended December 31, 1997 and 1996
was an increase of $221,238 and $152,242, respectively. The Company has
established a valuation allowance due to the uncertainty that the full
amount of the operating loss carryforwards will be utilized. Although
management expects future results of operations to be profitable, it
emphasized past performance rather than growth projections when
determining the valuation allowance. Any subsequent adjustments to the
valuation allowance, if deemed appropriate due to changed circumstances,
will be recognized as a separate component of the provision for income
taxes.
The Company has net operating loss carryforwards which are available to
offset future financial reporting and taxable income. Net operating
loss carryforwards for tax purposes totaled approximately $965,000 at
December 31, 1997 and expire in 2011 through 2012.
A provision of the Internal Revenue Code requires the utilization of net
operating losses be limited when there is a change of more than 50% in
ownership of the Company. The Company appears to have incurred an
ownership change under IRC Section 382. This potential ownership change
would limit the utilization of any net operating losses incurred prior
to the change in ownership date. The Company intends to complete an
analysis under IRC Section 382 to determine if any ownership change has
occurred.
(Continued)
- 10 -
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
Notes to Financial Statements
(5) DEBT
PROMISSORY NOTES
During 1997 and 1996, the Company issued unsecured promissory notes (the
Promissory Notes) aggregating $250,000. The Promissory Notes bore
interest at 8% per annum with both principal and interest payable on or
before March 31, 1997. As an additional inducement, the holders of the
Promissory Notes received 440 shares of the Company's common stock for
each $1,000 of principal. The Promissory Notes were originally recorded
at $213,700, which represents the $250,000 in proceeds less a discount
of $36,300 assigned to the common stock. The fair value of the common
stock was based on other recent equity transactions with third parties.
The discount was accreted to the debt over the life of the Promissory
Notes as a financing cost. The accretion of the value assigned to the
common stock is included in interest expense in the accompanying
financial statements. In 1997, $245,000 of the Promissory Notes, plus
accrued interest, were converted into 221,659 shares of the Company's
common stock. The remaining $5,000 and accrued interest was paid in
full during 1997.
CONVERTIBLE NOTES
During 1997, the Company issued unsecured convertible notes (the Notes)
with a face value of $420,000 and 560,000 shares of common stock
pursuant to a private placement memorandum (the Private Placement).
Total proceeds from the Private Placement was $840,000. The Notes bear
interest at 6% per annum, payable semiannually commencing June 30, 1998,
mature three years from the date of issuance and are convertible into
shares of the Company's common stock at $3.00 per share. The Notes were
originally recorded at $210,000, which represents the face value of
$420,000 less a discount of $210,000 which was assigned to the common
stock. The 560,000 shares of common stock were recorded at the
estimated fair market value of such shares which was $630,000 less stock
offering costs of $37,301, resulting in net proceeds of $592,699. The
fair market value of the common stock was based on other recent equity
transactions with third parties. The discount is being accreted to the
debt using the interest method over three years. The accretion value
assigned to the common stock is included in interest expense in the
accompanying financial statements.
(6) STOCKHOLDERS' EQUITY
PRIVATE PLACEMENT
During 1997, the Company issued 290,000 units, with each unit consisting
of two shares of common stock and one common stock purchase warrant
pursuant to a private placement memorandum. The Company sold 126,667
units (the Units) resulting in 168,888 shares for $190,000 with the
remaining 163,333 units being issued to the holders of the Promissory
Notes in exchange for converting $245,000 of the Promissory Notes plus
accrued interest into 221,659 shares of common stock (see note 5 above).
Stock offering cost associated with the sale of the Units was $61,250.
(Continued)
- 11 -
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
Notes to Financial Statements
STOCK OPTION PLANS
In July 1996, the Company established the FirstLink Communications, Inc.
Incentive Stock Option Plan (the Incentive Plan) and the FirstLink
Communications, Inc. Non-Qualified Stock Option Plan (the Non-Qualified
Plan). No shares were issued under the Incentive and Non-Qualified
Plans. In February 1997, the Company's Board of Directors adopted the
1997 Restated Combined Incentive Stock and Non-Qualified Stock Option
Plan (the 1997 Plan) to supersede and replace the Incentive and
Non-Qualified Plans. Options issued under the 1997 Plan shall not be
priced at less than fair market value and expire no later than ten years
from the date of grant. The vesting periods are at the discretion of
the Company's Board of Directors. The 1997 Plan is subject to
ratification by the majority vote of the holders of the Company's common
stock within one year from the effective date of adoption for any
incentive options granted under the 1997 Plan. Until ratified, all
shares issued under the 1997 Plan will be non-qualified as the Board of
Directors has the authority to issue nonqualified options. The Company
has made available 533,333 shares for grant under the 1997 Plan. During
1997, the Company issued options to purchase 416,667 shares of common
stock with vesting terms of 25% immediately and 25% on each anniversary
date over a three-year period.
The following table provides additional information concerning options
granted under the 1997 Plan:
<TABLE>
Weighted Weighted
average average
Number of exercise remaining
shares price term
--------- -------- ---------
<S> <C> <C> <C>
Outstanding, January 1, 1997 - $ -
Granted 416,667 1.13 9.2 years
Exercised - -
Forfeited - -
------- -----
Outstanding, December 31, 1997 416,667 $1.13
------- -----
------- -----
</TABLE>
A total of 104,167 options were exercisable at December 31, 1997 at a
weighted average exercise price of $1.13.
(Continued)
- 12 -
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
Notes to Financial Statements
The Company has elected to account for its stock-based compensation
plans under APB 25; however, the Company has computed, for pro forma
disclosure purposes, the value of all options granted during 1997 using
the Black-Scholes option pricing model as prescribed by SFAS 123 using
the following assumptions used for grants in 1997:
Risk-free interest 6.25%
Expected dividend yield None
Expected lives 5 years
Expected volatility Not applicable
The total value of options granted during 1997 was computed as
approximately $124,000 which would be amortized on a pro forma basis
over the three-year vesting period of the options. The fair market
value of the option grants during 1997 was $1.13 per share.
Had the Company determined compensation cost based on the fair value at
the grant date for its stock options under SFAS No. 123, the Company's
net loss and loss per share would have been:
<TABLE>
December 31, 1997
------------------------
As reported Pro forma
----------- ---------
<S> <C> <C>
Net loss $ (578,276) (609,276)
---------- --------
---------- --------
Basic and diluted loss per common share $ (.50) (.52)
---------- --------
---------- --------
</TABLE>
WARRANTS
The Company has issued various stock purchase warrants in connection
with its financing activities to investors and placement agents. The
following table provides additional information related to stock
purchase warrants:
<TABLE>
Range of Range of
Number of shares exercise expiration
underlying prices of dates of
warrants issued warrants issued warrants issued
Year during year during year during year
---- --------------- --------------- ---------------
<S> <C> <C> <C>
1997 357,000 $ .75-$3.00 12/00-11/02
</TABLE>
(Continued)
-13-
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
Notes to Financial Statements
(7) RELATED PARTY TRANSACTIONS
During 1997 and 1996, the Company had a management agreement with an
officer and director of the Company whereby from time to time a
management fee was paid for his services. Amounts paid under this
arrangement totaled $96,000 in both 1997 and 1996.
(8) COMMITMENTS AND CONTINGENCIES
OPERATING LEASE COMMITMENT
The Company leases office space under a non-cancelable operating lease
expiring on October 31, 2001. Operating lease payments for the years
ended December 31, 1997 and 1996 totaled $29,160 and $10,728,
respectively. At December 31, 1997, future minimum lease payments under
non-cancelable operating leases are as follows:
<TABLE>
<S> <C>
1998 $ 29,160
1999 29,160
2000 29,160
2001 24,300
2002 -
----------
$ 111,780
----------
----------
</TABLE>
The Company leases certain switching equipment under capital leases.
The following table is a schedule, by year, of future minimum payments
under capital leases, together with the present value of the net minimum
payments as of December 31, 1997:
<TABLE>
<S> <C>
1998 $ 74,693
1999 74,693
2000 73,017
2001 57,892
2002 8,499
----------
Total minimum lease payments 288,794
Less amount representing interest (81,547)
----------
Total obligations under capital leases $ 207,247
----------
----------
</TABLE>
In connection with entering into certain of the capital lease
agreements, certain stockholders, including directors of the Company
(the Guarantors), entered into personal guaranty arrangements with the
lessor on behalf of the Company. The Company, in turn, agreed to issue
common stock to each of the Guarantors upon execution of and throughout
the duration of the leases. 16,961 and 21,200 shares of common stock
were issued to the Guarantors during 1997 and 1996, respectively.
(Continued)
-14-
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
Notes to Financial Statements
The common stock was assigned values of $17,163 and $6,996 for the
shares issued during 1997 and 1996, respectively, based on recent equity
transactions with third parties. The value assigned to the common stock
is being amortized using the interest method over the lives of the
leases. The accretion value is included in interest expense in the
accompanying financial statements.
COMMITMENT WITH CABLE PROVIDERS
The Company has agreements with TCI Cablevision of Oregon, Inc. (TCI)
and Paragon Cable (Paragon) to purchase bulk cable signals at the
Company's properties. The agreements provide for the Company to pay
fixed monthly amounts regardless of the number of customers the Company
has at the properties. As of December 31, 1997, the Company's monthly
commitment was $27,224 per month. The TCI agreements provide for annual
rate increases not to exceed 5%. The agreements all have terms of five
years and expire during May 2001 through April 2002.
LITIGATION
In April 1997, LDDS World Comm (LDDS) filed a lawsuit against the
Company seeking payment of $190,000 plus attorney fees for goods and
services provided to the Company. The Company contends it was
overcharged by LDDS pursuant to the terms of its agreement and the
actual amount owed is approximately $126,000 which is recorded on the
accompanying balance sheet. The Company has provided LDDS with
supporting documentation for the actual amount owed and has offered a
settlement proposal. A trial date has been set for April 1998.
Management believes that the outcome will not have a material adverse
affect on the Company's financial position, results of operations or
liquidity.
From time to time, the Company is involved in various litigation in the
normal course of business. Management believes that the outcomes will
not have a material impact to the Company's financial statements.
(9) SUBSEQUENT EVENTS
CONVERTIBLE NOTE CONVERSION
Subsequent to year-end, the Company asked the holders of the Notes to
convert the Notes into shares of common stock. As an inducement to
convert, the Company reduced the conversion price to $2.25 per share
from the $3.00 conversion price stated on the Notes for those holders
converting on or before March 9, 1998. As of March 9, 1998, all of the
Notes had been converted into 186,667 shares of common stock.
(Continued)
-15-
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
Notes to Financial Statements
PRIVATE PLACEMENT
During February and March 1998, the Company sold 283,333 units with each
unit consisting of one share of common stock and one common stock
purchase warrant pursuant to a private placement memorandum. The gross
proceeds from the offering were $425,000.
-16-
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF
THE COMMON STOCK AND WARRANTS OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE SHARES OF COMMON
STOCK OR WARRANTS BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Dilution.................................................................. 12
Capitalization............................................................ 13
Use of Proceeds........................................................... 14
Dividend Policy........................................................... 14
Selected Financial Data................................................... 15
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 16
Business.................................................................. 19
Management................................................................ 25
Certain Transactions...................................................... 31
Principal Stockholders....................................................
Description of Securities................................................. 32
Underwriting.............................................................. 35
Legal Matters............................................................. 37
Experts................................................................... 37
Additional Information.................................................... 37
Index to Financial Statements.............................................
</TABLE>
UNTIL (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
1,000,000 SHARES OF COMMON STOCK
1,000,000 REDEEMABLE COMMON STOCK
PURCHASE WARRANTS
FIRSTLINK COMMUNICATIONS, INC.
---------------------
PROSPECTUS
---------------------
KASHNER DAVIDSON SECURITIES
CORPORATION
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The only statute, charter provision, bylaw, contract, or other arrangement
under which any controlling person, director or officers of the Registrant is
insured or indemnified in any manner against any liability which he may incur in
his capacity as such, is as follows:
The Company's Articles of Incorporation permit and its Bylaws require the
Company to indemnify officers and directors to the fullest extent permitted by
the Oregon Business Corporation Law (OBCA). The Company has also entered into
agreements to indemnify its directors and executive officers to provide the
maximum indemnification permitted by Oregon law. These agreements, among other
provisions, provide indemnification for certain expenses (including attorney
fees), judgments, fines and settlement amounts incurred in any action or
proceeding, including any action by or in the right of the Company.
Article VI of the Company's Bylaws permits the Company to indemnify its
directors, officers, employees and agent to the maximum extent permitted by the
OBCA. Section 317 of the OBCA provides that a corporation has the power to
indemnify and hold harmless a director, officer, employer, or agent of the
corporation who is or is made a party or is threatened to be made a party to any
threatened action, suit or proceeding, whether civil, criminal, administrative
or investigative, against all expense, liability and loss actually and
reasonably incurred by such person in connection with such a proceeding if he or
she acted in good faith and in a manner he or she reasonably believed to be in
the best interest of the corporation, and, with respect to any criminal
proceeding, had no reasonable cause to believe that the conduct was unlawful. If
it is determined that the conduct of such person meets these standards, such
person may be indemnified for expenses incurred and amounts paid in such
proceeding if actually and reasonably incurred in connection therewith.
If such a proceeding is brought by or on behalf of the corporation (i.e., a
derivative suit), such person may be indemnified against expenses actually and
reasonably incurred if such person acted in good faith and in a manner
reasonably believed to be in the best interest of the corporation and its
shareholders. There can be no indemnification with respect to any matter as to
which such person is adjudged to be liable to the corporation unless and only to
the extent that the court in which such action or suit was brought shall
determine upon application that, despite such adjudication but in view of all of
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the court shall deem proper.
Where any such person is successful in any such proceeding, such person is
entitled to be indemnified against expenses actually and reasonably incurred by
him or her. In all other cases (unless order by a court), indemnification is
made by the corporation upon determination by it that indemnification of such
person is proper in the circumstances because such person has met the applicable
standard of conduct.
A corporation may advance expenses incurred in defending any such proceeding
upon receipt of an undertaking to repay any amount so advanced if it is
ultimately determined that the person is not eligible for indemnification.
The indemnification rights provided in Section 317 of the OBCA are not
exclusive of additional rights to indemnification for breach of duty to the
corporation and its shareholders to the extent additional rights are authorized
in the corporation's articles of incorporation and are not exclusive of any
other rights to indemnification under any bylaw, agreement, vote of shareholders
or disinterested directors or otherwise, with as to action in his or her office
and as to action in another capacity while holding such office.
II-1
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of the offering are to be borne by the Company, are
as follows:
<TABLE>
<S> <C>
SEC Filing Fee.................................................... $ 5,900
NASD Filing Fee................................................... 2,500
Nasdaq Listing Fee................................................ 10,000
Printing Expenses*................................................ 40,000
Accounting Fees and Expenses*..................................... 30,000
Legal Fees and Expenses*.......................................... 45,000
Blue Sky Fees and Expenses*....................................... 15,000
Registrar, Transfer Agent, and Warrant Agent Fee*................. 10,000
Miscellaneous*.................................................... 1,600
---------
Total........................................................... $ 160,000
---------
---------
</TABLE>
- ------------------------
* Estimated
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The following discussion gives retroactive effect to the 1-for-1.5 stock
split of the Company's Common Stock which will be effected on the effective date
of this Registration Statement. The Registrant has sold and issued the following
securities during the past three years.
a. On January 1, 1996, the Company acquired all of the operating assets of
FirstLink Tenant Services, LLC, pursuant to an asset purchase agreement, in
exchange for 133,333 shares of Common Stock. The assets acquired were valued at
$82,790 which was the carry-over basis in such assets and liabilities. The
shares were issued to two individuals who owned the equity of FirstLink Tenant
Services, LLC.
b. In January 1996, the Company issued 200,000 shares of Common Stock to
eight persons, including management and employers of the Company and persons
associated with Bathgate McColley Capital Group, LLC (BMCG). Those investors
paid a total of $9,000 for the shares, or $.05 per share. The sale of the shares
was made pursuant to Section 4(2) of the Securities Act; each investor was
sophisticated and had access to all pertinent information about the Company.
c. In February-April 1996, the company issued 354,667 shares to 20
investors in a private placement pursuant to Section 4(2) of the Securities Act.
The shares were sold to the investors for $.33 per share, or an aggregate of
$117,040. Each investor was sophisticated and had access to all pertinent
information about the Company.
d. From September 1996 through April 1997 the Company borrowed $250,000
from eleven investors pursuant to Section 4(2) of the Securities Act. The
Company issued 110,000 shares as additional consideration for the loans; and
3,879 in lieu of interest on the Notes. Each investor was sophisticated and had
access to all pertinent information about the Company.
e. In April 1997, the Company issued 386,666 shares of Common Stock and
warrants to purchase 193,333 shares of Common Stock to 23 persons in a private
placement pursuant to Section 4(2) and Rule 506 of Regulation D of the
Securities Act. Bathgate McColley Capital Group, LLC, (BMCG) whose principals
are shareholders of the Company, acted as placement agent for the offering which
was placed with accredited investors. Each investor executed a subscription
agreement and investor questionnaire in connection with the offering. The
offering was sold in units, each unit consisting of two shares of Common Stock
and one Common Stock Purchase Warrant. The units were priced at $1.50 each for
an aggregate price of $435,000, plus interest on notes that were converted into
3,879 shares. The Company paid BMCG commissions and a non-accountable expense
allowance, totaling $61,250. BMCG also received, for
II-2
<PAGE>
nominal consideration, warrants to purchase 87,000 shares of Common Stock,
exercisable at $1.13 per share until they expire on April 30, 2002.
f. In August through November 1997, the Company issued 560,000 shares of
Common Stock and $420,000 of Convertible Notes in a private placement pursuant
to Section 4(2) and Rule 506 of Regulation D. BMCG acted as placement agent for
this offering which was placed with accredited investors. Each investor executed
a subscription agreement and investor questionnaire in connection with the
Offering. The Offering was sold in 12 units, each unit consisting of 46,667
shares of Common Stock and one $35,000 Convertible Note. The units were priced
at $70,000 per unit. The Company paid BMCG commissions and a non-accountable
expense allowance totaling $74,602 and issued BMCG warrants to purchase 56,000
shares of Common Stock at $.75 per share; and warrants to purchase 14,000 shares
of Common Stock at $3.00 per share. Those warrants are exercisable at any time
and expire on November 30, 2002.
g. Throughout 1996 and 1997 the Company issued shares of Common Stock to
four individuals, including two individuals who are directors of the Company,
who guaranteed $125,000 of Company leases. The Company will continue to issue
shares to each individual at the rate of 200 shares per month for as long as
those leases are guaranteed by such individuals. The Company issued a total of
38,161 shares pursuant to these guarantees as of December 31, 1997.
h. In February and March 1998 the Company issued 283,333 units consisting
of 188,889 shares of Common Stock and 188,889 Common Stock Purchase Warrants
("Exchange Warrants") to individuals in a private placement pursuant to Section
4(2) and Rule 506 of Regulation D. BMCG acted as placement agent in the
Offering, which was placed to accredited investors. Each investor executed a
subscription agreement and investor questionnaire in connection with the
Offering. The units were priced at $1.50 per unit. The Company paid BMCG
commissions of $38,000.
ITEM 27. EXHIBITS.
a. The following Exhibits are filed as part of this Registration Statement
pursuant to Item 601 of Regulation S-B:
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
- ------------- ---------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
1.2 Form of Representative's Share Option Agreement.
1.3 Form of Representative's Warrant Option Agreement.
3.1 Articles of Incorporation.
3.2 Bylaws.
4.1 Specimen Certificate for Common Stock.(1)
4.2 Warrant Agreement.
4.3 Form of Lock Up Agreement with certain Securityholders.
4.4 Specimen Certificate for Warrant (1)
5.1 Opinion of Neuman Drennen & Stone, LLC.
10.1 1996 Stock Option Plan.
10.2 Office Lease (190 SW Harrison, Portland, OR)
10.3 Telecommunications Services Agreement between Registrant and Oregon Portland Associates (Portland
Center Apartments)(2)
10.4 Telecommunications Services Agreement between Registrant and Riverplace II Joint Venture
(Riverplace Development)(2)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
- ------------- ---------------------------------------------------------------------------------------------------
10.5 Telecommunications Services Agreement between Registrant and Elsie D. McIver U/A Trust Dated 1/4/72
(Vista St. Clair)(2)
<C> <S>
10.6 Telecommunications Services Agreement between Registrant and Lloyd Place Apartments Limited
Partnership (Lloyd Place)(2)
10.7 Telecommunications Services Agreement between Registrant and Harsch Investment Corp. (King Tower
Apartments)(2)
10.8 Telecommunications Services Agreement between Registrant and Harsch Investment Corp. (Park Plaza
Apartments)(2)
10.9 Telecommunications Services Agreement between Registrant and Security Investments; LP (Ione Plaza
Apartments)(2)
10.10 Telecommunications Services Agreement between Registrant and Housing Authority of Portland (Pearl
Court Apartments)(2)
10.11 Telecommunications Services Agreement between Registrant and Harsch Investment Corp. (The Clay
Towers Apartments)(2)
10.12 Telecommunications Services Agreement between Registrant and Crossing Development Corporation
(Legends)(2)
10.13 Telecommunications Services Agreement between Registrant and Parkside Place (Parkside Plaza)(2)
10.14 Telecommunications Services Agreement between Registrant and Housing Authority of the City of
Vancouver, Washington (Cougar Creek Apartments)(2)
10.15 Telecommunications Services Agreement between Registrant and Housing Authority of the City of
Vancouver, Washington (ParkLane Apartments)(2)
10.16 Telecommunications Services Agreement between Registrant and Housing Authority of the City of
Vancouver, Washington (Willow Creek Apartments)(2)
10.17 Telecommunications Services Agreement between Registrant and Harsch Development Corp. (Sherman
Tower)(2)
10.18 Telecommunications Services Agreement between Registrant and Harsch Development Corp. (The
Nettleton)(2)
10.19 Telecommunications Services Agreement between Registrant and Harsch Development Corp. (Regency
Tower Apartments)(2)
10.20 Telecommunications Services Agreement between Registrant and Harsch Development Corp. (Syl-Mar
Estates)(2)
23.1 Consent of Neuman Drennen & Stone, LLC. (included in Exhibit 5.1)
23.2 Consent of KPMG Peat Marwick LLP.
24 Power of Attorney (included on page II-6).
</TABLE>
- ------------------------
(1) To be filed by Amendment.
(2) Certain information has been omitted pursuant to Rule 406 of the Securities
Act. Omitted information is designated by "-".
ITEM 28. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
II-4
<PAGE>
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
2. That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
4. To provide, upon Closing of the Offering as specified in the
Underwriting Agreement, certificates in such denominations and registered in
such names as are required to permit prompt delivery to each purchaser.
5. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding in connection with
the securities being registered), the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
6. For determining any liability under the Securities Act:
(i) To treat the information omitted from the form of prospectus filed
as part of this Registration Statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4), or 497(h) under the Securities
Act as part of this Registration Statement as of the time it was
declared effective; and
(ii) To treat each post-effective amendment that contains a form of
prospectus as a new registration statement for the securities
offered in the registration statement, and the offering of such
securities at that time as the initial BONA FIDE offering of those
securities.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in Portland, State of Oregon on March 31, 1998.
<TABLE>
<S> <C> <C>
FIRSTLINK COMMUNICATIONS, INC.
By: /s/ A. ROGER PEASE
-----------------------------------------
A. Roger Pease
PRESIDENT
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints A. Roger Pease and Jeffrey S. Sperber, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and re-substitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirement of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ A. ROGER PEASE
- ------------------------------ President, Chief Executive March 31, 1998
A. Roger Pease Officer and Director
/s/ JEFFREY S. SPERBER
- ------------------------------ Chief Financial Officer March 31, 1998
Jeffrey S. Sperber
/s/ ALLAN A. FULSHER
- ------------------------------ Secretary March 31, 1998
Allan A. Fulsher
/s/ THOMAS E. MCCHESNEY
- ------------------------------ Director March 31, 1998
Thomas E. McChesney
/s/ ROBERT F. OLSEN
- ------------------------------ Director March 31, 1998
Robert F. Olsen
/s/ JAMES F. TWADDELL
- ------------------------------ Director March 31, 1998
James F. Twaddell
II-6
<PAGE>
PROSPECTUS
FIRSTLINK COMMUNICATIONS, INC.
188,889 COMMON STOCK PURCHASE WARRANTS
935,556 SHARES OF COMMON STOCK
This Prospectus relates to (1) 188,889 Common Stock Purchase Warrants
("Exchange Warrants") issued to certain investors in exchange for warrants
issued to such investors as a private placement by the Company which was
completed in March 1998 (the "1998 Private Placement"); (2) 94,444 shares of
Common Stock (the "Exchange Warrant Shares") issuable upon exercise of the
Exchange Warrants; and (3) 746,667 shares of Common Stock (the "Private Shares")
issued to certain investors in connection with private placements. The Exchange
Warrants, the Exchange Warrant Shares, and the Private Shares are collectively
referred to as the "Offered Securities;" and the holders of the Selling
Securityholders' Securities are collectively referred to as the "Selling
Securityholders."
The securities offered by this prospectus may be sold from time to time by
the Selling Securityholders, or by their transferees. The distribution of the
securities offered hereby may be effected in one or more transactions that may
take place in the over-the-counter market, including ordinary brokers'
transactions, privately negotiated transactions or through sales to one or more
dealers for resale of such securities as principals, at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. Usual and customary or specifically negotiated brokerage fees
or commissions may be paid by the Selling Securityholders.
The Offered Securities are subject to agreements not to sell ("Lock-up
Agreements") such securities for a period of months after the effective date
of the Registration Statement (the "Registration Statement") of which this
Prospectus is a part.
The Selling Securityholders and intermediaries through whom such securities
are sold may be deemed "underwriters" within the meaning of the Securities Act
of 1933, as amended (the "Securities Act"), with respect to the securities
offered, and any profits realized or commission received may be deemed
underwriting compensation. The Company has agreed to indemnify the Selling
Securityholders against certain liabilities, including liabilities under the
Securities Act.
The Company will not receive any of the proceeds from the sale of securities
by the Selling Securityholders. See "SELLING SECURITYHOLDERS" and "PLAN OF
DISTRIBUTION."
On March , 1998, the Company filed a registration statement under the
Securities Act with the Securities and Exchange Commission (the "Commission")
relating to the Selling Securitiesholders' Securities and to a public offering
by the Company (the "Public Offering") of 1,000,000 shares of Common stock and
1,000,000 Redeemable Common Stock Purchase Warrants ("Warrants"). The Company
will receive approximately $ in net proceeds from the sale of the Common
Stock and Warrants (assuming no exercise of the Underwriter's over-allotment
option) after payment of underwriting discounts and estimated expenses of the
Public Offering.
Prior to this offering, there has been no public market for the Common Stock
and there can be no assurance that such a market will develop after the
completion of this offering. The Company has filed an application to list the
Common Stock and the Warrants (including the Exchange Warrants) on the Nasdaq
Small Cap Market under the symbols " " and " ," respectively.
------------------------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK AND SUBSTANTIAL IMMEDIATE
DILUTION. SEE "RISK FACTORS" BEGINNING AT PAGE AND "DILUTION."
---------------------
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION
NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities Offered by the
Selling Stockholders........ 188,889 Common Stock Purchase Warrants and 935,556 shares of
Common Stock. See "DESCRIPTION OF SECURITIES," "SELLING
SECURITYHOLDERS" and "PLAN OF DISTRIBUTION."
Offering Price................ Prevailing market price; except the Exchange Warrant Stock
is exercisable at $ per share.
Common Stock outstanding
before Offering.............
Common Stock outstanding after
Offering....................
Nasdaq Small cap market
Symbols:
Common Stock................
Warrants....................
</TABLE>
SELLING SECURITYHOLDERS
An aggregate of up to 188,889 Exchange Warrants and 94,445 Exchange Warrant
Shares; and up to 935,556 additional shares of Common Stock may be offered by
certain Securityholders or by their transferees.
The following table sets forth certain information with respect to each
Selling Securityholder for whom the Company is registering securities for resale
to the public. The proceeds from the exercise of the Exchange Warrants will be
paid to the Company. Except for such proceeds, the Company will not receive any
of the proceeds from the sale of these securities. Beneficial ownership of the
Securities by such Selling Securityholders after this offering will depend on
the number of Exchange Warrants and the number of shares of Common Stock sold by
each Selling Securityholder. Except as otherwise disclosed below, there
1
<PAGE>
are no material relationships between any of the Selling Securityholders and the
Company, nor have any such relationships existed within the past three years.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
EXCHANGE WARRANTS EXCHANGE OWNED AS OF SHARES OF
BENEFICIALLY OWNED WARRANTS OFFERING COMMON STOCK
SELLING SECURITYHOLDER AS OF OFFERING DATE OFFERED DATE(1) OFFERED(2)
- --------------------------------------- ------------------- ----------- --------------- --------------
<S> <C> <C> <C> <C>
Dudley Bailey(3)....................... -- -- 68,612 31,111
Scott Barraclough(4)................... -- -- 24,305 15,556
Steven M. Bathgate(5).................. 10,000 10,000 376,626 51,111
Kenneth S. Bernstein(6)................ 6,667 6,667 82,973 28,889
Birdie Capital Corp.(7)................ 7,407 7,407 11,111 7,407
Larry Black(8)......................... 18,518 18,518 27,777 18,518
Caribou Bridge Fund, LLC(9)............ -- -- 167,165 100,000
D & B Partners(10)..................... -- -- 36,458 23,333
Fred Duboc(11)......................... 3,333 3,333 34,306 22,223
Douglas Fleming(12).................... -- -- 48,611 31,111
Susan Fleming(13)...................... -- -- 24,306 15,556
Generation Capital(14)................. 33,333 33,333 100,000 66,667
Harold M. Golz(15)..................... -- -- 30,972 15,556
Kiawah Capital Partners(16)............ -- -- 84,711 31,111
John Kucera(17)........................ -- -- 24,306 15,556
J. Scott Liolios(18)................... 1,667 1,667 5,000 3,333
John P. Manry(19)...................... -- -- 42,471 15,556
Ann Mategrano(20)...................... -- -- 24,306 15,556
Elizabeth McChesney(21)................ -- -- 12,153 7,778
Eugene C. McColley(22)................. -- -- 324,126 31,111
James E. McDonald Trust(23)............ 10,000 10,000 121,499 68,889
Virginia S. McDonald Trust(24)......... -- -- 121,499 75,555
Paul E. Mendell(25).................... -- -- 12,153 7,778
Robert M. Neider(26)................... -- -- 42,040 15,556
PAMB Investments(27)................... -- -- 30,820 7,778
John Phillips(28)...................... -- -- 24,306 15,556
Marcie Powers(29)...................... -- -- 24,306 15,556
Randy Sasaki(30)....................... 1,667 1,667 5,000 3,333
Harry Schmidt(31)...................... -- -- 24,306 15,556
Greg Shimanski(32)..................... 3,333 3,333 10,000 6,667
Sterling Capital, LLC(33).............. 7,407 7,407 11,111 7,407
Glen Welstad(34)....................... -- -- 97,222 62,222
DW Squared(35)......................... 4,445 4,445 37,640 24,445
Winter Haven Homes(36)................. -- -- 97,222 62,222
</TABLE>
- ------------------------
(1) Includes shares of Common Stock receivable upon exercise of Exchange
Warrants.
(2) Does not include shares of Common Stock receivable upon exercise of Exchange
Warrants.
(3) Shares beneficially owned include 24,167 shares underlying presently
exercisable warrants.
(4) Shares beneficially owned include 8,750 shares underlying presently
exercisable warrants.
(5) Shares beneficially owned include 167,165 shares and warrants to purchase
14,445 shares owned by Caribou Bridge Fund, LLC. Messrs. Bathgate and
McColley own the Administrator of Caribou. They disclaim beneficial
ownership of such shares. Also includes 25,272 shares and 4,445 shares
underlying presently exercisable warrants owned by Kiawah Capital Partners,
an entity that Messrs. Bathgate and McColley own equally. Fifty percent of
those shares and warrants are attributed to each Mr. Bathgate
2
<PAGE>
and Mr. McColley. Includes 18,667 shares owned by Bathgate Family
Partnership II, of which Mr. Bathgate is a general partner.
(6) Shares beneficially owned include 22,084 shares underlying presently
exercisable warrants.
(7) Shares beneficially owned include 3,704 shares underlying presently
exercisable warrants.
(8) Shares beneficially owned include 9,259 shares underlying presently
exercisable warrants.
(9) Shares beneficially owned include 14,445 shares underlying presently
exercisable warrants.
(10) Shares beneficially owned include 13,125 shares underlying presently
exercisable warrants.
(11) Shares beneficially owned include 12,083 shares underlying presently
exercisable warrants.
(12) Shares beneficially owned include 17,500 shares underlying presently
exercisable warrants.
(13) Shares beneficially owned include 8,750 shares underlying presently
exercisable warrants.
(14) Shares beneficially owned include 6,667 shares underlying presently
exercisable warrants.
(15) Shares beneficially owned include 8,750 shares underlying presently
exercisable warrants.
(16) Shares beneficially owned include 26,389 shares underlying presently
exercisable warrants. Does not include shares otherwise beneficially owned
by Messrs. Bathgate and McColley, the two partners of Kiawah. See Footnotes
(5) and (22).
(17) Shares beneficially owned include 8,750 shares underlying presently
exercisable warrants.
(18) Shares beneficially owned include 1,667 shares underlying presently
exercisable warrants.
(19) Shares beneficially owned include 13,195 shares underlying presently
exercisable warrants.
(20) Shares beneficially owned include 4,375 shares underlying presently
exercisable warrants.
(21) Shares beneficially owned include 4,375 shares underlying presently
exercisable warrants. Does not include shares beneficially owned by Thomas
McChesney, her husband. See Footnote 8 on page 29.
(22) Shares beneficially owned include 122,121 shares and warrants to purchase
14,445 shares owned by Caribou Bridge Fund, LLC. Messrs. Bathgate and
McColley own the Administrator of Caribou. They disclaim beneficial
ownership of such shares. Also includes 25,272 shares and 4,445 shares
underlying presently exercisable warrants owned by Kiawah Capital Partners,
an entity that Messrs. Bathgate and McColley own equally. Fifty percent of
those shares and warrants are attributed to each Mr. Bathgate and Mr.
McColley. Includes 48,000 shares underlying presently exercisable warrants.
(23) Of the shares listed as being beneficially owned by James E. McDonald and
Virginia S. McDonald, 68,165 shares (including 7,778 shares underlying
presently exercisable warrants) are owned by James E. McDonald, Trustee for
the James E. McDonald Revocable Trust; and 53,333 shares (including 6,667
shares underlying presently exercisable warrants) are owned by Virginia S.
McDonald, Trustee for the Virginia S. McDonald Revocable Trust. Mr. and Mrs.
McDonald are husband and wife. They each disclaim beneficial ownership of
shares owned by their spouse's trust.
(24) See Footnote (23).
(25) Shares beneficially owned include 4,375 shares underlying presently
exercisable warrants.
(26) Shares beneficially owned include 13,195 shares underlying presently
exercisable warrants.
(27) Shares beneficially owned include 6,667 shares underlying presently
exercisable warrants.
(28) Shares beneficially owned include 8,750 shares underlying presently
exercisable warrants.
(29) Shares beneficially owned include 8,750 shares underlying presently
exercisable warrants.
(30) Shares beneficially owned include 1,667 shares underlying presently
exercisable warrants.
(31) Shares beneficially owned include 8,750 shares underlying presently
exercisable warrants.
(32) Shares beneficially owned include 3,333 shares underlying presently
exercisable warrants.
(33) Shares beneficially owned include 3,704 shares underlying presently
exercisable warrants.
(34) Shares beneficially owned include 35,000 shares underlying presently
exercisable warrants.
(35) Shares beneficially owned include 13,195 shares underlying presently
exercisable warrants.
(36) Shares beneficially owned include 35,000 shares underlying presently
exercisable warrants.
PLAN OF DISTRIBUTION
The Selling Securityholders have been advised that sales of the Exchange
Warrants, the Exchange Warrant Shares, and the Private Shares may be effected
from time to time in transactions (which may
3
<PAGE>
include block transactions) in the over-the-counter market, in negotiated
transactions, through the writing of options on the Common Stock or a
combination of such methods of sale, at fixed prices that may be changed, at
market prices prevailing at the time of sale, or at negotiated prices. The
Selling Securityholders may effect such transactions by selling the Offered
Securities directly to purchasers or through broker-dealers that may act as
agents or principals. Such broker-dealers may receive compensation in the form
of discounts, concessions or commissions from the Selling Securityholders and/or
the purchasers of Offered Securities for whom such broker-dealers may act as
agent or to whom they sell as principals, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions).
The Selling Securityholders and any broker-dealers that act in connection
with the sale of Offered Securities Stock as principals may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act and any
commissions received by them and any profit on the resale of the Offered
Securities as principals might be deemed to be underwriting discounts and
commission under the Securities Act. The Selling Securityholders may agree to
indemnify any agent, dealer or broker-dealer that participates in transactions
involving sales of the Offered Securities, against certain liabilities,
including liabilities under the Securities Act. The Company will not receive any
proceeds from the sale of shares the Exchange Warrants, the Conversion Shares,
or the Private Shares. The Company will receive the proceeds from the exercise
of the Exchange Warrants; but not from any resale of the Exchange Warrant
Shares. Sales of the Offered Securities, by the Selling Securityholders, or even
the potential of such sales, would likely have an adverse impact on the market
price of the Warrants and the Common Stock.
The Offered Securities of Common Stock are offered by the Selling
Securityholders on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act. The Company has agreed to pay all expenses incurred in
connection with the registration of the Offered Securities by the Selling
Securityholders; provided, however, that the Selling Securityholders shall be
exclusively liable to pay any and all commissions, discounts and other payments
to broker-dealers incurred in connection with their sale of the Offered
Securities. The Selling Securityholders have agreed not to sell such securities
for a period of
months after the effective date of the Registration Statement.
PUBLIC OFFERING
The Registration Statement of which this Prospectus forms a part also covers
an underwritten offering of 1,000,000 shares of Common Stock and 1,000,000
Warrants by the Company (1,150,000 shares of Common stock and 1,150,000 Warrants
if the Underwriters' over-allotment option is exercised in full).
4
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF
THE COMMON STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF ANY OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................
Risk Factors..............................................................
Use of Proceeds...........................................................
Dilution..................................................................
Capitalization............................................................
Dividend Policy...........................................................
Selected Financial Data...................................................
Management's Discussion and Analysis of Financial Condition and Results of
Operations..............................................................
Business..................................................................
Management................................................................
Certain Transactions......................................................
Selling Securityholders...................................................
Description of Securities.................................................
Plan of Distribution......................................................
Legal Matters.............................................................
Experts...................................................................
Additional Information....................................................
Index to Financial Statements.............................................
</TABLE>
UNTIL (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
188,889 COMMON STOCK PURCHASE
WARRANTS
935,556 SHARES OF COMMON STOCK
FIRSTLINK COMMUNICATIONS, INC.
---------------------
PROSPECTUS
---------------------
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
- ------------- ---------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
1.2 Form of Representative's Share Option Agreement.
1.3 Form of Representative's Warrant Option Agreement.
3.1 Articles of Incorporation.
3.2 Bylaws.
4.1 Specimen Certificate for Common Stock.(1)
4.2 Warrant Agreement.
4.3 Form of Lock Up Agreement with certain Securityholders.
4.4 Specimen Certificate for Warrant (1)
5.1 Opinion of Neuman Drennen & Stone, LLC.
10.1 1996 Stock Option Plan.
10.2 Office Lease (190 SW Harrison, Portland, OR)
10.3 Telecommunications Services Agreement between Registrant and Oregon Portland Associates (Portland
Center Apartments)(2)
10.4 Telecommunications Services Agreement between Registrant and Riverplace II Joint Venture
(Riverplace Development)(2)
10.5 Telecommunications Services Agreement between Registrant and Elsie D. McIver U/A Trust Dated 1/4/72
(Vista St. Clair)(2)
10.6 Telecommunications Services Agreement between Registrant and Lloyd Place Apartments Limited
Partnership (Lloyd Place)(2)
10.7 Telecommunications Services Agreement between Registrant and Harsch Investment Corp. (King Tower
Apartments)(2)
10.8 Telecommunications Services Agreement between Registrant and Harsch Investment Corp. (Park Plaza
Apartments)(2)
10.9 Telecommunications Services Agreement between Registrant and Security Investments; LP (Ione Plaza
Apartments)(2)
10.10 Telecommunications Services Agreement between Registrant and Housing Authority of Portland (Pearl
Court Apartments)(2)
10.11 Telecommunications Services Agreement between Registrant and Harsch Investment Corp. (The Clay
Towers Apartments)(2)
10.12 Telecommunications Services Agreement between Registrant and Crossing Development Corporation
(Legends)(2)
10.13 Telecommunications Services Agreement between Registrant and Parkside Place (Parkside Plaza)(2)
10.14 Telecommunications Services Agreement between Registrant and Housing Authority of the City of
Vancouver, Washington (Cougar Creek Apartments)(2)
10.15 Telecommunications Services Agreement between Registrant and Housing Authority of the City of
Vancouver, Washington (ParkLane Apartments)(2)
10.16 Telecommunications Services Agreement between Registrant and Housing Authority of the City of
Vancouver, Washington (Willow Creek Apartments)(2)
10.17 Telecommunications Services Agreement between Registrant and Harsch Development Corp. (Sherman
Tower)(2)
10.18 Telecommunications Services Agreement between Registrant and Harsch Development Corp. (The
Nettleton)(2)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
- ------------- ---------------------------------------------------------------------------------------------------
10.19 Telecommunications Services Agreement between Registrant and Harsch Development Corp. (Regency
Tower Apartments)(2)
<C> <S>
10.20 Telecommunications Services Agreement between Registrant and Harsch Development Corp. (Syl-Mar
Estates)(2)
23.1 Consent of Neuman Drennen & Stone, LLC. (included in Exhibit 5.1)
23.2 Consent of KPMG Peat Marwick LLP.
24 Power of Attorney (included on page II-7).
</TABLE>
- ------------------------
(1) To be filed by Amendment.
(2) Certain information has been omitted pursuant to Rule 406 of the Securities
Act. Omitted information is designated by " - ". The deleted information
has been provided to the Commission supplementally.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FIRSTLINK COMMUNICATIONS, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
<S> <C>
1.1 Form of Underwriting Agreement.
1.2 Form of Representative's Share Option Agreement.
1.3 Form of Representative's Warrant Option Agreement.
3.1 Articles of Incorporation.
3.2 Bylaws.
4.1 Specimen Certificate for Common Stock.
4.2 Warrant Agreement.
4.3 Form of Lock Up Agreement with certain Securityholders.
4.4 Specimen Certificate for Warrant (1)
5.1 Opinion of Neuman Drennen & Stone, LLC.
10.1 1996 Stock Option Plan.
10.2 Office Lease (190 SW Harrison, Portland, OR)
10.3 Telecommunications Services Agreement between Registrant and Oregon
Portland Associates (Portland Center Apartments)
10.4 Telecommunications Services Agreement between Registrant and
Riverplace II Joint Venture (Riverplace Development)
10.5 Telecommunications Services Agreement between Registrant and
Elsie D. McIver U/A Trust Dated 1/4/72 (Vista St. Clair)
10.6 Telecommunications Services Agreement between Registrant and
Lloyd Place Apartments Limited Partnership (Lloyd Place)
10.7 Telecommunications Services Agreement between Registrant and Harsch
Investment Corp. (King Tower Apartments)
10.8 Telecommunications Services Agreement between Registrant and Harsch
Investment Corp. (Park Plaza Apartments)
10.9 Telecommunications Services Agreement between Registrant and
Security Investments; LP (Ione Plaza Apartments)
10.10 Telecommunications Services Agreement between Registrant and Housing
Authority of Portland (Pearl Court Apartments)
10.11 Telecommunications Services Agreement between Registrant and Harsch
Investment Corp. (The Clay Towers Apartments)
10.12 Telecommunications Services Agreement between Registrant and
Crossing Development Corporation (Legends)
10.13 Telecommunications Services Agreement between Registrant and
Parkside Place (Parkside Plaza)
10.14 Telecommunications Services Agreement between Registrant and Housing
Authority of the City of Vancouver, Washington (Cougar Creek Apartments)
10.15 Telecommunications Services Agreement between Registrant and Housing
Authority of the City of Vancouver, Washington (ParkLane Apartments)
10.16 Telecommunications Services Agreement between Registrant and Housing
Authority of the City of Vancouver, Washington (Willow Creek Apartments)
10.17 Telecommunications Services Agreement between Registrant and Harsch
Development Corp. (Sherman Tower)
10.18 Telecommunications Services Agreement between Registrant and Harsch
Development Corp. (The Nettleton)
10.19 Telecommunications Services Agreement between Registrant and Harsch
Development Corp. (Regency Tower Apartments)
10.20 Telecommunications Services Agreement between Registrant and Harsch
Development Corp. (Syl-Mar Estates)
23.1 Consent of Neuman Drennen & Stone, LLC. (included in Exhibit 5.1)
23.2 Consent of KPMG Peat Marwick LLP.
24 Power of Attorney (included on page II-6).
</TABLE>
<PAGE>
Exhibit No. 1.1 Form of Underwriting Agreement.
<PAGE>
Exhibit 1.1
UNDERWRITING AGREEMENT
_______________, 1998
Kashner Davidson Securities Corporation
As Representative of the Several
Underwriters Named in Schedule I Hereto
77 South Palm Avenue
Sarasota, Florida 34236
Gentlemen:
FirstLink Communications, Inc., an Oregon corporation (the "Company"),
hereby confirms its agreement with you (the "Representative") and with the other
Underwriters, including the Representative, named in Schedule I hereto
(hereinafter "the Underwriters") as follows:
SECTION 1
DESCRIPTION OF SECURITIES
The Company proposes to issue and sell to the Underwriters shares (the
"Shares") of Common Stock, no par value per share, and Redeemable Common
Stock Purchase Warrants (the "Warrants") (the Shares and the Warrants shall
collectively be referred to as the "Securities"). The Underwriters propose
to purchase 1,000,000 Shares ("Firm Shares") and 1,000,000 Warrants
(collectively, the "Firm Securities") at a purchase price of $_______ PER
SHARE and $______ PER WARRANT. The Shares and the Warrants may be purchased
by the Underwriters only together on the basis of one Share and one Warrant.
The Underwriters shall also have options (the "Over-allotment Options") to
purchase up to an additional 150,000 Shares ("Over-allotment Shares") and/or
150,000 Warrants ("Over-allotment Warrants") (collectively, the
"Over-allotment Securities"), as provided in Section 3.1 hereof.
Two Warrants shall entitle the holder to purchase one share of Common Stock
at $______ PER SHARE UNTIL __________ __, 2001. The Company may redeem the
Warrants on forty-five (45) days' written notice at a price of $.05 per Warrant
at such time as the market price of the Common Stock exceeds $ _______ PER SHARE
for 20 of the 30 trading days ending within 30 days preceding the date of the
notice of redemption. To redeem the Warrants, the Company must have in effect a
current registration statement registering the Common Stock issuable upon
exercise of the Warrants. The shares of Common Stock underlying the Warrants are
referred to herein as the "Warrant Shares."
The Company proposes to issue and sell to the Representative and its
designees on the Closing Date (hereinafter defined) for an aggregate purchase
price of $100, options ("Share Options") to purchase 100,000 shares of Common
Stock and options ("Warrant Options") to purchase 100,000 Warrants. Each Share
Option shall be exercisable at $______ PER SHARE; and each Warrant Option is
exercisable at $______ PER WARRANT. The Share Options and the Warrant Options
are collectively referred to as the "Representative's Options." The terms of
the warrants receivable upon exercise of the Warrant Options (the
"Representative's Warrants"), including the exercise price, shall be identical
to the terms of the Warrants.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Underwriters to enter into this Agreement, the
Company hereby represents and warrants to and agrees with each Underwriter that:
2.1 REGISTRATION STATEMENT AND PROSPECTUS. A registration statement on
Form (FILE NO. 333-_____________) has been prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations of the Securities and Exchange
Commission (the "Commission") thereunder, and said registration statement has
been filed with the Commission. Copies of such
<PAGE>
registration statement and any amendments, and all forms of the related
prospectuses contained therein, have been delivered to the Representative.
Such registration statement, including the prospectus, Part II, and documents
incorporated by reference therein and financial schedules and exhibits
thereto, as amended at the time when it shall become effective, is herein
referred to as the "Registration Statement," and the prospectus included as
part of the Registration Statement on file with the Commission when it shall
become effective or, if the procedure in Rule 430A of the Rules and
Regulations (as defined below) under the Securities Act is followed, the
prospectus that discloses all the information that was omitted from the
prospectus on the effective date pursuant to such Rule, and in either case,
together with any changes contained in any prospectus filed with the
Commission by the Company with your consent after the effective date of the
Registration Statement, is herein referred to as the "Final Prospectus." If
the procedure in Rule 430A is followed, the prospectus included as part of
the Registration Statement on the date when the Registration Statement became
effective is referred to herein as the "Effective Prospectus." Any
prospectus included in the Registration Statement and in any amendments
thereto prior to the effective date of the Registration Statement is referred
to herein as a "Preliminary Prospectus." For purposes of this Agreement,
"Rules and Regulations" mean the rules and regulations adopted by the
Commission under the Securities Act.
Included in the Registration Statement are the Firm Securities and the
Over-allotment Securities; and an additional shares of Common Stock reserved
against exercise of the Firm Warrants, the Over-allotment Warrants, and the
Representative's Options.
As used in this Agreement, the term "Effective Date" refers to the date the
Commission declares the Registration Statement effective pursuant to Section 8
of the Securities Act.
2.2 ACCURACY OF REGISTRATION STATEMENT AND PROSPECTUS. The Commission
has not issued any order preventing or suspending the use of any Preliminary
Prospectus with respect to the Securities, and each Preliminary Prospectus has
conformed in all material respects with the requirements of the Securities Act
and the applicable Rules and Regulations and to the best of the Company's
knowledge has not included at the time of filing any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading; except that the
foregoing shall not apply to statements in or omissions from any Preliminary
Prospectus in reliance upon, and in conformity with, written information
furnished to the Company by the Representative, or from any Underwriter through
the Representative, specifically for use in the preparation thereof.
When the Registration Statement becomes effective and on the Closing Date
(hereinafter defined), the Registration Statement, the Effective Prospectus (and
on the Closing Date, the Final Prospectus) will contain all statements which are
required to be stated therein in accordance with the Securities Act and the
Rules and Regulations. No such document will contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading; except that the
foregoing does not apply to information contained in or omitted from the
Registration Statement or the Effective Prospectus or Final Prospectus in
reliance upon written information furnished by the Representative, or by any
Underwriter through the Representative, specifically for use in the preparation
thereof. The Company will not at any time hereafter file any amendments to the
Registration Statement or in accordance with Rule 424(b) of the Rules and
Regulations of which the Representative shall not have been previously advised
in advance of filing or to which the Representative shall reasonably object in
writing.
2.3 FINANCIAL STATEMENTS. KPMG Peat Marwick LLC, whose reports appear
in the Effective Prospectus and the Final Prospectus, are, and during the
periods covered by their reports were, independent accountants as required by
the Securities Act and the applicable Rules and Regulations. The financial
statements and schedules (including the related notes) included in the
Registration Statement, any Preliminary Prospectus or the Effective Prospectus
or the Final Prospectus, present fairly the financial position, the results of
operations, and changes in financial position of the entities purported to be
shown thereby at the dates and for the periods indicated; and such financial
statements have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods indicated.
Underwriting Agreement
March 26, 1998
2
<PAGE>
The PRO FORMA financial information and related notes and schedules
included in the Registration Statement, any Preliminary Prospectus or the Final
Prospectus comply in all material respects with the requirements of the
Securities Act and the Rules and Regulations and present fairly the PRO FORMA
financial position of the Company and its subsidiaries as of the dates
indicated, and the PRO FORMA results of operation for the periods therein
specified. Such PRO FORMA financial information, including the related notes
and schedules, have been prepared on a basis consistent with the historical
financial statements included in the Registration Statement, the Preliminary
Prospectus and the Final Prospectus, except for the PRO FORMA adjustments
specified herein, and give effect to assumptions made on a reasonable basis to
give effect to historical and proposed transactions described in the
Registration Statement, any Preliminary Prospectus and the Final Prospectus.
The PRO FORMA financial information and statistical data, and other data, set
forth in the Final Prospectus under the captions "Prospectus Summary--Financial
and Operating Data," "Selected Consolidated Financial Data," "Pro forma
Financial Information," "______________" and "Capitalization" are derived from
and prepared on a basis consistent with such PRO FORMA financial information.
2.4 NO MATERIAL ADVERSE CHANGE. Except as may be reflected in or
contemplated by the Effective Prospectus or the Final Prospectus, subsequent to
the dates as of which information is given in the Effective Prospectus or the
Final Prospectus, and prior to the Closing Date, (a) there shall not have been
any material adverse change in the condition, financial or otherwise, of the
Company or in its business taken as a whole; (b) there shall not have been any
material transaction entered into by the Company other than transactions in the
ordinary course of business; (c) the Company shall not have incurred any
material liabilities, obligations or claims, contingent or otherwise, which are
not disclosed in the Effective Prospectus or the Final Prospectus; (d) except in
the ordinary course of business and with the consent of the Representative,
there shall not have been nor will there be any change in the capital stock or
long-term debt (except current payments) of the Company; and (e) the Company has
not and will not have paid or declared any dividends or other distributions on
its capital stock.
2.5 NO DEFAULTS. Other than as disclosed in the Effective Prospectus or
the Final Prospectus, the Company is not in any default (which has not been
waived) in the performance of any obligation, agreement or condition contained
in any debenture, note or other evidence of indebtedness or any indenture or
loan agreement. The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated, and compliance with the
terms of this Agreement will not conflict with or result in a breach of any of
the terms, conditions or provisions of, or constitute a default under, the
articles of incorporation, as amended, or by-laws of the Company; any note,
indenture, mortgage, deed of trust, or other material agreement or instrument to
which the Company is a party or by which it or any of its property is bound,
other than for which the Company has received a consent or waiver of such
conduct, breach or default or except where such default would not have a
material adverse effect on the business of the Company; or any existing law,
order, rule, regulation, writ, injunction, or decree of any government,
governmental instrumentality, agency or body, arbitration tribunal or court,
domestic or foreign, having jurisdiction over the Company or its property. The
consent, approval, authorization, or order of any court or governmental
instrumentality, agency or body is not required for the consummation of the
transactions herein contemplated except such as may be required under the
Securities Act or under the securities laws of any state or jurisdiction.
2.6 INCORPORATION AND STANDING. The Company is, and at the Closing Date
(hereinafter defined) and the Over-allotment Closing Date (hereinafter defined)
will be, duly incorporated and validly existing in good standing as a
corporation under the laws of the jurisdiction of its organization, with full
power and authority (corporate and other) to own its property and conduct its
business, present and proposed, as described in the Effective Prospectus and the
Final Prospectus; the Company has full power and authority to enter into this
Agreement; is duly qualified and in good standing as a foreign corporation in
each jurisdiction in which the character or location of its properties (owned or
leased) or the nature of its business makes such qualification necessary except
where the failure to be so qualified would not have a material adverse effect on
the Company; and each of the Company and its Subsidiaries holds all material
licenses, certificates, and permits from governmental authorities necessary for
the conduct of its business as described in the Effective Prospectus and Final
Prospectus.
Underwriting Agreement
March 26, 1998
3
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2.7 CAPITALIZATION. The Company's authorized and outstanding
capitalization on the Effective Date and on the Closing Date (hereinafter
defined), and on the Over-allotment Closing Date (hereinafter defined) are and
will be as set forth under the caption "Capitalization" in the Effective
Prospectus and the Final Prospectus. The Common Stock, the Warrants, and the
Representative's Options conform to the description thereof contained under the
captions "Description of Securities" and "Underwriting" in the Effective
Prospectus and the Final Prospectus. The outstanding shares of Common Stock
have been, and the Securities, upon issuance and delivery against payment
therefor in the manner described herein, will be, duly authorized and validly
issued, fully paid and nonassessable. No sales of securities have been made by
the Company in violation of the registration or anti-fraud provisions of the
Securities Act or in violation of any other federal law or laws of any state or
jurisdiction.
2.8 LEGALITY OF SECURITIES. The Shares, the Warrants, the
Representative's Options, and the Common Stock and Representative's Warrants
issuable upon the exercise of the Representative's Options have been duly and
validly authorized and, when issued and delivered against payment therefor as
provided in this Agreement, will be validly issued, fully paid and
nonassessable. There are no preemptive rights or other rights to subscribe for
or to purchase, or any restriction upon the voting or transfer of, any shares of
Common Stock pursuant to the Company's articles of incorporation, by-laws or
other governing documents or any agreement or other instrument to which the
Company or any of its Subsidiaries is a party or by which any of them may be
bound. Neither the filing of the Registration Statement nor the offering or
sale of the Securities as contemplated by this Agreement gives rise to any
rights, other than those which have been waived or satisfied, for or relating to
the registration of any shares of Common Stock. All of the outstanding shares
of capital stock of each Subsidiary of the Company are owned directly or
indirectly by the Company, free and clear of any claim, lien, encumbrance or
security interest. The Warrants and the Representative's Options, when sold and
delivered, will constitute valid and binding obligations of the Company
enforceable in accordance with the terms thereof. A sufficient number of shares
of Common Stock of the Company has been reserved for issuance upon exercise of
the Warrants, the Representative's Options and the Representative's Warrants.
2.9 PRIOR SALES. No unregistered securities of the Company, of an
affiliate or of a predecessor of the Company have been sold within three years
prior to the date hereof, except as disclosed in the Registration Statement.
2.10 LITIGATION. Except as set forth in the Effective Prospectus and the
Final Prospectus, there is, and at the Closing Date there will be, no action,
suit or proceeding before any court, arbitration tribunal or governmental agency
pending, or to the knowledge of the Company, threatened, which might result in
judgments against the Company not adequately covered by insurance or which
collectively might result in any material adverse change in the condition
(financial or otherwise), the business or the prospects of the Company, or which
would materially affect the properties or assets of the Company.
2.11 REPRESENTATIVE'S OPTIONS. Upon delivery of and payment for the
Representative's Options to be sold by the Company as set forth in Section 3.4
of this Agreement, the Representative and designees of the Representative will
receive good and marketable title thereto, free and clear of all liens,
encumbrances, charges and claims whatsoever; and the Company will have on the
Effective Date and at the time of delivery of such Representative's Options the
requisite power and authority to sell, transfer and deliver such
Representative's Options in the manner provided hereunder.
2.12 FINDER. The Company knows of no outstanding claims against it for
compensation for services in the nature of a finder's fee, origination fee or
financial consulting fee with respect to the offer and sale of the Securities
hereunder except as previously disclosed in writing to the Representative.
2.13 EXHIBITS; CONTRACTS; AGREEMENTS. There are no contracts or other
documents which are required to be filed as exhibits to the Registration
Statement by the Securities Act or by the Rules and Regulations which have not
been so filed and each contract to which the Company is a party and to which
reference is made in the Effective Prospectus and the Final Prospectus has been
duly and validly executed by the Company and, to the best of the Company's
knowledge, is in full force and effect in all material respects in accordance
with its terms, and none of such contracts have been assigned by the Company;
and the Company knows of no present situation or condition or fact which
Underwriting Agreement
March 26, 1998
4
<PAGE>
would prevent compliance with the terms of such contracts, as amended to
date. Except for amendments or modifications of such contracts in the
ordinary course of business, the Company has no intention of exercising any
right which it may have to cancel any of its obligations under any of such
contracts, and has no knowledge that any other party to any of such contracts
has any intention not to render full performance under such contracts. All
material terms of each contract, agreement, plan, arrangement or
understanding to which the Company is a party, or to which it may reasonably
be expected to become a party, have been fully disclosed in the Effective
Prospectus and Final Prospectus.
2.14 TAX RETURNS. The Company has filed all federal and state tax
returns which are required to be filed by it and has paid all taxes shown on
such returns and on all assessments received by it to the extent such taxes have
become due. All taxes with respect to which the Company is obligated have been
paid or adequate accruals have been set up to cover any such unpaid taxes.
2.15 PROPERTY. Except as otherwise set forth in or contemplated by the
Effective Prospectus and the Final Prospectus, the Company and its Subsidiaries
have good and marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them, in each case free and
clear of all liens, encumbrances and defects, except such as are described in
the Effective Prospectus and the Final Prospectus or such as do not materially
effect the value of such property and do not interfere with the use made or
proposed to be made of such property by the Company or such Subsidiaries; and
any real property and buildings held under lease by the Company and its
Subsidiaries are held by them under valid, existing, and enforceable leases with
such exceptions as are not material and do not interfere with the use made or
proposed to be made of such property and buildings by the Company and such
Subsidiaries.
2.16 AUTHORITY. The execution and delivery by the Company of this
Agreement has been duly authorized by all necessary corporate action and this
Agreement is the valid, binding and legally enforceable obligation of the
Company, except as rights to indemnity hereunder may be limited by federal or
state securities laws or public policy and except as enforceability may be
limited by bankruptcy, insolvency, or similar laws affecting creditors rights
generally and by general equitable principles.
2.17 LOCK-UP. The Company has obtained from each of its officers,
directors, and 1% or greater shareholders, his written agreement that for a
period of nine (9) months from the Effective Date he will not, without the
prior written consent of the Representative, sell or otherwise dispose of any
shares of Common Stock of the Company owned directly or indirectly or
beneficially by him.
2.18 USE OF FORM SB-2. The Company is eligible to use Form SB-2 for the
offer and sale of the Securities.
2.19 GOVERNMENTAL COMPLIANCE. Neither the Company nor any Subsidiary is
in violation of any law, ordinance, governmental rule or regulation or court
decree to which it may be subject which violation might reasonably be expected
to have a material adverse effect on the condition (financial or other),
properties, prospective results of operations or net worth of the Company and
its Subsidiaries.
2.20 STABILIZATION. The Company has not taken and may not take, directly
or indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of Common Stock to
facilitate the sale or resale of the Shares or the Warrants.
2.21 CUSIP NUMBER. The Company has obtained CUSIP numbers for the Common
Stock and the Warrants.
2.22 SUBSIDIARIES. The Company has no Subsidiaries and it has no present
intention of acquiring or forming any subsidiaries, except as disclosed in the
Effective Prospectus or the Final Prospectus.
Underwriting Agreement
March 26, 1998
5
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2.23 BOOKS AND ACCOUNTS. The books, records and accounts of the Company
and each of its subsidiaries accurately and fairly reflect, in reasonable
detail, the transactions in and dispositions of the assets of the Company and
each of its subsidiaries. The systems of internal accounting controls
maintained by the Company and each of its subsidiaries are sufficient to provide
reasonable assurances that (w) transactions are executed in accordance with
management's general or specific authorization; (x) transactions are recorded as
necessary (A) to permit preparation of financial statements in conformity with
generally accepted accounting principles and (B) to maintain accountability for
assets; and (z) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
2.24 EMPLOYEES. No labor disturbance by the employees of the Company or
any of its subsidiaries exists or is imminent; and the Company is not aware of
any existing or imminent labor disturbance by the employees of any principal
suppliers, contract manufacturing organizations, manufacturers, authorized
dealers or distributors that might be expected to result in any material adverse
change in the condition (financial or otherwise), earnings, operations, business
or prospects of the Company and its subsidiaries, considered as a whole. No
collective-bargaining agreement exists with any of the Company's or any of the
Company's subsidiaries' employees and, to the best knowledge of the Company, no
such agreement is imminent.
2.25 POLITICAL CONTRIBUTIONS. Neither the Company nor any of its
subsidiaries has, directly or indirectly, at any time (x) made any contributions
to any candidate for political office, or failed to disclose fully any such
contribution, in violation of law; (y) made any payment to any state, federal or
foreign governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments required or allowed by all
applicable laws; or (z) violated nor is it in violation of any provision of the
Foreign Corrupt Practices Act of 1977, as amended.
2.26 ENVIRONMENTAL LIABILITIES. Neither the Company nor any of its
subsidiaries has any liability, known or unknown, matured or not matured,
absolute or contingent, assessed or unassessed, imposed or based upon any
provision of, or has received notice of any potential liability under, any
foreign, federal, state or local law, rule or regulation or the common law, or
any tort, nuisance or absolute liability theory, or under any code, order,
decree, judgment or injunction applicable to the Company or any of its
subsidiaries relating to public health or safety, worker health or safety or
pollution, damage to or protection of the environment, including, without
limitation, laws relating to damage to natural resources, emissions, discharges,
releases or threatened releases of hazardous materials into the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata), or otherwise relating to the manufacture,
processing, use treatment, storage, generation, disposal, transport or handling
of hazardous materials. As used herein, "hazardous material" includes chemical
substances, wastes, pollutants, contaminants, hazardous or toxic substances,
constituents, materials or wastes, whether solid, gaseous or liquid in nature.
2.27 INVESTMENT COMPANY ACT. The Company is familiar with the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules and regulations
thereunder, and has in the past conducted, and intends in the future to conduct,
its affairs in such a manner as to ensure that it will not become an "investment
company" within the meaning of the 1940 Act and such rules and regulations.
2.28 PATENTS. The Company owns or possesses adequate rights to use all
material trademarks, service marks, trade names and copyrights described or
referred to in the Final Prospectus as owned by or used by it, or which are
necessary for the conduct of its business as described in the Final Prospectus;
and the Company has not received any notice of infringement of or conflict with
asserted rights of others with respect to any trade secrets, know-how,
trademarks, service marks, trade names or copyrights which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, might
have a material adverse effect on the business, properties, condition (financial
or otherwise), prospects or results of operations of the Company.
Underwriting Agreement
March 26, 1988
6
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SECTION 3
PURCHASE AND SALE OF THE SECURITIES
3.1 PURCHASE OF SECURITIES AND OVER-ALLOTMENT OPTION. Subject to the
terms and conditions and upon the basis of the representations and warranties
herein set forth, the Company agrees to issue and sell to the Underwriters, and
each of the Underwriters agrees to purchase from the Company at a price of
$_____ PER SHARE AND $______ PER WARRANT, severally and not jointly, the number
of Shares and Warrants set forth opposite their respective names in Schedule I
hereto. The Underwriters agree to offer the Shares and Warrants to the public
as set forth in the Final Prospectus.
The Company hereby grants to the Underwriters an option to purchase from
the Company, solely for the purpose of covering over-allotments in the sale of
Firm Securities, all or any portion of the Over-allotment Shares and/or the
Over-allotment Warrants for a period of forty-five (45) days after the Effective
Date at the purchase price set forth above. The Representative shall notify the
Company of its intention to exercise the Over-allotment Option at least three
(3) days prior to such exercise or exercises.
3.2 SUBSTITUTION OF UNDERWRITERS. If any Underwriter defaults in its
obligation to purchase the number of Securities which it has agreed to purchase
under this Agreement, the non-defaulting Underwriters shall be obligated to
purchase (pro rata in proportion to the number of Securities set forth opposite
the name of each non-defaulting Underwriter in Schedule I hereto) the total
number of Securities which the defaulting Underwriter agreed but failed to
purchase; except that the non-defaulting Underwriters shall not be obligated to
purchase any of the Securities if the total number of Securities which the
defaulting Underwriter or Underwriters agreed but failed to purchase exceeds
9.09% of the total number of Securities, and any non-defaulting Underwriter
shall not be obligated to purchase more than 110% of the number of Securities
set forth opposite its name in Schedule I hereto purchasable by it pursuant to
the terms of Section 3.1; and provided further that the non-defaulting
Underwriters shall not be obligated to purchase any Securities which the
defaulting Underwriter or Underwriters agreed to purchase if such additional
purchase would cause the Underwriter to be in violation of the net capital rule
of the Commission or other applicable law. If the foregoing maximums are
exceeded, the non-defaulting Underwriters, and any other underwriters
satisfactory to the Representative who so agree, shall have the right, but will
not be obligated, to purchase (in such proportions as may be agreed upon among
them) all the Securities. In any such case, the Representative shall have the
right to postpone the Closing determined as provided in Section 3.3.2 hereof for
not more than seven Business Days after the date originally fixed as the Closing
pursuant to said Section 3.3.2 in order that any necessary changes in the
Registration Statement, the Prospectus or any other documents or arrangements
may be made. If the non-defaulting Underwriters or the other underwriters
satisfactory to the Representative do not elect to purchase the Securities which
the defaulting Underwriter or Underwriters agreed but failed to purchase, this
Agreement shall terminate without liability on the part of any non-defaulting
Underwriter or the Company except for the payment of expenses to be borne by the
Company and the Underwriters as provided in Section 3.5 and the indemnity and
contribution agreements of the Company and the Underwriters contained in Section
6 hereof.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have to the Company or to the non-defaulting Underwriters for
damages caused by its default hereunder.
3.3 PUBLIC OFFERING PRICE. After the Commission notifies the Company
that the Registration Statement has become effective, the Underwriters propose
to offer the Firm Securities to the public at an initial public offering price
of $_______ PER SHARE AND $______ PER WARRANT as set forth in the Final
Prospectus. The Underwriters may allow such discounts and concessions upon
sales to selected dealers as may be determined from time to time by the
Representative.
3.3.1 PAYMENT FOR SECURITIES. Payment for the Securities
(including any Securities included in the Over-allotment Option which the
Underwriters agree to purchase) shall be made to the Company or its order
by certified or official bank check or checks, in the amount of the
purchase price by or on behalf of the Underwriters at the offices of the
Representative in Englewood, Colorado, upon delivery to the Representative
Underwriting Agreement
March 26, 1998
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<PAGE>
or its designee of certificates for the Shares and Warrants in definitive
form in such numbers and registered in such names as the Representative
requests in writing at least three full business days prior to such
delivery. At the request of the Representative, the Company shall deliver
the Securities to the Underwriters through the facilities of The Depository
Trust Company or as otherwise directed.
3.3.2 CLOSING. The time and date of delivery and payment
hereunder is herein called the "Closing Date" and shall take place at the
office of the Representative in Englewood, Colorado, or at such other
location as may be specified by the Representative, on the fourth Business
Day (as hereinafter defined) following the Effective Date; provided,
however, that such date may be extended for not more than an additional
seven business days by the Representative. Should the Underwriters elect
to exercise any part of the Over-allotment Option pursuant to Section 3.1
above, the time and date of delivery and payment for such Over-allotment
Shares and/or Over-allotment Warrants shall be the third Business Day
following such exercise of the Over-allotment Option, or each earlier date
as may be agreed upon by the Representative and the Company. Said date is
referred to as the "Over-allotment Closing Date."
3.3.3 INSPECTION OF CERTIFICATES. For the purpose of expediting
the checking and packaging of the certificates for the Securities, if
requested by the Representative, the Company agrees to make the
certificates available for inspection by the Representative at the main
office of the Representative in Sarasota, Florida, at least two full
business days prior to the proposed delivery date.
3.4 SALE OF REPRESENTATIVE'S OPTIONS. On the Closing Date the Company
will sell and deliver to the Representative and its designees, for a purchase
price of $100, Share Options and Warrant Options dated as of the date of the
Prospectus substantially in the form filed as an Exhibit to the Registration
Statement with such changes therein, if any, as may be agreed upon by the
Company and the Representative, to purchase 100,000 SHARES AT $______ PER SHARE
AND 100,000 WARRANTS AT $______ PER WARRANT. The Company shall not be obligated
to sell and deliver the Representative's Options, and the Representative will
not be obligated to purchase and pay for the Representative's Options, except
upon payment for the Securities pursuant to Subsection 3.3.1 hereof.
The Representative's Options shall be non-transferable for a period of one
(1) year following the Effective Date except to the Underwriters and their
respective officers or partners. The Representative's Options shall also contain
anti-dilution provisions for stock splits, recombinations and reorganizations, a
one-time demand registration provision, customary piggyback registration rights
and shall otherwise be in form and substance satisfactory to the Representative.
The Representative's Options will be exercisable during the four year period
commencing one (1) year after the Effective Date.
3.5 REPRESENTATIVE'S EXPENSE ALLOWANCE. It is understood that the
Company shall reimburse the Representative, for itself alone and not on behalf
of the other Underwriters, for its expenses on a nonaccountable basis in the
amount of three percent (3%) of the gross proceeds from the sale of the Shares
and the Warrants ($_____ PER SHARE AND $______ PER WARRANT) including proceeds
from the sale of the Over-allotment Shares and/or the Over-allotment Warrants
(hereinafter the "Expense Allowance"). The Representative acknowledges receipt
of $25,000 of said Expense Allowance. On the Closing Date and, if applicable,
on the Over-allotment Closing Date, the Representative shall be entitled to
withhold the unpaid balance of such Expense Allowance. The Representative shall
be solely responsible for all expenses incurred by it in connection with the
offering including, but not limited to, the expenses of its own counsel except
as set forth in Section 5.7 hereof. Notwithstanding the foregoing, if the
Registration Statement does not become effective, or the offering is never
commenced after it becomes effective, or if this Agreement is terminated as
provided herein, the Representative will retain so much of the Expense Allowance
which has been or should have been received by the Representative from the
Company as is equal to its actual accountable out-of-pocket expenses and
reimburse the remainder, if any, to the Company, provided that the amount to be
reimbursed will not exceed $25,000. The Representative's expenses shall
include, but are not to be limited to, a fee to compensate the Representative
for the services and time of Representative's counsel plus any additional
expenses and fees, including but not limited to, travel expenses, postage
expenses, duplication expenses, confirmation and other record preparation
Underwriting Agreement
March 26, 1998
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<PAGE>
expenses, long-distance telephone expenses, consultant and investigator
expenses and other expenses incurred by the Representative in connection with
the proposed offering.
3.6 REPRESENTATIONS OF THE PARTIES. The parties hereto respectively
represent that as of the Closing Date the representations herein contained
and the statements contained in all the certificates theretofore or
simultaneously delivered by any party to another, pursuant to this Agreement,
shall in all material respects be true and correct.
3.7 POST-CLOSING INFORMATION. The Representative covenants that
reasonably promptly after the Closing Date, it will supply the Company with
all information required from the Representative which must be supplied to
the Commission, if any, and such additional information as the Company may
reasonably request to be supplied to the securities authorities for such
states in which the Securities have been qualified for sale.
3.8 RE-OFFERS BY SELECTED DEALERS. On each sale by the Underwriters
of any of the Securities to selected dealers, the Representative shall
require the selected dealer purchasing any such Securities to agree to
re-offer the same on the terms and conditions of the offering set forth in
the Final Prospectus.
SECTION 4
REGISTRATION STATEMENT AND PROSPECTUS
4.1 DELIVERY OF REGISTRATION STATEMENTS. The Company shall deliver to
the Representative without charge two (2) manually signed copies of the
Registration Statement, including all financial statements and exhibits filed
therewith and any amendments or supplements thereto, and shall deliver
without charge to the Representative ten (10) conformed copies of the
Registration Statement and any amendment or supplement thereto, including
such financial statements and exhibits. The signed copies of the
Registration Statement so furnished to the Representative will include
manually signed copies of any and all consents and certificates of the
independent public accountant certifying to the financial statements included
in the Registration Statement and signed copies of any and all opinions,
consents and certificates of any other persons whose profession gives
authority to statements made by them and who are named in the Registration
Statement as having prepared, certified, or reviewed any part thereof.
4.2 DELIVERY OF PRE-EFFECTIVE PROSPECTUS. The Company will cause to
be delivered to the Underwriters and to other broker-dealers, without
charge, prior to the Effective Date, as many copies of each Preliminary
Prospectus filed with the Commission bearing in red ink the statement
required by Item 501(c)(8) of Regulation S-K (Reg. 229.501(c)(8)) as may be
required by the Representative. The Company consents to the use of such
documents by the Underwriters and by selected dealers prior to the Effective
Date of the Registration Statement.
4.3 DELIVERY OF PROSPECTUS. The Company will deliver, without charge,
copies of the Effective Prospectus and the Final Prospectus at such addresses
and in such quantities as may be required by the Underwriters for the
purposes contemplated by this Agreement and shall deliver said printed copies
of the Effective Prospectus and the Final Prospectus to the Underwriters and
to selected dealers within one business day after the Effective Date.
4.4 FURTHER AMENDMENTS AND SUPPLEMENTS. If during such period of time
as in the opinion of the Representative or its counsel the Final Prospectus
is required to be delivered under the Securities Act, any event occurs or any
event known to the Company relating to or affecting the Company shall occur
as a result of which the Final Prospectus as then amended or supplemented
would include an untrue statement of a material fact, or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time after the Effective Date to amend or supplement the
Final Prospectus to comply with the Securities Act, the Company will
forthwith notify the Representative thereof and prepare and file with the
Commission such further amendment to the Registration Statement or supplement
the Final Prospectus (at the expense of the Company) so as to correct such
statement or omission or effect such compliance. The Company shall furnish
and deliver to the Representative and to others whose names and addresses are
designated by the Representative, all at the cost of the Company, a
reasonable number of copies of the amended or supplemented Prospectus which
as so amended or supplemented will not contain any untrue statement of a
material fact or omit to state any material fact
9
<PAGE>
necessary in order to make the Prospectus not misleading in the light of the
circumstances as of the date of such Prospectus, amendment, or supplement,
and which will comply in all respects with the Securities Act. In the event
the Underwriters are required to deliver a Prospectus beyond completion of
their participation in the public offering, upon request the Company will
prepare promptly such Prospectus or Prospectuses as may be necessary to
permit continued compliance with the requirements of Section 10 of the
Securities Act.
4.5 USE OF PROSPECTUS. The Company authorizes the Underwriters and
all selected dealers to whom any of the Securities may be sold to use the
Effective Prospectus and the Final Prospectus, as from time to time amended
or supplemented, in connection with the offer and sale of the Securities and
in accordance with the applicable provisions of the Securities Act, the Rules
and Regulations and state Blue Sky or securities laws.
SECTION 5
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Underwriters that:
5.1 OBJECTION OF REPRESENTATIVE TO AMENDMENTS OR SUPPLEMENTS. The
Company will not at any time, whether before or after the Effective Date,
file any amendment or supplement to the Registration Statement or Prospectus,
unless and until a copy of such amendment or supplement has been furnished
to the Representative a reasonable period of time prior to the proposed
filing thereof; or to which the Representative or counsel for the
Representative have reasonably objected, in writing, on the ground that such
amendment or supplement is not in compliance with the Securities Act or the
Rules and Regulations.
5.2 COMPANY'S BEST-EFFORTS TO CAUSE REGISTRATION STATEMENT TO BECOME
EFFECTIVE. The Company will use its best efforts to cause the Registration
Statement to become effective or, if the procedure in Rule 430A of the Rules
and Regulations is followed, comply with the provisions of and make all
requisite filings with the Commission pursuant to such Rule and to notify the
Representative promptly (in writing, if requested) of all such filings. The
Company shall promptly advise the Representative, and will confirm such
advice in writing (a) when the Registration Statement shall become effective
and when any amendment thereto shall have become effective and when any
amendment of or supplement to the Effective Prospectus or the Final
Prospectus shall be filed with the Commission; (b) when the Commission makes
a request or suggestion for any amendment to the Registration Statement or
the Effective Prospectus or the Final Prospectus or for additional
information and the nature and substance thereof; and (c) of the happening of
any event which in the judgment of the Company makes any material statement
in the Registration Statement or Effective Prospectus or the Final Prospectus
untrue or which requires the making of any changes in the Registration
Statement or the Effective Prospectus or Final Prospectus in order to make
the statements therein not misleading. The Company shall also promptly
notify the Representative, and confirm such notice in writing, when the
Company has knowledge of the issuance by the Commission of an order
suspending the effectiveness of the Registration Statement pursuant to
Section 8 of the Securities Act, suspending or preventing the use of any
Preliminary Prospectus or the Effective Prospectus or Final Prospectus or
suspending the qualification of the Securities for offering or sale in any
jurisdiction, or of the institution of any proceedings for any such purpose.
The Company will use every reasonable effort to prevent the issuance of any
order suspending the effectiveness of the Registration Statement or refusing
or suspending the qualification of the Securities, and to obtain as soon as
possible a lifting of any such suspension order, the reversal of any such
refusal to qualify, and the termination of any such suspension.
5.3 PREPARATION AND FILING OF AMENDMENTS AND SUPPLEMENTS. The Company
agrees to prepare and file promptly with the Commission, upon request of the
Representative, such amendments or supplements to the Registration Statement
or Final Prospectus, in form satisfactory to counsel to the Company, as may
be necessary, in the opinion of counsel to the Representative and of counsel
to the Company; and it shall use its best efforts to cause the same to become
effective as promptly as possible.
5.4 BLUE SKY QUALIFICATION. The Company has used and will use its
best efforts to qualify (blue-sky) the sale of the Securities in those states
as may be agreed upon by the Company and the Representative. Copies of all
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applications for the registration of securities and related documents (except
for the Registration Statement and Preliminary or Final Prospectus) filed by
the Representative's counsel with the various states have been supplied to
the Company's counsel, concurrently with their transmission to the various
states, and copies of all comments and orders received from the various
states have been and shall be immediately supplied to the Company's counsel.
Immediately prior to the Effective Date, counsel for the Representative shall
advise the Representative in writing of all states wherein the offering is
exempt or has been registered for sale, canceled, withdrawn or denied, the
date of such event(s) and the number of Securities registered for sale in
each such state. After settlement and closing, the Representative shall
notify its counsel of the number of Securities sold in each such jurisdiction.
5.5 FINANCIAL STATEMENTS. The Company at its own expense will prepare
and give such financial statements and other information to the Commission,
or the proper public bodies of the states in which the Securities may be
registered or qualified, as may be required by them.
5.6 REPORTS AND FINANCIAL STATEMENTS TO THE REPRESENTATIVE. During
the period ending three years from the Closing Date, the Company will deliver
to the Representative copies of each annual report of the Company, and will
deliver to the Representative, within 90 days after the close of each fiscal
year of the Company, a financial report of the Company and its Subsidiaries,
if any, on a consolidated basis, and a similar financial report of all
unconsolidated Subsidiaries, if any. All such reports will include a balance
sheet as of the end of the preceding fiscal year, a statement of operations,
a statement of cash flows and an analysis of shareholders' equity covering
such fiscal year, and all will be in reasonable detail and certified by
independent public accountants for the Company. These requirements will be
satisfied if the Company provides to the Representative copies of its Forms
10-K, Forms 10-Q and Forms 8-K (or other appropriate forms) when they are
filed with the Commission.
If the Company shall fail to furnish the Representative with financial
statements as herein provided, within the times specified herein, the
Representative, after giving reasonable notice of not less than 30 days (and
if the financial statements are not provided within such 30 day period),
shall have the right to have such financial statements prepared by
independent public accountants of its own choosing and the Company agrees to
furnish such independent public accountants such data and assistance and
access to such records as they may reasonably require to enable them to
prepare such statements and to pay their reasonable fees and expenses in
preparing the same.
During the period ending three years from the Closing Date the Company
shall also provide to the Representative copies of all other statements,
documents, or other information which the Company shall mail or otherwise
make available to any class of its security holders, or which it shall file
with the Commission; and, upon request in writing from the Representative,
the Company shall furnish to the Representative such other information as may
reasonably be requested and which may be properly disclosed to the
Representative with reference to the property, business and affairs of the
Company and its Subsidiaries, if any; provided such written request includes
an agreement to keep confidential any information which should not be
disclosed to the public.
5.7 EXPENSES PAID BY THE COMPANY. The Company will pay or cause to be
paid, whether or not the transactions contemplated hereunder are consummated
or the Registration Statement is prevented from becoming effective or this
Agreement is terminated, (a) all expenses (including stock transfer taxes)
incurred in connection with the delivery to the several Underwriters of the
Securities; (b) all fees and expenses (including, without limitation, fees
and expenses of the Company's accountants and counsel, but excluding fees and
expenses of counsel for the Underwriters in connection with the preparation,
printing, filing, delivery and shipping of the Registration Statement
(including financial statements therein and all amendments and exhibits
thereto), each Preliminary Prospectus, the Effective Prospectus and the Final
Prospectus as amended or supplemented, and the printing, delivery and
shipping of this Agreement and other underwriting documents, including
Underwriter's Questionnaires, Underwriters' Powers of Attorney, Blue Sky
Memoranda, Agreements Among Underwriters, and Selected Dealer Agreements; (c)
the filing fee of the National Association of Securities Dealers, Inc.; (d)
any applicable listing fees; (e) the cost of printing certificates
representing the Shares and Warrants; (f) the cost and charges of any
transfer agent or registrar, and the Warrant agent; and (g) all other costs
and expenses incident to the performance of its obligations hereunder which
are not otherwise provided for in this Section. It is understood, however,
that, except as provided in this Section, the Underwriters shall
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pay all of their own costs and expenses, including the fees of their counsel,
stock transfer taxes on resale of any of the Securities by them, and any
advertising expenses connected with any offers they may make.
5.8 REPORTS TO SHAREHOLDERS. During the period ending five years from
the Closing Date the Company will, as promptly as possible, but not later
than 180 days after the end of its annual fiscal year, render and distribute
reports to its shareholders which will include audited statements of its
operations and cash flows during such period and its balance sheet as of the
end of such period, as to which statements the Company's independent
certified public accountants shall have rendered an opinion.
5.9 SECTION 11(a) FINANCIALS. The Company will make generally
available to its security holders and will deliver to the Representative, as
soon as practicable, an earnings statement (as to which no opinion need be
rendered but which will satisfy the provisions of Section 11(a) of the
Securities Act) covering a period of at least 12 months beginning after the
Effective Date. Compliance by the Company with Rule 158 promulgated under the
Securities Act shall satisfy the requirements of this Section 5.9.
5.10 POST-EFFECTIVE AVAILABILITY OF PROSPECTUS. The Company will
comply, at its own expense, with all requirements imposed upon it by the
Securities Act, as now or hereafter amended, by the Rules and Regulations, as
from time to time may be in force, and by any order of the Commission, so far
as necessary to permit the continuance of sales or dealings in the Shares and
the Warrants and the exercise of the Warrants.
5.11 APPLICATION OF PROCEEDS. The Company will apply the net proceeds
from the sale of the Securities substantially in the manner specifically set
forth in the Final Prospectus. Any deviation from such application must be in
accordance with the Final Prospectus and may occur only after approval by the
board of directors of the Company and then only after the board of directors
has obtained the written opinion as to the propriety of any such deviation
provided by recognized legal counsel well versed in the federal and state
securities laws.
5.12 AGREEMENTS OF CERTAIN SHAREHOLDERS. The Company has delivered to
the Representative, prior to the execution of this Agreement, the agreement
of each officer, director, and one percent (1%) or greater shareholder, that
for a period of from the Effective Date such persons shall not sell,
contract to sell, pledge, hypothecate, grant any option to purchase or
otherwise dispose of any portion of the shares of Common Stock owned
directly, indirectly or beneficially by such person prior to the Effective
Date, without the Representative's prior written consent.
5.13 DELIVERY OF DOCUMENTS. At the Closing, the Company has delivered
to the Representative true and correct copies of the articles of
incorporation of the Company and all amendments thereto; true and correct
copies of the by-laws of the Company and of the minutes of all meetings of
the directors and shareholders of the Company held prior to the Closing Date
which in any way relate to the subject matter of this Agreement. All such
copies shall be certified by the Secretary of the Company.
5.14 COOPERATION WITH REPRESENTATIVE'S DUE DILIGENCE. At all times
prior to the Closing Date, the Company will cooperate with the Representative
in such investigation as the Representative may make or cause to be made of
all the properties, management, business and operations of the Company, and
the Company will make available to the Representative in connection therewith
such information in its possession as the Representative may reasonably
request.
5.15 APPOINTMENT OF TRANSFER AGENT AND WARRANT AGENT. The Company has
appointed , as Transfer Agent for the Common Stock and Warrant Agent for the
Warrants, subject to the closing of the offering. The Company will not
change or terminate such appointment for a period of three years from the
Effective Date without first obtaining the written consent of the
Representative, which consent shall not be unreasonably withheld.
5.16 COMPLIANCE WITH CONDITIONS PRECEDENT. The Company will use all
reasonable efforts to comply or cause to be complied with the conditions
precedent to the several obligations of the Underwriters in Section 8 hereof.
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5.17 FILING OF FORM SR. If required under the Securities Act, the
Company agrees to file with the Commission all required reports on Form SR in
accordance with the provisions of Rule 463 promulgated under the Securities
Act and to provide a copy of such reports to the Representative and its
counsel.
5.18 BOUND VOLUME. The Company shall supply to the Representative and
the Representative's counsel, at the Company's cost, three bound volumes each
of all of the public offering materials within a reasonable time after the
closing, not to exceed three months.
5.19 LISTING IN MOODY'S AND STANDARD & POOR'S. The Company has applied
to have the Company listed in Moody's Over-The-Counter Manual or Standard &
Poor's Standard Corporation Records, and it agrees to maintain such listings.
5.20 NASDAQ. The Company has applied to have the Common Stock and
Warrants quoted on the Nasdaq Stock Market ("NASDAQ") on the Effective Date
and it shall continue such listing on NASDAQ or on a national securities
exchange during the entire period each such security is outstanding; provided
that the Company is in compliance with NASDAQ maintenance requirements. The
NASDAQ symbols shall be mutually agreeable to the Company and the
Representative.
5.21 SECONDARY TRADING QUALIFICATION. The Company agrees to use its
best efforts to qualify the Common Stock and Warrants for secondary trading
as soon as legally possible in such states as are requested by the
Representative from time to time, including, without limitation, California
and Texas.
5.22 RIGHT OF INSPECTION. For a period of three years after the
Effective Date, the Representative, at the Representative's expense, will
have the right to have a person or persons selected by the Representative
review the books and records of the Company upon seven days' written notice
and at reasonable times. Such person or persons will be required to execute
a confidentiality agreement which will, in part, prohibit disclosure of
information to any party except the Representative, which information shall
be held in confidence unless otherwise specifically agreed to by the Company
in writing.
5.23 OUTSIDE DIRECTORS, COMMITTEES, EXECUTIVE COMPENSATION. The
Company shall use its best efforts to have at least two members elected to
its board of directors who are not officers or employees of the Company
("outside directors") on the Effective Date of the Registration Statement,
and to cause two such outside directors to be nominated as directors for two
additional one-year terms. The Company will form independent audit and
compensation committees which shall be comprised of at least three of the
Company's directors, at least a majority of whom shall be outside directors.
5.24 REGISTRATION UNDER THE EXCHANGE ACT. The Company has filed a
Registration Statement under Section 12(g) of the Exchange Act with respect
to the Common Stock and the Warrants. The Company has delivered a copy of
such filing to the Representative and to legal counsel for the
Representative. The Company shall use its best efforts to cause the
registration statement under the Exchange Act to become effective not later
than the Effective Date, or as soon thereafter as possible.
SECTION 6
INDEMNIFICATION AND CONTRIBUTION
6.1 INDEMNIFICATION BY COMPANY. The Company shall indemnify and hold
harmless each Underwriter against any and all loss, claim, damage or
liability, joint or several, to which such Underwriter may become subject,
under the Securities Act or otherwise, insofar as such loss, claim, damage,
or liability (or action with respect thereto) arises out of or is based upon
(a) any violation of any registration requirements; (b) any improper use of
sales literature by the Company; (c) any untrue statement or alleged untrue
statement made by the Company in Section 2 hereof; (d) any untrue statement
or alleged untrue statement of a material fact contained (i) in the
Registration Statement, any
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Preliminary Prospectus, the Effective Prospectus, or the Final Prospectus or
any amendment or supplement thereto, or (ii) in any application or other
document, executed by the Company specifically for such application or based
upon written information furnished by the Company, filed in order to qualify
the Securities under the securities laws of the states where filings were
made (any such application, document, or information being hereinafter called
"Blue Sky Application"); or (e) the omission or alleged omission to state in
the Registration Statement, any Preliminary Prospectus, the Effective
Prospectus, or the Final Prospectus or any amendment or supplement thereto or
in any Blue Sky Application a material fact required to be stated therein or
necessary to make the statements therein not misleading; and shall reimburse
each Underwriter for any legal or other reasonable expenses incurred by such
Underwriter in connection with investigating or defending against or
appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action, notwithstanding the possibility that payments
for such expenses might later be held to be improper, in which case the
person receiving them shall promptly refund them; except that the Company
shall not be liable in any such case to the extent, but only to the extent,
that any such loss, claim, damage, or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with written information
furnished to the Company through the Representative by or on behalf of any
Underwriter specifically for use in the preparation of the Registration
Statement, any Preliminary Prospectus, the Effective Prospectus and the Final
Prospectus or any amendment or supplement thereto, or any Blue Sky
Application.
6.2 INDEMNIFICATION BY UNDERWRITERS. Each Underwriter severally, but
not jointly, shall indemnify and hold harmless the Company against any and
all loss, claim, damage or liability, joint or several, to which the Company
may become subject under the Securities Act or otherwise, insofar as such
loss, claim, damage, liability (or action in respect thereto) arises out of
or are based upon (a) any untrue statement or alleged untrue statement of a
material fact contained (i) in the Registration Statement, any Preliminary
Prospectus, the Effective Prospectus or the Final Prospectus or any amendment
or supplement thereto or (ii) in any Blue Sky Application; or (b) the
omission or alleged omission to state in the Registration Statement, any
Preliminary Prospectus, the Effective Prospectus or the Final Prospectus or
any amendment or supplement thereto or in any Blue Sky Application a material
fact required to be stated therein or necessary to make the statements
therein not misleading; except that such indemnification shall be available
in each such case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was
made in reliance upon information and in conformity with written information
furnished to the Company through the Representative or on behalf of such
Underwriter specifically for use in the preparation thereof; and shall
reimburse any legal or other expenses reasonably incurred by the Company in
connection with the investigation or defending against any such loss, claim,
damage, liability, or action.
6.3 RIGHT TO PROVIDE DEFENSE. Promptly after receipt by an
indemnified party under Section 6.1 or 6.2 above of written notice of the
commencement of any action, the indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party under such
section, notify the indemnifying party in writing of the claim or the
commencement of that action; the failure to notify the indemnifying party
shall not relieve it of any liability which it may have to an indemnified
party, except to the extent that the indemnifying party did not otherwise
have knowledge of the commencement of the action and the indemnifying party's
ability to defend against the action was prejudiced by such failure. Such
failure shall not relieve the indemnifying party from any other liability
which it may have to the indemnified party or any person identified in
Section 6.4 below. If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the
extent that it wishes, jointly with any other similarly notified indemnifying
party, to assume the defense thereof with counsel reasonably satisfactory to
the indemnified party. After notice from the indemnifying party to the
indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under such section for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof other than
reasonable costs of investigation; except that the Representative shall have
the right to employ counsel to represent the Representative and those other
Underwriters who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the Underwriters against the
Company under such section if, in the Representative's reasonable judgment,
it is advisable for the Representative and those Underwriters to be
represented by separate counsel, and in that event the fees and expenses of
such separate counsel shall be paid by the Company.
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6.4 CONTRIBUTION. If the indemnification provided for in Sections 6.1
and 6.2 of this Agreement is unavailable or insufficient to hold harmless an
indemnified party, then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the losses,
claims, damages, or liabilities referred to in Sections 6.1 or 6.2 above (a)
in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the other
from the offering of the Securities; or (b) if the allocation provided by
clause (a) above is not permitted by applicable law, in such proportion as is
appropriate to reflect the relative benefits referred to in clause (a) above
but also the relative fault of the Company on the one hand and the
Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, or liabilities, as well as
any other relevant equitable considerations. The relative benefits received
by the Company and the Underwriters shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts
and un-itemized expenses received by the Underwriters, in each case as set
forth in the table on the cover page of the Final Prospectus. Relative fault
shall be determined by reference to, among other things, whether the untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by the Company or the Underwriter and the parties'
relative intent, knowledge, access to information, and opportunity to correct
or prevent such untrue statement or omission. For purposes of this Section
6.4, the term "damages" shall include any counsel fees or other expenses
reasonably incurred by the Company or the Underwriters in connection with
investigating or defending any action or claim which is the subject of the
contribution provisions of this Section 6.4. Notwithstanding the provisions
of this Section 6.4, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the
Securities underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages which such Underwriter has
otherwise been required to pay by reason of any such untrue statements or
omissions. No person adjudged guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Under this Section 6.4, each Underwriter's obligations to
contribute are several in proportion to their respective underwriting
obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted
against it in respect of which contribution may be sought, it shall promptly
give written notice of such service to the party or parties from whom
contribution may be sought, but the omission so to notify such party or
parties of any such service shall not relieve the party from whom
contribution may be sought from any obligation it may have hereunder or
otherwise (except as specifically provided in Section 6.4 hereof).
6.5 EXTENSION OF OBLIGATIONS. The obligations of the Company under
this Section 6 shall be in addition to any other liability which the Company
may otherwise have, and shall extend, upon the same terms and conditions, to
each person, if any, who controls any Underwriter within the meaning of the
Securities Act; and the obligations of the Underwriters under this Section
shall be in addition to any liability that the respective Underwriters may
otherwise have, and shall extend, upon the same terms and conditions, to each
director of the Company (including any person who, with his consent, is named
in the Registration Statement as about to become a director of the Company),
to each officer of the Company who has signed the Registration Statement, and
to each person, if any, who controls the Company within the meaning of the
Securities Act.
6.6 REIMBURSEMENT OF UNDERWRITERS. In addition to its obligations
under Section 6.1 of this Agreement, the Company agrees that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding arising out of or based upon any loss, claim, damage, or
liability described in Section 6.1 of this Agreement, it will reimburse the
Underwriters, and each of them, on a monthly basis (or more often, if
requested) for all reasonable legal or other expenses incurred in connection
with investigating or defending any such claim, action, investigation,
inquiry or other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the Company's
obligation to reimburse the Underwriters for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any portion, or all, of
any such interim reimbursement payments are so held to have been improper,
the Underwriters receiving the same shall promptly return such amounts to the
Company together with interest, compounded daily, determined on the basis of
the prime rate (or other commercial lending rate for borrowers of the highest
credit rating) announced from time to time by Norwest Bank of Denver, Denver,
Colorado (the "Prime Rate"). Any such interim reimbursement payments that
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are not made to the Underwriters within 30 days of a request for
reimbursement shall bear interest at the Prime Rate from the date of such
request until the date paid.
6.7 REIMBURSEMENT OF THE COMPANY. In addition to their obligations
under Section 6.2 of this Agreement, the Underwriters agree that, as an
interim measure during the pendency of any claim, action, investigation,
inquiry or other proceeding arising out of or based upon any loss, claim,
damage or liability described in Section 6.2 of this Agreement, they will
reimburse the Company on a monthly basis (or more often, if requested) for
all reasonable legal or other expenses incurred by the Company in connection
with investigating or defending any such claim, action, investigation,
inquiry or other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the Underwriters'
obligation to reimburse the Company for such expenses and the possibility
that such payments might later be held to have been improper by a court of
competent jurisdiction. To the extent that any portion, or all, of any such
interim reimbursement payments are so held to have been improper, the Company
shall promptly return such amounts to the Underwriters together with
interest, compounded daily, determined on the basis of the Prime Rate. Any
such interim reimbursement payments that are not made to the Company within
30 days of a request for reimbursement shall bear interest at the Prime Rate
from the date of such request until the date paid.
SECTION 7
EFFECTIVENESS OF AGREEMENT
This Agreement shall become effective (a) at 10:00 a.m., Eastern Time,
on the first full business day after the Effective Date, or (b) upon release
by the Representative of the Securities for sale after the Effective Date,
whichever shall first occur. The Representative shall notify the Company
immediately after the Representative shall have taken any action, by release
or otherwise, whereby this Agreement shall have become effective. For
purposes of this Agreement, the release of the initial public offering of the
Firm Securities for sale to the public shall be deemed to have been made when
the Representative releases, by telegram or otherwise, firm offers of the
Firm Securities to securities dealers or release for publication of a
newspaper advertisement relating to the Firm Securities, whichever occurs
first. This Agreement shall, nevertheless, become effective at such time
earlier than the time specified above, after the Effective Date, as the
Representative may determine by notice to the Company.
SECTION 8
CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS
The obligations of the several Underwriters hereunder to purchase the
Securities and to make payment to the Company hereunder on the Closing Date
and on the Over-allotment Closing Date, if any, shall be subject to the
accuracy, as of the Closing Date and the Over-allotment Closing Date, of each
of the representations and warranties on the part of the Company herein
contained, to the performance by the Company of all its agreements herein
contained, to the fulfillment of or compliance by the Company with all
covenants and conditions hereof, and to the following additional conditions:
8.1 EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement and all post-effective amendments thereto filed with the Commission
prior to the Closing Date or the Over-allotment Closing Date shall have
become effective and any and all filings required by Rule 424 and Rule 430A
of the Rules and Regulations shall have been made; no stop order suspending
the effectiveness of the Registration Statement or any amendment or
supplement thereto shall have been issued; no proceeding for that purpose
shall have been initiated or threatened by the Commission or be pending; any
request for additional information on the part of the Commission (to be
included in the Registration Statement or Final Prospectus or otherwise)
shall have been complied with to the satisfaction of the Commission; and
neither the Registration Statement, the Effective Prospectus or Final
Prospectus, nor any amendment thereto shall have been filed to which counsel
to the Representative shall have reasonably objected in writing or have not
given their consent.
8.2 ACCURACY OF REGISTRATION STATEMENT. The Representative shall not
have advised the Company that the Registration Statement or the Effective
Prospectus or Final Prospectus or any amendment thereof or supplement
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thereto contains an untrue statement of a fact which, in the opinion of
counsel to the Representative, is material, or omits to state a fact which,
in the opinion of such counsel, is material and is required to be stated
therein, or is necessary to make the statements therein not misleading.
8.3 CASUALTY AND OTHER CALAMITY. Since the Effective Date the Company
shall not have sustained any loss on account of fire, explosion, flood,
accident, calamity or any other cause, of such character as materially
adversely affects its business or property considered as an entire entity,
whether or not such loss is covered by insurance, and no officer or director
of the Company shall have suffered any injury, sickness or disability of a
nature which would materially adversely affect his or her ability to properly
function as an officer or director of the Company.
8.4 LITIGATION AND OTHER PROCEEDINGS. Other than as disclosed in the
Registration Statement or Prospectus, there shall be no litigation instituted
or threatened against the Company and there shall be no proceeding instituted
or threatened against the Company before or by any federal or state
commission, regulatory body or administrative agency or other governmental
body, domestic or foreign, wherein an unfavorable ruling, decision or finding
would materially adversely affect the business, management, licenses,
operations or financial condition or income of the Company considered as an
entity.
8.5 LACK OF MATERIAL CHANGE. Except as contemplated herein or as set
forth in the Registration Statement and Final Prospectus, during the period
subsequent to the date of the last audited balance sheet included in the
Registration Statement, the Company (a) shall have conducted its business in
the usual and ordinary manner as the same was being conducted on the date of
the last audited balance sheet included in the Registration Statement, and
(b) except in the ordinary course of its business, the Company shall not have
incurred any liabilities, claims or obligations (direct or contingent) or
disposed of any of its assets, or entered into any material transaction or
suffered or experienced any substantially adverse change in its condition,
financial or otherwise. The capital stock and surplus accounts of the
Company shall be substantially the same as at the date of the last audited
balance sheet included in the Registration Statement, without considering the
proceeds from the sale of the Securities, other than as may be set forth in
the Final Prospectus, and except as the surplus reflects the result of
continued profits or losses from operations consistent with prior periods.
8.6 REVIEW BY REPRESENTATIVE'S COUNSEL. The authorization of the
Shares, the Warrants, the Warrant Shares, the Representative's Options and
the Common Stock and Warrants issuable upon the exercise of the
Representative's Options, the Registration Statement, the Effective
Prospectus and the Final Prospectus and all corporate proceedings and other
legal matters incident thereto and to this Agreement shall be reasonably
satisfactory in all respects to counsel to the Representative.
8.7.1 OPINION OF COUNSEL. The Company shall have furnished to the
Representative the opinion, dated the Closing Date and, if applicable, the
Over-allotment Closing Date, addressed to the Representative, from Neuman &
Drennen, LLC, counsel to the Company, to the effect that based upon a review
by them of the Registration Statement, Effective Prospectus and the Final
Prospectus, the Company's articles of incorporation, by-laws, and relevant
corporate proceedings and contracts, and examination of such statutes they
deem necessary and such other investigation by such counsel as they deem
necessary to express such opinion:
(a) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of,
and has the corporate power and authority to own its properties and to
carry on its business as described in the Registration Statement and
Effective Prospectus and the Final Prospectus.
(b) The Company is duly qualified and in good standing as a
foreign corporation authorized to do business in all jurisdictions in which
the character of the properties owned or held under lease or the nature of
the business conducted requires such qualification except where the failure
to qualify would not have a material adverse effect on the business of the
Company.
17
<PAGE>
(c) The authorized and outstanding capital stock of the
Company is as set forth in the Effective Prospectus and Final Prospectus;
the Common Stock of the Company, the Warrants, and the Representative's
Options conform in all material respects to the statements concerning them
in the Effective Prospectus and Final Prospectus; the outstanding Common
Stock of the Company contains no preemptive rights; the Shares, the
Warrants, and the Representative's Options have been, and the Common Stock
issuable upon exercise of the Share Options and the Representative's
Options, will be, duly and validly authorized and, upon issuance thereof
and payment therefor in accordance with this Agreement, validly issued,
fully paid and nonassessable, and will not be subject to the preemptive
rights of any shareholder of the Company.
(d) A sufficient number of shares of Common Stock have been duly
reserved for issuance upon the exercise of the Warrants, the
Representative's Options and the Warrants issuable upon exercise of the
Representative's Options.
(e) To such counsel's knowledge, no consents, approvals,
authorizations or orders of agencies, officers or other regulatory
authorities are required for the valid authorization, issuance or sale of
the Common Stock, the Warrants and the Representative's Options
contemplated by this Agreement, except for those consents, approvals,
authorizations, and orders which the Company has obtained and which are in
full force and effect under the Securities Act, the Exchange Act, and under
applicable state securities laws in connection with the purchase and
distribution of such securities by the Underwriters, and the clearance of
the underwriting compensation by the NASD.
(f) The issuance and sale of the Securities and the
Representative's Options, the consummation of the transactions herein
contemplated, and the compliance with the terms of this Agreement will not
conflict with or result in a breach of any of the terms, conditions, or
provisions of or constitute a default under the articles of incorporation
or by-laws of the Company; nor, to such counsel's knowledge, will they
conflict with or result in a breach of any of the terms, conditions, or
provisions of any note, indenture, mortgage, deed of trust, or other
agreement or instrument to which the Company is a party or by which the
Company or any of its property is bound, other than for which the Company
has received a consent or waiver of such conflict, breach or default, or
where such conflict or breach would not have a material adverse effect on
the business of the Company; or any existing law (provided this paragraph
shall not relate to federal or state securities laws), order, rule,
regulation, writ, injunction, or decree known to such counsel of any
government, governmental instrumentality, agency, body, arbitration
tribunal, or court, domestic or foreign, having jurisdiction over the
Company or its property.
(g) On the basis of a reasonable inquiry by such counsel,
including participation in conferences with representatives of the Company
and its accountants at which the contents of the Registration Statement and
the Effective Prospectus and the Final Prospectus and related matters were
discussed, and without expressing any opinion as to the financial
statements or other financial data contained therein: (i) nothing has come
to such counsel's attention which leads them to believe that the
Registration Statement and the Final Prospectus, as amended or supplemented
by any amendments or supplements thereto made by the Company prior to the
Closing Date, do not comply as to form in all material respects with the
requirements of the Securities Act; (ii) nothing has come to their
attention which leads them to believe that the Registration Statement or
the Final Prospectus, as amended or supplemented by any such amendments or
supplements thereto, contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading; (iii) they do not know of any contract or
other document required to be described in or filed as an exhibit to the
Registration Statement which is not so described or filed; and (iv) the
Registration Statement has become effective under the Securities Act, and,
to the best of their knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated by the
Commission.
18
<PAGE>
(h) This Agreement has been duly authorized and executed by
the Company and is a valid and binding agreement of the Company, except as
rights to indemnity hereunder may be limited by federal or state securities
laws or public policy and except as enforceability may be limited by
bankruptcy, insolvency, or similar laws affecting creditors rights
generally and by general equitable principles.
(i) The Company is not in default of any of the contracts, licenses,
leases or agreements to which it is a party, and the offering of the
Shares, the Warrants and the Representative's Options will not cause the
Company to become in default of any of its contracts, licenses, leases or
agreements.
(j) To such counsel's knowledge the Company is not currently
offering any securities for sale except as described in the Registration
Statement.
(k) Counsel has no knowledge of any promoter, affiliate,
parent or subsidiaries of the Company except as are described in the
Registration Statement and Final Prospectus.
(l) To the knowledge of counsel, and without making any
statement as to title, the Company owns all properties described in the
Registration Statement as being owned by it; the properties are free and
clear of all liens, charges, encumbrances or restrictions except as
described in the Registration Statement; all of the leases, subleases and
other agreements under which the Company holds its properties are in full
force and effect; the Company is not in default under any of the material
terms or provisions of any of the leases, subleases or other agreements;
and there are no claims against the Company concerning its rights under the
leases, subleases and other agreements and concerning its right to
continued possession of its properties.
(m) To the knowledge of counsel, the Company has been issued
by the appropriate federal, state and local regulatory authorities the
required licenses, certificates, authorizations or permits necessary to
conduct its business as described in the Registration Statement and to
retain possession of its properties. Counsel is unaware of any notice of
any proceeding relating to the revocation or modification of any of these
certificates or permits.
(n) To the knowledge of counsel, the Company has paid all
taxes which are shown as due and owing on the financial statements included
in the Registration Statement and Final Prospectus.
As to all factual matters, including without limitation the issuance of
stock certificates and receipt of payment therefor, the states in which the
Company transacts business, and the adoption of resolutions reflected by the
Company's minute book, such counsel may rely on the certificate of an
appropriate officer of the Company. Counsel's opinion as to the validity and
enforceability of any and all contracts and agreements referenced herein may
exclude any opinion as to the validity or enforceability of any
indemnification or contribution provisions thereof, or as the validity or
enforceability of any such contract or agreement may be limited by bankruptcy
or other laws relating to or affecting creditors' rights generally and by
equitable principles.
8.8 ACCOUNTANT'S LETTER. The Representative shall have received
letters addressed to it dated the Effective Date, the Closing Date and, if
applicable, the Over-allotment Closing Date, respectively, and a draft of
such letter at least five days prior to the Effective Date, the Closing Date
and, if applicable, the Over-allotment Closing Date, from KPMG Peat Marwick
LLC, confirming that they are independent public accountants with respect to
the Company within the meaning of the Act and the published Rules and
Regulations. In the letter dated the date of this Agreement, they shall state
their conclusions and findings with respect to such financial, accounting,
and statistical information and other matters contained in the Registration
Statement as have been approved by the Representative prior to the execution
of this Agreement. In the letter dated the Closing Date (and if applicable,
the Over-allotment Closing Date), they shall state as of such date (or, with
respect to matters involving changes or developments since the respective
dates as of which specified financial information is given in the Final
Prospectus, as of a date not more than five days prior to the date of such
letter) their conclusions and findings with respect to the financial
information and other matters covered by their letter dated the date of this
Agreement, the purpose of the letter to be delivered on the Closing Date
(and, if applicable,
19
<PAGE>
the Over-allotment Closing Date) being to update in all respects the
conclusions and findings set forth in the prior letter or letters. The
Representative shall be furnished without charge, in addition to the original
signed copies, such number of signed or photostatic or conformed copies of
such letters as the Representative shall reasonably request.
8.9 OFFICER'S CERTIFICATE. The Company shall furnish to the
Representative certificates, each signed by the President and Chief Financial
Officer of the Company, one dated as of the Effective Date, one dated as of
the Closing Date, and, if applicable, one dated as of the Over-allotment
Closing Date, to the effect that:
(a) The representations and warranties of the Company in this
Agreement are true and correct at and as of the date of the certificate, and
the Company has complied with all the agreements and has satisfied all the
conditions on its part to be performed or satisfied at or prior to the date
of the certificate.
(b) The Registration Statement has become effective and to the
best of the knowledge of the respective signers no order suspending the
effectiveness of the Registration Statement has been issued and no proceeding
for that purpose has been initiated or is threatened by the Commission.
(c) The respective signers have each examined the Registration
Statement and the Final Prospectus and any amendments and supplements
thereto, and to the best of their knowledge the Registration Statement and
the Final Prospectus and any amendments and supplements thereto contain all
statements required to be stated therein, do not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and, since
the Effective Date, there has occurred no event required to be set forth in
an amended or a supplemented Prospectus which has not been so set forth.
8.10 TENDER OF DELIVERY OF SECURITIES. All of the Securities being
offered by the Company and being purchased from the Company by the
Underwriters, and the Representative's Options being purchased from the
Company by the Representative, shall be tendered for delivery in accordance
with the terms and provisions of this Agreement.
8.11 BLUE-SKY REGISTRATION OR QUALIFICATION. The Shares and the
Warrants shall be registered or qualified in such states as the
Representative and the Company may agree pursuant to Section 5.4, and each
such registration or qualification shall be in effect and not subject to any
stop order or other proceeding on the Closing Date or the Over-allotment
Closing Date. On the Effective Date, on the Closing Date and, if applicable,
the Over-allotment Closing Date, the Representative shall receive from
counsel for the Representative, written information which contains the
following:
(a) the names of the states in which applications to register or
qualify the Shares, the Warrants and the Warrant Shares have been filed;
(b) the status of such registrations or qualifications in such
states as of the date of such letter;
(c) a list containing the name of each such state in which the
Shares, the Warrants and the Warrant Shares may be legally offered and sold
by a dealer licensed in such state and the number of each which may be
legally offered and sold in the offering in each such state as of the date of
such letter;
(d) with respect to the written information provided on the
Effective Date, a representation that such counsel will promptly update such
written information if counsel receives actual notice of any material changes
in the information provided therein between the Effective Date and the
Closing Date and, if applicable, Over-allotment Closing Date;
(e) the names of the states in which the offer and sale of the
Shares and Warrants in the offering is exempt from registration or
qualification; and
(f) a statement that the Underwriters and selected dealers in the
offering may rely upon the information contained therein.
20
<PAGE>
8.12 APPROVAL OF REPRESENTATIVE'S COUNSEL. All opinions, letters,
certificates and evidence mentioned above or elsewhere in this Agreement
shall be deemed to be in compliance with the provisions hereof only if they
are in form and substance satisfactory to counsel to the Representative,
whose approval shall not be unreasonably withheld. The suggested form of
such documents shall be provided to the counsel for the Representative at
least three business days before the dates they are to be provided, that is,
the Effective Date, the Closing Date, and the Over-allotment Closing Date, if
applicable.
8.13 OFFICERS' CERTIFICATE AS A COMPANY REPRESENTATION. Any
certificate signed by an officer of the Company and delivered to the
Representative or counsel for the Representative shall be deemed a
representation and warranty by the Company to the Underwriters as to the
statements made therein.
8.14 OPINION OF REPRESENTATIVE'S COUNSEL. The Representative shall
have received from Marc J. Ross, Esq., counsel for the Representative, an
opinion dated the Closing Date, with respect to the issuance and sale of the
Securities, and such other related matters as the Representative may
reasonably require, and the Company shall have furnished such counsel with
all documents which they may request for the purpose of enabling them to pass
upon such matter.
SECTION 9
TERMINATION
9.1 TERMINATION BECAUSE OF NONCOMPLIANCE. This Agreement may be
terminated in its entirety by the Representative by notice to the Company
prior to its effectiveness in the event that the Company shall have failed or
been unable to comply with any of the terms, conditions or provisions of this
Agreement which the Company is required by this Agreement to be performed,
complied with or fulfilled (including but not limited to those specified in
Sections 2, 3, 4, 5, and 8 hereof) within the respective times herein
provided for, unless compliance therewith or performance or satisfaction
thereof shall have been expressly waived by the Representative in writing.
9.2 MARKET OUT TERMINATION. This Agreement may be terminated by the
Representative by notice to the Company at any time if, in the sole judgment
of the Representative, payment for and delivery of the Securities is rendered
impracticable or inadvisable because of:
(a) Material adverse changes in the Company's business,
business prospects, management, earnings, properties or conditions, financial
or otherwise;
(b) Any action, suit, or proceedings, at law or in equity,
hereafter threatened or filed against the Company by any person or entity, or
by any federal, state or other commission, board or agency wherein any
unfavorable result or decision could materially adversely affect the
business, business prospects, properties, financial condition or income or
earnings of the Company;
(c) Additional material governmental restrictions not in force and
effect on the date hereof shall have been imposed upon the trading in
securities generally, or new offering or trading restrictions shall have been
generally established by a registered securities exchange, the Commission,
NASD or other applicable regulatory authority, or trading in securities
generally on any such exchange, NASDAQ or otherwise, shall have been
suspended, or a general moratorium shall have been established by federal or
state authorities;
(d) Substantial and material changes in the condition of the
market beyond normal fluctuations such that it would be undesirable,
impracticable or inadvisable in the judgment of the Representative to proceed
with this Agreement or with the public offering of the Securities;
(e) Any outbreak or escalation of major hostilities in which the
United States is involved, any declaration of war by Congress or any other
substantial national or international calamity or emergency if, in the
21
<PAGE>
judgment of the Representative, the effect of any such outbreak, escalation,
declaration, calamity or emergency makes it impractical or inadvisable to
proceed with completion of the sale of and payment for the Securities; or
(f) Any suspension of trading in the securities of the Company in
the over-the-counter market or the interruption or termination of quotations
of any security of the Company on the NASDAQ System.
9.3 EFFECT OF TERMINATION HEREUNDER. Any termination of this
Agreement pursuant to this Section 9 shall be without liability of any
character (including, but not limited to, loss of anticipated profits or
consequential damages) on the part of any party hereto, except that the
Company shall remain obligated to pay the costs and expenses provided to be
paid by it specified in Sections 3.5 and 5.7; and the Company and the
Underwriters shall be obligated to pay, respectively, all losses, claims,
damages or liabilities, joint or several, under Sections 6.1 or 6.4 in the
case of the Company and Sections 6.2 or 6.4 in the case of the Underwriters.
SECTION 10
REPRESENTATIVE'S REPRESENTATIONS AND WARRANTIES
The Representative represents and warrants to and agrees with the
Company that:
10.1 REGISTRATION AS BROKER-DEALER AND MEMBER OF NASD. The
Representative is registered as a broker-dealer with the Commission and is
registered as a securities broker-dealer in all states in which it will sell
Securities and is a member in good standing of the National Association of
Securities Dealers, Inc.
10.2 NO PENDING PROCEEDINGS. There is not now pending or threatened
against the Representative any action or proceeding of which it has been
advised, either in any court of competent jurisdiction, before the Commission
or any state securities regulatory authority concerning activities as a
broker or dealer which are foreseen as affecting the Representative's
capacity to complete the terms of this Agreement.
10.3 COMPANY'S RIGHT TO TERMINATE. In the event any action or
proceeding of the type referred to in Section 10.2 above shall be instituted
or threatened against the Representative at any time prior to the Effective
Date hereunder, or in the event there shall be filed by or against the
Representative in any court pursuant to any federal, state, local or
municipal statute, a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or trustee of its assets
or if it makes an assignment for the benefit of creditors, the Company shall
have the right on three days' written notice to the Representative to
terminate this Agreement without any liability to the Representative or the
Company of any kind except for the payment of all expenses as provided herein.
10.4 REPRESENTATIVE'S COVENANTS. The Representative covenants and
agrees with the Company that (a) it will not offer or sell the Securities in
any state or other jurisdiction where it has not been advised in writing by
legal counsel for the Company that the Securities are qualified for the offer
and sale therein or exempt from such requirements; (b) it will not make any
representation to any person in connection with the offer and sale of the
Securities covered hereby except as set forth in the Registration Statement
or as authorized in writing by the Company and the Representative; (c) it
will comply in good faith with all laws, rules and regulations applicable to
the distribution of the securities, including the Rules of Fair Practice of
the NASD; and (d) the Representative has the authority to execute this
Agreement on behalf of all of the Underwriters.
SECTION 11
NOTICE
Except as otherwise expressly provided in this Agreement:
11.1 NOTICE TO THE COMPANY. Whenever notice is required by the
provisions of this Underwriting Agreement to be given to the Company, such
notice shall be in writing addressed to the Company as follows:
22
<PAGE>
FirstLink Communications, Inc.
190 SW Harrison
Portland, Oregon 97201
Attn: A. Roger Pease, President
with a copy to:
David H. Drennen, Esq.
Neuman & Drennen, LLC
5350 S. Roslyn Street
Suite 380
Englewood, Colorado 80111
11.2 NOTICE TO THE REPRESENTATIVE. Whenever notice is required by the
provisions of this Agreement to be given to the Representative, such notice
shall be given in writing addressed to the Representative as follows:
Kashner Davidson Securities Corporation
77 S. Palm Avenue
Sarasota, Florida 34236
Attn: Victor Kashner
with a copy to:
Marc J. Ross, Esq.
331 Madison Avenue
Third Floor
New York, New York 10017
11.3 EFFECTIVE DATE OF NOTICES. Such notices shall be effective on the
date of delivery set forth on the receipt if the notice is sent by registered
or certified mail or any expedited delivery, or, if sent regular mail, three
days from the day of mailing.
SECTION 12
MISCELLANEOUS
12.1 BENEFIT. This Agreement is made solely for the benefit of the
Representative, other Underwriters, the Company, their respective officers,
directors and controlling persons referred to in Section 15 of the Securities
Act and such other persons as are identified in this Agreement, and their
respective successors and assigns, and no other person shall acquire or have
any right under or by virtue of this Agreement. The term "successor" or the
term "successors and assigns" as used in this Agreement shall not include any
purchasers, as such, of any of the Securities.
12.2 SURVIVAL. The respective indemnities, agreements,
representations, warranties, and covenants of the Company or its officers and
the Representative or the Underwriters as set forth in or made pursuant to
this Agreement and the indemnity and contribution agreements contained in
Section 6 hereof of the Company and the Underwriters (as defined in Section
6) shall survive and remain in full force and effect, regardless of (a) any
investigation made by or on behalf of the Company or the Underwriters or any
such officer or director thereof or any controlling person of the Company or
of the Underwriters, (b) delivery of or payment for the Securities, and (c)
the Closing Date and, if applicable, the Over-allotment Closing Date, and any
successor of the Company or the Underwriters or any controlling person,
officer or director thereof, as the case may be, shall be entitled to the
benefits hereof.
12.3 GOVERNING LAW. The validity, interpretation and construction of
this Agreement and of each part hereof will be governed by the laws of the
State of Colorado.
23
<PAGE>
12.4 ENTIRE AGREEMENT. This Agreement contains the entire agreement
and understanding between the parties hereto, and supersedes all agreements
and understandings including, but not limited to, the Letter of Intent dated
December ___ , 1997.
12.5 REPRESENTATIVE'S INFORMATION. The statements with respect to the
public offering of the Securities on the inside and outside of both the front
and back cover pages of the Prospectus and under the caption "Underwriting"
in the Final Prospectus constitute the written information furnished by or on
behalf of the Representative referred to in Section 2.2 hereof, in Section
6.1 hereof and Section 6.2 hereof.
12.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together will constitute one and the same instrument.
12.7 DEFINITION OF "BUSINESS DAY" AND "SUBSIDIARY". For purposes of
this Agreement, (a) "Business Day" means any day on which the New York Stock
Exchange, Inc. is open for trading and (b) "Subsidiary" has the meaning set
forth in Rule 405 of the Rules and Regulations.
Please confirm that the foregoing correctly sets forth the Agreement
between you and the Company.
Very truly yours,
ATTEST:
FIRSTLINK COMMUNICATIONS, INC.
By By
----------------------------- ------------------------------------
Secretary A. Roger Pease, President
WE HEREBY CONFIRM AS OF THE DATE HEREOF THAT THE ABOVE SETS FORTH THE
AGREEMENT BETWEEN THE COMPANY AND US.
KASHNER DAVIDSON SECURITIES CORPORATION
(for itself and as Representative of
the several Underwriters named in
Schedule I hereto)
By
-------------------------------------
Victor Kashner, President
24
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
(An Oregon Corporation)
SCHEDULE I
This Schedule sets forth the name of each Underwriter referred to in the
Underwriting Agreement and the number of Shares and Warrants to be purchased
by each Underwriter.
<TABLE>
<CAPTION>
Number
Name of shares and warrants
---- ----------------------
<S> <C>
Kashner Davidson Securities Corporation
----------------------
Total 1,000,000
</TABLE>
25
<PAGE>
Exhibit No. 1.2 Form of Representative's Share Option Agreement.
<PAGE>
Exhibit 1.2
FIRSTLINK COMMUNICATIONS, INC.
KASHNER DAVIDSON SECURITIES CORPORATION
REPRESENTATIVE'S SHARE OPTION AGREEMENT
Dated as of ________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Title Page Number
<S> <C>
1 Definitions 1
2 Options and Issuance of Option Certificates 2
3 Form of Option 2
4 Term of Options; Exercise of Options 3
5 Reservation of Option Securities 4
6 Payment of Taxes 5
7 Option Securities to be Fully Paid 5
8 Limitation on Transfer 5
9 Adjustment of Exercise Price and Number of Shares 5
10 Merger or Consolidation of Company 8
11 Modification of Agreement 8
12 Notice to Holders 8
13 Registration Rights 9
14 Payment of Taxes 12
15 Indemnification and Contribution 12
16 Restrictions on Transfer 14
17 Fractional Shares 15
18 No Rights as Stockholder; Notices to Option Holder 15
19 Charges Due Upon Exercise 15
20 Notices 15
21 Arbitration 16
22 Applicable Law 16
23 Miscellaneous Provisions 16
</TABLE>
ii
<PAGE>
REPRESENTATIVE'S SHARE OPTION AGREEMENT
This Representative's Share Option Agreement (the "Agreement"), dated as
of ____, is made and entered into by and between FirstLink Communications,
Inc., an Oregon corporation (the "Company"), and Kashner Davidson Securities
Corporation ("Kashner Davidson").
The Company agrees to issue and sell, and Kashner Davidson agrees to
purchase, for the price of $100, Options to purchase up to an aggregate of
100,000 shares ("Shares") of the Company's Common Stock, subject to the terms
and conditions set forth below.
In consideration of the foregoing and for the purpose of defining the
terms and provisions of the Options and the respective rights and obligations
thereunder, the Company and Kashner Davidson, for value received, hereby
agree as follows:
SECTION 1. DEFINITIONS
The following terms used in this agreement shall have the following
meanings (unless otherwise expressly provided herein):
THE "ACT." The Securities Act of 1933, as amended.
THE "COMMISSION." The Securities and Exchange Commission.
THE "COMPANY." FirstLink Communications, Inc., an Oregon corporation.
"COMMON STOCK." The Common Stock, no par value per share, of the
Company, whether now or hereafter authorized, holders of which have the right
to participate in the distribution of earnings and assets of the Company
without limit as to the amount or percentage.
"CURRENT MARKET PRICE." The Current Market Price shall be determined as
follows:
(a) if the security at issue is listed on a national securities
exchange or admitted to unlisted trading privileges on such an exchange or
quoted on either the Nasdaq National Market or the Nasdaq Small Cap Market,
the Current Market Price shall be the last reported sale price of that
security on such exchange or system on the day immediately before the event;
or, if no such sale is made on such day, the average of the highest closing
bid and lowest asked price for such day on such exchange or system; or
(b) if the security at issue is not so listed or quoted or admitted to
unlisted trading privileges, the Current Market Price shall be the last
reported sale price of that security on the OTC Bulletin Board on the day
immediately before the event; or if no such sale is made on such day, the
average of the last reported highest bid and lowest asked prices quoted on
the OTC Bulletin Board on the last business day prior to the day of the
event; or
(c) if the security at issue is not so listed or quoted or admitted to
unlisted trading privileges and bid and asked prices are not reported, the
Current Market Price shall be determined in such reasonable manner as may be
prescribed from time to time by the Board of Directors of the Company,
subject to the objection and arbitration procedure as described in Section
9.9 below.
"EFFECTIVE DATE." _________
"EXERCISE DATE." __________
"EXERCISE PRICE." $ per Share, as modified in accordance with
Section 4, below.
"EXPIRATION DATE." ________
<PAGE>
"HOLDER" OR "WARRANT HOLDER." The person to whom a warrant
certificate is issued, and any valid transferee thereof pursuant to Section
8, below.
"MAJORITY HOLDER." Any Holder, any holder of Option Securities, or
any combination of Holders and such holders of Option Securities; and any
Holder of Warrant Options, any holder of Warrant Option Securities, or any
combination of such Holders and such holders of Warrant Option Securities, if
they hold, in the aggregate, unexercised Options plus issued and outstanding
Option Securities equal to more than 50% of the total of (i) all Option
Securities issued and outstanding as a result of the exercise of the Option,
and (ii) all Option Securities that may at that time be purchased by
exercising the unexercised portion of the Option. For purposes hereof, a
Holder of an Option which entitles the Holder to purchase more than one share
or Warrant shall be deemed to hold Options equal to the number of shares or
Warrants which may be acquired pursuant to any such Option.
"NASD." The National Association of Securities Dealers, Inc.
"NASDAQ." The Nasdaq Stock Market, Inc.
"OPTIONS." The Options issued in accordance with the terms of this
Agreement and any Options issued in substitution for or replacement of such
Options, or any Options into which such Options may be divided or exchanged.
"OPTION SECURITIES." The Common Stock purchasable upon exercise of an
Option.
"PUBLIC OFFERING." The public offering by the Company of 1,000,000
shares of Common Stock and 1,000,000 warrants pursuant to an underwriting
agreement dated as of ______, between the Company and Kashner Davidson as
Representative of the several Underwriters named in the underwriting
agreement.
"TERMINATION OF BUSINESS." Any sale, lease or exchange of all, or
substantially all, of the Company's assets or business or any dissolution,
liquidation or winding up of the Company.
"UNDERWRITER." A broker-dealer identified as an Underwriter in the Final
Prospectus for the Public Offering.
"WARRANT OPTIONS." Those options to purchase Warrants issued to the
Holder concurrently with the issuance of the Share Options under this
Agreement, pursuant to a Representative's Warrant Option Agreement dated the
date of this Agreement.
SECTION 2 OPTIONS AND ISSUANCE OF OPTION CERTIFICATES
2.1 DESCRIPTION OF OPTIONS. Each Option shall initially entitle the
Option Holder to purchase one share of Common Stock on exercise thereof,
subject to modification and adjustment as hereinafter provided in Section 10.
Option Certificates representing up to 100,000 Options and evidencing the
right to purchase an aggregate of up to 100,000 shares of Common Stock of the
Company shall be executed by the proper officers of the Company. The Company
shall deliver Option Certificates in required whole number denominations to
the person entitled thereto in connection with the original issuance of
Option Certificates or any transfer or exchange permitted under this
Agreement.
2.2 OPTION SECURITIES. Except as provided in Section 3.4 hereof,
Certificates representing the Option Securities shall be issued only on or
after the Exercise Date upon exercise of the Options or upon transfer or
exchange of the Option Securities following exercise of the Options.
SECTION 3 FORM OF OPTION
3.1 FORM OF CERTIFICATES. The Option Certificates shall be
substantially in the form attached hereto as Exhibit A and may have such
letters, numbers or other marks of identification and such legends, summaries
or endorsements printed, lithographed or engraved thereon as the Company may
deem appropriate and as are not inconsistent with the provisions of this
Agreement. The Option Certificates shall be dated as of the date of issuance,
whether on initial issuance, transfer, exchange or in lieu of mutilated,
lost, stolen or destroyed Option Certificates.
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3.2 EXECUTION OF CERTIFICATES. The Option Certificates shall be
executed on behalf of the Company by its President and Secretary, by manual
signatures thereon, and shall have imprinted thereon a facsimile of the
Company's seal. Any Option Certificate may be signed by any person who at
the actual date of the preparation of such Option Certificate shall be a
proper officer of the Company to sign such Option Certificate even though
such person was not such an officer upon the date of this Agreement.
3.3 MUTILATED, LOST, STOLEN, OR DESTROYED CERTIFICATE. In case the
certificate or certificates evidencing the Options shall be mutilated, lost,
stolen or destroyed, the Company shall, at the request of the Option Holder,
issue and deliver in exchange and substitution for and upon cancellation of
the mutilated certificate or certificates, or in lieu of and substitution for
the certificate or certificates lost, stolen or destroyed, a new Option
Certificate or Certificates of like tenor and representing an equivalent
right or interest, but only upon receipt of evidence satisfactory to the
Company of such loss, theft or destruction of such Option and a bond of
indemnity, if requested, also satisfactory in form and amount, at the
applicant's cost. Applicants for such substitute Option Certificate shall
also comply with such other reasonable regulations and pay such other
reasonable charges as the Company may prescribe.
3.4 EXCHANGE OF CERTIFICATE. Any Option Certificate may be exchanged
for another certificate or certificates entitling the Option Holder to
purchase a like aggregate number of Shares as the certificate or certificates
surrendered then entitled such Option Holder to purchase. Any Option Holder
desiring to exchange a Option Certificate shall make such request in writing
delivered to the Company, and shall surrender, properly endorsed, with
signatures guaranteed, the certificate evidencing the Option to be so
exchanged. Thereupon, the Company shall execute and deliver to the person
entitled thereto a new Option Certificate as so requested.
SECTION 4. TERM OF OPTIONS; EXERCISE OF OPTION
4.1 EXERCISE OF OPTION. Subject to the terms of this Agreement, the
Optionholder shall have the right, at any time during the four-year period
commencing at 9:00 a.m., Portland, Oregon Time, on the Exercise Date and
ending at 5:00 p.m., Portland Time, on the Expiration Date to purchase from
the Company up to the number of fully paid and nonassessable Shares to which
the Optionholder may at the time be entitled to purchase pursuant to this
Agreement, upon surrender to the Company, at its principal office, of the
certificate evidencing the Options to be exercised, together with the
purchase form on the reverse thereof; or to convert the Options into Option
Securities pursuant to Section 4.5 herein, duly filled in and signed, and
upon payment to the Company of the Exercise Price for the number of Shares in
respect of which such Options are then exercised, but in no event for less
than 100 Shares (unless fewer than an aggregate of 100 shares are then
purchasable under all outstanding Options held by a Optionholder).
4.2 PAYMENT OF EXERCISE PRICE. Payment of the aggregate Exercise
Price shall be made in cash or by check, or any combination thereof.
4.3. ISSUANCE OF SHARES. Upon such surrender of the Options and
payment of such Exercise Price as aforesaid, the Company shall issue and
cause to be delivered with all reasonable dispatch to or upon the written
order of the Optionholder and in such name or names as the Optionholder may
designate, a certificate or certificates for the number of full Shares so
purchased upon the exercise of the Option, together with cash, as provided in
Section 12 hereof, in respect of any fractional Shares otherwise issuable
upon such surrender. Such certificate or certificates shall be deemed to
have been issued and any person so designated to be named therein shall be
deemed to have become the holder of record of such securities as of the date
of surrender of the Options and be divided or combined, upon request to the
Company by the Optionholder, into a certificate or certificates representing
the right to purchase the same aggregate number of Shares. Unless the
context indicates otherwise, the term "Optionholder" shall include any
transferee or transferees of the Options pursuant to this Subsection 4.3, and
the term "Options" shall include any and all Options outstanding pursuant to
this Agreement, including those evidenced by a certificate or certificates
issued upon division, exchange, substitution or transfer pursuant to this
Agreement.
4.4 CANCELLATION OF CERTIFICATES. All Warrant Certificates
surrendered upon exercise of Warrants shall be cancelled.
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4.5 DELIVERY OF PROCEEDS OF EXERCISE. Within two days after the
receipt thereof in cleared funds, the Warrant Agent shall deliver to the
Company all proceeds received from Warrant Holders on exercise of the
Warrants.
4.6 CONVERSION RIGHT. In addition to and without limiting the rights
of the Warrantholder under the terms of the Warrant, the Holder shall have
the right (the "Conversion Right") to convert the Warrant evidenced by this
certificate or any portion thereof into Shares as provided in this Section
4.6 at any time or from time to time prior to its expiration.
a. Upon exercise of the Conversion Right with respect to a
particular number of Shares (the "Conversion Shares"), the Company shall
deliver to the Holder, without payment by the Holder of any Exercise Price or
any cash or other consideration, that number of Shares equal to the quotient
obtained by dividing the Net Value (as hereinafter defined in this paragraph
4.6(a)) of the Converted Shares by the Current Market Price of a single
Share, determined in each case as of the close of business on the Conversion
Date (as hereinafter defined). The "Net Value" of the Converted Shares shall
be determined by subtracting the aggregate Exercise Price of the Converted
Shares from the aggregate Current Market Price of the Converted Shares. No
fractional securities shall be issuable upon exercise of the Conversion
Right, and if the number of securities to be issued in accordance with the
foregoing formula is other than a whole number, the Company shall pay to the
Holder an amount in cash equal to the Current Market Price of the resulting
fractional Share.
b. The Conversion Right may be exercised by the Holder by the
surrender of the Warrant at the principal office of the Company or at the
office of the Company's stock transfer agent, if any, together with a written
statement specifying that the Holder thereby intends to exercise the
Conversion Right and indicating the number of Shares subject to the Warrant
which are being surrendered (referred to in subparagraph 4.(a) above as the
Converted Shares), on the reverse side of the Warrant, in exercise of the
Conversion Right. Such conversion shall be effective upon receipt by the
Company of the Warrant, or on such later date as is specified therein (the
"Conversion Date"), but not later than the Expiration Date. Certificates for
the Converted Shares issuable upon exercise of the Conversion Right, together
with a check in payment of any fractional Warrant Share and, in the case of a
partial exercise a new Warrant evidencing the Warrant Shares remaining
subject to the Warrant, shall be issued as of the Conversion Date and shall
be delivered to the Holder within seven (7) days following the Conversion
Date.
4.7 FRACTIONAL SHARES. On exercise of the Warrants by the Warrant
Holders, the Company shall not be required to deliver fractions of shares of
Common Stock; provided, however, that the Company shall purchase such
fraction for an amount in cash equal to the Current Market Price of such
fraction, computed on the trading day immediately preceding the day upon
which such Warrant Certificate was surrendered for exercise. By accepting a
Warrant Certificate, the holder thereof expressly waives any right to receive
a Warrant Certificate evidencing any fraction of a Warrant or to receive any
fractional share of securities upon exercise of a Warrant, except as
expressly provided in this Section 4.7.
4.8. STATUS AS SHAREHOLDER. Upon receipt of the Warrant Certificate
by the company as described in Sections 4.1 or 4.3 above, the Holder shall be
deemed to be the holder of record of the Shares issuable upon such exercise,
notwithstanding that the transfer books of the Company may then be closed or
that certificates representing such Shares may not have been prepared or
actually delivered to the Holder.
SECTION 5. RESERVATION OF OPTION SECURITIES
There has been reserved, and the Company shall at all times keep
reserved so long as the Options remain outstanding, out of its authorized and
unissued Common Stock, such number of shares of Common Stock as shall be
subject to purchase under the Options. Every transfer agent for the Common
Stock and other securities of the Company issuable upon the exercise of the
Options will be irrevocably authorized and directed at all times to reserve
such number of authorized shares and other securities as shall be requisite
for such purpose. The Company will keep a copy of this Agreement on file with
every transfer agent for the Common Stock and other securities of the Company
issuable upon the exercise of the Options. The Company will supply every
such transfer agent with duly executed stock and other certificates, as
appropriate, for such purpose and will provide or otherwise make available
any cash which may be payable as provided in Section 10 hereof.
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SECTION 6. PAYMENT OF TAXES
The Company will pay all documentary stamp taxes, if any, attributable
to the initial issuance of the Options or the securities comprising the
Shares; provided, however, the Company shall not be required to pay any tax
which may be payable in respect of any transfer of the Options or the
securities comprising the Shares.
SECTION 7. OPTION SECURITIES TO BE FULLY PAID
The Company covenants that all Option Securities that may be issued and
delivered to a Holder of this Option upon the exercise of this Option and
payment of the Exercise Price will be, upon such delivery, validly and duly
issued, fully paid and nonassessable.
SECTION 8. LIMITATION ON TRANSFER
This Option may not be sold, transferred, assigned, pledged or
hypothecated until the Exercise Date, except for (a) the sale, transfer, or
assignment, in whole or in part, to or among the officers of Kashner Davidson
and other Underwriters and the officers or partners of those Underwriters,
(b) the transfer by operation of law as a result of the death of any
transferee to whom all or a portion of this Option may be transferred, and
(c) the transfer to any successor to the business of an Underwriter. All
sales, transfers, assignments or hypothecations of this Option must be in
compliance with Section 8 hereof. Any assignment or transfer of this Option
shall be made by the presentation and surrender of this Option to the Company
at its principal office or the office of its transfer agent, if any,
accompanied by a duly executed Assignment Form, in the form attached to and
by this reference incorporated in this Option as Exhibit B. Upon the
presentation and surrender of these items to the Company, the Company, at its
sole expense, shall execute and deliver to the new Holder or Holders a new
Option or Options, containing the same terms and conditions as this Option,
in the name of the new Holder or Holders as named in the Assignment Form, and
this Option shall at that time be cancelled.
SECTION 9. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES
8.1. ADJUSTMENTS. The number and kind of securities purchasable upon
the exercise of the Options and the Option Price shall be subject to
adjustment from time to time upon the happening of certain events, as
follows:
(a) In case the Company shall (i) pay a dividend in Common Stock or
make a distribution to its stockholders in Common Stock, (ii) subdivide its
outstanding Common Stock, (iii) combine its outstanding Common Stock into a
smaller number of shares of Common Stock, or (iv) issue by classification
of its Common Stock other securities of the Company, the number of Shares
purchasable upon exercise of the Options immediately prior thereto shall be
adjusted so that the Optionholder shall be entitled to receive the kind and
number of Shares or other securities of the Company which it would have owned
or would have been entitled to receive immediately after the happening of any
of the events described above, had the Options been exercised immediately
prior to the happening of such event or any record date with respect thereto.
Any adjustment made pursuant to this subsection 9.1(a) shall become
effective immediately after the effective date of such event retroactive to
the record date, if any, for such event.
(b) If, prior to the expiration of the Options by exercise, by their
terms, or by redemption, the Company shall be recapitalized by reclassifying
its outstanding shares of Common Stock into shares with a different par
value, or by changing its outstanding shares of Common Stock into shares
without par value or in the event of any other material change of the capital
structure of the Company or of any successor corporation by reason of any
reclassification, recapitalization or conveyance, prompt, proportionate,
equitable, lawful and adequate provision shall be made whereby any Option
Holder shall thereafter have the right to purchase, on the basis and the
terms and conditions specified in this Agreement, in lieu of the Option
Securities theretofore purchasable on the exercise of any Option, such
securities or assets as may be issued or payable with respect to or in
exchange for the number of Option Securities theretofore purchasable on
exercise of the Option had such reclassification, recapitalization or
conveyance not taken place; and in any such event, the rights of any Option
Holder to any adjustment in the number of Option Securities purchasable on
exercise of such Option, as set forth above, shall continue to be preserved
in respect of any stock, securities or assets which the Option Holder becomes
entitled to purchase.
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(c) In case the Company shall issue rights, options, warrants, or
convertible securities to all or substantially all holders of its Common
Stock, without any charge to such holders, entitling them to subscribe for or
purchase Common Stock at a price per share which is lower at the record date
mentioned below than the then Current Market Price, the number of Shares
thereafter purchasable upon the exercise of each Option shall be determined
by multiplying the number of Shares theretofor purchasable upon exercise of
the Options by a fraction, of which the numerator shall be the number of
shares of Common Stock outstanding immediately prior to the issuance of such
rights, options, warrants or convertible securities plus the number of
additional shares of Common Stock offered for subscription or purchase, and
of which the denominator shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such rights, options,
warrants, or convertible securities plus the number of shares which the
aggregate offering price of the total number of shares offered would purchase
at such Current Market Price. Such adjustment shall be made whenever such
rights, options, warrants, or convertible securities are issued, and shall
become effective immediately and retroactively to the record date for the
determination of stockholders entitled to receive such rights, options,
warrants, or convertible securities.
(d) In case the Company shall distribute to all or substantially all
holders of its Common Stock evidences of its indebtedness or assets
(excluding cash dividends or distributions out of earnings) or rights,
options, warrants, or convertible securities containing the right to
subscribe for or purchase Common Stock (excluding those referred to in
subsection 9.1(b) above), then in each case the number of Shares thereafter
purchasable upon the exercise of the Options shall be determined by
multiplying the number of Shares theretofor purchasable upon exercise of the
Options by a fraction, of which the numerator shall be the then Current
Market Price on the date of such distribution, and of which the denominator
shall be such Current Market Price on such date minus the then fair value
(determined as provided in subsection 9.1(g) below) of the portion of the
assets or evidences of indebtedness so distributed or of such subscription
rights, options, warrants, or convertible securities applicable to one share.
Such adjustment shall be made whenever any such distribution is made and
shall become effective on the date of distribution retroactive to the record
date for the determination of stockholders entitled to receive such
distribution.
(e) No adjustment in the number of Shares purchasable pursuant to
the Options shall be required unless such adjustment would require an
increase or decrease of at least one percent in the number of Shares then
purchasable upon the exercise of the Options or, if the Options are not then
exercisable, the number of Shares purchasable upon the exercise of the
Options on the first date thereafter that the Options become exercisable;
provided, however, that any adjustments which by reason of this subsection
9.1(d) are not required to be made immediately shall be carried forward and
taken into account in any subsequent adjustment.
(f) Whenever the number of Shares purchasable upon the exercise of
the Option is adjusted, as herein provided, the Exercise Price payable upon
exercise of the Option shall be adjusted by multiplying such Exercise Price
immediately prior to such adjustment by a fraction, of which the numerator
shall be the number of Option Shares purchasable upon the exercise of the
Option immediately prior to such adjustment, and of which the denominator
shall be the number of Option Shares so purchasable immediately thereafter.
(g) Whenever the number of Shares purchasable upon exercise of the
Options is adjusted as herein provided, the Company shall cause to be
promptly mailed to the Optionholder by first class mail, postage prepaid,
notice of such adjustment and a certificate of the chief financial officer
of the Company setting forth the number of Shares purchasable upon the
exercise of the Options after such adjustment, a brief statement of the
facts requiring such adjustment and the computation by which such
adjustment was made.
(h) For the purpose of this subsection 9.1, the term "Common Stock"
shall mean (i) the class of stock designated as the Common Stock of the
Company at the date of this Agreement, or (ii) any other class of stock
resulting from successive changes or reclassifications of such Common Stock
consisting solely of changes in par value, or from par value to no par value,
or from no par value to par value. In the event that at any time, as a
result of an adjustment made pursuant to this Section 9, the Optionholder
shall become entitled to purchase any securities of the Company other than
Common Stock, (y) if the Optionholder's right to purchase is on any other
basis than that available to all holders of the Company's Common Stock, the
Company shall obtain an opinion of an independent investment banking firm
valuing such other securities; and (z) thereafter the number of such other
securities so purchasable upon exercise of the Options shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent
as practicable to the provisions with respect to the Shares contained in this
Section 9.
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(j) Upon the expiration of any rights, options, warrants, or
conversion privileges, if such shall have not been exercised, the number of
Shares purchasable upon exercise of the Options, to the extent the Options
have not then been exercised, shall, upon such expiration, be readjusted and
shall thereafter be such as they would have been had they been originally
adjusted (or had the original adjustment not been required, as the case may
be) on the basis of (i) the fact that the only shares of Common Stock so
issued were the shares of Common Stock, if any, actually issued or sold upon
the exercise of such rights, options, warrants, or conversion privileges, and
(ii) the fact that such shares of Common Stock, if any, were issued or sold
for the consideration actually received by the Company upon such exercise
plus the consideration, if any, actually received by the Company for the
issuance, sale or grant of all such rights, options, warrants, or conversion
privileges whether or not exercised; provided, however, that no such
readjustment shall have the effect of decreasing the number of Shares
purchasable upon exercise of the Options by an amount in excess of the amount
of the adjustment initially made in respect of the issuance, sale, or grant
of such rights, options, warrants, or conversion rights.
9.2. NO ADJUSTMENT FOR DIVIDENDS. Except as provided in subsection
9.1, no adjustment in respect of any dividends or distributions out of
earnings shall be made during the term of the Options or upon the exercise of
the Options.
9.3. NO ADJUSTMENT IN CERTAIN CASES. No adjustments shall be made
pursuant to Section 9 hereof in connection with the issuance of the Common
Stock sold as part of the public sale pursuant to the Underwriting Agreement
or the issuance of Shares upon exercise of the Options. No adjustments shall
be made pursuant to Section 9 hereof in connection with the grant or exercise
of presently authorized or outstanding options to purchase, or the issuance
of shares, aggregating up to 487,805 shares of Common Stock, under the
Company's director or employee benefit plans disclosed in the Registration
Statement relating to the Public Offering.
9.4. PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION,
CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger
of the Company into another corporation, or in case of any sale or conveyance to
another corporation of the property, assets, or business of the Company as an
entirety or substantially as an entirety, the Company or such successor or
purchasing corporation, as the case may be, shall execute with the Optionholder
an agreement that the Optionholder shall have the right thereafter upon payment
of the Exercise Price in effect immediately prior to such action to purchase,
upon exercise of the Options, the kind and amount of shares and other securities
and property which it would have owned or have been entitled to receive after
the happening of such consolidation, merger, sale, or conveyance had the Options
been exercised immediately prior to such action. In the event of a merger
described in Section 368(a)(2)(E) of the Internal Revenue Code of 1986, in which
the Company is the surviving corporation, the right to purchase Shares under the
Options shall terminate on the date of such merger and thereupon the Options
shall become null and void, but only if the controlling corporation shall agree
to substitute for the Options, its Options which entitle the holder thereof to
purchase upon their exercise the kind and amount of shares and other securities
and property which it would have owned or been entitled to receive had the
Options been exercised immediately prior to such merger. Any such agreements
referred to in this subsection 9.4 shall provide for adjustments, which shall
be as nearly equivalent as may be practicable to the adjustments provided for
in Section 9 hereof. The provisions of this subsection 9.4 shall similarly
apply to successive consolidations, mergers, sales, or conveyances.
9.5. PAR VALUE OF SHARES OF COMMON STOCK. Before taking any action
which would cause an adjustment effectively reducing the portion of the
Exercise Price allocable to each Share below the par value per share of the
Common Stock issuable upon exercise of the Options, the Company will take any
corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable Common Stock upon exercise of the Options.
9.6. INDEPENDENT PUBLIC ACCOUNTANTS. The Company may retain a firm of
independent public accountants of recognized national standing (which may be
any such firm regularly employed by the Company) to make any computation
required under this Section 9, and a certificate signed by such firm shall be
conclusive evidence of the correctness of any computation made under this
Section 9.
9.7. STATEMENT ON OPTION CERTIFICATES. Irrespective of any
adjustments in the number of securities issuable upon exercise of the
Options, Option certificates theretofore or thereafter issued may continue to
express the same number of securities as are stated in the similar Option
certificates initially issuable pursuant to this Agreement. However, the
Company may, at any time in its sole discretion (which shall be conclusive),
make any change in the
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form of Option certificate that it may deem appropriate and that does not
affect the substance thereof; and any Option certificate thereafter issued,
whether upon registration of transfer of, or in exchange or substitution for,
an outstanding Option certificate, may be in the form so changed.
9.8. TREASURY STOCK. For purposes of this Section 9, shares of Common
Stock owned or held at any relevant time by, or for the account of, the
Company, in its treasury or otherwise, shall not be deemed to be outstanding
for purposes of the calculations and adjustments described.
9.9. OFFICERS' CERTIFICATE. Whenever the Exercise Price or the
aggregate number of Option Securities purchasable pursuant to this Option
shall be adjusted as required by the provisions of this Section 9, the
Company shall promptly file with its Secretary or an Assistant Secretary at
its principal office, and with its transfer agent, if any, an officers'
certificate executed by the Company's President and Secretary or Assistant
Secretary, describing the adjustment and setting forth, in reasonable detail,
the facts requiring such adjustment and the basis for and calculation of such
adjustment in accordance with the provisions of this Option. Each such
officers' certificate shall be made available to the Holder or Holders of
this Option for inspection at all reasonable times, and the Company, after
each such adjustment, shall promptly deliver a copy of the officers'
certificate relating to that adjustment to the Holder or Holders of this
Option. If the officers' certificate is not accompanied by the certificate
described in Section 8.6, the officers' certificate described in this Section
6 shall be deemed to be conclusive as to the correctness of the adjustment
reflected therein if, and only if, no Holder of this Option delivers written
notice to the Company of an objection to the adjustment within 30 days after
the officers' certificate is delivered to the Holder or Holders of this
Option. The Company will make its books and records available for inspection
and copying during normal business hours by the Holder so as to permit a
determination as to the correctness of the adjustment. If written notice of
an objection is delivered by a Holder to the Company and the parties cannot
reconcile the dispute, the Holder and the Company shall submit the dispute to
arbitration pursuant to the provisions of Section 19 below. Failure to
prepare or provide the officers' certificate shall not modify the parties'
rights hereunder.
SECTION 10. MERGER OR CONSOLIDATION OF THE COMPANY
The Company will not merge or consolidate with or into any other
corporation or sell all or substantially all of its property to another
corporation, unless the provisions of Section 9.3 are complied with.
SECTION 11. MODIFICATION OF AGREEMENT.
The Company may by supplemental agreement make any changes or
corrections in this Agreement it shall deem appropriate to cure any ambiguity
or to correct any defective or inconsistent provision or mistake or error
herein contained. Additionally, the Company may make any changes or
corrections deemed necessary which shall not adversely affect the interests
of the Warrant Holders, including lowering the exercise price or extending
the Exercise Period of the Warrants; provided, however, this Agreement shall
not otherwise be modified, supplemented or altered in any respect except with
the consent in writing of the Warrant Holders who hold not less than a
majority of the Warrants then outstanding and provided further that no such
amendment shall accelerate the Warrant Expiration Date or increase the
Exercise Price without the approval of all the holders of all outstanding
Warrants.
SECTION 12. NOTICE TO HOLDERS
If, prior to the expiration of this Option either by its terms or by its
exercise in full, any of the following shall occur:
(i) the Company shall declare a dividend or authorize any other
distribution on its Common Stock; or
(ii) the Company shall authorize the granting to the shareholders of
its Common Stock of rights to subscribe for or purchase any securities or any
other similar rights; or
(iii) any reclassification, reorganization or similar change of the
Common Stock, or any consolidation or merger to which the Company is a party,
or the sale, lease, or exchange of any significant portion of the assets of
the Company; or
(iv) the voluntary or involuntary dissolution, liquidation or winding
up of the Company; or
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(v) any purchase, retirement or redemption by the Company of its Common
Stock;
then, and in any such case, the Company shall deliver to the Holder or Holders
written notice thereof at least 30 days prior to the earliest applicable date
specified below with respect to which notice is to be given, which notice shall
state the following:
(x) the date on which a record is to be taken for the purpose of such
dividend, distribution or rights, or, if a record is not to be taken, the date
as of which the shareholders of Common Stock of record to be entitled to such
dividend, distribution or rights are to be determined;
(y) the date on which such reclassification, reorganization,
consolidation, merger, sale, transfer, dissolution, liquidation, winding up or
purchase, retirement or redemption is expected to become effective, and the
date, if any, as of which the Company's shareholders of Common Stock of record
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, reorganization, consolidation,
merger, sale, transfer, dissolution, liquidation, winding up, purchase,
retirement or redemption; and
(z) if any matters referred to in the foregoing clauses (x) and (y) are
to be voted upon by shareholders of Common Stock, the date as of which those
shareholders to be entitled to vote are to be determined.
SECTION 13. REGISTRATION RIGHTS
13.1. DEMAND REGISTRATION RIGHT. Upon the written request of a Majority
Holder, made at any time after the Exercise Date, but before the Expiration
Date, the Company shall file within 90 days of such written request a
registration statement or Regulation A offering statement pursuant to the Act,
and all necessary amendments thereto, to register or qualify the Option, Option
Securities and the Option Securities underlying the unexercised portion of this
Option. No additional securities shall be included in such registration
statement or offering statement without the written consent of the Majority
Holder. The Company may use the Regulation A exemption if available, but the
Company must file a registration statement if the securities that are to be
covered cannot be sold pursuant to Regulation A because of the limitations
applicable to the use of the Regulation A exemption. The Company agrees to use
its best efforts to cause this registration or qualification to become effective
as promptly as practicable and to keep such registration effective for a period
of the lesser of 180 days or the date of completion of the distribution
described in the Registration Statement; and its officers, directors,
consultants, auditors and counsel shall cooperate in all matters necessary or
advisable to pursue this objective. All of the expenses of this registration or
qualification shall be borne by the Company, including, but not limited to,
legal, accounting, consulting, printing, filing and NASD fees, out-of-pocket
expenses incurred by counsel, accountants, and consultants retained by the
Company and miscellaneous expenses directly related to the registration
statement or offering statement and the offering, and the underwriter's
accountable and nonaccountable expense allowances and fees; but the Company
shall not pay any brokerage fees, commissions or underwriting discounts except
to the extent they are attributable to other securities that the Company has
been permitted to register or qualify or to offer in conjunction with the
registration and qualification of the Option, Option Securities or the Option
Securities underlying the unexercised portion of this Option. Notwithstanding
the foregoing, if, as a qualification of any offering in any state or
jurisdiction in which the Company (by vote of its Board of Directors) or any
underwriter determines in good faith that it wishes to offer securities
registered in the offering, it is required that offering expenses be allocated
in a manner different from that provided above, then the offering expenses shall
be allocated in whatever manner is most nearly in compliance with the provisions
set out above. The Majority Holder shall be entitled to exercise the rights
described in this subsection 13.1 one time only.
Within 10 days after the delivery by the Majority Holder to the Company of
the notice described above, the Company shall deliver written notice to all
other Holders of this Option and holders of the Option Securities, if any,
advising them that the Company is proceeding with a registration statement or
offering statement and offering them the right to include the Option and Option
Securities of those Holders or holders therein. If any Holder of a Option and
Option Securities delivers written acceptance of that offer to the Company
within 30 days after the delivery of the Company's notice, the Company shall be
obligated to include that holder's Option and that holder's Option Securities in
the contemplated registration statement or offering statement.
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13.2. PIGGY-BACK REGISTRATION RIGHT. If at any time prior to the
Expiration Date the Company files a registration statement with the Commission
pursuant to the Act, or pursuant to any other act passed after the date of this
Agreement, which filing provides for the sale of securities by the Company to
the public, or files a Regulation A offering statement under the Act, the
Company shall offer to the Holder or Holders of this Option and the holders of
any Option Securities the opportunity to register or qualify the Option
Securities and any Option Securities underlying the unexercised portion of this
Option, if any, at the Company's sole expense, regardless of whether the Holder
or Holders of this Option or the holders of Option Securities or both may have
previously availed themselves of any of the registration rights described in
this Section 13; provided, however, that in the case of a Regulation A offering,
the opportunity to qualify shall be limited to the amount of the available
exemption after taking into account the securities that the Company wishes to
qualify. Notwithstanding anything to the contrary, this subsection 13.2 shall
not be applicable to a registration statement registering securities issued
pursuant to an employee benefit plan or as to a transaction subject to Rule 145
promulgated under the Act or which a form S-4 registration statement could be
used.
The Company shall deliver written notice to the Holder or Holders of this
Option and to any holders of the Option Securities of its intention to file a
registration statement or Regulation A offering statement under the Act at least
60 days prior to the filing of such registration statement or offering
statement, and the Holder or Holders and holders of Option Securities shall have
30 days thereafter to request in writing that the Company register or qualify
the Option Securities or the Option Securities underlying the unexercised
portion of this Option in accordance with this subsection 13.2. Upon the
delivery of such a written request within the specified time, the Company shall
be obligated to include in its contemplated registration statement or offering
statement all information necessary or advisable to register or qualify the
Option Securities or Option Securities underlying the unexercised portion of
this Option for a public offering, if the Company does file the contemplated
registration statement or offering statement; provided, however, that neither
the delivery of the notice by the Company nor the delivery of a request by a
Holder or by a holder of Option Securities shall in any way obligate the Company
to file a registration statement or offering statement. Furthermore,
notwithstanding the filing of a registration statement or offering statement,
the Company may, at any time prior to the effective date thereof, determine not
to offer the securities to which the registration statement or offering
statement relates, other than the Option, Option Securities and Option
Securities underlying the unexercised portion of this Option. Notwithstanding
the foregoing, if, as a qualification of any offering in any state or
jurisdiction in which the Company (by vote of its Board of Directors) or any
underwriter determines in good faith that it wishes to offer securities
registered in the offering, it is required that offering expenses be allocated
in a manner different from that provided above, then the offering expenses shall
be allocated in whatever manner is most nearly in compliance with the provisions
set out above.
The Company shall comply with the requirements of this subsection 13.2 and
the related requirements of subsection 13.7 at its own expense. That expense
shall include, but not be limited to, legal, accounting, consulting, printing,
federal and state filing fees, NASD fees, out-of-pocket expenses incurred by
counsel, accountants and consultants retained by the Company, and miscellaneous
expenses directly related to the registration statement or offering statement
and the offering. However, this expense shall not include the portion of any
underwriting commissions, transfer taxes and the underwriter's accountable and
nonaccountable expense allowances attributable to the offer and sale of the
Option, Option Securities and the Option Securities underlying the unexercised
portion of this Option, all of which expenses shall be borne by the Holder or
Holders of this Option and the holders of the Option Securities registered or
qualified.
If the registration for which the Company gives notice is for a registered
public offering involving an underwriting, the Company shall so advise as part
of the written notice given pursuant to this Section. In such event, the right
of any Optionholder or holder of Shares to registration pursuant to Section 13.2
shall be conditioned upon such holder's participation in such underwriting, and
the inclusion of Shares in the underwriting shall be limited to the extent
provided herein. All holders proposing to distribute their Shares through such
underwriting shall (together with the Company and the other holders distributing
their Shares through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by
the Company. Notwithstanding any other provision of this Section, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, such underwriter may limit the amount
of securities to be included in the registration and underwriting by the holders
of Company securities exercising "piggyback" registration rights (including the
Optionholder and each holder of Options and Shares). The Company shall so
advise all such holders, and the number of shares of such securities that may be
included in the registration and underwriting shall be allocated among all of
such holders, in proportion, as nearly as practicable, to
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the respective amounts of securities requested to be included in such
registration held by such holders at the time of filing the registration
statement, PROVIDED, HOWEVER, that no security holder other than one
exercising a demand registration right shall have superior rights with
respect to inclusion in a registration than those of the Optionholder and
each holder of Options and Shares and if any party is granted such superior
rights hereafter the Optionholder and each holder of Options and Shares shall
be deemed to be automatically granted similar rights. The Company shall
advise all such holders of any such limitations and of the number or
securities that may be included in the registration. Any securities excluded
or withdrawn from such underwriting shall not be transferred prior to one
hundred twenty (120) days after the effective date of the registration
statement relating thereto, or such shorter period of time as the
underwriters may require.
13.3. INCLUSION OF INFORMATION. In the event that the Company registers
or qualifies the Option, Option Securities or the Option Securities underlying
the unexercised portion of this Option pursuant to subsections 13.1 or 13.2
above, the Company shall include in the registration statement or qualification,
and the prospectus included therein, all information and materials necessary or
advisable to comply with the applicable statutes and regulations so as to permit
the public sale of the Option Securities or the Option Securities underlying the
unexercised portion of this Option. As used in subsections 13.1 and 13.2,
reference to the Company's securities shall include, but not be limited to, any
class or type of the Company's securities or the securities of any of the
Company's subsidiaries or affiliates.
13.4. REGISTRATION STATEMENT FILED BY HOLDER. In addition to the
registration rights described in subsections 13.1 and 13.2 above, upon the
written request of any Majority Holder, the Company, as promptly as possible
after delivery of such request, shall cooperate with the requesting Majority
Holder or holder in preparing and signing any registration statement or offering
statement that the Holder or holder may desire to file in order to sell or
transfer the Option and Option Securities. Within 10 days after the delivery of
the written request described above, the Company shall deliver written notice to
all other Holders of this Option and holders of Option Securities, if any,
advising them that the Company is proceeding with a registration statement or
offering statement and that their Option and Option Securities will be included
therein if they so desire and agree to pay their pro rata share of the cost of
registration or qualification and provided that the Holder or holder delivers
written notice to the Company of their desire to be included and their agreement
to pay their pro rata share of the cost within 30 days after the delivery of the
Company's notice to them. The Company will supply all information necessary or
advisable for any such registration statements or offering statements; provided,
however, that all the costs and expenses of such registration statements or
offering statements shall be borne, in a manner proportionate to the number of
securities for which they indicate a desire to register, by the Holders of this
Option and the holders of Option Securities who seek the registration or
qualification of their Option, Option Securities or Option Securities underlying
the unexercised portion of their Option. In determining the amount of costs and
expenses to be borne by those Holders or holders, the only costs and expenses of
the Company to be included are the additional costs and expenses that would not
have otherwise been incurred by the Company if those Holders or holders had not
desired to file a registration statement or offering statement. As an example,
and without limitation, audit fees would not be charged to those Holders or
holders if or to the extent that the Company would have incurred the same audit
fees for its year-end or other use in the absence of the registration statement
or offering statement. The Holders or holders responsible for the costs and
expenses shall reimburse the Company for those reimbursable costs and expenses
reasonably incurred by the Company within 30 days after the initial effective
date of the registration statement or qualification at issue.
13.5. PAYMENT OF EXERCISE PRICE FROM PROCEEDS. In the event that any
such Registration Statement is utilized for a public offering of any of the
Shares to be received upon exercise of the Options pursuant to this Section 13,
the Optionholder may elect to pay the exercise price of the Options to the
Company out of the proceeds of the sale of the Shares pursuant to the
Registration Statement concurrently with the closing of such sale of the Shares;
provided that if such sale is not closed within 90 days of the effective date of
such Registration Statement, then the Optionholder shall be obligated to pay the
exercise price of the Options to the Company on such 90th day.
13.6. CONDITION OF COMPANY'S OBLIGATIONS. As to each registration
statement or offering statement, the Company's obligations contained in this
Section 13 shall be conditioned upon a timely receipt by the Company in writing
of the following:
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(a) Information as to the terms of the contemplated public offering
furnished by and on behalf of each Holder or holder intending to make a public
distribution of the Option Securities or Option Securities underlying the
unexercised portion of the Option; and
(b) Such other information as the Company may reasonably require from
such Holders or holders, or any underwriter for any of them, for inclusion in
the registration statement or offering statement.
13.7. ADDITIONAL REQUIREMENTS. In each instance in which the Company
shall take any action to register or qualify the Option Securities or the Option
Securities underlying the unexercised portion of this Option, if any, pursuant
to this Section 13, the Company shall do the following:
(a) Supply to Kashner Davidson, as the representative of the Holders of
the Option and the holders of Option Securities whose Option Securities are
being registered or qualified, two (2) manually signed copies of each
registration statement or offering statement, and all amendments thereto, and a
reasonable number of copies of the preliminary, final or other prospectus or
offering circular, all prepared in conformity with the requirements of the Act
and the rules and regulations promulgated thereunder, and such other documents
as Kashner Davidson shall reasonably request;
(b) Cooperate with respect to (i) all necessary or advisable actions
relating to the preparation and the filing of any registration statements or
offering statements, and all amendments thereto, arising from the provisions of
this Section 13, (ii) all reasonable efforts to establish an exemption from the
provisions of the Act or any other federal or state securities statutes, (iii)
all necessary or advisable actions to register or qualify the public offering at
issue pursuant to federal securities statutes and the state "blue sky"
securities statutes of each jurisdiction that the Holders of the Option or
holders of Option Securities shall reasonably request, and (iv) all other
necessary or advisable actions to enable the Holders of the Option Securities to
complete the contemplated disposition of their securities in each reasonably
requested jurisdiction; and
(c) Keep all registration statements or offering statements to which
this Section 13 applies, and all amendments thereto, effective under the Act for
a period of at least 180 days after their initial effective date and cooperate
with respect to all necessary or advisable actions to permit the completion of
the public sale or other disposition of the securities subject to a registration
statement or offering statement.
13.8. RECIPROCAL INDEMNIFICATION. In each instance in which pursuant to
this Section 13 the Company shall take any action to register or qualify the
Securities or the Option Securities underlying the unexercised portion of this
Option, prior to the effective date of any registration statement or offering
statement, the Company and each Holder or holder of Options or Option Securities
being registered or qualified shall enter into reciprocal indemnification and
contribution agreements, in the form customarily used by reputable investment
bankers with respect to public offerings of securities, containing substantially
the same terms as described in Section 10 .
13.9. KASHNER DAVIDSON AS REPRESENTATIVE. For purposes of subsection
13.6 (a) above, by the receipt of this Option or any Option Securities, all
Holders and all holders of Option Securities acknowledge and agree that Kashner
Davidson is and shall be their representative.
13.10. SURVIVAL. The Company's obligations described in this Section 13
shall continue in full force and effect regardless of the exercise, surrender,
cancellation or expiration of this Option.
SECTION 14. PAYMENT OF TAXES
The Company will pay all documentary stamp taxes, if any, attributable to
the initial issuance of the Options or the securities comprising the Shares;
provided, however, the Company shall not be required to pay any tax which may be
payable in respect of any transfer of the Options or the securities comprising
the Shares.
SECTION 15. INDEMNIFICATION AND CONTRIBUTION
15.1. INDEMNIFICATION BY COMPANY. In the event of the filing of any
Registration Statement with respect to the Shares pursuant to Section 8 hereof,
the Company agrees to indemnify and hold harmless the Optionholder or any holder
of Shares and each person, if any, who controls the Optionholder or any holder
of Shares within the
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meaning of the Act, against any and all loss, claim, damage or liability,
joint or several (which shall, for all purposes of this Agreement include,
but not be limited to, all costs of defense and investigation and all
attorneys' fees), to which such Optionholder or any holder of Shares may
become subject, under the Act or otherwise, insofar as such loss, claim,
damage, or liability (or action with respect thereto) arises out of or is
based upon (a) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, any Preliminary Prospectus, the
Effective Prospectus, or the Final Prospectus or any amendment or supplement
thereto; or (b) the omission or alleged omission to state in the Registration
Statement, any Preliminary Prospectus, the Effective Prospectus or the Final
Prospectus or any amendment or supplement thereto a material fact required to
be stated therein or necessary to make the statements therein not misleading;
except that the Company shall not be liable in any such case to the extent,
but only to the extent, that any such loss, claim, damage, or liability
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by such
Optionholder or the holder of such Shares specifically for use in the
preparation of the Registration Statement, any Preliminary Prospectus, the
Effective Prospectus and the Final Prospectus or any amendment or supplement
thereto. This indemnity will be in addition to any liability which the
Company may otherwise have.
15.2. INDEMNIFICATION BY UNDERWRITERS. The Optionholders and the holders
of Shares agree that they, severally, but not jointly, shall indemnify and hold
harmless the Company, each other person referred to in subparts (1), (2) and (3)
of Section 11(a) of the Act in respect of the Registration Statement and each
person, if any, who controls the Company within the meaning of the Act, against
any and all loss, claim, damage or liability, joint or several (which shall, for
all purposes of this Agreement include, but not be limited to, all costs of
defense and investigation and all attorneys' fees), to which the Company may
become subject under the Act or otherwise, insofar as such loss, claim, damage,
liability (or action in respect thereto) arises out of or are based upon (a) any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, any Preliminary Prospectus, the Effective Prospectus or
the Final Prospectus or any amendment or supplement thereto; or (b) the omission
or alleged omission to state in the Registration Statement, any Preliminary
Prospectus, the Effective Prospectus or the Final Prospectus or any amendment or
supplement thereto a material fact required to be stated therein or necessary to
make the statements therein not misleading; except that such indemnification
shall be available in each such case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon information and in conformity with written
information furnished to the Company by the Optionholder or the holder of
Shares specifically for use in the preparation thereof. This indemnity will be
in addition to any liability which the Company may otherwise have.
15.3. RIGHT TO PROVIDE DEFENSE. Promptly after receipt by an indemnified
party under subsection 15.1 or 15.2 above of written notice of the commencement
of any action, the indemnified party shall, if a claim in respect thereof is to
be made against the indemnifying party under such section, notify the
indemnifying party in writing of the claim or the commencement of that action;
the failure to notify the indemnifying party shall not relieve it of any
liability which it may have to an indemnified party, except to the extent that
the indemnifying party did not otherwise have knowledge of the commencement of
the action and the indemnifying party's ability to defend against the action was
prejudiced by such failure. Such failure shall not relieve the indemnifying
party from any other liability which it may have to the indemnified party. If
any such claim or action shall be brought against an indemnified party, and it
shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice
from the indemnifying party to the indemnified party of its election to assume
the defense of such claim or action, the indemnifying party shall not be liable
to the indemnified party under such section for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; except that Kashner
Davidson shall have the right to employ counsel to represent it and the other
Optionholders of holders of Shares who may be subject to liability arising out
of any claim in respect of which indemnity may be sought by such persons against
the Company under such section if, in Kashner Davidson's reasonable judgment, it
is advisable for Kashner Davidson and those Optionholders or holders of Shares
to be represented by separate counsel, and in that event the fees and expenses
of such separate counsel shall be paid by the Company.
15.4. CONTRIBUTION. If the indemnification provided for in subsections
15.1 and 15.2 of this Agreement is unavailable or insufficient to hold harmless
an indemnified party, then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the losses,
claims, damages, or liabilities referred to in subsections 15.1 or 15.2 above
(a) in such proportion as is appropriate to reflect the relative benefits
received
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by the Company on the one hand and the Optionholders on the other; or (b) if
the allocation provided by clause (a) above is not permitted by applicable
law, in such proportion as is appropriate to reflect the relative benefits
referred to in clause (a) above but also the relative fault of the Company on
the one hand and the Optionholders on the other in connection with the
statements or omissions which resulted in such losses, claims, damages, or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Optionholders shall be
deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bear to the
total underwriting discounts and un-itemized expenses received by the
Underwriters, in each case as set forth in the table on the cover page of the
Final Prospectus. Relative fault shall be determined by reference to, among
other things, whether the untrue statement of a material fact or the omission
to state a material fact relates to information supplied by the Company or
the Underwriter and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such untrue statement or
omission. For purposes of this subsection 15.4, the term "damages" shall
include any counsel fees or other expenses reasonably incurred by the Company
or the Underwriters in connection with investigating or defending any action
or claim which is the subject of the contribution provisions of this
subsection 15.4. No person adjudged guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it shall promptly give
written notice of such service to the party or parties from whom contribution
may be sought, but the omission so to notify such party or parties of any such
service shall not relieve the party from whom contribution may be sought from
any obligation it may have hereunder or otherwise (except as specifically
provided in subsection 15.4 hereof).
SECTION 16. RESTRICTIONS ON TRANSFER
16.1. RESTRICTIONS ON TRANSFER. This Option, the Option Securities, and
all other securities issued or issuable upon exercise of this Option, may not be
offered, sold or transferred, in whole or in part, except in compliance with the
Act, and except in compliance with all applicable state securities laws. The
Optionholder agrees that prior to making any disposition of the Options, other
than to persons or entities identified in Section 2.1, the Optionholder shall
give written notice to the Company describing briefly the manner in which any
such proposed disposition is to be made; and no such disposition shall be made
if the Company has notified the Optionholder that in the opinion of counsel
reasonably satisfactory to the Optionholder a registration statement or other
notification or post-effective amendment thereto (hereinafter collectively a
"Registration Statement") under the Act is required with respect to such
disposition and no such Registration Statement has been filed by the Company
with, and declared effective, if necessary, by, the Commission.
16.2. RESTRICTIVE LEGEND. The Company may cause substantially the
following legends, or their equivalents, to be set forth on each certificate
representing the Options, the Option Securities, or any other security issued or
issuable upon exercise of this Option, not theretofore distributed to the public
or sold to underwriters, as defined by the Act, for distribution to the public
pursuant to Section 8 above:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES
LAWS AND MAY NOT BE SOLD, EXCHANGED, HYPOTHECATED OR TRANSFERRED IN
ANY MANNER EXCEPT IN COMPLIANCE WITH THE AGREEMENT PURSUANT TO WHICH
THEY WERE ISSUED.
(b) Any legend required by applicable state securities laws.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legends (except a new certificate issued upon
completion of a public distribution pursuant to a registration statement under
the Securities Act of 1933, as amended (the "Act"), or the securities
represented thereby) shall also bear the above legends unless, in the opinion of
the Company's counsel, the securities represented thereby need no longer be
subject to such restrictions.
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SECTION 17. FRACTIONAL SHARES
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of all or any part of this Option. With respect to any
fraction of a share of any security called for upon any exercise of this Option,
the Company shall pay to the Holder an amount in money equal to that fraction
multiplied by the Current Market Price of that share.
SECTION 18. NO RIGHTS AS STOCKHOLDER; NOTICES TO OPTIONHOLDER
Nothing contained in this Agreement or in the Options shall be construed as
conferring upon the Optionholder or its transferees any rights as a stockholder
of the Company, including the right to vote, receive dividends, consent or
receive notices as a stockholder in respect to any meeting of stockholders for
the election of directors of the Company or any other matter. The Company
covenants, however, that for so long as this Option is at least partially
unexercised, it will furnish any Holder of this Option with copies of all
reports and communications furnished to the shareholders of the Company. In
addition, if at any time prior to the expiration of the Options and prior to
their exercise, any one or more of the following events shall occur:
(a) Any action which would require an adjustment pursuant to Section
4.1 (except subsections 4.1(e) and 4.1(h)) or 4.4; or
(b) A dissolution, liquidation, or winding up of the Company (other
than in connection with a consolidation, merger, or sale of its property,
assets, and business as an entirety or substantially as an entirety) shall be
proposed:
then the Company shall give notice in writing of such event to the
Optionholder, as provided in Section 16 hereof, at least 20 days prior
to the date fixed as a record date or the date of closing the transfer
books for the determination of the stockholders entitled to any relevant
dividend, distribution, subscription rights or other rights or for the
determination of stockholders entitled to vote on such proposed
dissolution, liquidation, or winding up. Such notice shall specify such
record date or the date of closing the transfer books, as the case may
be. Failure to mail or receive notice or any defect therein shall not
affect the validity of any action taken with respect thereto.
SECTION 19. CHARGES DUE UPON EXERCISE
The Company shall pay any and all issue or transfer taxes, including, but
not limited to, all federal or state taxes, that may be payable with respect to
the transfer of this Option or the issue or delivery of Option Securities upon
the exercise of this Option.
SECTION 20. NOTICES
Any notice pursuant to this Agreement by the Company or by an Optionholder
or a holder of Shares shall be in writing and shall be deemed to have been duly
given if delivered or mailed by certified mail, return receipt requested:
(a) If to an Optionholder or a holder of Shares, addressed to Kashner
Davidson Securities Corporation, 77 South Palm Avenue, Sarasota, Florida 34236,
Attention: President.
(b) If to the Company addressed to it at FirstLink Communications,
Inc., 190 SW Harrison, Portland, Oregon 97201, Attention: President.
Each party may from time to time change the address to which notices to it
are to be delivered or mailed hereunder by notice in accordance herewith to the
other party.
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SECTION 21. ARBITRATION
The Company and the Holder, and by receipt of this Option or any Option
Securities, all subsequent Holders or holders of Option Securities, agree to
submit all controversies, claims, disputes and matters of difference with
respect to this Option, including, without limitation, the application of this
Section 21 to arbitration in Portland, Oregon, according to the rules and
practices of the American Arbitration Association from time to time in force;
provided, however, that if such rules and practices conflict with the applicable
procedures of Oregon courts of general jurisdiction or any other provisions of
Oregon law then in force, those Oregon rules and provisions shall govern. This
agreement to arbitrate shall be specifically enforceable. Arbitration may
proceed in the absence of any party if notice of the proceeding has been given
to that party. The parties agree to abide by all awards rendered in any such
proceeding. These awards shall be final and binding on all parties to the
extent and in the manner provided by the rules of civil procedure enacted in
Oregon. All awards may be filed, as a basis of judgment and of the issuance of
execution for its collection, with the clerk of one or more courts, state or
federal, having jurisdiction over either the party against whom that award is
rendered or its property. No party shall be considered in default hereunder
during the pendency of arbitration proceedings relating to that default.
SECTION 22. APPLICABLE LAW
This Option shall be governed by and construed in accordance with the laws
of the State of Oregon, and courts located in Oregon shall have exclusive
jurisdiction over all disputes arising hereunder.
SECTION 23. MISCELLANEOUS PROVISIONS
(a) Subject to the terms and conditions contained herein, this Option
shall be binding on the Company and its successors and shall inure to the
benefit of the original Holder, its successors and assigns and all holders of
Option Securities and the exercise of this Option in full shall not terminate
the provisions of this Option as it relates to holders of Option Securities.
(b) If the Company fails to perform any of its obligations hereunder,
it shall be liable to the Holder for all damages, costs and expenses resulting
from the failure, including, but not limited to, all reasonable attorney's fees
and disbursements.
(c) This Option cannot be changed or terminated or any performance or
condition waived in whole or in part except by an agreement in writing signed by
the party against whom enforcement of the change, termination or waiver is
sought; provided, however, that any provisions hereof may be amended, waived,
discharged or terminated upon the written consent of the Company and Kashner
Davidson.
(d) If any provision of this Option shall be held to be invalid,
illegal or unenforceable, such provision shall be severed, enforced to the
extent possible, or modified in such a way as to make it enforceable, and the
invalidity, illegality or unenforceability shall not affect the remainder of
this Option.
(e) The Company agrees to execute such further agreements, conveyances,
certificates and other documents as may be reasonably requested by the Holder to
effectuate the intent and provisions of this Option.
(f) Paragraph headings used in this Option are for convenience only and
shall not be taken or construed to define or limit any of the terms or
provisions of this Option. Unless otherwise provided, or unless the context
shall otherwise require, the use of the singular shall include the plural and
the use of any gender shall include all genders.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, all as of the day and year first above written.
FIRSTLINK COMMUNICATIONS, INC.
By:
-----------------------------------------
A. Roger Pease, President
KASHNER DAVIDSON SECURITIES
CORPORATION
By:
-----------------------------------------
EXHIBIT A
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, EXCHANGED,
HYPOTHECATED OR TRANSFERRED IN ANY MANNER EXCEPT IN COMPLIANCE WITH THE
AGREEMENT PURSUANT TO WHICH THEY WERE ISSUED.
Option Certificate No. RSO-
REPRESENTATIVE'S OPTIONS TO PURCHASE
SHARES OF COMMON STOCK
FIRSTLINK COMMUNICATIONS, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF OREGON
This certifies that, for value received,______________________, the
registered holder hereof or assigns (the "Optionholder"), is entitled to
purchase from FirstLink Communications, Inc. (the "Company"), at any time
during the period commencing at 9:00 a.m., Portland, Oregon time,
on_______________ at the purchase price per Share of __________________ (the
"Exercise Price"), the number of shares of Common Stock of the Company set
forth above (the "Shares"). The number of shares of Common Stock of the
Company purchasable upon exercise of the Options evidenced hereby shall be
subject to adjustment from time to time as set forth in the Representative's
Option Agreement.
The Options evidenced hereby may be exercised in whole or in part by
presentation of this Option Certificate with the Purchase Form attached hereto
duly executed (with a signature guarantee as provided thereon) and simultaneous
payment of the Exercise Price at the principal office of the Company. Payment
of such price shall be made at the option of the Optionholder in cash or by
check or by Cashless Exercise subject to the provisions of Section 3 of the
Representative's Option Agreement (as that term is defined herein).
The Options evidenced hereby represent the right to purchase an
aggregate of up to 100,000 Shares and are issued under and in accordance with
a Representative's Share Option Agreement, dated as of________________ ,
between the Company and Kashner Davidson Securities Corporation and are
subject to the terms and provisions contained in the Representative's Option
Agreement, to all of which the Optionholder by acceptance hereof consents.
1
<PAGE>
Upon any partial exercise of the Options evidenced hereby, there shall be
signed and issued to the Optionholder a new Option Certificate in respect of the
Shares as to which the Options evidenced hereby shall not have been exercised.
These Options may be exchanged at the office of the Company by surrender of this
Option Certificate properly endorsed for one or more new Options of the same
aggregate number of Shares as here evidenced by the Option or Options exchanged.
No fractional shares of Common Stock will be issued upon the exercise of rights
to purchase hereunder, but the Company shall pay the cash value of any fraction
upon the exercise of one or more Options. These Options are transferable at the
office of the Company in the manner and subject to the limitations set forth in
the Representative's Option Agreement.
This Option Certificate does not entitle any Optionholder to any of the
rights of a stockholder of the Company.
FIRSTLINK COMMUNICATIONS, INC.
By:
-----------------------------------------
Dated:
[Seal]
Attest:
- ------------------------------
Secretary
2
<PAGE>
NOTICE OF EXERCISE
(To be executed by a Holder desiring to exercise the right to purchase Shares
pursuant to a Option.)
The undersigned Holder of a Option hereby:
(a) irrevocably elects to exercise the Option to the extent of
purchasing _______________ Shares;
(b) makes payment in full of the aggregate Exercise Price for those
Shares in the amount of $_________________ by the delivery of certified funds or
a bank cashier's check in the amount of $_________________;
(c) requests that certificates evidencing the securities underlying
such Shares be issued in the name of the undersigned, or, if the name and
address of some other person is specified below, in the name of such other
person:
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
(Name and address of person OTHER than the
undersigned in whose name Shares are to be registered)
(d) requests, if the number of Shares purchased are not all the Shares
purchasable pursuant to the unexercised portion of the Option, that a new Option
of like tenor for the remaining Shares purchasable pursuant to the Option be
issued and delivered to the undersigned at the address stated below.
Dated: --------------------------------------------
--------------------- Signature
(This signature must conform in all respects
to the name of the Holder as specified on the
face of the Option.)
- --------------------------- --------------------------------------------
Social Security Number Printed Name
or Employer ID Number
Address:
-----------------------------------------
-----------------------------------------
3
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned, __________________________________, hereby
sells, assigns and transfers unto:
Name:
-------------------------------------------------
(Please type or print in block letters)
Address:
----------------------------------------------
----------------------------------------------
the right to purchase _________________ Shares of FirstLink Communications, Inc.
(the "Company") pursuant to the terms and conditions of the Option held by the
undersigned. The undersigned hereby authorizes and directs the Company (i) to
issue and deliver to the above-named assignee at the above address a new Option
pursuant to which the rights to purchase being assigned may be exercised, and
(ii) if there are rights to purchase Shares remaining pursuant to the
undersigned's Option after the assignment contemplated herein, to issue and
deliver to the undersigned at the address stated below a new Option evidencing
the right to purchase the number of Shares remaining after issuance and delivery
of the Option to the above-named assignee. Except for the number of Shares
purchasable, the new Options to be issued and delivered by the Company are to
contain the same terms and conditions as the undersigned's Option. To complete
the assignment contemplated by this Assignment Form, the undersigned hereby
irrevocably constitutes and appoints ____________________________________ as the
undersigned's attorney-in-fact to transfer the Options and the rights thereunder
on the books of the Company with full power of substitution for these purposes.
Dated:
-------------------- --------------------------------------------
Signature
(This signature must conform in all
respects to the name of the Holder as
specified on the face of the Option.)
--------------------------------------------
Printed Name
Address:
--------------------------------------------
--------------------------------------------
4
<PAGE>
OPTION CONVERSION EXERCISE FORM
TO: FirstLink Communications, Inc.
Pursuant to Section 4.6 of the Representative's Share Option Agreement, the
Holder hereby irrevocably elects to convert Options into_________________Shares
of the Company. A conversion calculation is attached hereto as Exhibit B-1.
The undersigned requests that certificates for such Shares be issued as
follows:
Name:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------
Deliver to:
---------------------------------------------------------------
and that a new Option Certificate for the balance remaining of the Options, if
any, be registered in the name of, and delivered to, the undersigned at the
address stated above.
Signature Dated
---------------------------------- ------------------------
5
<PAGE>
Exhibit B-1
CALCULATION OF OPTION CONVERSION
<TABLE>
<S> <C> <C>
Converted Securities = NET VALUE
---------
FMV
FMV = $
---------------------------------
Net Value = Aggregate FMV - Aggregate Exercise Price
= $ -
-------------- ----------------
= $
---------------------------------
Converted Shares = ---------------------------------
Fractional Converted Shares = ---------------------------------(1)
</TABLE>
(1) FirstLink Communications, Inc. to pay for fractional Shares in cash @
$___________________ per Share.
6
<PAGE>
Exhibit No. 1.3 Form of Representative's Warrant Option Agreement.
<PAGE>
Exhibit 1.3
FIRSTLINK COMMUNICATIONS, INC.
KASHNER DAVIDSON & ASSOCIATES, INC.
REPRESENTATIVE'S WARRANT OPTION AGREEMENT
Dated as of ________
<PAGE>
REPRESENTATIVE'S WARRANT OPTION AGREEMENT
This Representative's Warrant Option Agreement (the "Agreement"), dated
as of ____, is made and entered into by and between FirstLink Communications,
Inc., an Oregon corporation (the "Company"), and Kashner Davidson Securities
Corporation ("Kashner Davidson").
The Company agrees to issue and sell, and Kashner Davidson agrees to
purchase, for the price of $100, options ("Options") to purchase up to an
aggregate of 100,000 warrants, subject to the terms and conditions set forth
below.
In consideration of the foregoing and for the purpose of defining the terms
and provisions of the Options and the respective rights and obligations
thereunder, the Company and Kashner Davidson, for value received, hereby agree
as follows:
SECTION 1. DEFINITIONS
The following terms used in this agreement shall have the following
meanings (unless otherwise expressly provided herein):
1.1. THE "ACT." The Securities Act of 1933, as amended.
1.2. THE "COMMISSION." The Securities and Exchange Commission.
1.3. THE "COMPANY." FirstLink Communications, Inc., an Oregon
corporation.
1.4. "COMMON STOCK." The Company's No Common Stock.
1.5. "EFFECTIVE DATE." _________
1.6. "EXERCISE DATE." __________
1.7. "EXERCISE PRICE." $ per Warrant, as modified in accordance with
Section 4, below.
1.8. "EXPIRATION DATE." ________
1.9. "HOLDER." Kashner Davidson Securities Corporation, and any valid
transferee thereof pursuant to Section 3.1. below.
1.10. "MAJORITY HOLDER." Any Holder, any holder of Option Securities, or
any combination of Holders and such holders of Option Securities; and any Holder
of Share Options, any holder of Share Option Securities, or any combination of
such Holders and such holders of Share Option Securities, if they hold, in the
aggregate, unexercised Options plus issued and outstanding Option Securities
equal to more than 50% of the total of (i) all Option Securities issued and
outstanding as a result of the exercise of the Option, and (ii) all Option
Securities that may at that time be purchased by exercising the unexercised
portion of the Option. For purposes hereof, a Holder of an Option which
entitles the Holder to purchase more than one share or Warrant shall be deemed
to hold Options equal to the number of shares or Warrants which may be acquired
pursuant to any such Option.
1.11. "NASD." The National Association of Securities Dealers, Inc.
1.12. "OPTIONS." The options issued in accordance with the terms of this
Agreement and any options issued in substitution for or replacement of such
options, or any options into which this option may be divided or exchanged.
1.13. "OPTION SECURITIES." The Warrants issued or issuable upon exercise
of an Option; and the Common Stock issued or issuable upon exercise of such
Warrants.
<PAGE>
1.14. "PUBLIC OFFERING." The public offering by the Company of 1,000,000
shares of Common Stock and 1,000,000 Warrants pursuant to an underwriting
agreement dated as of ______, between the Company and Kashner Davidson as
Representative of the several Underwriters named in the underwriting agreement.
1.15. "SHARE OPTIONS." Those options to purchase Warrants issued to the
Holder concurrently with the issuance of the Share Options under this Agreement,
pursuant to a Representative's Warrant Option Agreement dated the date of this
Agreement.
1.16. "UNDERWRITER." A broker-dealer identified as an Underwriter in the
Final Prospectus for the Public Offering.
1.17. "WARRANTS." The Warrants issued to the public pursuant to the
Registration Statement.
SECTION 2. TERM OF OPTIONS; EXERCISE OF OPTION
2.1. EXERCISE OF OPTION. Subject to the terms of this Agreement, the
Optionholder shall have the right, at any time during the four-year period
commencing at 9:00 a.m., Portland, Oregon time, on the Exercise Date and ending
at 5:00 p.m., Portland time, on the Expiration Date to purchase from the Company
up to the number of fully paid and nonassessable Warrants to which the
Optionholder may at the time be entitled to purchase pursuant to this Agreement,
upon surrender to the Company, at its principal office, of the certificate
evidencing the Options to be exercised, together with the purchase form on the
reverse thereof, duly filled in and signed, and upon payment to the Company of
the Exercise Price for the number of Warrants in respect of which such Options
are then exercised, but in no event for less than 100 Warrants (unless fewer
than an aggregate of 100 Warrants are then purchasable under all outstanding
Options held by a Optionholder).
2.2. PAYMENT OF EXERCISE PRICE. Payment of the aggregate Exercise Price
shall be made in cash or by check, or any combination thereof.
2.3. ISSUANCE OF WARRANTS. Upon such surrender of Options and payment
of such Exercise Price as aforesaid, the Company shall issue and cause to be
delivered with all reasonable dispatch to or upon the written order of the
Optionholder and in such name or names as the Optionholder may designate, a
certificate or certificates for the number of Warrants so purchased upon the
exercise of the Option. Such certificate or certificates shall be deemed to
have been issued and any person so designated to be named therein shall be
deemed to have become the holder of record of such securities as of the date of
surrender of the Options, notwithstanding that the transfer books of the Company
may then be closed or that certificates representing such Option Securities may
not have been prepared or actually delivered to the Holder. Unless the context
indicates otherwise, the term "Optionholder" shall include any transferee or
transferees of the Options pursuant to this Subsection 2.3, and the term
"Options" shall include any and all Options outstanding pursuant to this
Agreement, including those evidenced by a certificate or certificates issued
upon division, exchange, substitution or transfer pursuant to this Agreement.
SECTION 3. TRANSFERABILITY AND FORM OF OPTION
3.1. LIMITATION ON TRANSFER. This Option may not be sold, transferred,
assigned, pledged or hypothecated until the Exercise Date, except for (i) the
sale, transfer, or assignment, in whole or in part, to or among the officers of
Kashner Davidson and other Underwriters and the officers or partners of those
Underwriters, (ii) the transfer by operation of law as a result of the death of
any transferee to whom all or a portion of this Option may be transferred, and
(iii) the transfer to any successor to the business of an Underwriter. All
sales, transfers, assignments or hypothecations of this Option must be in
compliance with Section 8 hereof. Any assignment or transfer of this Option
shall be made by the presentation and surrender of this Option to the Company at
its principal office or the office of its transfer agent, if any, accompanied by
a duly executed Assignment Form, in the form attached to and by this reference
incorporated in this Option as Exhibit B. Upon the presentation and surrender
of these items to the Company, the Company, at its sole expense, shall execute
and deliver to the new Holder or Holders a new Option or Options, containing the
same terms and conditions as this Option, in the name of the new Holder or
Holders as named in the Assignment Form, and this Option shall at that time be
cancelled.
3.2. EXCHANGE OF CERTIFICATE. Any Option certificate may be exchanged
for another certificate or certificates entitling the Optionholder to purchase a
like aggregate number of Shares as the certificate or certificates
2
<PAGE>
surrendered then entitled such Optionholder to purchase. Any Optionholder
desiring to exchange a Option certificate shall make such request in writing
delivered to the Company, and shall surrender, properly endorsed, the
certificate evidencing the Option to be so exchanged. Thereupon, the Company
shall execute and deliver to the person entitled thereto a new Option
certificate as so requested.
3.3. MUTILATED, LOST, STOLEN, OR DESTROYED CERTIFICATE. In case the
certificate or certificates evidencing the Options shall be mutilated, lost,
stolen or destroyed, the Company shall, at the request of the Optionholder,
issue and deliver in exchange and substitution for and upon cancellation of the
mutilated certificate or certificates, or in lieu of and substitution for the
certificate or certificates lost, stolen or destroyed, a new Option certificate
or certificates of like tenor and representing an equivalent right or interest,
but only upon receipt of evidence satisfactory to the Company of such loss,
theft or destruction of such Option and a bond of indemnity, if requested, also
satisfactory in form and amount, at the applicant's cost. Applicants for such
substitute Option certificate shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
3.4. FORM OF CERTIFICATE. The text of the Option and of the form of
election to purchase Warrants shall be substantially as set forth in Exhibit A
attached hereto. The number of Warrants issuable upon exercise of the Options
is subject to adjustment upon the occurrence of certain events, all as
hereinafter provided. The Options shall be executed on behalf of the Company
by its President or by a Vice President and attested to by its Secretary or an
Assistant Secretary. An Option bearing the signature of an individual who was
at any time the proper officer of the Company shall bind the Company,
notwithstanding that such individual shall have ceased to hold such officer
prior to the delivery of such Option or did not hold such office on the date of
this Agreement.
3.5. DATE OF CERTIFICATE. The Options shall be dated as of the date of
signature thereof by the Company either upon initial issuance or upon division,
exchange, substitution or transfer.
SECTION 4. ADJUSTMENT OF NUMBER OF SHARES
4.1. ADJUSTMENTS. The adjustments to the number of Shares
purchasable upon the exercise of the Warrants underlying the Options and the
adjustments to the exercise price of such Warrants shall be made to the
Options, notwithstanding that such Options shall not have been exercised at the
time of the event which causes such adjustment.
4.2. NOTICE OF ADJUSTMENT. Whenever the number of Shares purchasable
upon exercise of the Options is adjusted as herein provided, the Company shall
cause to be promptly mailed to the Optionholder by first class mail, postage
prepaid, notice of such adjustment and a certificate of the chief financial
officer of the Company setting forth the number of Shares purchasable upon the
exercise of the Options after such adjustment, a brief statement of the facts
requiring such adjustment and the computation by which such adjustment was
made.
4.3. PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION,
CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger
of the Company into another corporation, or in case of any sale or conveyance to
another corporation of the property, assets, or business of the Company as an
entirety or substantially as an entirety, the Company or such successor or
purchasing corporation, as the case may be, shall execute with the Optionholder
an agreement that the Optionholder shall have the right thereafter upon payment
of the Exercise Price in effect immediately prior to such action to purchase,
upon exercise of the Options, the kind and amount of shares and other securities
and property which it would have owned or have been entitled to receive after
the happening of such consolidation, merger, sale, or conveyance had the Options
been exercised immediately prior to such action. In the event of a merger
described in Section 368(a)(2)(E) of the Internal Revenue Code of 1986, in which
the Company is the surviving corporation, the right to purchase Warrants under
the Options shall terminate on the date of such merger and thereupon the Options
shall become null and void, but only if the controlling corporation shall agree
to substitute for the Options, its Options which entitle the holder thereof to
purchase upon their exercise the kind and amount of Warrants and other
securities and property which it would have owned or been entitled to receive
had the Options been exercised immediately prior to such merger. Any such
agreements referred to in this subsection 4.3 shall provide for adjustments,
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in Section 4 hereof. The provisions of this subsection 4.3 shall
similarly apply to successive consolidations, mergers, sales, or conveyances.
4.4. INDEPENDENT PUBLIC ACCOUNTANTS. The Company may retain a firm of
independent public
3
<PAGE>
accountants of recognized national standing (which may be any such firm
regularly employed by the Company) to make any computation required under
this Section 4, and a certificate signed by such firm shall be conclusive
evidence of the correctness of any computation made under this Section 4.
SECTION 5. NOTICE TO HOLDERS
If, prior to the expiration of this Option either by its terms or by its
exercise in full, any of the following shall occur:
(i) the Company shall declare a dividend or authorize any other
distribution on its Common Stock; or
(ii) the Company shall authorize the granting to the shareholders of its
Common Stock of rights to subscribe for or purchase any securities or any other
similar rights; or
(iii) any reclassification, reorganization or similar change of the
Common Stock, or any consolidation or merger to which the Company is a party, or
the sale, lease, or exchange of any significant portion of the assets of the
Company; or
(iv) the voluntary or involuntary dissolution, liquidation or winding up
of the Company; or
(v) any purchase, retirement or redemption by the Company of its Common
Stock;
then, and in any such case, the Company shall deliver to the Holder or Holders
written notice thereof at least 30 days prior to the earliest applicable date
specified below with respect to which notice is to be given, which notice shall
state the following:
(x) the date on which a record is to be taken for the purpose of such
dividend, distribution or rights, or, if a record is not to be taken, the date
as of which the shareholders of Common Stock of record to be entitled to such
dividend, distribution or rights are to be determined;
(y) the date on which such reclassification, reorganization,
consolidation, merger, sale, transfer, dissolution, liquidation, winding up or
purchase, retirement or redemption is expected to become effective, and the
date, if any, as of which the Company's shareholders of Common Stock of record
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, reorganization, consolidation,
merger, sale, transfer, dissolution, liquidation, winding up, purchase,
retirement or redemption; and
(z) if any matters referred to in the foregoing clauses (x) and (y) are
to be voted upon by shareholders of Common Stock, the date as of which those
shareholders to be entitled to vote are to be determined.
SECTION 6. OFFICERS' CERTIFICATE
Whenever the Exercise Price or the aggregate number of Option Securities
purchasable pursuant to this Option shall be adjusted as required by the
provisions of Section 4 above, the Company shall promptly file with its
Secretary or an Assistant Secretary at its principal office, and with its
transfer agent, if any, an officers' certificate executed by the Company's
President and Secretary or Assistant Secretary, describing the adjustment
and setting forth, in reasonable detail, the facts requiring such
adjustment and the basis for and calculation of such adjustment in
accordance with the provisions of this Option. Each such officers'
certificate shall be made available to the Holder or Holders of this Option
for inspection at all reasonable times, and the Company, after each such
adjustment, shall promptly deliver a copy of the officers' certificate
relating to that adjustment to the Holder or Holders of this Option. The
officers' certificate described in this Section 6 shall be deemed to be
conclusive as to the correctness of the adjustment reflected therein if,
and only if, no Holder of this Option delivers written notice to the Company
of an objection to the adjustment within 30 days after the officers'
certificate is delivered to the Holder or Holders of this Option. The
Company will make its books and records available for inspection and copying
during normal business hours by the Holder so as to permit a determination as
to the correctness of the adjustment. If written notice of an objection is
delivered by a Holder to the Company and the parties cannot reconcile the
dispute, the Holder and the Company shall submit the dispute to arbitration
pursuant to the provisions of Section 19 below. Failure to prepare or
provide the officers' certificate shall not modify the parties' rights
hereunder.
4
<PAGE>
SECTION 7. RESERVATION OF OPTION SECURITIES
There has been reserved, and the Company shall at all times keep
reserved so long as the Options remain outstanding, out of its authorized and
unissued Common Stock, such number of shares of Common Stock as shall be
subject to purchase under the Options. Every transfer agent for the Common
Stock and other securities of the Company issuable upon the exercise of the
Options will be irrevocably authorized and directed at all times to reserve
such number of authorized shares and other securities as shall be requisite
for such purpose. The Company will keep a copy of this Agreement on file with
every transfer agent for the Common Stock and other securities of the Company
issuable upon the exercise of the Options. The Company will supply every
such transfer agent with duly executed stock and other certificates, as
appropriate, for such purpose and will provide or otherwise make available
any cash which may be payable as provided in Section 10 hereof.
SECTION 8. REGISTRATION RIGHTS.
8.1. DEMAND REGISTRATION RIGHTS. Upon the written request of a
Majority Holder, made at any time after the Exercise Date, but before the
Expiration Date, the Company shall file within 90 days of such written
request a registration statement or Regulation A offering statement pursuant
to the Act, and all necessary amendments thereto, to register or qualify the
Option Securities (including both the Warrants issued or issuable upon
exercise of the Options and the shares issued or issuable upon exercise of
such Warrants). No additional securities shall be included in such
registration statement or offering statement without the written consent of
the Majority Holder. The Company may use the Regulation A exemption if
available, but the Company must file a registration statement if the
securities that are to be covered cannot be sold pursuant to Regulation A
because of the limitations applicable to the use of the Regulation A
exemption. The Company agrees to use its best efforts to cause this
registration or qualification to become effective as promptly as practicable
and to keep such registration effective for a period of the lesser of 180
days or the date of completion of the distribution described in the
Registration Statement; and its officers, directors, consultants, auditors
and counsel shall cooperate in all matters necessary or advisable to pursue
this objective. All of the expenses of this registration or qualification
shall be borne by the Company, including, but not limited to, legal,
accounting, consulting, printing, filing and NASD fees, out-of-pocket
expenses incurred by counsel, accountants, and consultants retained by the
Company and miscellaneous expenses directly related to the registration
statement or offering statement and the offering, and the underwriter's
accountable and nonaccountable expense allowances and fees; but the Company
shall not pay any brokerage fees, commissions or underwriting discounts
except to the extent they are attributable to other securities that the
Company has been permitted to register or qualify or to offer in conjunction
with the registration and qualification of the Option Securities.
Notwithstanding the foregoing, if, as a qualification of any offering in any
state or jurisdiction in which the Company (by vote of its Board of
Directors) or any underwriter determines in good faith that it wishes to
offer securities registered in the offering, it is required that offering
expenses be allocated in a manner different from that provided above, then
the offering expenses shall be allocated in whatever manner is most nearly in
compliance with the provisions set out above. The Majority Holder shall be
entitled to exercise the rights described in this subsection 8(b) one time
only.
Within 10 days after the delivery by the Majority Holder to the Company
of the notice described above, the Company shall deliver written notice to
all other Holders of this Option and holders of the Option Securities, if
any, advising them that the Company is proceeding with a registration
statement or offering statement and offering them the right to include the
Option Securities of those Holders or holders therein. If any Holder of an
Option and/or Option Securities delivers written acceptance of that offer to
the Company within 30 days after the delivery of the Company's notice, the
Company shall be obligated to include that holder's Option Securities in the
contemplated registration statement or offering statement.
8.2. "PIGGY-BACK" REGISTRATION RIGHTS. If at any time prior to the
Expiration Date the Company files a registration statement with the
Commission pursuant to the Act, or pursuant to any other act passed after the
date of this Agreement, which filing provides for the sale of securities by
the Company to the public, or files a Regulation A offering statement under
the Act, the Company shall offer to the Holder or Holders of this Option and
the holders of any Option Securities the opportunity to register or qualify
the Option Securities, at the Company's sole expense, regardless of whether
the Holder or Holders of this Option or the holders of Option Securities or
both may have previously availed themselves of any of the registration rights
described in this Section 8; provided, however, that in the case of a
Regulation A offering, the opportunity to qualify shall be limited to the
amount of the available exemption after taking into account the securities
that the Company wishes to qualify. Notwithstanding anything to the
contrary, this subsection 8.2 shall not be applicable to a registration
statement registering securities issued pursuant to an employee benefit plan
or as to a transaction subject to Rule 145 promulgated under the Act or which
a
5
<PAGE>
form S-4 registration statement could be used.
The Company shall deliver written notice to the Holder or Holders of
this Option and to any holders of Option Securities of its intention to file
a registration statement or Regulation A offering statement under the Act at
least 60 days prior to the filing of such registration statement or offering
statement, and the Holder or Holders and holders of Option Securities shall
have 30 days thereafter to request in writing that the Company register or
qualify the Option Securities in accordance with this subsection 8.2. Upon
the delivery of such a written request within the specified time, the Company
shall be obligated to include in its contemplated registration statement or
offering statement all information necessary or advisable to register or
qualify the Option Securities, if the Company does file the contemplated
registration statement or offering statement; provided, however, that neither
the delivery of the notice by the Company nor the delivery of a request by a
Holder or by a holder of Option Securities shall in any way obligate the
Company to file a registration statement or offering statement. Furthermore,
notwithstanding the filing of a registration statement or offering statement,
the Company may, at any time prior to the effective date thereof, determine
not to offer the securities to which the registration statement or offering
statement relates, other than the Option Securities. Notwithstanding the
foregoing, if, as a qualification of any offering in any state or
jurisdiction in which the Company (by vote of its Board of Directors) or any
underwriter determines in good faith that it wishes to offer securities
registered in the offering, it is required that offering expenses be
allocated in a manner different from that provided above, then the offering
expenses shall be allocated in whatever manner is most nearly in compliance
with the provisions set out above.
The Company shall comply with the requirements of this subsection 8.2.
at its own expense. That expense shall include, but not be limited to,
legal, accounting, consulting, printing, federal and state filing fees, NASD
fees, out-of-pocket expenses incurred by counsel, accountants and consultants
retained by the Company, and miscellaneous expenses directly related to the
registration statement or offering statement and the offering. However, this
expense shall not include the portion of any underwriting commissions,
transfer taxes and the underwriter's accountable and nonaccountable expense
allowances attributable to the offer and sale of the Option Securities, all
of which expenses shall be borne by the Holder or Holders of this Option and
the holders of the Option Securities registered or qualified.
If the registration for which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise as part of the written notice given pursuant to this Section. In such
event, the right of any Optionholder or holder of Option Securities to
registration pursuant to Section 8.2. shall be conditioned upon such holder's
participation in such underwriting, and the inclusion of Option Securities in
the underwriting shall be limited to the extent provided herein. All holders
proposing to distribute their Option Securities through such underwriting
shall (together with the Company and the other holders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting
by the Company. Notwithstanding any other provision of this Section, if the
managing underwriter determines that marketing factors require a limitation
of the number of shares to be underwritten, such underwriter may limit the
amount of securities to be included in the registration and underwriting by
the holders of Company securities exercising "piggyback" registration rights
(including the Optionholder and each holder of Options and Shares). The
Company shall so advise all such holders, and the number of shares of such
securities that may be included in the registration and underwriting shall be
allocated among all of such holders, in proportion, as nearly as practicable,
to the respective amounts of securities requested to be included in such
registration held by such holders at the time of filing the registration
statement, PROVIDED, HOWEVER, that no security holder other than one
exercising a demand registration right shall have superior rights with
respect to inclusion in a registration than those of the Optionholder and
each holder of Option Securities and if any party is granted such superior
rights hereafter the Optionholder and each holder of Option Securities shall
be deemed to be automatically granted similar rights. The Company shall
advise all such holders of any such limitations and of the number of
securities that may be included in the registration. Any securities excluded
or withdrawn from such underwriting shall not be transferred prior to one
hundred twenty (120) days after the effective date of the registration
statement relating thereto, or such shorter period of time as the
underwriters may require.
8.3. INCLUSION OF INFORMATION. In the event that the Company
registers or qualifies the Option Securities pursuant to subsections 8.1 or
8.2 above, the Company shall include in the registration statement or
qualification, and the prospectus included therein, all information and
materials necessary or advisable to comply with the applicable statutes and
regulations so as to permit the public sale of the Option Securities. As
used in subsections 8.1 and 8.2, reference to the Company's securities shall
include, but not be limited to, any class or type of the Company's securities
or the securities of any of the Company's subsidiaries or affiliates.
6
<PAGE>
8.4. REGISTRATION STATEMENT FILED BY HOLDER. In addition to the
registration rights described in subsections 8.1 and 8.2 above, upon the
written request of any Majority Holder, the Company, as promptly as possible
after delivery of such request, shall cooperate with the requesting Holder or
holder in preparing and signing any registration statement or offering
statement that the Holder or holder may desire to file in order to sell or
transfer the Option Securities. Within 10 days after the delivery of the
written request described above, the Company shall deliver written notice to
all other Holders of this Option and holders of Option Securities, if any,
advising them that the Company is proceeding with a registration statement or
offering statement and that their Option Securities will be included therein
if they so desire and agree to pay their pro rata share of the cost of
registration or qualification and provided that the Holder or holder delivers
written notice to the Company of their desire to be included and their
agreement to pay their pro rata share of the cost within 30 days after the
delivery of the Company's notice to them. The Company will supply all
information necessary or advisable for any such registration statements or
offering statements; provided, however, that all the costs and expenses of
such registration statements or offering statements shall be borne, in a
manner proportionate to the number of securities for which they indicate a
desire to register, by the Holders of this Option and the holders of Option
Securities who seek the registration or qualification of their Option
Securities. In determining the amount of costs and expenses to be borne by
those Holders or holders, the only costs and expenses of the Company to be
included are the additional costs and expenses that would not have otherwise
been incurred by the Company if those Holders or holders had not desired to
file a registration statement or offering statement. As an example, and
without limitation, audit fees would not be charged to those Holders or
holders if or to the extent that the Company would have incurred the same
audit fees for its year-end or other use in the absence of the registration
statement or offering statement. The Holders or holders responsible for the
costs and expenses shall reimburse the Company for those reimbursable costs
and expenses reasonably incurred by the Company within 30 days after the
initial effective date of the registration statement or qualification at
issue.
8.5. PAYMENT OF EXERCISE PRICE FROM PROCEEDS. In the event that any
registration statement is utilized for a public offering of any of the Option
Securities to be received upon exercise of the Options pursuant to this
Section 8, the Optionholder may elect to pay the exercise price of the
Options to the Company out of the proceeds of the sale of the Option
Securities pursuant to the registration statement concurrently with the
closing of such sale of the Option Securities; provided that if such sale is
not closed within 90 days of the effective date of such registration
statement, then the Optionholder shall be obligated to pay the exercise price
of the Options and/or the Warrants to the Company on such 90th day.
8.6. CONDITION OF COMPANY'S OBLIGATIONS. As to each registration
statement or offering statement, the Company's obligations contained in this
Section 8 shall be conditioned upon a timely receipt by the Company in
writing of the following:
(a) Information as to the terms of the contemplated public offering
furnished by and on behalf of each Holder or holder intending to make a
public distribution of the Option Securities; and
(b) Such other information as the Company may reasonably require from
such Holders or holders, or any underwriter for any of them, for inclusion in
the registration statement or offering statement.
8.7. ADDITIONAL REQUIREMENTS. In each instance in which the Company
shall take any action to register or qualify the Option Securities, if any,
pursuant to this Section 8, the Company shall do the following:
(a) Supply to Kashner Davidson, as the representative of the Holders
of the Option and the holders of Option Securities whose Option Securities
are being registered or qualified, two (2) manually signed copies of each
registration statement or offering statement, and all amendments thereto, and
a reasonable number of copies of the preliminary, final or other prospectus
or offering circular, all prepared in conformity with the requirements of the
Act and the rules and regulations promulgated thereunder, and such other
documents as Kashner Davidson shall reasonably request;
(b) Cooperate with respect to (i) all necessary or advisable actions
relating to the preparation and the filing of any registration statements or
offering statements, and all amendments thereto, arising from the provisions
of this Section 8, (ii) all reasonable efforts to establish an exemption from
the provisions of the Act or any other federal or state securities statutes,
(iii) all necessary or advisable actions to register or qualify the public
offering at issue pursuant to federal securities statutes and the state "blue
sky" securities statutes of each jurisdiction that the Holders of the Option
or holders of Option Securities shall reasonably request, and (iv) all other
necessary or
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<PAGE>
advisable actions to enable the Holders of the Option Securities to complete
the contemplated disposition of their securities in each reasonably requested
jurisdiction; and
(c) Keep all registration statements or offering statements to which
this Section 8 applies, and all amendments thereto, effective under the Act
for a period of at least 180 days after their initial effective date and
cooperate with respect to all necessary or advisable actions to permit the
completion of the public sale or other disposition of the securities subject
to a registration statement or offering statement.
8.9. INDEMNIFICATION AGREEMENTS. In each instance in which pursuant
to this Section 8 the Company shall take any action to register or qualify
the Option Securities, prior to the effective date of any registration
statement or offering statement, the Company and each Holder or holder of
Options or Option Securities being registered or qualified shall enter into
reciprocal indemnification agreements, in the form customarily used by
reputable investment bankers with respect to public offerings of
securities, containing substantially the same terms as described in Section
10. These indemnification agreements also shall contain an agreement by the
Holder or holder at issue to indemnify and hold harmless the Company, its
officers and directors from and against any and all losses, claims, damages
and liabilities, including, but not limited to, all expenses reasonably
incurred in investigating, preparing, defending or settling any claim,
directly resulting from any untrue statements of material facts, or omissions
to state a material fact necessary to make a statement not misleading,
contained in a registration statement or offering statement to which this
Section 8 applies, if, and only if, the untrue statement or omission directly
resulted from information provided in writing to the Company by the
indemnifying Holder or shareholder expressly for use in the registration
statement or offering statement at issue.
8.10. KASHNER DAVIDSON AS REPRESENTATIVE. For purposes of subsection
8.7(i) above, by the receipt of this Option or any Option Securities, all
Holders and all holders of Option Securities acknowledge and agree that
Kashner Davidson is and shall be their representative.
8.11. SURVIVAL. The Company's obligations described in this Section 8
shall continue in full force and effect regardless of the exercise,
surrender, cancellation or expiration of this Option.
SECTION 9. PAYMENT OF TAXES
The Company will pay all documentary stamp taxes, if any, attributable
to the initial issuance of the Options or the securities comprising the
Shares; provided, however, the Company shall not be required to pay any tax
which may be payable in respect of any transfer of the Options or the
securities comprising the Shares.
SECTION 10. INDEMNIFICATION AND CONTRIBUTION
10.1. INDEMNIFICATION BY COMPANY. In the event of the filing of any
Registration Statement with respect to the Shares pursuant to Section 8
hereof, the Company agrees to indemnify and hold harmless the Optionholder or
any holder of Option Securities and each person, if any, who controls the
Optionholder or any holder of Option Securities within the meaning of the
Act, against any and all loss, claim, damage or liability, joint or several
(which shall, for all purposes of this Agreement include, but not be limited
to, all costs of defense and investigation and all attorneys' fees), to which
such Optionholder or any holder of Option Securities may become subject,
under the Act or otherwise, insofar as such loss, claim, damage, or liability
(or action with respect thereto) arises out of or is based upon (a) any
untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement, any Preliminary Prospectus, the Effective
Prospectus, or the Final Prospectus or any amendment or supplement thereto;
or (b) the omission or alleged omission to state in the Registration
Statement, any Preliminary Prospectus, the Effective Prospectus or the Final
Prospectus or any amendment or supplement thereto a material fact required to
be stated therein or necessary to make the statements therein not misleading;
except that the Company shall not be liable in any such case to the extent,
but only to the extent, that any such loss, claim, damage, or liability
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by such
Optionholder or the holder of such Option Securities specifically for use in
the preparation of the Registration Statement, any Preliminary Prospectus,
the Effective Prospectus and the Final Prospectus or any amendment or
supplement thereto. This indemnity will be in addition to any liability
which the Company may otherwise have.
10.2. INDEMNIFICATION BY UNDERWRITERS. The Optionholders and the
holders of Option Securities agree that they, severally, but not jointly,
shall indemnify and hold harmless the Company, each other person referred to
in
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subparts (1), (2) and (3) of Section 11(a) of the Act in respect of the
Registration Statement and each person, if any, who controls the Company
within the meaning of the Act, against any and all loss, claim, damage or
liability, joint or several (which shall, for all purposes of this Agreement
include, but not be limited to, all costs of defense and investigation and
all attorneys' fees), to which the Company may become subject under the Act
or otherwise, insofar as such loss, claim, damage, liability (or action in
respect thereto) arises out of or are based upon (a) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, any Preliminary Prospectus, the Effective Prospectus or the Final
Prospectus or any amendment or supplement thereto; or (b) the omission or
alleged omission to state in the Registration Statement, any Preliminary
Prospectus, the Effective Prospectus or the Final Prospectus or any amendment
or supplement thereto a material fact required to be stated therein or
necessary to make the statements therein not misleading; except that such
indemnification shall be available in each such case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon information and in
conformity with written information furnished to the Company by the
Optionholder or the holder of Option Securities specifically for use in the
preparation thereof. This indemnity will be in addition to any liability
which the Company may otherwise have.
10.3. RIGHT TO PROVIDE DEFENSE. Promptly after receipt by an
indemnified party under Section 10.1 or 10.2 above of written notice of the
commencement of any action, the indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party under such
section, notify the indemnifying party in writing of the claim or the
commencement of that action; the failure to notify the indemnifying party
shall not relieve it of any liability which it may have to an indemnified
party, except to the extent that the indemnifying party did not otherwise
have knowledge of the commencement of the action and the indemnifying party's
ability to defend against the action was prejudiced by such failure. Such
failure shall not relieve the indemnifying party from any other liability
which it may have to the indemnified party. If any such claim or action
shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable
to the indemnified party under such section for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; except that Kashner
Davidson shall have the right to employ counsel to represent it and the other
Optionholders of holders of Option Securities who may be subject to liability
arising out of any claim in respect of which indemnity may be sought by such
persons against the Company under such section if, in Kashner Davidson's
reasonable judgment, it is advisable for Kashner Davidson and those
Optionholders or holders of Option Securities to be represented by separate
counsel, and in that event the fees and expenses of such separate counsel
shall be paid by the Company.
10.4. CONTRIBUTION. If the indemnification provided for in Sections
10.1 and 10.2 of this Agreement is unavailable or insufficient to hold
harmless an indemnified party, then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party as a result of the
losses, claims, damages, or liabilities referred to in Sections 10.1 or 10.2
above (a) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Optionholders on the
other; or (b) if the allocation provided by clause (a) above is not permitted
by applicable law, in such proportion as is appropriate to reflect the
relative benefits referred to in clause (a) above but also the relative fault
of the Company on the one hand and the Optionholders on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages, or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the
Optionholders shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the
Company bear to the total underwriting discounts and un-itemized expenses
received by the Underwriters, in each case as set forth in the table on the
cover page of the Final Prospectus. Relative fault shall be determined by
reference to, among other things, whether the untrue statement of a material
fact or the omission to state a material fact relates to information supplied
by the Company or the Underwriter and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
untrue statement or omission. For purposes of this Section 10.4, the term
"damages" shall include any counsel fees or other expenses reasonably
incurred by the Company or the Underwriters in connection with investigating
or defending any action or claim which is the subject of the contribution
provisions of this Section 10.4. No person adjudged guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted
against it in respect of which contribution may be sought, it shall promptly
give
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written notice of such service to the party or parties from whom
contribution may be sought, but the omission so to notify such party or
parties of any such service shall not relieve the party from whom
contribution may be sought from any obligation it may have hereunder or
otherwise (except as specifically provided in Section 10.4 hereof).
SECTION 11. RESTRICTIONS ON TRANSFER
11.1. RESTRICTIONS ON TRANSFER. This Option, the Option Securities,
and all other securities issued or issuable upon exercise of this Option, may
not be offered, sold or transferred, in whole or in part, except in
compliance with the Act, and except in compliance with all applicable state
securities laws. The Optionholder agrees that prior to making any disposition
of the Options, other than to persons or entities identified in Section 3.1,
the Optionholder shall give written notice to the Company describing briefly
the manner in which any such proposed disposition is to be made; and no such
disposition shall be made if the Company has notified the Optionholder that
in the opinion of counsel reasonably satisfactory to the Optionholder a
registration statement or other notification or post-effective amendment
thereto (hereinafter collectively a "Registration Statement") under the Act
is required with respect to such disposition and no such Registration
Statement has been filed by the Company with, and declared effective, if
necessary, by, the Commission.
11.2. RESTRICTIVE LEGEND. The Company may cause substantially the
following legends, or their equivalents, to be set forth on each certificate
representing the Options, the Option Securities, or any other security issued
or issuable upon exercise of this Option or the Option Securities, not
theretofore distributed to the public or sold to underwriters, as defined by
the Act, for distribution to the public pursuant to Section 8 above:
a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES
LAWS AND MAY NOT BE SOLD, EXCHANGED, HYPOTHECATED OR TRANSFERRED IN
ANY MANNER EXCEPT IN COMPLIANCE WITH THE AGREEMENT PURSUANT TO
WHICH THEY WERE ISSUED.
(b) Any legend required by applicable state securities laws.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legends (except a new certificate issued upon
completion of a public distribution pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Act"), or the securities
represented thereby) shall also bear the above legends unless, in the opinion
of the Company's counsel, the securities represented thereby need no longer
be subject to such restrictions.
SECTION 12. FRACTIONAL SHARES
No fractional Warrant shall be issued upon the exercise of all
or any part of this Option. In any case in which other than a full number of
Warrants would be issuable hereunder, the number of Warrants issuable shall
be rounded up to the next whole number.
SECTION 13. NO RIGHTS AS STOCKHOLDER; NOTICES TO OPTIONHOLDER
Nothing contained in this Agreement or in the Options shall be construed
as conferring upon the Optionholder or its transferees any rights as a
stockholder of the Company, including the right to vote, receive dividends,
consent or receive notices as a stockholder in respect to any meeting of
stockholders for the election of directors of the Company or any other
matter. The Company covenants, however, that for so long as this Option is
at least partially unexercised, it will furnish any Holder of this Option
with copies of all reports and communications furnished to the shareholders
of the Company. In addition, if at any time prior to the expiration of the
Options and prior to their exercise, any one or more of the following events
shall occur:
(a) Any action which would require an adjustment pursuant to
Section 4.1 (except subsections 4.1(e) and 4.1(h)) or 4.4; or
(b) A dissolution, liquidation, or winding up of the Company (other
than in connection with a consolidation, merger, or sale of its property,
assets, and business as an entirety or substantially as an entirety) shall be
proposed:
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<PAGE>
then the Company shall give notice in writing of such event to the
Optionholder, as provided in Section 16 hereof, at least 20 days prior to the
date fixed as a record date or the date of closing the transfer books for the
determination of the stockholders entitled to any relevant dividend,
distribution, subscription rights or other rights or for the determination of
stockholders entitled to vote on such proposed dissolution, liquidation, or
winding up. Such notice shall specify such record date or the date of
closing the transfer books, as the case may be. Failure to mail or receive
notice or any defect therein shall not affect the validity of any action
taken with respect thereto.
SECTION 14. CHARGES DUE UPON EXERCISE
The Company shall pay any and all issue or transfer taxes, including,
but not limited to, all federal or state taxes, that may be payable with
respect to the transfer of this Option or the issue or delivery of Option
Securities upon the exercise of this Option.
SECTION 15. OPTION SECURITIES TO BE FULLY PAID
The Company covenants that all Option Securities that may be issued and
delivered to a Holder of this Option upon the exercise of this Option and
payment of the Exercise Price will be, upon such delivery, validly and duly
issued, fully paid and nonassessable.
SECTION 16. NOTICES
Any notice pursuant to this Agreement by the Company or by an
Optionholder or a holder of Option Securities shall be in writing and shall
be deemed to have been duly given if delivered or mailed by certified mail,
return receipt requested:
(a) If to an Optionholder or a holder of Option Securities, addressed
to Kashner Davidson Securities Corporation, 77 S. Palm Avenue, Sarasota,
Florida 34236, Attention: President; or
(b) If to the Company, addressed to it at 190 SW Harrison, Portland,
Oregon 97201, Attention: President.
Each party may from time to time change the address to which notices to
it are to be delivered or mailed hereunder by notice in accordance herewith
to the other party.
SECTION 17. MERGER OR CONSOLIDATION OF THE COMPANY
The Company will not merge or consolidate with or into any other
corporation or sell all or substantially all of its property to another
corporation, unless the provisions of Section 4.4 are complied with.
SECTION 18. APPLICABLE LAW
This Option shall be governed by and construed in accordance with the
laws of the State of Oregon, and courts located in Oregon shall have
exclusive jurisdiction over all disputes arising hereunder.
SECTION 19. ARBITRATION
The Company and the Holder, and all subsequent Holders or holders of
Option Securities, agree to submit all controversies, claims, disputes and
matters of difference with respect to this Option, including, without
limitation, the application of this Section 19 to arbitration in Portland,
Oregon, according to the rules and practices of the American Arbitration
Association from time to time in force; provided, however, that if such rules
and practices conflict with the applicable procedures of Oregon courts of
general jurisdiction or any other provisions of Oregon law then in force,
those Oregon rules and provisions shall govern. This agreement to arbitrate
shall be specifically enforceable. Arbitration may proceed in the absence of
any party if notice of the proceeding has been given to that party. The
parties agree to abide by all awards rendered in any such proceeding. These
awards shall be final and binding on all parties to the extent and in the
manner provided by the rules of civil procedure enacted in Oregon. All
11
<PAGE>
awards may be filed, as a basis of judgment and of the issuance of execution
for its collection, with the clerk of one or more courts, state or federal,
having jurisdiction over either the party against whom that award is rendered
or its property. No party shall be considered in default hereunder during
the pendency of arbitration proceedings relating to that default.
SECTION 20. MISCELLANEOUS PROVISIONS
(a) Subject to the terms and conditions contained herein, this Option
shall be binding on the Company and its successors and shall inure to the
benefit of the original Holder, its successors and assigns and all holders of
Option Securities and the exercise of this Option in full shall not
terminate the provisions of this Option as it relates to holders of Option
Securities.
(b) If the Company fails to perform any of its obligations hereunder,
it shall be liable to the Holder for all damages, costs and expenses
resulting from the failure, including, but not limited to, all reasonable
attorney's fees and disbursements.
(c) This Option cannot be changed or terminated or any performance or
condition waived in whole or in part except by an agreement in writing signed
by the party against whom enforcement of the change, termination or waiver is
sought; provided, however, that any provisions hereof may be amended, waived,
discharged or terminated upon the written consent of the Company and Kashner
Davidson.
(d) If any provision of this Option shall be held to be invalid,
illegal or unenforceable, such provision shall be severed, enforced to the
extent possible, or modified in such a way as to make it enforceable, and the
invalidity, illegality or unenforceability shall not affect the remainder of
this Option.
(e) The Company agrees to execute such further agreements,
conveyances, certificates and other documents as may be reasonably requested
by the Holder to effectuate the intent and provisions of this Option.
(f) Paragraph headings used in this Option are for convenience only
and shall not be taken or construed to define or limit any of the terms or
provisions of this Option. Unless otherwise provided, or unless the context
shall otherwise require, the use of the singular shall include the plural and
the use of any gender shall include all genders.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, all as of the day and year first above written.
FIRSTLINK COMMUNICATIONS, INC.
By:
------------------------------------
A. Roger Pease, President
KASHNER DAVIDSON SECURITIES CORPORATION
By:
------------------------------------
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EXHIBIT A
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, EXCHANGED,
HYPOTHECATED OR TRANSFERRED IN ANY MANNER EXCEPT IN COMPLIANCE WITH THE
AGREEMENT PURSUANT TO WHICH THEY WERE ISSUED.
Option Certificate No. RWO-
----
REPRESENTATIVE'S OPTIONS TO PURCHASE 100,000 WARRANTS
FIRSTLINK COMMUNICATIONS, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF OREGON
This certifies that, for value received, , the
registered holder hereof or assigns (the "Optionholder"), is entitled to
purchase from FirstLink Communications, Inc. (the "Company"), at any time
during the period commencing at 9:00 a.m., Portland time, on at the
purchase price of $ per Warrant (the "Exercise Price"), the number of
Warrants of the Company set forth above (the "Warrants"). The number of
Warrants purchasable upon exercise of the Options evidenced hereby shall be
subject to adjustment from time to time as set forth in the
Representative's Option Agreement.
The Options evidenced hereby may be exercised in whole or in part by
presentation of this Option Certificate with the Purchase Form attached
hereto duly executed (with a signature guarantee as provided thereon) and
simultaneous payment of the Exercise Price at the principal office of the
Company. Payment of such price shall be made at the option of the
Optionholder in cash or by check.
The Options evidenced hereby represent the right to purchase an
aggregate of up to 100,000 Warrants and are issued under and in accordance
with an Representative's Option Agreement, dated as of , between the
Company and Kashner Davidson Securities Corporation and are subject to the
terms and provisions contained in the Representative's Option Agreement, to
all of which the Optionholder by acceptance hereof consents.
Upon any partial exercise of the Options evidenced hereby, there shall
be signed and issued to the Optionholder a new Option Certificate in respect
of the Warrants as to which the Options evidenced hereby shall not have been
exercised. These Options may be exchanged at the office of the Company by
surrender of this Option Certificate properly endorsed for one or more new
Options of the same aggregate number of Warrants as here evidenced by the
Option or Options exchanged. No fractional Warrants will be issued upon the
exercise of rights to purchase hereunder, but the Company shall issue an
additional Warrant in lieu of a fractional Warrant if the fractional Warrant
otherwise issuable would be equivalent to one-half a Warrant or more. These
Options are transferable at the office of the Company in the manner and
subject to the limitations set forth in the Representative's Option Agreement.
This Option Certificate does not entitle any Optionholder to any of the
rights of a stockholder of the Company.
FIRSTLINK COMMUNICATIONS, INC.
Dated: By:
------------------------------------
A. Roger Pease, President
[Seal]
Attest:
- -----------------------------------
Secretary
<PAGE>
NOTICE OF EXERCISE
(To be executed by a Holder desiring to exercise the right to purchase Warrants
pursuant to an Option.)
The undersigned Holder of a Option hereby
(a) irrevocably elects to exercise the Option to the extent of
purchasing _______________ Warrants;
(b) makes payment in full of the aggregate Exercise Price for those
Warrants in the amount of $_________________ by the delivery of certified funds
or a bank cashier's check in the amount of $_________________;
(c) requests that certificates evidencing the Warrants be issued in the
name of the undersigned, or, if the name and address of some other person is
specified below, in the name of such other person:
__________________________________________________________________________
(Name and address of person OTHER than the undersigned in whose name
Warrants are to be registered)
(d) requests, if the number of Warrants purchased are not all the
Warrants purchasable pursuant to the unexercised portion of the Option, that
a new Option of like tenor for the remaining Warrants purchasable pursuant to
the Option be issued and delivered to the undersigned at the address stated
below.
Dated:
-------------------- --------------------------------------------------
Signature((This signature must conform in all
respects to the name of the Holder as specified on
the face of the Option.)
- --------------------------- -------------------------------------------------
Social Security Number Printed Name
or Employer ID Number Address:
------------------------------------
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned, __________________________________, hereby
sells, assigns and transfers unto:
Name: ----------------------------------------------------
(Please type or print in block letters)
Address: -----------------------------------------------
the right to purchase _________________ Warrants of FirstLink Communications,
Inc. (the "Company") pursuant to the terms and conditions of the Option held
by the undersigned. The undersigned hereby authorizes and directs the
Company (i) to issue and deliver to the above-named assignee at the above
address a new Option pursuant to which the rights to purchase being assigned
may be exercised, and (ii) if there are rights to purchase Warrants remaining
pursuant to the undersigned's Option after the assignment contemplated
herein, to issue and deliver to the undersigned at the address stated below a
new Option evidencing the right to purchase the number of Warrants remaining
after issuance and delivery of the Option to the above-named assignee.
Except for the number of Warrants purchasable, the new Options to be issued
and delivered by the Company are to contain the same terms and conditions as
the undersigned's Option. To complete the assignment contemplated by this
Assignment Form, the undersigned hereby irrevocably constitutes and appoints
____________________________________ as the undersigned's attorney-in-fact to
transfer the Options and the rights thereunder on the books of the Company
with full power of substitution for these purposes.
-------------------------------------------------
Signature (This signature must conform in all
respects to the name of the Holder as specified on
the face of the Option.)
-------------------------------------------------
Printed Name
Address:
-----------------------------------------
<PAGE>
Exhibit No. 3.1 Articles of Incorporation.
<PAGE>
ARTICLES OF INCORPORATION
OF
FirstLink Communications, Inc.
The following Articles of Incorporation are adopted and submitted pursuant to
the provisions of Oregon Business Corporation Act:
ARTICLE I
The name of the corporation is FirstLink Communications, Inc
ARTICLE II
The number of shares the corporation will have authority to issue is
20,000,000 shares, which shares shall be designated "Common." The
corporation also has authority to issue 1,000,000 shares, which shares shall
be designated "Preferred Shares." The Corporation's Board of Directors is
authorized to establish one or more series of such preferred Shares and to
determine the preferences, limitations and relative rights of the Preferred
Shares, subject to limitations imposed by the Oregon Business Corporation Act.
ARTICLE III
The name of the Initial registered agent is A. Roger Pease. The address of
the initial registered office is 255 SW Harrison Ave., Suite lA, Portland,
OR 97201-5338
ARTICLE IV
The address where the Division may mail notices is 255 SW Harrison Ave.,
Suite lA. Portland, OR 9720l-5338
ARTICLE V
The name and address of the incorporator is as follows:
Allan A. Fulsher
10220 SW Greenburg Road, Suite 105
Portland, Oregon 97223
ARTICLE VI
The number of directors constituting the initial Board of Directors of the
Corporation is one, and the name and address of the person who is to serve as
director until the first meeting of shareholders or until his successor is
elected and shall qualify is:
A. Roger Pease
255 SW Harrison Ave., Suite lA,
Portland, OR 97201-5338.
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<PAGE>
ARTICLE VII
The corporation shall have the power to indemnify to the fullest extent
permitted by law any person who is made, or threatened to be made, a party to
an action, suit or proceeding, whether civil, criminal, administrative,
investigative or otherwise (including an action, suit or proceeding by or in
the right of the corporation) by reason of the fact that the person is or was
a director, officer, employee, or agent of the corporation, or a fiduciary
within the meaning of the Employee Retirement Income Security Act of 1974
with respect to any employee the corporation as a director, officer,
employee, or agent, or as a fiduciary of an employee benefit plan, of another
corporation, partnership, joint venture, trust or other enterprise, and their
respective heirs, administrators, personal representative, successors and
assigns. Indemnification specifically provided by the Oregon Business
Corporation Act shall not be deemed exclusive of any other rights to which
such director, officer, employee or agent may be entitled under any bylaw,
agreement, vote of shareholders or disinterested directors or otherwise. The
corporation, its officers, directors, employees or agents shall be fully
protected in taking any action or making any payment under this Article or in
refusing to do so upon the advice of counsel.
ARTICLE VIII
No director of the corporation shall be personally liable to the corporation
or its shareholders for monetary damages for conduct as a director, except
that this provision shall not apply to:
1. Any breach of the director's duty of loyalty to the corporation or
its shareholder;
2. Any acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
3. Any distribution from which the director derived an improper
personal benefit; or
5. Any act or omission occurring prior to the date on which these
Articles of Incorporation are filed with the Oregon Secretary of State.
ARTICLE IX
The person to contact about this filing is Allan A. Fulsher, 10220 SW
Greenburg Road, Suite 105, Portland, Oregon 97223.
Dated: December 28, 1995
/s/ Allan A. Fulsher
-----------------------------------------
Allan A. Fulsher, Incorporator
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<PAGE>
Exhibit No. 3.2 Bylaws.
<PAGE>
BYLAWS
OF
FIRSTLINK COMMUNICATIONS, INC.
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICES. The Board of Directors shall fix the location
of the principal executive offices of the corporation at any place within or
outside the State of Oregon. If the principal executive office is located
outside the State of Oregon, and the corporation has one or more business
offices in the State of Oregon, the Board of Directors shall fix and
designate a principal business office in the State of Oregon.
SECTION 2. OTHER OFFICES. The Board of Directors may at any time establish
branch or subordinate offices at any place or places.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS. Meetings of shareholders shall be held at any
place within or outside the State of Oregon designated by the Board of
Directors. In the absence of any such designation, shareholder meetings
shall be held at the principal executive office of the corporation.
SECTION 2. ANNUAL MEETINGS. The annual meeting of shareholders shall be
held on the first Tuesday of March of each year. However, if this day falls
on a legal holiday, then the meeting shall be held at the same time and place
on the next succeeding full business day. At this meeting, directors shall
be elected, and any other proper business with the power of the shareholders
may be transacted. The failure to hold an annual meeting at the time stated
above shall not affect the validity of any corporation action.
SECTION 3. SPECIAL MEETINGS. A special meeting of the shareholders may be
called at any time by the Board of Directors, or by the Chairman of the
Board, or by the President, Chief Executive Officer, Vice President, or may
be called by one or more shareholders holding shares in the aggregate
entitled to cast not less than ten percent (10%) of the votes at that
meeting, provided that such shareholder or shareholders must sign, date and
deliver to the corporations Secretary one or more written demands for such a
meeting describing the purpose or purposes for which it is to be held.
If a special meeting is called by any person or persons other than the Board
of Directors or a shareholder or shareholders as provided above, the request
shall be in writing, specifying the time of such meeting and the general
nature of the business to be transacted, and shall be delivered personally or
sent by registered mail or by telegraphic or other facsimile transmission to
the Secretary of the corporation. The Secretary receiving the request or
demand shall cause notice to be promptly given to the shareholders entitled
to vote, in accordance with
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the provisions of Sections 4 and 5 of this Article II, that a meeting will be
held at the time requested by the person or persons calling the meeting, not
less than ten (10) nor more than sixty (60) days after the receipt of such
request. If the notice is not given within twenty (20) days after receipt of
the request or demand, the person or persons requesting or demanding the
meeting may give the notice. Nothing contained in this Section 3 of Article
II shall be construed as limiting, fixing or affecting the time when a
meeting of shareholders called by action of the Board of Directors may be
held.
SECTION 4. NOTICE OF SHAREHOLDERS MEETING. All notices of meetings of
shareholders shall be sent or otherwise given in accordance with Section 5 of
this Article II not less than ten (10) nor more than sixty (60) days before
the date of the meeting. The notice shall specify the place, date, and hour
of the meeting and (a) in the case of a special meeting, the general nature
of the business to be transacted, or (b) in the case of the annual meeting,
those matters which the Board of Directors, at the time of giving the notice,
intends to present for action by the shareholders. The notice of any meeting
at which directors are to be elected shall include the name of the any
nominee or nominees whom, at the time of the notice, management intends to
present for election.
If action is proposed to be taken at any meeting for approval of (a) a
contract or transaction in which a director has a direct or indirect
financial interest, (b) an amendment of the Articles of Incorporation, (c) a
reorganization of the corporation, (d) a voluntary dissolution of the
corporation, or (e) a distribution in dissolution other than in accordance
with the rights of outstanding preferred shares, the notice shall also state
the general nature of that proposal.
SECTION 5. MANNER OF GIVING NOTICE. AFFIDAVIT OF NOTICE. Notice of any
shareholders meeting shall be given either personally or by first class mail
or telegraphic or other written communication, charges prepaid, addressed to
the shareholder at the address of that shareholder appearing on the books of
the corporation for the purpose of the notice. If no such address appears on
the corporation's books or has been so given, notice shall be deemed to have
been given if sent to that shareholder by first class mail or telegraphic or
other written communication to the corporation's principal executive office,
or if published at least once in a newspaper of general circulation in the
county where that office is located. Notice shall be deemed to have been
given at the time when delivered personally, deposited in the mail, delivered
to a common carrier for transmission to the recipient, actually transmitted
by electronic means to the recipient by the person giving the notice, or sent
by other means of written communication.
If any notice addressed to a shareholder at the office of that shareholder
appearing on the books of the corporation is returned to the corporation by
the United States Postal Service, marked to indicate that the United States
Postal Service is unable to deliver the notice to the shareholder at that
address, all future notices or reports shall be deemed to have been duly
given without further mailing if these shall be available to the shareholder
on written demand of the shareholder at the principal executive office of the
corporation for a period of one year from the date of the giving of the
notice.
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An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting may be executed by the Secretary, Assistant Secretary,
or any transfer agent of the corporation giving the notice, and filed and
maintained in the minute book of the corporation.
SECTION 6. QUORUM. The presence in person or by proxy of the holders of a
majority of the shares entitled to vote at any meeting of shareholders shall
constitute a quorum for the transaction of business. The shareholders
present at a duly called or held meeting at which a quorum is present may
continue to do business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum, if any action taken (other
than adjournment) is approved by at least a majority of the shareholders
required to constitute a quorum.
SECTION 7. ADJOURNED MEETING; NOTICE. Any shareholders' meeting, annual or
special, whether or not a quorum is present, may be adjourned from time to
time by the vote of a majority of the shares represented at that meeting,
either in person or by proxy, but in the absence of a quorum, no other
business may be transacted at that meeting, except as provided in Section 6
of this Article II.
When any meeting of shareholders, either annual or special, is adjourned to
another time or place, notice need not be given of the adjourned meeting if
the time and place are announced at a meeting at which the adjournment is
taken, unless a new record date for the adjourned meetings is fixed, or
unless the adjournment is for more than one hundred twenty (120) days form
the date set for the original meeting, in which case the Board of Directors
shall set a new record date. Notice of any such adjourned meeting, if
required, shall be given to each shareholder of record entitled to vote at
the adjourned meeting in accordance with provisions of Sections 4 and S of
this Article II. Any adjourned meeting of the corporation may transact any
business that might have been transacted at the original meeting.
SECTION 8. VOTING. The shareholders entitled to vote at any meeting of
shareholders shall be determined in accordance with the provisions of Section
11 of this Article II, subject to the provisions of the Oregon Business
Corporation Act relating to voting shares owned by a fiduciary, in the name
of the corporation, in the name of a receiver, or shares which may have been
pledged. The shareholders' vote may be by voice vote or by ballot; provided,
however, that any election for directors must be by ballot if demanded by any
shareholder before the voting has begun.
At a shareholder's meeting at which directors are to be elected, no
shareholder shall be entitled to cumulate votes (i.e., cast for any candidate
a number of votes greater than the number of votes which such shareholder
normally is entitled to cast).
SECTION 9. WAIVER OF NOTICE OR CONSENT BV ABSENT SHAREHOLDERS. The
transactions of any meeting of shareholders, either annual or special,
however called and noticed, and wherever held, shall be as valid as though
had at a meeting duly held after regular call and notice, if a quorum is
present either in person or by proxy, and if, either before or after the
meeting, each person entitled to vote, who was not present in person or by
proxy, signs a written waiver of notice or a consent to a holding of the
meeting, or an approval of the minutes. The waiver of notice or consent need
not specify either the business to be transacted
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<PAGE>
or the purpose of any annual or special meeting of shareholders, except that
if action is taken or proposed to be taken for approval of any of those
matters specified in the second paragraph of Section 4 of this Article II,
the waiver of notice or consent shall state the general nature of the
proposal. All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of notice
of that meeting, except when a person objects, at the beginning of the
meeting, to the transaction of any business because the meeting is not
lawfully called or convened, and except that attendance at a meeting is not a
waiver of any right to object to the consideration of matters required by law
to be included in the notice of the meeting, but not so included, if that
objection is expressly made at the meeting.
SECTION 10. SHAREHOLDER ACTION BV WRITTEN CONSENT WITHOUT A MEETING. Any
action which may be taken at any annual or special meeting of shareholders
may be taken without a meeting and without prior notice, if a consent in
writing, setting forth the actions so taken, is signed by all of the holders
of outstanding shares entitled to vote with respect to the subject matter
thereof. Any such consent has the effect of a meeting vote and may be
described as such in any document.
Directors may be elected by written consent without a meeting only if the
written consents of all outstanding shares entitled to vote are obtained.
All such consents shall be filed with the Secretary of the corporation and
shall be maintained in the corporate records. Any shareholder giving a
written consent, or the shareholders proxy holder, or a transferee of the
shares of a personal representative of the shareholder or their respective
proxy holders, may revoke the consent by a writing received by the Secretary
of the corporation before written consents of all of the shareholders
entitled to vote have been filed with the Secretary. The Secretary shall
give prompt notice of any corporate action approved by the shareholders
without a meeting. This notice shall be given in the manner specified in
Section S of this Article II. In the case of approval of (a) contracts or
transaction in which a director has a direct or indirect financial interest,
(b) indemnification of agents of the corporation, (c) a reorganization of the
corporation, or (d) a distribution in dissolution other than in accordance
with the rights of outstanding preferred shares, notice of such approval
shall be given at least ten (10) days before the consummation of any action
authorized by that approval.
SECTION 11. RECORD DATE FOR SHAREHOLDER NOTICE. VOTING AND GIVING CONSENTS.
For purposes of determining the shareholders entitled to notice of any
meeting or to vote or entitled to give consent to corporate action without a
meeting, the Board of Directors may fix, in advance, a record date, which
shall not be more than seventy (70) days or less than ten (10) days before
the date of any such meeting or more than (70) days before any such action
without a meeting, and in this event, only shareholders of record at the
close of business on the date so fixed are entitled to notice and to vote or
to give consents, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date except as
otherwise provided in the Oregon Business Corporation Act.
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<PAGE>
If the Board of Directors does not so fix a record date:
a. The record date for determining shareholders entitled to notice of or to
vote at a meeting of shareholders shall be at the close of business on the
business day next preceding the day on which the meeting is held.
b. The record date for determining shareholders entitled to give consent to
corporate action in writing without a meeting, (i) when no prior action by
the Board has been taken, shall be the date on which the first written
consent is given, or (ii) when prior action of the Board of Directors has
been taken, shall be at the close of business on the date on which the
Board adopts the resolution relating to that action, or the fiftieth (50)
day before the day of such other action, whichever is later.
SECTION 12. PROXIES. Every person entitled to vote for directors or any
other matter shall have the right to do so either in person or by one or more
agents authorized by a written proxy signed by the person and filed with the
Secretary of the corporation. A proxy shall be deemed signed if the
shareholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the shareholder or the
shareholder's attorney-in-fact. A validly executed proxy that does not state
that it is irrevocable shall continue in full force and effect unless (a)
revoked by the person executing it, before the vote pursuant to that proxy,
by a writing delivered to the corporation stating that the proxy is revoked,
or by attendance at the meeting and voting in person by the person executing
the proxy or by a subsequent proxy executed by the same person and presented
at the meeting; or (b) written notice of the death or incapacity of the maker
of that proxy is received by the corporation before the vote pursuant to that
proxy is counted; provided, however, that no proxy shall be valid after the
expiration of eleven (11) months from the date of the proxy, unless otherwise
provided.
SECTION 13. INSPECTORS OF ELECTION. Before any meeting of shareholders, the
Board of Directors may appoint any person other than nominees for office to
act as inspectors of election at the meeting or to adjournment. If no
inspectors of election are 50 appointed, the Chairman of the meeting may, and
on the request of any shareholder or shareholders proxy shall, appoint
inspectors or election at the meeting. The number of inspectors shall be
either one (1) or three (3). If inspectors are appointed at a meeting on the
request of one or more shareholders or proxies, the holders of a majority of
the shares or their proxies present at the meeting shall determine whether
one (1) or three (3) inspectors are to be appointed. If any person appointed
as inspector fails to appear or refuses to act, the Chairman of the meeting,
upon the request of any shareholder or to a shareholders proxy shall, appoint
a person to fill that vacancy.
These inspectors shall:
a. Determine the number of shares outstanding and the voting power of each,
the shares represented at the meeting, the existence of a quorum and
authenticity, validity and effect of proxies;
b. Receive votes, ballots or consents;
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c. Hear and determine all challenges and questions in any way arising in
connection with the right to vote;
d. Count and tabulate all votes or consents;
e. Determine when the polls shall close,
f. Determine the results; and
g. Do any other acts that may be proper to conduct the election or vote with
fairness to all shareholders.
SECTION 14. SHAREHOLDER LIST. The officer or agent having charge of the
corporation's stock transfer books shall make, after fixing a record date for a
meeting of shareholders, a complete record of the shareholders entitled to vote
at such meeting or adjournment thereof, arranged by voting group and in
alphabetical order, with the address of and number of shares held by each, which
record beginning two (2) business days after notice is given for the meeting for
which the list was prepared an continuing through the meeting, shall be kept on
file at the principal office of the corporation and shall be subject to
inspection by any shareholder or his agent upon written demand during usual
business hours. A shareholder or his agent may copy the record only in
compliance with applicable provisions of the Oregon Business Corporation Act.
Such record shall also be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any shareholder during the
whole time of the meeting. The original stock transfer books shall be PRIMA
FACIE evidence at to who are the shareholders entitled to examine such records
or transfer books or to vote at any meeting or shareholders. Failure to comply
with this Section 14 of Article II shall not affect the validity of any action
taken at such meeting.
ARTICLE III
DIRECTORS
SECTION 1. POWERS. Subject to the provisions of the Oregon Business
Corporation Act and any limitations in the Articles of Incorporation and these
Bylaws relating to action required to be approved by the shareholders or by the
outstanding shares, the business and affairs of the corporation shall be managed
and all corporate powers shall be exercised by or under the direction of the
Board of Directors.
Without prejudice to these general powers, and subject to the same limitations,
the Board of Directors shall have the power to:
a. Select and remove all officers, agents, and employees of the corporation;
prescribe any powers and duties for them that are consistent with law,
with the Articles of Incorporation, and with these Bylaws; fix their
compensation and require from them security for faithful service.
b. Change the principal executive offices or the principal business office in
the State of Oregon from one location to another; cause the corporation to
be qualified to do business in any other state, territory, dependency or
country and to conduct business within and without the State of Oregon and
designate any place within or
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without the State of Oregon for the holding of any shareholder's meeting
or meetings, including annual meetings.
c. Adopt, make and use a corporate seal; prescribe the forms of certificates
of stock and alter the form of the seal and certificates.
d. Authorize the issuance of shares of stock of the corporation on any lawful
terms, in consideration of money paid, labor done, services actually
rendered, debts or securities canceled, or tangible or intangible property
actually received.
e. Borrow money and incur indebtedness on behalf of the corporation, and
cause to be executed and delivered for the corporation's purposes, in the
corporate name, promissory notes, bonds, debentures, deeds of trust,
mortgages, pledges, hypothecation 5 and other evidences of debt and
securities.
SECTION 2. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized number of
directors of the corporation shall not be less than one (1) nor more than seven
(7). The exact number of authorized directors shall be fixed from time to time,
within the minimum and maximum, by the Board of Directors pursuant to a duly
adopted resolution. The indefinite number of directors may be changed, or a
definite number fixed without provision for an indefinite number, by duly
adopted amendment to this Bylaw duly adopted by the vote or written consent of
holders of a majority of the outstanding shares entitled to vote.
SECTION 3. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors shall be elected
by vote of the shareholders at each annual meeting of the corporation. If there
are fewer than (6) directors of the corporation as determined in accordance with
Section 2 of Article III, the terms of each director shall expire at the next
annual shareholders meeting. If there are six (6) or more directors, the terms
of the directors, may, upon adoption of a duly authorized resolution of the
Board of Directors, so stating, be staggered by classifying the directors into
two groups, with each group to contain not fewer than three members and to be as
nearly equal as possible. If such a provision is adopted, the terms of the
directors in the first group shall expire at the first annual shareholders
meeting after their election; the terms of the directors in the second group
shall expire at the second annual shareholders meeting after their election. At
each annual shareholders meeting held together, directors shall be chosen for a
term of two (2) years to succeed those whose terms expire. Each director,
including a director elected to fill a vacancy, shall hold office until the
expiration of the term for which elected and qualified. There shall be no limit
on the number of terms a director may serve.
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
SECTION 4. VACANCIES. A vacancy or vacancies in the Board of Directors shall
be deemed to exist in the event of the death, resignation, or removal of any
director, or if the Board of Directors by resolution declares vacant the office
of a director who has been declared of unsound mind by an order of court or
conviction of a felony, or if the authorized number of directors is increased,
or if the shareholders fail at any meeting of shareholders at which any director
or directors are
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<PAGE>
elected to elect the number of directors to be voted for at that meeting.
Any director may resign effective on giving written notice to the Chairman of
the Board, the corporation or the Board of Directors, unless the notice
specifies a later time for that resignation becoming effective. If the
resignation of a director is effective at a future time, the Board of
Directors may elect a successor to take office when the resignation becomes
effective. Once delivered, a notice of resignation is irrevocable unless
revocation is permitted by the Board of Directors.
Vacancies on the Board of Directors may be filled by a majority vote of the
shareholders entitled to vote for directors or may be filled by a majority of
the remaining directors, whether or not less than a quorum, or by a sole
remaining director.
Each director so elected shall hold office until the next annual meeting of the
shareholders and until a successor has been elected and qualified.
SECTION 5. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. Regular meetings of
the Board of Directors may be held at any place within or outside the State of
Oregon that has been designated from time to time by the Board. In the absence
of such a designation, regular meetings shall be held at the principal executive
office of the corporation. Special meetings of the Board shall be held at any
place within or outside the State of Oregon that has been designated in the
notice of the meeting or, if not stated in the notice or if there is no notice,
at the principal executive office of the corporation. Any meeting, regular or
special, may be held by conference telephone or other electronic communication
equipment, as long as all directors participation in the meeting can hear one
another, and all such directors shall be deemed to be present in person at the
meeting.
SECTION 6. ANNUAL MEETING. Immediately following each annual meeting of
shareholders, the Board of Directors shall hold a regular meeting at the place
that the annual meeting of the shareholders was held, or at any other place that
shall have been designated by the Board of Directors, for the purpose of
organization, any desired election of officers, and the transaction of other
business. Notice of this meeting shall not be required.
SECTION 7. OTHER REGULAR MEETINGS. Other regular meetings of the Board of
Directors shall be held without call at such time as shall from time to time be
fixed by the Board of Directors. Such regular meetings may be held without
notice.
SECTION 8. SPECIAL MEETINGS. Special meetings of the Board of Directors for
any purpose or purposes may be called at any time by the Chairman of the Board
of Directors or the President, any Vice President, the Secretary or any two
directors.
Notice of the time and place of a special meeting shall be delivered personally
or by telephone to each director or sent by first class mail or telegraph,
charges prepaid, addressed to each director at that director's address as it is
shown on the records of the corporation. In case the notice is mailed, it shall
be deposited in the United States mail at least four (4) business days before
the time of the meeting. In case the notice is delivered personally, or by
telephone or telegram, it
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<PAGE>
shall be delivered personally or by telephone or to the telegraph company at
least two (2) days before the time of the meeting. Any oral notice given
personally or by telephone may be communicated either to the director or to a
person at the office of the director whom the person giving the notice has
reason to believe will promptly communicate it to the director. The notice
need not specify the purpose of the meeting, nor need it specify the place if
the meeting is to be held at the principal executive office of the
corporation. Attendance of a director at a special meeting shall constitute
a waiver of notice of such meeting except where a director attends a meeting
for the express purpose of objecting to the transaction of any business
because the meeting if not lawfully called or convened.
SECTION 9. QUORUM A majority of the prescribed number of directors shall
constitute a quorum for the transaction of business except to adjourn as
provided in Section 11 of this Article III. If no number of directors has
been prescribed, a quorum shall consist of a majority of the number of
directors in office immediately before the meeting begins. Every act or
decision done or made by a majority of the directors present at a meeting
duly held at which a quorum is present shall be regarded as the act of the
Board of Directors. A meeting at which a quorum is initially present may
continue to transaction business notwithstanding the withdrawal of directors,
if any action taken is approved by at least a majority of the required quorum
for that meeting.
SECTION 10. WAIVER OF NOTICE. The transaction of any meeting of the Board of
Directors, however called and noticed or wherever held, shall be as valid as
though had at a meeting duly held after regular call and notice if a quorum is
present and if each director (a) has received notice of the meeting, (b) attends
the meeting without protesting before or at the beginning of the meeting, the
lack of notice to such director, or (c) before or after the meeting signs a
waiver of notice, consent to holding the meeting or an approval of the minutes
of the meeting. Any such waiver of notice or consent need not specify the
purpose of the meeting. All such waivers, consents and approvals shall be filed
with the corporate records or made a part of the minutes of the meeting.
SECTION 11. ADJOURNMENT. A majority of the directors present, whether or not
constituting a quorum, may adjourn any meeting to another time and place.
SECTION 12. NOTICE OF ADJOURNMENT. Notice of the time and place of holding an
adjourned meeting need not be given, unless the meeting is adjourned for more
than twenty-four (24) hours, in which case notice of the time and place shall be
given before the time of the adjourned meeting, in the manner specified in
Section 8 of this Article III, to the directors who were not present at the time
of the adjournment.
SECTION 13. ACTION WITHOUT MEETING. Any action required or permitted to be
taken by the Board of Directors may be taken without a meeting, if all members
of the Board shall individually or collectively consent in writing to that
action. Such action by written consent shall have the same force and effect as
an unanimous vote of the Board of Directors and shall be effective when the last
directors signature has been obtained or at any earlier or later time if so
specified in the written action. Such written consent or consents shall be filed
with the minutes of the proceedings of the Board. Such consent or consents
shall have the effect of a meeting vote and may be described as such in any
document.
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SECTION 14. FEES AND COMPENSATION OF DIRECTORS. Directors and members of
committees may receive such compensation, if any for their services, and such
reimbursement of expenses, as may be fixed or determined by resolution of the
Board of Directors. This Section 14 Shall not be construed to preclude any
director from serving the corporation in any other capacity, as an officer,
agent, employee, or otherwise, and receiving compensation for those services.
ARTICLE IV
COMMITTEES
SECTION 1. COMMITTEES OF DIRECTORS. The Board of Directors may, by resolution
adopted by a majority of the authorized number of directors, designate an
executive committee and one or more other committees, each consisting of two or
more directors, to serve at the pleasure of the Board. The Board may designate
one or more directors as alternate members of any committee, who may replace any
absent member at any meeting of the committee. Any committee, to the extent
provided in the resolution of the Board, shall have all the authority of the
Board, except with respect to:
a. The approval of any action which would be prohibited under the Oregon
Business Corporation Act or which, under the Oregon Business Corporation
Act also requires shareholders' approval or approval of the outstanding
shares;
b. The filling of vacancies on the Board of Directors or in any committee;
c. The fixing of compensation of the directors for serving on the Board or on
any committee;
d. The amendment, alteration, restatement or repeal of Bylaws or the adoption
of new Bylaws;
e. The amendment or repeal of any resolution of the Board of Directors which
by its express terms is not so amendable or repealable;
f. Distribution to the shareholders of the corporation, except at a rate or
in a periodic amount or within a price range determined by the Board of
Directors; or
g. The appointment of any other committees of the Board of Directors of the
members of such committees.
SECTION 2. MEETINGS AND ACTIONS OF COMMITTEES. Meetings and actions of
committees shall be governed by, and held and taken in accordance with, the
provisions of Article III of these Bylaws, Section 5 (Place of Meetings), 7
(Regular Meetings), 8 (Special Meetings and Notice), 9 (Quorum), 10 (Waiver
of Notice), 11 (Adjournment), 12 (Notice of Adjournment), and 13 (Action
without Meeting), with such changes in the context of those Bylaws as are
necessary to substitute the committee and its members for the Board of
Directors and its members, except that the time of regular meetings of
committees may be determined either by resolution of the Board of Directors
or by resolution of the committee; special meetings of committees may also be
called by resolution of the
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<PAGE>
Board of Directors; and notice of special meetings of committees shall also
be given to all alternate members. who shall have the right to attend all
meetings of the committee. The Board of Directors may adopt rules for the
governance of any committee not inconsistent with the provisions of these
Bylaws.
ARTICLE V
OFFICERS
SECTION 1. OFFICERS. The officers of the corporation shall be a President,
Secretary, and a Chief Financial Officer. The corporation may also have, at the
discretion of the Board of Directors, a Chairman of the Board, one or more Vice
presidents, one or more Assistant Secretaries, one or more Assistant Treasurers,
and such other officers as may be appointed in accordance with the provisions of
Section 3 of this Article V. Any number of offices may be held by the same
person.
SECTION 2. ELECTION OF OFFICERS. The officers of the corporation, except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section S of this Article V., shall be chosen by the Board of Directors, and
each shall serve at the pleasure of the Board, subject to the rights, if any, of
an officer under contract of employment.
SECTION 3. SUBORDINATE OFFICERS. The Board of Directors may appoint, and may
empower the President to appoint, such other officers as the business of the
corporation may require, each of whom shall hold office for such period, have
such authority and perform such duties as are provided in the Bylaws or as the
Board of Directors may from time to time determine.
SECTION 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights, if any,
or an officer under any contract of employment, any officer may be removed,
either with or without cause, by the Board of Directors, at any regular or
special meeting of the Board, or, except in case of an officer chosen by the
Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the corporation.
Any resignation takes effect at the date of receipt or that notice, or at any
later time specified in that notice; unless otherwise specified in that notice,
the acceptance of the resignation shall not be necessary to make it effective.
Any resignation is without prejudice to the rights, if any, or the corporation
under any contract to which the officer is a party. Once delivered, a notice of
resignation is irrevocable unless revocation is permitted by the Board of
Directors.
SECTION 5. VACANCIES. A vacancy in any office because of death, resignation,
removal, disqualification, or any other cause shall be filled in the manner
prescribed in these Bylaws for regular appointments to that office.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such an
officer is elected, shall, if present, preside at meetings of the Board of
Directors and exercise and perform such other powers and duties as may from time
to time be assigned to that person by the Board of Directors or prescribed by
the Bylaws. If there is no President, the
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<PAGE>
Chairman of the Board shall, in addition, be the Chief Executive Officer of
the corporation and shall have the powers and duties described in Section 7
of this Article V.
SECTION 7. PRESIDENT. Subject to such powers, if any, as may be given by
the Bylaws of Board of Directors to the Chairman of the Board, if there is
such an officer, the President shall be General Manager and Chief Executive
Officer of the corporation and shall, subject to the control of the Board of
Directors, have general supervision, direction, control of the business and
the officers of the corporation. That person shall preside at all meetings
of the shareholders and, in the absence of the Chairman of the Board, or if
there is none, at all meetings of the Board of Directors. He shall have the
general powers and duties of management usually vested in the office of the
president of a corporation and shall have such other powers and duties as may
be prescribed by the Board of Directors or the Bylaws.
SECTION 8. VICE PRESIDENTS. In the absence or disability of the President,
the Vice Presidents, if any, in order of their rank as fixed by the Board of
Directors or, if not ranked, a Vice President designated by the Board of
Directors, shall perform all the duties of President, and when so acting
shall have all the powers of, and be subject to all the restriction upon, the
President. The vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by
the Board of Directors or the Bylaws, and the President, or the Chairman of
the Board if there is no President.
SECTION 9. SECRETARY. The Secretary shall keep or cause to be kept, at the
principal executive office or such other place as the Board of Directors may
direct, a book of minutes of all meetings and actions of the directors,
committees of directors, and shareholders, with the time and place of
holding, whether regular or special and, if special, how authorized, the
notice given, the names of those present and director's meetings or committee
meetings, the number of shares present or represented at shareholder's
meetings, and the proceedings.
The Secretary shall keep or cause to be kept, at the principal executive
office or at the office of the corporation's transfer agent or registrar, as
determined by resolution of the Board of Directors, a record of shareholders,
or a duplicate record of shareholders, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the
number and date of certificates issued for same, and the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary or Assistant Secretary or, if they are absent or unable to act
or refuse to act, any other officer of the corporation shall give, or cause
to be given, notice of all meetings of the shareholders, of the Board of
Directors, and of committees of the Board of Directors, required by the
Bylaws or by law to be given. The Secretary shall keep the seal of the
corporation, if one is adopted, in custody and shall have such other powers
and perform such other duties as may be prescribed by the Board of Directors
or by the Bylaws.
SECTION 10. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall keep
and maintain, or cause to be kept and maintained, adequate and correct books
and records of accounts of the properties and business
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<PAGE>
transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained
earnings and shares. The books of account shall at all reasonable times be
open to inspection by any director.
The Chief Financial Officer shall deposit all moneys and other valuables in
the name and to the credit of the corporation with such depositories as may
be designated by the Board of Directors. He shall disburse the funds of the
corporation as may be ordered by the Board of Directors, shall render to the
President and directors, whenever they request it, an account of all his
transactions as Chief Financial Officer and of the financial condition of the
corporation, and shall exercise such other powers and perform such other
duties as may be prescribed by the Board of Directors or the Bylaws.
The Chief Financial Officer, is for purposes of giving any reports or
executing any certificates or other documents requiring the signature or the
"Treasurer," deemed to be also the Treasurer of the corporation.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND OTHER AGENTS
SECTION 1. DIRECTORS AND OFFICERS. The corporation shall indemnify its
directors and officers to the fullest extent permitted by the Oregon Business
Corporation Act, as the same exists or may hereafter be amended (but, in the
case of alleged occurrences of actions or omissions preceding any such
amendment, only to the extent that such amendment permits the corporation to
provide broader indemnification rights than the Oregon Business Corporation
Act permitted to corporation to provide prior to such amendment).
SECTION 2. EMPLOYEES AND OTHER AGENTS. The corporation shall have power to
indemnify its employees and other agents as set forth in the Oregon Business
Corporation Act.
SECTION 3. NO PRESUMPTION OF BAD FAITH. The termination of any proceeding
by judgment, order, settlement, conviction or upon a plea of nolo contendere
or its equivalent shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which the person reasonable
believed to be in or not opposed to the best interest of the corporation,
and, with respect to any criminal proceeding, that the person had reasonable
cause to believe that the conduct was unlawful.
SECTION 4. ADVANCE OF EXPENSES. The expenses incurred by a director or
officer in any proceeding shall be paid by the corporation in advance at the
written request of the director or officer, if the director or officer:
a. Furnishes the corporation a written affirmation of such person's
good faith belief that such person is entitled to be indemnified by
the corporation; and
b. Furnishes the corporation a written undertaking to repay such
advance to the extent that it is ultimately determined by a court
that such person is not entitled to be indemnified by the
corporation. Such advances shall be made without regard to the
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<PAGE>
persons ability to repay such expenses and without regard to the
person's ultimate entitlement to indemnification under these Bylaws
or otherwise.
SECTION 5. ENFORCEMENT. Without the necessity of entering into an express
contract, all rights to indemnification and advances under these Bylaws shall be
deemed to be contractual rights and be effective to the same extent and as if
provided for in a contract between the corporation and the director or officer
who serves in such capacity at any time while these Bylaws and relevant
provisions of the Oregon Business Corporation Act and other applicable law, if
any, are in effect. Any right to indemnification or advances granted by these
Bylaws to a director or officer shall be enforceable by or on behalf of the
person holding such right in any court of competent jurisdiction if:
a. the claim for indemnification or advances is denied, in whole or in
part, or
b. no disposition of such claim is made within ninety (90) days of
request therefor.
The claimant in such enforcement action, if successful in whole or in part,
shall be entitled to be paid also the expense of prosecuting a claim. It
shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in connection with any proceeding in
advance of its final disposition when the required affirmation and
undertaking have been tendered to the corporation) that the claimant has not
met the standards of conduct which make it permissible under the Oregon
Business Corporation Act for the corporation to indemnify the claimant for
the amount claimed, but the burden of proving such defense shall be on the
corporation. Neither the failure of the corporation (including its Board of
Directors, independent legal counsel or its shareholders) to have made a
determination prior to the commencement of such action that indemnification
of the claimant is proper in the circumstances because the claimant has met
the applicable standard of conduct set forth in the Oregon Business
Corporation Act, nor an actual determination by the corporation (including
its Board of Directors, independent legal counsel or its shareholders) that
the claimant has not met such applicable standard of conduct, shall be
defense to the action or create a presumption that the claimant has not met
the applicable standard of conduct.
SECTION 6. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person by
these Bylaws shall not be exclusive of any other right which such person may
have or hereafter acquire under any statute, provision of the Articles of
Incorporation, Bylaws, agreement, vote of shareholders or disinterested
Directors or otherwise, both as to action in the person's official capacity
and as to action in another capacity while holding office. The corporation
is specifically authorized to enter into individual contracts with any or all
of its directors, officers, employees or agents respecting indemnification
and advances, to the fullest extent permitted by the law.
SECTION 7. SURVIVAL OF RIGHTS. The rights conferred on any person by this
bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
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<PAGE>
SECTION 8. INSURANCE. To the fullest extent permitted by the Act, the
corporation, upon approval by the Board of Directors, may purchase insurance
on behalf of any person required or permitted to be indemnified pursuant to
these Bylaws.
SECTION 9. AMENDMENTS. Any repeal of these Bylaws shall only be
prospective, and no repeal or modification hereof shall adversely affect the
rights under these Bylaws in effect at the time of the alleged occurrence of
any action or omission to act that is the cause of any proceeding against any
agent of the corporation.
SECTION 10. SAVINGS CLAUSE. If these Bylaws or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, the
corporation shall indemnify each director, officer or other agent to the
fullest extent permitted by any applicable portion of this bylaw that shall
not have been invalidated, or by any other applicable law.
SECTION 11. CERTAIN DEFINITIONS. For the purposes of these Bylaws, the
following definitions shall apply:
a. The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation,
prosecution, defense, settlement and appeal of any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
b. The term "expenses" shall be broadly construed and shall include,
without limitation, expenses of investigations, judicial or
administrative proceedings or appeals, attorneys' fees and
disbursements and any expenses of establishing a right to
indemnification under Section 5, but shall not include amounts
paid in settlement, judgments or fines.
c. The term "corporation" shall include, in addition to the
resulting or surviving corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its
directors, officers, employees or agents, so that any person who
is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust
or other enterprise, shall stand in the same position under the
provisions of this bylaw with respect to the resulting or
surviving corporation as the person would have with respect to
such constituent corporation if its separate existence had
continued.
d. References to a "director", "officer", "employee", or "agent" of
the corporation shall include, without limitation, situations
where such person is at the request of the corporation as a
director, officer, employee, trustee or agent of another
corporation, partnership, joint venture, trust or other
enterprise.
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<PAGE>
e. References to "other enterprises" shall include employee benefit
plans; references to "fines" in the Oregon Business Corporation
Act shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to .-serving
at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit
plan, its participants, or beneficiaries; and a person who acted
in good faith in a manner the person reasonably believed to be in
the interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation' as referred to
in these Bylaws.
ARTICLE VII
RECORDS AND REPORTS
SECTION 1. MAINTENANCE AND INSPECTION OF RECORDS OF SHAREHOLDERS. The
corporation shall keep at its principal office, or at its registered office,
a record of its shareholders, giving the names and addresses of all
shareholders and the number and class of shares held by each shareholder, as
well as all other records required to be kept under provisions of the Oregon
Business Corporation Act.
Any shareholder or shareholders of the corporation may inspect and copy the
records referred to above during usual business hours on five (5) business
days' prior written demand on the corporation. Any inspection and copying
under this Section 1 may be made in person or by an agent or attorney of the
shareholder or holder of a voting trust certificate making the demand.
SECTION 2. MAINTENANCE AND INSPECTION OF ARTICLES AND BYLAWS. The
corporation shall keep at its principal office, or if its principal office is
not in the State of Oregon, at its principal business office in the State of
Oregon, the originals or true copies of the Articles of Incorporation and By
laws as amended to date, which shall be open to inspection by the
shareholders at all reasonable times during office hours. If the principal
office of the corporation is outside the State of Oregon, and the corporation
has no principal business office in the State of Oregon, the Secretary shall,
upon the written request of any shareholder, furnish to that shareholder a
copy of the Articles of Incorporation and/or Bylaws as amended to date.
SECTION 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS. The
accounting books and records and minutes of proceedings of the shareholders
and the Board of Directors and any committee or committees of the Board of
Directors shall be kept at such place or places designated by the Board of
Directors, or, in the absence of such designation, at the principal office of
the corporation. The minutes shall be kept in written form and the accounting
books and records shall be kept either in written form or in any other form
capable of being converted into written form. The minutes and accounting
books and records shall be open to inspection upon the written demand of any
shareholder or holder of a voting trust certificate, at any reasonable time
during usual business hours, for a purpose reasonable related to the holder's
interest as a shareholder or as a holder of a voting trust certificate. The
inspection may be made in person or by an agent or
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<PAGE>
attorney, and shall include the right to copy and make extracts. These
rights of inspection shall extend to the records of each subsidiary
corporation of the corporation.
SECTION 4. INSPECTION OF DIRECTORS. Every director shall have the absolute
right, at any reasonable time, to inspect all books, records, and documents
of every kind, and the physical properties of the corporation and each of its
subsidiary corporations. This inspection by a director may be made in person
or by an agent or attorney and the right of inspection includes the right to
copy and make extracts of documents.
SECTION 5. ANNUAL REPORT TO SHAREHOLDERS. The Board of Directors may issue
annual or other periodic reports to the shareholders of the corporation as
they consider appropriate.
SECTION 6. FINANCIAL STATEMENTS. A copy of any annual financial statement
and any income statement of the corporation for each quarterly period of each
fiscal year, and any accompanying balance sheet of the corporation as of the
end of such period, that has been prepared by the corporation shall be kept
on file in the principal office of the corporation for twelve (12) months,
and each such statement shall be exhibited at all reasonable times to any
shareholder demanding an examination of any such statement or a copy shall be
mailed to any such shareholder.
SECTION 7. ANNUAL STATEMENT OF DOMESTIC CORPORATION. The corporation shall
each year, not later than the anniversary of the date the Articles of
Incorporation originally were filed with the Oregon Corporation Commissioner,
file with the Oregon Corporation Commissioner on the prescribed form, the
annual statement required by the Oregon Business Corporation Act.
ARTICLE VIII
GENERAL CORPORATE MATTERS
SECTION 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING. For
purposes of determining the shareholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or entitled to
exercise any rights in respect of any other lawful action (other than action
by shareholders by written consent without a meeting), the Board of Directors
may fix, in advance, a record date, which shall not be more that seventy (70)
nor less than (10) days before any such action, and in that case only
shareholders of record on the date fixed are entitled to receive the
dividend, distribution, or allotment of rights or to exercise the rights, as
the case may be, notwithstanding any transfer of any shares on the books of
the corporation after the record date so fixed, except as otherwise provided
in the Oregon Business Corporation Act.
If the Board of Directors does not fix a record date, the record date for
determining shareholders for any such purpose shall be at the close of
business on the day on which the Board adopts the applicable resolution or
the seventieth (70) day before the date of that action, whichever is later.
SECTION 2. CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS. All checks, drafts, or
other orders for payment of money, notes or other evidences
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<PAGE>
of indebtedness, issued in the name of or payable to the corporation, shall
be signed or endorsed by such person or persons and in such manner as, from
time to time, shall be determined by resolution of the Board of Directors.
SECTION 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The Board of
Directors, except as otherwise provided in these Bylaws, my Authorize any
officer or officers, agent or agents, to enter into any contract or execute
any instrument in the name of and on behalf of the corporation, and this
authority may be general or confined to specific instances; and , unless so
authorized or ratified by the Board of Directors or within the agency power
of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement of to pledge
its credit or to render it liable for any purpose or for any amount.
SECTION 4. CERTIFICATE FOR SHARES. A certificate or certificates for shares
of the capital stock of the corporation may be issued to each shareholder
when any of these shares are fully paid, and the Board of directors may
authorize the issuance of certificates for shares as partly paid provided
that these certificates shall state the amount of the consideration to be
paid for them and the amount paid. All certificates shall be signed in the
name of the corporation by the Chief Executive officer or the President and
by the Chief Financial Officer or Secretary, certifying the number of shares
and the class or series of shares owned by the shareholder. Any of the
signatures on the certificate may be facsimile. In case any officer,
transfer agent or registrar who has sign or whose facsimile signature is
issued, it may be issued by the corporation with the same effect as if that
person were an officer, transfer agent or registrar at the date of issue.
SECTION 5. LOST CERTIFICATES. Except as provided in this Section 5, no new
certificates for shares shall be issued to replace an old certificate unless
the latter is surrendered to the corporation and canceled at the same time.
The Board of Directors may, in case any share certificate or certificate for
any other security is lost, stolen, or destroyed, authorize the issuance of a
replacement certificate on such terms and conditions as the Board may
require, including provisions for conditions for indemnification of the
corporation secured by a bond or other adequate security sufficient to
protect the corporation against any claim that may be made against it,
including any expense for liability, on account of the alleged loss, theft,
or destruction of the certificate or the issuance of the replacement
certificate.
SECTION 6. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The Chairman of
the Board, the Chief Executive Officer, the President, or any other person
authorized by resolution of the Board of Directors or by any of the foregoing
designated officers, is authorized to vote on behalf of the corporation any
and all shares of any other corporation or corporations, foreign or domestic,
standing in the name of the corporation. The authority granted to these
officers to vote or represent on behalf of the corporation any and all shares
held by the corporation in any other corporation or corporations may be
exercised by any of these officers in person or by any person authorized to
do so by a proxy duly executed by these officers.
SECTION 7. CONSTRUCTION AND DEFINITIONS. Unless the context requires
otherwise, the general provisions, rules of construction, and
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<PAGE>
definitions in the Oregon Business Corporation Act shall govern the
construction of these Bylaws. Without limiting the generality of these
provisions, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both the corporation
and a natural person.
SECTION 8. REIMBURSEMENT. If all or part of the salary or other
compensation paid to any officer, director, agent or employee of the
corporation is finally determined not allowable as a federal or state income
tax deduction, such officer, director, employee or agent shall repay to the
corporation the amount disallowed. The Board of Directors shall enforce
repayment of each such amount disallowed.
ARTICLE IX
AMENDMENTS
SECTION 1. AMENDMENT BY DIRECTORS. New Bylaws may be adopted or these Bylaws
may be amended, altered, restated, or repealed by the vote of a majority of the
Board of Directors or unanimous written consent of the Board of Directors except
as otherwise provided by law, these Bylaws, or the Articles of Incorporation,
provided, however, that if the Articles of Incorporation or the corporation set
forth the number of authorized directors of the corporation, the authorized
number of directors may be changed only by an amendment of the Articles of
Incorporation. The corporation's shareholders may amend or repeal these Bylaws
even though the Bylaws may also be amended or repealed by the corporation's
Board of Directors.
ARTICLE X
EMERGENCY BYLAWS
SECTION 1. EMERGENCY. The Board of Directors may adopt bylaws which shall be
effective only in an emergency as defined in the Oregon Business Corporation
Act.
SECTION 2. MUST FOLLOW OREGON CORPORATION BUSINESS ACT. Any such emergency
bylaws must be adopted in accordance with applicable provisions of the Oregon
Business Corporation Act.
I HEREBY CERTIFY that I was the Secretary of the first directors' meeting of
FirstLink Communications, Inc. held on January 1, 1996, and that the foregoing
Bylaws in nineteen (19) typewritten pages numbered consecutively from one to
nineteen were and are the Bylaws adopted by the directors of the corporation at
that meeting.
DATED: January 1, 1996.
/s/ Allan A. Fulsher
--------------------------------
Allan A. Fulsher, Secretary of
First Directors' Meeting.
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<PAGE>
Exhibit No. 4.2 Warrant Agreement (including form of Warrant Certificate).
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
AND
AMERICAN SECURITIES TRANSFER & TRUST, INC.
WARRANT AGENT
WARRANT AGREEMENT
DATED AS OF _______, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section
Number Title Page
<C> <S> <C>
1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . 3
2 Warrants and Issue of Warrant Certificates . . . . . . . . . 5
3 Form of Warrant Certificates . . . . . . . . . . . . . . . . 5
4 Term of Warrants; Exercise of Warrants . . . . . . . . . . . 6
5 Redemption . . . . . . . . . . . . . . . . . . . . . . . . . 7
6 Reservation of Warrant Shares. . . . . . . . . . . . . . . . 8
7 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . 8
8 Warrant Shares to be Fully Paid. . . . . . . . . . . . . . . 8
9 Limitation on Transfer . . . . . . . . . . . . . . . . . . . 8
10 Adjustment of Exercise Price and Number of Shares. . . . . . 9
11 Merger or Consolidation of Company . . . . . . . . . . . . .12
12 Modification of Agreement. . . . . . . . . . . . . . . . . .12
13 Notices to Warrant Holders . . . . . . . . . . . . . . . . .12
14 No Rights as Shareholder . . . . . . . . . . . . . . . . . .13
15 Warrant Agent. . . . . . . . . . . . . . . . . . . . . . . .13
16 Merger, Consolidation or Change of Name of Warrant Agent . .14
17 Change of Warrant Agent. . . . . . . . . . . . . . . . . . .15
18 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . .15
19 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . .16
20 Miscellaneous Provisions . . . . . . . . . . . . . . . . . .16
</TABLE>
<PAGE>
THIS WARRANT AGREEMENT dated as of _______________, 1998, is between
FirstLink Communications, Inc. (the "Company"), an Oregon corporation, and
American Securities Transfer & Trust, Inc. (called, as well as any successor
acting as warrant agent under this Agreement, the "Warrant Agent").
RECITALS
1. The Company proposes to issue shares ("Shares") of its no par
value Common Stock ("Common Stock") and Common Stock Purchase Warrants
("Warrants") pursuant to Registration Statement No. 33 - (the "Registration
Statement") that the Company has filed with the United States Securities and
Exchange Commission; and
2. Warrants will be evidenced by a "Warrant Certificate"; and
3. Two Warrants will entitle the Warrant Holder to purchase one
Share of Common Stock (a "Warrant Share"); and
4. The Company desires to enter into this agreement to establish the
terms and conditions of the Warrants, to set forth the rights of the
registered holders of the Warrants, and to provide for the issuance, transfer
and exercise of the Warrants and other matters; and
5. The Company desires the Warrant Agent to act on behalf of the
Company and the Warrant Agent is willing so to act under the terms of this
Agreement;
NOW THEREFORE, in consideration of the mutual agreements stated in this
Agreement, the Company and the Warrant Agent agree as follows:
TERMS OF WARRANTS
SECTION 1 DEFINITIONS
The following terms used in this agreement shall have the following
meanings (unless otherwise expressly provided herein):
THE "ACT." The Securities Act of 1933, as amended.
THE "COMMISSION." The Securities and Exchange Commission.
THE "COMPANY." FirstLink Communications, Inc., a corporation.
"COMMON STOCK." The Common Stock, no par value per share, of the
Company, whether now or hereafter authorized, holders of which have the right
to participate in the distribution of earnings and assets of the Company
without limit as to the amount or percentage.
"CURRENT MARKET PRICE." The Current Market Price shall be determined as
follows:
(a) if the security at issue is listed on a national securities
exchange or admitted to unlisted trading privileges on such an exchange or
quoted on either the Nasdaq National Market or on the Nasdaq Small Cap
Market, the Current Market Price shall be the last reported sale price of
that security on such exchange or system on the day for which the Current
Market Price is to be calculated; or, if no such sale is made on such day,
the average of the highest closing bid and lowest asked price for such day on
such exchange or system; or
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(b) if the security at issue is not so listed or quoted or
admitted to unlisted trading privileges, the Current Market Price shall be
the last reported sale price of that security on the OTC Bulletin Board on
the day for which the Current Market Price is to be calculated; or if no such
sale is made on such day, the average of the last reported highest bid and
lowest asked prices quoted on the OTC Bulletin Board on such day; or
(c) if the security at issue is not so listed or quoted or
admitted to unlisted trading privileges and bid and asked prices are not
reported, the Current Market Price shall be determined in such reasonable
manner as may be prescribed from time to time by the Board of Directors of
the Company, subject to the objection and arbitration procedure as described
in Sections 10.9 and 19 below.
"EFFECTIVE DATE." __________ .
"EXERCISE DATE." The date of surrender for exercise of any Warrant
Certificate, provided the exercise form on the back of the Warrant
Certificate or a form substantially similar thereto has been completed in
full by the Warrant Holder or a duly appointed attorney and the Warrant
Certificate is accompanied by payment in full of the Exercise Price.
"EXERCISE PERIOD." The period commencing on the date the Warrants are
issued and extending to and through the Expiration Date.
"EXERCISE PRICE." $_______ per Share, as modified in accordance with
Section 10, below.
"EXPIRATION DATE." 5:00 p.m. Portland, Oregon, local time on
_____________, subject to the terms provided in Section 5 hereof for
redemption; provided, however, if such date shall be a holiday or a day on
which banks are authorized to close in the State of Oregon, the Expiration
Date shall mean 5:00 p.m. Portland, Oregon, local time on the next following
day which in the State of Oregon is not a holiday or a day on which banks
are authorized to close. If the Company redeems the Warrants as provided in
Section 5 of this Agreement, the Expiration Date shall be the date fixed for
redemption.
"HOLDER" OR "WARRANT HOLDER." The person to whom a Warrant Certificate
is issued, and any valid transferee thereof pursuant to Section 9 below.
"NASDAQ." The electronic inter-dealer quotation system operated by The
Nasdaq Stock Market, Inc.
"OTC BULLETIN BOARD." An electronic quotation medium operated by The
Nasdaq Stock Market, Inc.
"PUBLIC OFFERING." The public offering by the Company of 1,000,000
Shares and 1,000,000 Warrants pursuant to an underwriting agreement dated as
of ______ between the Company and Kashner Davidson Securities Corporation
("Kashner Davidson") as Representative of the several Underwriters named in
the underwriting agreement.
"WARRANTS." The Warrants issued in accordance with the terms of this
Agreement and any Warrants issued in substitution for or replacement of such
Warrants, or any Warrants into which such Warrants may be divided or
exchanged.
"WARRANT SHARES." The Common Stock receivable upon exercise or
conversion of a Warrant, and the Common Stock underlying the unexercised
portion of a Warrant.
1.15 "TERMINATION OF BUSINESS." Any sale, lease or exchange of all,
or substantially all, of the Company's assets or business or any dissolution,
liquidation or winding up of the Company.
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SECTION 2 WARRANTS AND ISSUANCE OF WARRANT CERTIFICATES
2.1 DESCRIPTION OF WARRANTS. Each Warrant shall initially entitle
the Warrant Holder to purchase one share of Common Stock on exercise thereof,
subject to modification and adjustment as hereinafter provided in Section 10.
Warrant Certificates representing up to 1,150,000 Warrants and evidencing the
right to purchase an aggregate of up to 575,000 shares of Common Stock of the
Company shall be executed by the proper officers of the Company. The Company
shall deliver Warrant Certificates in required whole number denominations to
the person entitled thereto in connection with the original issuance of
Warrant Certificates or any transfer or exchange permitted under this
Agreement.
2.2 WARRANT SHARES. Except as provided in Section 3.4 hereof,
certificates representing the Warrant Shares shall be issued only on or after
the Exercise Date upon exercise of the Warrants or upon transfer or exchange
of the Warrant Shares following exercise of the Warrants.
SECTION 3 FORM OF WARRANT CERTIFICATE
3.1 FORM OF CERTIFICATES. The Warrant Certificates shall be
substantially in the form attached hereto as Exhibit A and may have such
letters, numbers or other marks of identification and such legends, summaries
or endorsements printed, lithographed or engraved thereon as the Company may
deem appropriate and as are not inconsistent with the provisions of this
Agreement. The Warrant Certificates shall be dated as of the date of
issuance, whether on initial issuance, transfer, exchange or in lieu of
mutilated, lost, stolen or destroyed Warrant Certificates.
3.2 EXECUTION OF CERTIFICATES. The Warrant Certificates shall be
executed on behalf of the Company by its President and Secretary, by manual
signatures or by facsimile signatures printed thereon, and shall have
imprinted thereon a facsimile of the Company's seal. If any person whose
facsimile signature has been placed upon any Warrant Certificate as the
signature of an officer of the Company shall have ceased to be such officer
before such Warrant Certificate is countersigned, issued and delivered, such
Warrant Certificate may be countersigned, issued and delivered with the same
effect as if such person had not ceased to be such officer. Any Warrant
Certificate may be signed by, or may bear the facsimile signature of, any
person who at the actual date of the preparation of such Warrant Certificate
shall be a proper officer of the Company to sign such Warrant Certificate
even though such person was not such an officer upon the date of this
Agreement.
3.3 COUNTERSIGNATURES. Warrant Certificates shall be manually
countersigned by the Warrant Agent and shall not be valid for any purpose
unless so countersigned. The Warrant Agent is hereby authorized to
countersign and deliver to, or in accordance with the instructions of, any
Warrant Holder any Warrant Certificate which is properly issued under the
terms of this Agreement.
3.4 MUTILATED, LOST, STOLEN, OR DESTROYED CERTIFICATE. In case the
certificate or certificates evidencing the Warrants shall be mutilated, lost,
stolen or destroyed, the Company shall, at the request of the Warrant Holder,
issue and deliver in exchange and substitution for and upon cancellation of
the mutilated certificate or certificates, or in lieu of and substitution for
the certificate or certificates lost, stolen or destroyed, a new Warrant
Certificate or Certificates of like tenor and representing an equivalent
right or interest, but only upon receipt of evidence satisfactory to the
Company of such loss, theft or destruction of such Warrant and a bond of
indemnity, if requested, also satisfactory in form and amount, at the
applicant's cost. Applicants for such substitute Warrant Certificate shall
also comply with such other reasonable regulations and pay such other
reasonable charges as the Company may prescribe.
3.5 EXCHANGE OF CERTIFICATE. Any Warrant Certificate may be
exchanged for another certificate or certificates entitling the Warrant
Holder to purchase a like aggregate number of Shares as the certificate or
certificates surrendered then entitled such Warrant Holder to purchase. Any
Warrant Holder desiring to exchange a Warrant Certificate shall make such
request in writing delivered to the Company, and shall surrender, properly
endorsed, with signatures guaranteed, the certificate evidencing the Warrant
to be so exchanged. Thereupon, the Company shall execute and deliver to the
person entitled thereto a new Warrant Certificate as so requested.
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SECTION 4 TERM OF WARRANTS; EXERCISE OF WARRANTS
4.1 EXERCISE OF WARRANT. Subject to the terms of this Agreement, the
Warrant Holder shall have the right, at any time during the Exercise Period, to
purchase from the Company up to the number of fully paid and nonassessable
Shares to which the Warrant Holder may at the time be entitled to purchase
pursuant to this Agreement, upon surrender to the Company, at its principal
office, of the certificate evidencing the Warrants to be exercised, together
with the purchase form on the reverse thereof, duly filled in and signed, and
upon payment to the Company of the Exercise Price for the number of Shares in
respect of which such Warrants are then exercised, but in no event for less than
100 Shares (unless fewer than an aggregate of 100 shares are then purchasable
under all outstanding Warrants held by a Warrant Holder).
4.2 PAYMENT OF EXERCISE PRICE. Payment of the aggregate Exercise Price
shall be made in cash or by check, or any combination thereof.
4.3 DELIVERY OF SHARE CERTIFICATE. Subject to the provisions of
Section 9, upon receipt of a Warrant Certificate with the exercise form thereon
duly executed, together with payment in full of the Exercise Price for the
Warrant Shares being purchased by such exercise, or upon exercise of the
Conversion Right described in Section 4.6, the Warrant Agent shall requisition
from the Company's transfer agent (which transfer agent may be the Warrant Agent
pursuant to its appointment therefor separately from this Agreement),
certificates for Warrant Shares and upon receipt shall make delivery of
certificates evidencing the total number of whole Warrant Shares for which
Warrants are then being exercised or converted, together with cash as provided
in Section 4.8 hereof in respect of any fractional Warrant Shares otherwise
issuable upon such surrender. The certificates shall be in such names and
denominations as are required for delivery to, or in accordance with the
instructions of the Warrant Holder; provided that if fewer than all Warrant
Shares issuable on exercise of a Warrant Certificate are purchased, the Warrant
Agent (if so requested) shall issue such balance Warrant Certificate for the
balance of the Warrant Shares. Such certificates for the Warrant Shares shall
be deemed to be issued, and the person to whom such Warrant Shares are issued of
record shall be deemed to have become a holder of record of such Warrant Shares,
as of the date of the surrender of such Warrant Certificate and payment of the
Exercise Price, whichever shall last occur; provided further that if the books
of the Company with respect to the Warrant Shares shall be closed as of such
date, the certificates for such Warrant Shares shall be deemed to be issued, and
the person to whom such Warrant Shares are issued of record shall be deemed to
have become a record holder of such Warrant Shares, as of the date on which such
books shall next be open (whether before, on or after the applicable Expiration
Date) but at the Exercise Price and upon the other conditions in effect upon the
date of surrender of the Warrant Certificate and payment of the Exercise Price,
whichever shall have last occurred, to the Warrant Agent.
4.4 CANCELLATION OF CERTIFICATES. All Warrant Certificates surrendered
upon exercise of Warrants shall be canceled.
4.5 DELIVERY OF PROCEEDS OF EXERCISE. Within two days after the
receipt thereof in cleared funds, the Warrant Agent shall deliver to the Company
all proceeds received from Warrant Holders on exercise of the Warrants.
4.6 REGISTRATION STATEMENT. If any Warrant Shares issuable upon the
exercise of Warrants require the maintenance of a current registration statement
under the Securities Act of 1933, as amended (the "Act"), with respect to such
Warrant Shares before such Warrant Shares may be validly and lawfully issued,
the Company will in good faith endeavor to maintain such current registration
statement under the Act, provided that in no event shall such Warrant Shares be
issued, and the Company shall have the authority to suspend the exercise of any
or all Warrants while such registration statement is not current. Similarly, a
Warrant Holder residing in a state where a required registration or governmental
approval of issuance of the Warrant Shares is not in effect as of or has not
been obtained within a reasonable time after the surrender date of the Warrant
Certificate for exercise shall not be entitled to exercise Warrants unless in
the opinion of counsel such registration or approval in such state shall not be
required, or the Company authorizes issuance. In such event, the Warrant Holder
shall be entitled to transfer the Warrants to others, but only prior to the
Expiration Date for the Warrants being transferred.
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4.7 FRACTIONAL SHARES. On exercise of the Warrants by the Warrant
Holders, the Company shall not be required to deliver fractions of shares of
Common Stock; provided, however, that the Company shall purchase such fraction
for an amount in cash equal to the Current Market Price of such fraction,
computed on the trading day immediately preceding the day upon which such
Warrant Certificate was surrendered for exercise. By accepting a Warrant
Certificate, the holder thereof expressly waives any right to receive a Warrant
Certificate evidencing any fraction of a Warrant or to receive any fractional
share of securities upon exercise of a Warrant, except as expressly provided in
this Section 4.7.
4.8 STATUS AS SHAREHOLDER. Upon receipt of the Warrant Certificate by
the Company as described in this Section, the Holder shall be deemed to be the
holder of record of the Warrant Shares issuable upon such exercise,
notwithstanding that the transfer books of the Company may then be closed or
that certificates representing such Warrant Shares may not have been prepared or
actually delivered to the holder.
SECTION 5 REDEMPTION
5.1 RIGHT TO REDEEM. The Company may, at its option, redeem the
Warrants in whole or in part on a pro rata basis for a redemption price of $.05
per Warrant (the "Redemption Price") on 45 days prior written notice to the
Warrant Holders. The right to redeem the Warrants may be exercised by the
Company only in the event (i) the closing bid price or closing sale price, as
the case may be, for the Common Stock has exceeded the Exercise Price by at
least 50% during a period of at least 20 of the 30 trading days immediately
preceding the date of mailing of the notice of redemption, (ii) the Company has
in effect a current registration statement (or a post-effective amendment to an
existing registration statement) with the Commission registering the Warrant
Shares, and (iii) the expiration of the 45 days notice period is within the
Exercise Period. In the event the Company exercises its right to redeem the
Warrants, the Expiration Date will be deemed to be, and the Warrants will be
exercisable until the close of business on, the date fixed for redemption in
such notice (the "Redemption Date"). If any Warrant called for redemption is
not exercised by such time, it will cease to be exercisable and the Warrant
Holder thereof will be entitled only to the Redemption Price.
5.2 TERMINATION OF RIGHTS. From and after the Redemption Date, all
rights of the holders of record of redeemed Warrants (except the right to
receive the Redemption Price) shall terminate, but only if (i) no later than one
day prior to the Redemption Date the Company shall have irrevocably deposited
with the Warrant Agent, as paying agent, a sufficient amount to pay on the
Redemption Date the Redemption Price for all Warrants called for redemption, and
(ii) the notice of redemption shall have stated the name and address of the
Warrant Agent and the intention of the company to deposit such amount with the
Warrant Agent no later than one day prior to the Redemption Date.
5.3 PAYMENT OF REDEMPTION PRICE. The Warrant Agent shall pay to the
holders of record of redeemed Warrants all amounts received by the Warrant Agent
for the redemption of warrants to which the holders of record of such redeemed
Warrants who shall have surrendered their Warrants are entitled. Any amounts
deposited by the Company with the Warrant Agent to pay the Redemption Price for
all Warrants called for redemption that are not required for redemption of
Warrants may be withdrawn by the Company. Any amounts deposited by the Company
with the Warrant Agent to pay the Redemption Price for all Warrants called for
redemption that shall be unclaimed six months after the Redemption Date may be
withdrawn by the Company, and thereafter the holders of the Warrants called for
redemption for which such funds were deposited shall look solely to the Company
for payment. The Company shall be entitled to the interest, if any, on funds
deposited with the Warrant Agent, and the Warrant Holders of redeemed Warrants
shall have no right to any such interest.
5.4 FAILURE TO MAKE DEPOSIT. If the Company fails to make a sufficient
deposit with the Warrant Agent as provided above, the Warrant Holder of any
Warrants called for redemption may at the option of the holder (i) by notice to
the Company declare the notice of redemption a nullity as to such holder, or
(ii) maintain an action against the Company for the Redemption Price. If the
Warrant Holder brings such an action, the Company will pay the reasonable
attorney's fees of the Warrant Holder. If the Warrant Holder fails to bring an
action against the Company for the Redemption Price within 60 days after the
Redemption Date, the Warrant Holder shall be deemed to have elected to
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declare the notice of redemption to be a nullity as to such holder and such
notice shall be without any force or effect as to such holder.
SECTION 6. RESERVATION OF WARRANT SHARES
There has been reserved, and the Company shall at all times keep reserved
so long as the Warrants remain outstanding, out of its authorized and unissued
Common Stock, such number of shares of Common Stock as shall be subject to
purchase under the Warrants. The Company covenants that all Warrant Shares that
may be issued and delivered to a Warrant Holder upon the exercise of a Warrant
and payment of the Exercise Price shall be validly issued, fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issuance thereof. Every transfer agent for the Common Stock and other securities
of the Company issuable upon the exercise of the Warrants will be irrevocably
authorized and directed at all times to reserve such number of authorized shares
and other securities as shall be requisite for such purpose. The Company will
keep a copy of this Agreement on file with every transfer agent for the Common
Stock and other securities of the Company issuable upon the exercise of the
Warrants. The Company will supply every such transfer agent with duly executed
stock and other certificates, as appropriate, for such purpose and will provide
or otherwise make available any cash which may be payable as provided in
Sections 4.7 and 7 hereof.
SECTION 7 PAYMENT OF TAXES
The Company will pay all documentary stamp taxes, if any, attributable to
the initial issuance of the Warrants or the Warrant Shares and any tax (except
federal or state income tax) which may be payable in respect of any transfer of
the Warrants or the Warrant Shares.
SECTION 8 WARRANT SHARES TO BE FULLY PAID
The Company covenants that all Warrant Shares that may be issued and
delivered to a Holder of this Warrant upon the exercise of this Warrant and
payment of the Exercise Price, will be upon such delivery, validly and duly
issued, fully paid and nonassessable.
SECTION 9 REGISTRATION OF TRANSFER
9.1. EXCHANGE OF CERTIFICATE. A Warrant Certificate may be exchanged
for another certificate or certificates entitling the Warrant Holder to purchase
a like aggregate number of Warrant Shares as the certificate or certificates
surrendered then entitled such Warrant Holder to purchase. Any Warrant Holder
desiring to exchange a Warrant Certificate shall make such request in writing
delivered to the Company, and shall surrender, properly endorsed, with
signatures guaranteed, the certificate evidencing the Warrant to be so
exchanged. Thereupon, the Company shall execute and deliver to the person
entitled thereto a new Warrant Certificate as so requested.
9.2 TRANSFER. The Warrants may be transferred in whole or in part.
Warrant Certificates representing the Warrants to be transferred shall be
surrendered to the Warrant Agent, properly endorsed, with signatures guaranteed.
Thereupon, the Company shall execute and deliver to the persons entitled thereto
the Warrant Certificate or Certificates to which the holder making the transfer
and the person to whom the transfer is made are entitled and the Warrant Agent
shall promptly cancel the surrendered Warrant Certificate.
9.3 OWNERSHIP RECORDS. The Warrant Agent shall keep books for
registration of ownership and transfer of Warrant Certificates. Such books
shall show the names and addresses of the respective holders of the Warrant
Certificates and the number of Warrants evidenced by each such Warrant
Certificate. All Warrant Certificates presented for registration of transfer
shall be duly endorsed or be accompanied by a written instrument or instruments
of transfer in form satisfactory to the Company and the Warrant Agent. On due
presentment for registration of transfer of any Warrant Certificate at such
office, the Company shall caused to be executed, issued and delivered to the
transferee or transferees a new Warrant Certificate or Certificates representing
an equal aggregate number of Warrants.
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9.4 OWNERSHIP PRIOR TO PRESENTMENT. Prior to due presentment for
registration of transfer thereof, the Company may treat the Warrant Holder as
the absolute owner thereof (notwithstanding any notations of ownership or
writing thereon made by anyone other than the Company) and the parties hereto
shall not be affected by any notice to the contrary.
SECTION 10 ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES
The number and kind of securities purchasable upon the exercise of the
Warrants and the Warrant Price shall be subject to adjustment from time to time
upon the happening of certain events, as follows:
10.1 ADJUSTMENTS. The number of Warrant Shares purchasable upon the
exercise of the Warrants shall be subject to adjustments as follows:
(a) In case the Company shall (i) pay a dividend in Common Stock
or securities convertible into Common Stock or make a distribution to its
stockholders in Common Stock or securities convertible into Common Stock; (ii)
subdivide its outstanding Common Stock; (iii) combine its outstanding Common
Stock into a smaller number of shares of Common Stock; or (iv) issue by
reclassification of its Common Stock other securities of the Company; then the
number of Warrant Shares purchasable upon exercise of the Warrants immediately
prior thereto shall be adjusted so that the Warrant Holder shall be entitled to
receive the kind and number of Warrant Shares or other securities of the Company
which it would have owned or would have been entitled to receive immediately
after the happening of any of the events described above, had such Warrants been
exercised immediately prior to the happening of such event or any record date
with respect thereto. Any adjustment made pursuant to this subsection 10.1(a)
shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(b) If, prior to the expiration of the Warrants by exercise, by
their terms, or by redemption, the Company shall be recapitalized by
reclassifying its outstanding shares of Common Stock into shares with a
different par value, or by changing its outstanding shares of Common Stock into
shares without par value or in the event of any other material change of the
capital structure of the Company or of any successor corporation by reason of
any reclassification, recapitalization or conveyance, prompt, proportionate,
equitable, lawful and adequate provision shall be made whereby any Warrant
Holder shall thereafter have the right to purchase, on the basis and the terms
and conditions specified in this Agreement, in lieu of the Warrant Shares
theretofore purchasable on the exercise of any Warrant, such securities or
assets as may be issued or payable with respect to or in exchange for the number
of Warrant Shares theretofore purchasable on exercise of the Warrants had such
reclassification, recapitalization or conveyance not taken place; and in any
such event, the rights of any Warrant Holder to any adjustment in the number of
Warrant Shares purchasable on exercise of such Warrant, as set forth above,
shall continue to be preserved in respect of any stock, securities or assets
which the Warrant Holder becomes entitled to purchase.
(c) In case the Company shall issue rights, options, warrants, or
convertible securities to all or substantially all holders of its Common Stock,
without any charge to such holders, entitling them to subscribe for or purchase
Common Stock at a price per share which is lower at the record date mentioned
below than the then Current Market Price, the number of Shares thereafter
purchasable upon the exercise of each Option shall be determined by multiplying
the number of Shares theretofore purchasable upon exercise of the Options by a
fraction, of which the numerator shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such rights, options, warrants
or convertible securities plus the number of additional shares of Common Stock
offered for subscription or purchase, and of which the denominator shall be the
number of shares of Common Stock outstanding immediately prior to the issuance
of such rights, options, warrants, or convertible securities plus the number of
shares which the aggregate offering price of the total number of shares offered
would purchase at such Current Market Price. Such adjustment shall be made
whenever such rights, options, warrants, or convertible securities are issued,
and shall become effective immediately and retroactively to the record date for
the determination of shareholders entitled to receive such rights, options,
warrants, or convertible securities.
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(d) In case the Company shall distribute to all or substantially
all holders of its Common Stock evidences of its indebtedness or assets
(excluding cash dividends or distributions out of earnings) or rights, options,
warrants, or convertible securities containing the right to subscribe for or
purchase Common Stock (excluding those referred to in subsection 10.1(b) above),
then in each case the number of Warrant Shares thereafter purchasable upon the
exercise of the Warrants shall be determined by multiplying the number of
Warrant Shares theretofor purchasable upon exercise of the Warrants by a
fraction, of which the numerator shall be the then Current Market Price on the
date of such distribution, and of which the denominator shall be such Current
Market Price on such date minus the then fair value (determined as provided in
subsection 10.1(g)(y) below) of the portion of the assets or evidences of
indebtedness so distributed or of such subscription rights, options, warrants,
or convertible securities applicable to one share. Such adjustment shall be
made whenever any such distribution is made and shall become effective on the
date of distribution retroactive to the record date for the determination of
stockholders entitled to receive such distribution.
(e) No adjustment in the number of Warrant Shares purchasable
pursuant to the Warrants shall be required unless such adjustment would require
an increase or decrease of at least one percent in the number of Warrant Shares
then purchasable upon the exercise of the Warrants or, if the Warrants are not
then exercisable, the number of Warrant Shares purchasable upon the exercise of
the Warrants on the first date thereafter that the Warrants become exercisable;
provided, however, that any adjustments which by reason of this subsection
10.1(e) are not required to be made immediately shall be carried forward and
taken into account in any subsequent adjustment.
(f) Whenever the number of Warrant Shares purchasable upon the
exercise of the Warrant is adjusted, as herein provided, the Exercise Price
payable upon exercise of the Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Warrant Shares purchasable upon the exercise of
the Warrant immediately prior to such adjustment, and of which the denominator
shall be the number of Warrant Shares so purchasable immediately thereafter.
(g) For the purpose of this subsection 10.1, the term "Common
Stock" shall mean (i) the class of stock designated as the Common Stock of the
Company at the date of this Agreement, or (ii) any other class of stock
resulting from successive changes or reclassifications of such Common Stock
consisting solely of changes in par value, or from par value to no par value, or
from no par value to par value. In the event that at any time, as a result of
an adjustment made pursuant to this Section 10, the Warrant Holder shall become
entitled to purchase any securities of the Company other than Common Stock, (y)
if the Warrant Holder's right to purchase is on any other basis than that
available to all holders of the Company's Common Stock, the Company shall obtain
an opinion of an independent investment banking firm valuing such other
securities; and (z) thereafter the number of such other securities so
purchasable upon exercise of the Warrants shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Warrant Shares contained in this Section 10.
(h) Upon the expiration of any rights, options, warrants, or
conversion privileges, if such shall have not been exercised, the number of
Warrant Shares purchasable upon exercise of the Warrants, to the extent the
Warrants have not then been exercised, shall, upon such expiration, be
readjusted and shall thereafter be such as they would have been had they been
originally adjusted (or had the original adjustment not been required, as the
case may be) on the basis of (i) the fact that the only shares of Common Stock
so issued were the shares of Common Stock, if any, actually issued or sold upon
the exercise of such rights, options, warrants, or conversion privileges, and
(ii) the fact that such shares of Common Stock, if any, were issued or sold for
the consideration actually received by the Company upon such exercise plus the
consideration, if any, actually received by the Company for the issuance, sale
or grant of all such rights, options, warrants, or conversion privileges whether
or not exercised; provided, however, that no such readjustment shall have the
effect of decreasing the number of Warrant Shares purchasable upon exercise of
the Warrants by an amount in excess of the amount of the adjustment initially
made in respect of the issuance, sale, or grant of such rights, options,
warrants, or conversion rights.
10.2 NO ADJUSTMENT FOR DIVIDENDS. Except as provided in subsection
10.1, no adjustment in respect of any dividends or distributions out of earnings
shall be made during the term of the Warrants or upon the exercise of the
Warrants.
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10.3 NO ADJUSTMENT IN CERTAIN CASES. No adjustments shall be made
pursuant to Section 4 hereof in connection with the issuance of the Common Stock
sold as part of the Public Offering sale or the issuance of Warrant Shares upon
exercise of the Warrants. No adjustments shall be made pursuant to Section 10
hereof in connection with the grant or exercise of presently authorized or
outstanding options to purchase, or the issuance of shares, of Common Stock
under the Company's director or employee benefit plans disclosed in the
Registration Statement relating to the Public Offering.
10.4 PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION,
CONSOLIDATION, ETC. In case of any consolidation of the Company with or
merger of the Company into another corporation, or in case of any sale or
conveyance to another corporation of the property, assets, or business of the
Company as an entirety or substantially as an entirety, the Company or such
successor or purchasing corporation, as the case may be, shall execute an
agreement that the Warrant Holder shall have the right thereafter upon payment
of the Exercise Price in effect immediately prior to such action to purchase,
upon exercise of the Warrants, the kind and amount of shares and other
securities and property which it would have owned or have been entitled to
receive after the happening of such consolidation, merger, sale, or conveyance
had the Warrants been exercised immediately prior to such action. In the event
of a merger described in Section 368(a)(2)(E) of the Internal Revenue Code of
1986, in which the Company is the surviving corporation, the right to purchase
Warrant Shares under the Warrants shall terminate on the date of such merger and
thereupon the Warrants shall become null and void, but only if the controlling
corporation shall agree to substitute for the Warrants, its Warrants which
entitle the holder thereof to purchase upon their exercise the kind and amount
of shares and other securities and property which it would have owned or been
entitled to receive had the Warrants been exercised immediately prior to such
merger. Any such agreements referred to in this subsection 10.4 shall provide
for adjustments, which shall be as nearly equivalent as may be practicable to
the adjustments provided for in Section 10 hereof. The provisions of this
subsection 10.4 shall similarly apply to successive consolidations, mergers,
sales, or conveyances.
10.5 PAR VALUE OF SHARES OF COMMON STOCK. Before taking any action
which would cause an adjustment effectively reducing the portion of the Exercise
Price allocable to each Warrant Share below the par value per share of the
Common Stock issuable upon exercise of the Warrants, the Company will take any
corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and nonassessable
Common Stock upon exercise of the Warrants.
10.6 INDEPENDENT PUBLIC ACCOUNTANTs. The Company may retain a firm of
independent public accountants of recognized national standing (which may be any
such firm regularly employed by the Company) to make any computation required
under this Section 10, and a certificate signed by such firm shall be conclusive
evidence of the correctness of any computation made under this Section 10.
10.7 STATEMENT ON WARRANT CERTIFICATES. Irrespective of any adjustments
in the number of securities issuable upon exercise of the Warrants, Warrant
Certificates theretofore or thereafter issued may continue to express the same
number of securities as are stated in the similar Warrant Certificates initially
issuable pursuant to this Agreement. However, the Company may, at any time in
its sole discretion (which shall be conclusive), make any change in the form of
Warrant Certificate that it may deem appropriate and that does not affect the
substance thereof; and any Warrant Certificate thereafter issued, whether upon
registration of transfer of, or in exchange or substitution for, an outstanding
Warrant Certificate, may be in the form so changed.
10.8 TREASURY STOCK. For purposes of this Section 10, shares of Common
Stock owned or held at any relevant time by, or for the account of, the Company,
in its treasury or otherwise, shall not be deemed to be outstanding for purposes
of the calculations and adjustments described.
10.9 OFFICERS' CERTIFICATE. Whenever the Exercise Price or that
aggregate number of Warrant Shares purchasable pursuant to this Warrant shall be
adjusted as required by the provisions of this Section 10, the Company shall
promptly file with the Warrant Agent an officers' certificate executed by the
Company's President and Secretary or Assistant Secretary, describing the
adjustment and setting forth, in reasonable detail, the facts requiring such
adjustment
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and the basis for and calculation of such adjustment in accordance with the
provisions of this Warrant Agreement. Each such officers' certificate shall
be made available to the Holders for inspection at all reasonable times, and
the Company, after each such adjustment, shall promptly deliver a copy of the
officers' certificate relating to that adjustment to the Holders. If the
officers' certificate is not accompanied by the Certificate described in
Section 10.6, the officers' certificate described in this Section 10.9 shall
be deemed to be conclusive as to the correctness of the adjustment reflected
therein if, and only if, no Holder delivers written notice to the Company of
an objection to the adjustment within 30 days after the officers' certificate
is delivered to the Holders. The Company will make its books and records
available for inspection and copying during normal business hours by the
Holder so as to permit a determination as to the correctness of the
adjustment. If written notice of an objection is delivered by a Holder to
the Company and the parties cannot reconcile the dispute, the Holder and the
Company shall submit the dispute to arbitration pursuant to the provisions of
Section 19 below. Failure to prepare or provide the officers' certificates
shall not modify the parties' rights hereunder.
SECTION 11 MERGER OR CONSOLIDATION OF THE COMPANY
The Company will not merge or consolidate with or into any other
corporation or sell all or substantially all of its property to another
corporation, unless the provisions of Section 10.4 are complied with.
SECTION 12 MODIFICATION OF AGREEMENT
The Company may by supplemental agreement make any changes or
corrections in this Agreement it shall deem appropriate to cure any ambiguity
or to correct any defective or inconsistent provision or mistake or error
herein contained. Additionally, the Company may make any changes or
corrections deemed necessary which shall not adversely affect the interests
of the Warrant Holders, including lowering the exercise price or extending
the Exercise Period of the Warrants; provided, however, this Agreement shall
not otherwise be modified, supplemented or altered in any respect except with
the consent in writing of the Warrant Holders who hold not less than a
majority of the Warrants then outstanding and provided further that no such
amendment shall accelerate the Warrant Expiration Date or increase the
Exercise Price without the approval of all the holders of all outstanding
Warrants.
SECTION 13 NOTICES TO WARRANT HOLDERS
If, prior to the expiration of this Warrant either by its terms or by
its exercise in full, any of the following shall occur:
(i) the Company shall declare a dividend on its Common Stock or
authorize any other distribution on its Common Stock; or
(ii) the Company shall authorize the granting to the
stockholders of its Common Stock of rights to subscribe for or purchase any
securities or any other similar rights; or
(iii) any reclassification, reorganization or similar change of
the Common Stock, or any consolidation or merger to which the Company is a
party, or the sale, lease, or exchange of any significant portion of the
assets of the Company; or
(iv) the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(v) any purchase, retirement or redemption by the Company of
its Common Stock;
then, and in any such case, the Company shall deliver to the Holder or
Holders written notice thereof at least 30 days prior to the earliest
applicable date specified below with respect to which notice is to be given,
which notice shall state the following:
(a) the purpose for which a record of stockholders is to be
taken;
12
<PAGE>
(b) the number, amount, price, and nature of the shares of
Common Stock or other stock, securities, or assets which will be deliverable
on Warrant Shares following exercise of the Warrants if such exercise occurs
prior to the record date for such action;
(c) the date on which a record is to be taken for the purpose
of such dividend, distribution or rights, or, if a record is not to be taken,
the date as of which the stockholders of Common Stock of record to be
entitled to such dividend, distribution or rights are to be determined;
(d) the date on which such reclassification, reorganization,
consolidation, merger, sale, transfer, dissolution, liquidation, winding up
or purchase, retirement or redemption is expected to become effective, and
the date, if any, as of which the Company's stockholders of Common Stock of
record shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reclassification, reorganization,
consolidation, merger, sale, transfer, dissolution, liquidation, winding up,
purchase, retirement or redemption; and
(e) if any matters referred to in the foregoing clauses (x) and
(y) are to be voted upon by stockholders of Common Stock, the date as of
which those stockholders to be entitled to vote are to be determined.
SECTION 14 NO RIGHTS AS SHAREHOLDER
Nothing contained in this Agreement or in the Warrants shall be
construed as conferring upon the Warrant Holder or its transferees any rights
as a stockholder of the Company, including the right to vote, receive
dividends, consent or receive notices as a stockholder in respect to any
meeting of stockholders for the election of directors of the Company or any
other matter. The Company covenants, however, that for so long as this
Warrant is at least partially unexercised, it will furnish any Holder of this
Warrant with copies of all reports and communications furnished to the
stockholders of the Company.
SECTION 15 WARRANT AGENT
15.1. APPOINTMENT. The Company hereby appoints the Warrant Agent to
act as the agent of the Company in accordance with this Agreement and Warrant
Agent hereby accepts such appointment.
15.2 DUTIES. The Warrant Agent undertakes the duties and obligations
imposed by this Agreement upon the following terms and conditions by all of
which the Company and every Warrant Holder by acceptance of any Warrant
Certificates, shall be bound:
(i) The statements contained in this Agreement and in the
Warrant Certificates shall be taken as statements of the Company and the
Warrant Agent assumes no responsibility for the correctness of any of the
same except such as described by the Warrant Agent or action taken or to be
taken by it.
(ii) The Warrant Agent shall not be responsible for any failure
of the Company to comply with any of the Company's covenants contained in
this Agreement or in the Warrant Certificates.
(iii) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any Warrant
Holder in respect to any action taken, suffered or omitted by it hereunder in
good faith and in accordance with the opinion or the advice of such counsel,
provided the Warrant Agent shall have exercised reasonable care in the
selection and continued employment of such counsel.
(iv) The Warrant Agent shall incur no liability or
responsibility to the Company or to any Warrant Holder for any action taken
in reliance on any notice, resolution, waiver, consent, order, certificate,
or other paper,
13
<PAGE>
document or instrument believed by it to be genuine and to have been signed,
sent or presented by the property party or parties.
(v) The Company agrees to pay to the Warrant Agent the Warrant
Agent's standard published rates in effect on the date of this Agreement, as
the same may be changed from time to time upon thirty (30) days prior written
notice from the Warrant Agent to the Company, for all services rendered by
the Warrant Agent in the execution of this Agreement; to reimburse the
Warrant Agent for all expenses, taxes and governmental charges and other
charges of any kind and nature incurred by the Warrant Agent in the execution
of this Agreement; and to indemnify the Warrant Agent and save it harmless
against any and all liabilities, including judgments, costs and counsel fees,
for anything done or omitted by the Warrant Agent in the execution of this
Agreement except as a result of the Warrant Agent's negligence or bad faith.
(vi) The Warrant Agent shall be under no obligation to institute
any action, suit or legal proceeding or to take any other action likely to
involve expense unless the Company or one or more Warrant Holders shall
furnish the Warrant Agent with reasonable security and indemnity for any
costs and expenses which may be incurred, but this provision shall not affect
the power of the Warrant Agent to take such action as the Warrant Agent may
consider proper, whether with or without any such security or indemnity. All
rights of action under this Agreement or under any of the Warrants may be
enforced by the Warrant Agent without the possession of any of the Warrant
Certificates or the production thereof at any trial or other proceeding
relative thereto, and any such action, suit or proceedings instituted by the
Warrant Agent shall be brought in its name as Warrant Agent, and any recovery
or judgment shall be for the ratable benefit of the Warrant Holders as their
respective rights or interests may appear.
(vii) The Warrant Agent and any stockholder, director, officer
or employee of the Warrant Agent may buy, sell or deal in any of the Warrants
or other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were
not Warrant Agent under this Agreement. Nothing herein shall preclude the
Warrant Agent from acting in any other capacity for the Company or for any
other legal entity.
(viii) The Warrant Agent shall act hereunder solely as agent for
the Company, and its duties shall be determined solely by the provisions
hereof and those provisions of the Act, the Securities Exchange Act of 1934,
as amended, and those Rules and Regulations of the Commission applicable to
the duties of the Warrant Agent hereunder.
SECTION 16 MERGER, CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT
16.1. SUCCESSOR. Any corporation into which the Warrant Agent may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Warrant
Agent shall be a party, or any corporation succeeding to the corporate trust
business of the Warrant Agent, shall be the successor to the Warrant Agent
hereunder without the execution or filing of any paper or any further act on
the part of the parties hereto, provided that such corporation would be
eligible for appointment as a successor Warrant Agent under the provisions of
Section 17 of this Agreement. In case at the time such successor to the
Warrant Agent shall succeed to the agency created by this Agreement, and in
case at that time any of the Warrant Certificates shall have been
countersigned but not delivered, any such successor to the Warrant Agent may
adopt the countersignature of the original Warrant Agent; and in case at the
time any of the Warrant Certificates shall not have been countersigned, any
successor to the Warrant Agent may countersign such Warrant Certificates
either in the name of the predecessor Warrant Agent or in the name of the
successor Warrant Agent; and in all such cases such Warrant Certificates
shall have the full force provided in the Warrant Certificates and in this
Agreement.
16.2. CHANGE OF NAME. In case at any time the name of the Warrant
Agent shall be changed and at such time any of the Warrant Certificates shall
have been countersigned but not delivered, the Warrant Agent may adopt the
countersignature under its prior name; and in case at that time any of the
Warrant Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its
changed
14
<PAGE>
name; and in all such cases such Warrant Certificates shall have the full
force provided in the Warrant Certificates and in this Agreement.
SECTION 17 CHANGE OF WARRANT AGENT
The Warrant Agent may resign and be discharged from its duties under
this Agreement by giving to the Company notice in writing, and by giving
notice in writing to each Warrant Holder at his address appearing in the
Warrant register, specifying a date when such resignation shall take effect,
which notice shall be sent at least 90 days prior to the date so specified.
If the Warrant Agent shall resign or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Warrant Agent. If the
Company shall fail to make such appointment within a period of 90 days after
it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Warrant Agent or by any Warrant Holder, then any
Warrant Holder may apply to any court of competent jurisdiction for the
appointment of a successor to the Warrant Agent. Pending appointment of a
successor to the Warrant Agent, either by the Company or by such court, the
duties of the Warrant Agent shall be carried out by the Company. Any
successor Warrant Agent, whether appointed by the Company or by such court,
shall be a transfer agent, bank or trust company, in good standing, organized
under the laws of one of the states of the United States of America or under
the laws of the United States of America. After appointment, the successor
Warrant Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Warrant Agent without
further act or deed and the former Warrant Agent shall deliver and transfer
to the successor Warrant Agent any property at the time held by it hereunder,
and execute and deliver any further assurance, conveyance, act or deed
necessary for the purpose. Failure to give any notice provided for in this
Section, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Warrant Agent or the
appointment of the successor Warrant Agent, as the case may be.
SECTION 18 NOTICES
18.1 THE COMPANY. All notices, demands, claims, elections, opinions,
requests or other communications hereunder (however characterized or
described) shall be in writing and shall be deemed duly given or made if (and
then two business days after) sent by registered or certified mail, return
receipt requested, postage prepaid and addressed to, in the case of the
Company as follows:
FirstLink Communications, Inc.
190 SW Harrison
Portland, Oregon 97201
Attention: President
18.2 THE WARRANT AGENT. All notices, demands, claims, elections,
opinions, requests or other communications hereunder (however characterized
or described) shall be in writing and shall be deemed duly given or made if
(and then two business days after) sent by registered or certified mail,
return receipt requested, postage prepaid and addressed to, in the case of
the Warrant Agent as follows:
American Securities Transfer & Trust, Inc.
1825 Lawrence Street, Suite 444
Denver, Colorado 80202-1817
18.3 THE WARRANT HOLDERS. Any distribution, notice or demand required
or authorized by this Agreement to be given or made by the Company or the
Warrant Agent to or on the Warrant Holders shall be sufficiently given or
made if sent by mail, first class, certified or registered, postage prepaid,
addressed to the Warrant Holders at their last known addresses as they shall
appear on the registration books for the Warrant Certificates maintained by
the Warrant Agent.
15
<PAGE>
18.4 EFFECTIVENESS OF NOTICE. The Company may send any notice,
demand, claim, election, opinion, request or communication hereunder to the
intended recipient at the address set forth above using any other means
(including personal delivery, expedited courier, messenger service, telecopy,
telex, ordinary mail or electronic mail), but no such notice, demand, claim,
election, opinion, request or other communication shall be deemed to have
been duly given or made unless and until it actually is received by the
intended recipient. The Company may change the address to which notices,
demands, claims, elections, opinions, requests and other communications
hereunder are to be delivered by giving the Warrant Holders notice in the
manner herein set forth.
SECTION 19 ARBITRATION
The Company and the Holder, and by receipt of a Warrant Certificate or
any Warrant Shares, all subsequent Holders or holders of Warrant Shares,
agree to submit all controversies, claims, disputes and matters of difference
with respect to this Agreement and the Warrant Certificates, including,
without limitation, the application of this Section 19, to arbitration in
Portland, Oregon, according to the rules and practices of the American
Arbitration Association from time to time in force; provided, however, that
if such rules and practices conflict with the applicable procedures of Oregon
courts of general jurisdiction or any other provisions of Oregon law then in
force, those Oregon rules and provisions shall govern. This agreement to
arbitrate shall be specifically enforceable. Arbitration may proceed in the
absence of any party if notice of the proceeding has been given to that
party. The parties agree to abide by all awards rendered in any such
proceeding. These awards shall be final and binding on all parties to the
extent and in the manner provided by the rules of civil procedure enacted in
Colorado. All awards may be filed, as a basis of judgment and of the
issuance of execution for its collection, with the clerk of one or more
courts, state or federal, having jurisdiction over either the party against
whom that award is rendered or its property. No party shall be considered in
default hereunder during the pendency of arbitration proceedings relating to
that default.
SECTION 20 MISCELLANEOUS PROVISIONS
20.1 PERSONS BENEFITING. This Agreement shall be binding upon and
inure to the benefit of the Company, the Warrant Agent and their respective
successors and assigns and the Warrant Holders. By his acceptance of a
Warrant Certificate, the Holder accepts and agrees to comply with all of the
terms and provisions hereof. Nothing in this Agreement is intended or shall
be construed to confer on any other person any right, remedy or claim or to
impose on any other person any duty, liability or obligation.
20.2 SEVERABILITY. If any term contained herein shall be held,
declared or pronounced void, voidable, invalid, unenforceable or inoperative
for any reason by any court of competent jurisdiction, government authority
or otherwise, such holding, declaration or pronouncement shall not affect
adversely any other term, which shall otherwise remain in full force and
effect, and the effect of such holding, declaration or pronouncement shall be
limited to the territory or jurisdiction in which made.
20.3 TERMINATION. This Agreement shall terminate as of the close of
business on the Expiration Date, or such earlier date upon which all Warrants
shall have been exercised or redeemed; except that the exercise of a Warrant
in full or the Expiration Date shall not terminate the provisions of this
Agreement as it relates to holders of Warrant Securities.
20.4 GOVERNING LAW. These terms and each Warrant Certificate issued
hereunder shall be deemed to be a contract under the laws of the State of
Oregon and for all purposes shall be construed in accordance with the laws of
said state without giving effect to conflicts of laws provisions of such
state.
20.5 AGREEMENT AVAILABLE TO WARRANT HOLDERS. A copy of these terms
shall be available at all reasonable times at the office of the Warrant Agent
for inspection by any Warrant Holder. As a condition of such inspection, the
Company may require any Warrant Holder to submit a Warrant Certificate held
of record for inspection.
16
<PAGE>
20.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of such counterparts shall for all purposes be deemed to
be an original and all such counterparts shall together constitute but one
and the same instrument.
20.7 FAILURE TO PERFORM. If the Company fails to perform any of its
obligations hereunder, it shall be liable to the Warrant Holder for all
damages, costs and expenses resulting from the failure, including, but not
limited to, all reasonable attorney's fees and disbursements.
20.8 PARAGRAPH HEADINGS. Paragraph headings used in this Warrant
are for convenience only and shall not be taken or construed to define or
limit any of the terms or provisions of this Warrant. Unless otherwise
provided, or unless the context shall otherwise require, the use of the
singular shall include the plural and the use of any gender shall include all
genders.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first written above.
FIRSTLINK COMMUNICATIONS, INC.
By: _________________________________________
Name:_________________________________________
Title: ____________________________________
Attest:
______________________________
Secretary
AMERICAN SECURITIES TRANSFER & TRUST, INC.
By: _________________________________________
Name: ______________________________________
Title: ____________________________________
Attest:
____________________________________
Secretary
17
<PAGE>
Exhibit No. 4.3 Form of Mandatory Sale and Lock Up Agreement with certain
Securityholders.
<PAGE>
Exhibit 4.3
, 1998
-----------------
Kashner Davidson Securities Corporation
77 Palm Avenue
Sarasota, Florida 34236
RE: FIRSTLINK COMMUNICATIONS, INC.
AGREEMENT NOT TO SELL
Ladies and Gentlemen:
Reference is made to a proposed public offering of 1,000,000 Shares of
Common Stock and 1,000,000 Warrants (collectively, the "Securities") of
FirstLink Communications, Inc. (the "Company") pursuant to a Registration
Statement and prospectus included therein (the "Registration Statement" and the
"Prospectus") to be filed with the Securities and Exchange Commission and to be
underwritten by Kashner Davidson Securities Corporation as representative of the
several underwriters to be named in an underwriting agreement (the
"Representative").
In consideration of the offer and sale of the Securities by the Company
and the underwriters and of other valuable consideration, the receipt of
which is hereby acknowledged, the undersigned agrees not to offer, sell,
contract to sell, pledge, hypothecate, grant any option to purchase or
otherwise dispose of (the "Resale Restrictions") any shares of common stock
of the Company or any securities convertible into or exchangeable for common
stock of the Company beneficially owned or otherwise held by the undersigned
as of the date of this letter or acquired on or prior to the date of
effectiveness of the Registration Statement or issuable upon exercise of
options or warrants held by the undersigned on such dates (collectively, the
"Shares") for the period specified hereafter without the prior written
consent of the Representative. Such restrictions shall apply to the total
number of Shares for a period of ((LockupPeriod)) after the date of the Final
Prospectus (the "Restriction Period").
As a reasonable means of ensuring compliance with the terms of this
Agreement, the undersigned further agrees that the Company may instruct the
transfer agent for the Shares to place a transfer restriction on such transfer
agent's records.
Notwithstanding the foregoing, if the undersigned is an individual, he or
she may transfer any or all of the Shares either during his or her lifetime or
on death by will or intestacy to his or her immediate family or to a trust, the
beneficiaries of which are exclusively the undersigned and/or a member or
members of his or her immediate family; provided, however, that in any such case
it shall be a condition to the transfer that the transferee execute an agreement
stating that the transferee is receiving and holding the Shares subject to the
provisions of this Agreement, and there shall be no further transfer of such
Shares except in accordance with this Agreement. For purposes of this
paragraph, "immediate family" shall mean spouse, lineal descendant, father,
mother, brother or sister of the transferor.
In addition, notwithstanding the foregoing, if the undersigned is a
partnership, the partnership may transfer any Shares to a partner of such
partnership or a retired partner of such partnership who retires after the
date hereof, or to the estate of any such partner or retired partner, and any
partner who is an individual may transfer Shares by gift, will or intestate
succession to his or her immediate family (as defined above) or ancestors;
and if the undersigned is a corporation, the corporation may transfer Shares
to any shareholder of such corporation and any shareholder who is an
individual may transfer Shares by gift, will or intestate succession to his
or her immediate family (as defined above) or ancestors; provided, however,
that in any such case, it shall be a condition to the transfer that the
transferee execute an agreement stating that the transferee is receiving and
holding the Shares subject to the provisions of this Agreement, and there
shall be no further transfer of such Shares except in accordance with this
Agreement.
<PAGE>
This agreement shall be enforceable by the Company and the Representative,
or either of them, and shall bind and inure to the benefit of their respective
successors, personal representatives, heirs, and assigns.
Very truly yours,
By:
- ------------------------------------ ---------------------------------
Shares of common stock subject Signature
to this Agreement after closing of
public offering
---------------------------------
Printed name of person or entity
---------------------------------
Title if signing for an entity
<PAGE>
Exhibit No. 5.1 Opinion of Neuman Drennen & Stone, LLC.
<PAGE>
[NEUMAN DRENNEN & STONE, LLC LETTERHEAD]
March 27, 1998
FirstLink Communications, Inc.
190 SW Harrison
Portland, Oregon 97201
Ladies and Gentlemen:
We have acted as legal counsel for FirstLink Communications, Inc. (the
"Company") in connection with the Company's Registration Statement on Form SB-2
(the "Registration Statement") to be filed by the Company with the Securities
and Exchange Commission under the Securities Act of 1933, as amended, and the
Prospectus included as a part of the Registration Statement (the "Prospectus"),
relating to 1,000,000 shares (the "Shares") of Common Stock, no par value per
share (the "Common Stock") and 1,000,000 Common Stock Purchase Warrants (the
"Warrants") to be offered and sold by the Company in the manner set forth in the
Registration Statement and Prospectus.
In connection therewith, we have examined: (a) the Registration Statement and
the Prospectus included therein; (b) the Articles of Incorporation and Bylaws of
the Company; and (c) the relevant corporate proceedings of the Company. In
addition to such examination we have reviewed such other proceedings, documents,
and records and have ascertained or verified such additional facts as we deem
necessary or appropriate for purposes of this opinion.
Based upon the foregoing, we are of the opinion that:
1. The Company has been legally incorporated and is validly existing under the
laws of the State of Oregon.
2. The Shares and the Warrants, and shares of Common Stock into which Warrants
are exercisable, upon issuance and payment therefor, as contemplated by the
Registration Statement and Prospectus, will be validly issued, fully paid, and
nonassessable.
3. We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus. In giving this consent, we do not admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/s/ David H. Drennen
NEUMAN DRENNEN & STONE, LLC
<PAGE>
Exhibit No. 10.1 1997 Stock Option Plan.
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
1996 RESTATED COMBINED INCENTIVE STOCK OPTION ("ISO")
AND NONQUALIFIED STOCK OPTION ("NSO") PLAN
1. PURPOSE
The purpose of the FirstLink Communications, Inc. 1996 Restated
Incentive Stock Option and Nonqualified Stock Option Plan (the "Plan") is to
promote the growth and general prosperity of FirstLink Communications, Inc.,
an Oregon corporation (the "Company") and its subsidiary corporations by
permitting the Company to grant options to purchase shares of its common
stock (the "Common Stock") to key employee's and directors. The Plan is
designed to help attract and retain superior personnel for positions of
substantial responsibility With the Company and its subsidiary corporations,
and to provide key employees with an additional incentive to contribute to
the success of the company and those subsidiary corporations. The Company
intends that options granted pursuant to the provisions of the Plan as
incentive stock options ("ISO") will qualify as "incentive stock options"
Within the meaning of Section 421 through 424 of the Internal Revenue Code of
1986, as amended (the "Code"). Nonqualified stock options ("NSO") granted
under the Plan will not meet the requirements of Sections 421 through 424 of
the Code.
2. ADMINISTRATION
2.1 PLAN ADMINISTRATORS. This Plan shall be administered by the
Company's Board of Directors. The Board of Directors is hereafter referred
to as the "Plan Administrators." The Board may designate a committee to act
as the Plan Administrators. Actions of the Plan Administrators shall be
taken by majority vote or by unanimous written consent.
2.2 AUTHORITY OF PLAN ADMINISTRATORS. Subject to the provisions of
the Plan, and with a view to effecting its purpose, the Plan Administrators
shall have sole authority, in their absolute discretion:
Page 1 - 1996 STOCK OPTION PLAN
<PAGE>
2.2.1 to construe and interpret the Plan,
2.2.2 to define the terms used herein,
2.2.3 to prescribe, amend and rescind rules and regulations
relating to the Plan,
2.2.4 to determine the individuals to whom options to purchase
shares of Common stock shall be granted under the Plan,
2.2.5 to determine the time or times at which options shall be
granted under the Plan,
2.2.6 to determine the number of shares of Common Stock subject to
each option, the option price, and the duration of each
option granted under the Plan,
2.2.7 to determine all of the other terms and conditions of options
granted under the Plan, and
2.2.8 to make all other determinations necessary or advisable for
the administration of the Plan and do everything necessary or
appropriate to administer the Plan,
All decisions, determinations and interpretations made by the Plan
Administrators shall be final and conclusive on all participants in the Plan
and on their legal representatives, heirs and beneficiaries. The Plan
Administrators shall endeavor to ensure that ISO option agreements entered
into pursuant to the Plan meet all the requirements for incentive stock
options described in of the Code.
2.3 INDEMNIFICATION OF PLAN ADMINISTRATORS. In addition to such other
rights of Indemnification as they may have as directors or as
Page 2- 1996 STOCK OPTION PLAN
<PAGE>
officers of the Company, the Plan Administrators shall be indemnified by the
company against all reasonable expenses, including attorneys' fees actually
and necessarily incurred in connection with the defense of any action, suit
or proceeding, or in connection With any appeal therein, to which they or any
of them may be a party by reason of any action taken or failure to act under
or in connection with the Plan or any option thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is
approved by independent legal counsel selected by the Company) or paid by
them in satisfaction of a judgment in any such action, suit or proceeding,
except in relation to matters as to which it shall be adjudged in such
action, suit or proceeding that such Plan Administrator is liable for
negligence or misconduct in the performance of his duties; provided that
within sixty (60) days after institution of any such action, suit or
proceeding a Plan Administrator shall in writing offer the company the
opportunity, at its own expense, to handle and defend the same.
2.4 TERMS, CONDITIONS AND METHOD OF GRANT. The terms and conditions of
options granted under the Plan may differ from one another as the Plan
Administrators, In their absolute discretion, shall determine as long as all
options granted under the Plan satisfy the requirements of the Plan. No
employee who receives an option (the "optionee") shall have any rights with
respect to an option granted under the Plan unless the optionee shall have
executed and delivered to the Plan Administrators an option agreement. The
option agreement shall be in the form and shall contain such provisions
consistent with the Plan as the Plan Administrators, acting with the benefit
of legal counsel, shall deem advisable. The date of the option agreement
shall be the date of granting the option to the optionee for all purposes of
the Plan. No option under
Page 3 - 1996 STOCK OPTION PLAN
<PAGE>
the Plan shall be granted the exercise of which shall be conditioned upon the
exercise of any other option under the Plan or any other plan.
3. NUMBER OF SHARES SUBJECT TO PLAN
Subject to the provisions of Section 13, the maximum aggregate number of
shares that may be optioned and sold under the Plan is 800,000 shares of
authorized and unissued Common Stock. If any of the options granted under
the Plan expire or terminate for any reason before they have been exercised
in full, the unpurchased stock subject to those expired or terminated options
shall again be available for the purposes of the Plan. The Plan
Administrators may designate any option granted under the Plan as ISO or NSO.
4. ELIGIBILITY AND PARTICIPATION
Only key management, full-time employees or directors of the company or
its subsidiaries shall be eligible for selection by the Plan Administrators
to participate in the Plan. As used herein, the term "full-time employee"
shall mean any person employed by the Company or its subsidiaries, in return
for salary, wages or other compensation, whose employment shall be regular as
opposed to a part time or job basis.
5. PLAN DETAILS
5.1 EFFECTIVE DATE. The Plan shall become effective upon its
adoption by the Board of Directors of the company, subject to approval of the
Plan by the shareholders of the Company, as provided in Section 15. The Plan
shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 14.
5.2 DURATION OF OPTIONS. Each option and all rights thereunder
granted pursuant to the terms of the Plan shall expire on the date
Page 4-1996 STOCK OPTION PLAN
<PAGE>
determined by the Plan Administrators, but in no event shall any option
granted under the Plan expire later than ten (10) years from the date on
which the option is granted. In addition, each option shall be subject to
early termination as provided in the Plan.
5.3 EXERCISE PRICE. The purchase price for shares of Common Stock
acquired pursuant to the exercise (in whole or in part) of any option shall
be not less than the fair market value of the stock at the time of the grant
of the option. Fair market value shall be determined by the Plan
Administrators on the basis of those factors they deem appropriate; provided
that the Plan Administrators shall make a good faith effort to determine such
fair market value in selecting such factors.
6. EXERCISE
6.1 EXERCISE OF OPTIONS. Each option shall be exercisable in one or
more installments during its term, and the right to exercise may be
cumulative as determined by the Plan Administrators. No option may be
exercised for a fraction of a share of Common Stock or other than on a
business day of the Company. The full purchase price of any shares purchased
shall be paid at the time of exercise of the option by a combination of cash,
certified or cashier's check payable to the order of the Company, or shares
of Common Stock. If any portion of the purchase price is paid in shares of
Common Stock, those shares shall be tendered at their then fair market value,
as determined by the Plan Administrators in accordance with Section 5.3 of
the Plan. No option may be exercised on a date later than ten (10) years
from the date it is granted. For persons who own ten (10) percent of the
voting power or value of all classes of the Company, the maximum exercised
period is five (5) years for ISO options.
6.2 WRITTEN NOTICE REQUIRED. Any option granted pursuant to the
terms of the Plan shall be considered exercised when written notice of
Page 5-1996 STOCK OPTION PLAN
<PAGE>
that exercise, together with the investment representations described in
Section 7, if any, have been given to the Company at its principal office by
the person entitled to exercise the option and full payment for the shares
with respect to which the option is exercised has been received by the
Company. Upon receipt thereof, and in connection with the transfer of Common
Stock, the Company shall provide optionee with a written statement containing
the information required by Section 6039(a) of the Code.
7. COMPLIANCE WITH STATE AND FEDERAL LAWS
Shares of Common Stock shall not be issued with respect to any option
granted under the Plan unless the exercise of that option and the issuance
and delivery of the Common Stock pursuant to that exercise shall comply with
all relevant provisions of state and Federal laws, rules and regulations, and
the requirements of any stock exchange upon which the Common Stock may then
be listed, and shall be further subject to the approval of counsel for the
Company with respect to that compliance. If any law or any regulation of the
Securities Exchange Commission, or of any other Federal or State body having
jurisdiction shall require the Company or the optionee to take any action in
connection with the shares specified in the optionee's notice, then the date
for the delivery of the shares shall be adjourned until the completion of the
necessary action. The Plan Administrators shall also require (to the extent
required by applicable laws, rules and regulations) an optionee to furnish
evidence satisfactory to the Company (including a written and signed
representation letter and a consent to be bound by any transfer restrictions
imposed by law, legend condition, or
Page 6-1996 STOCK OPTION PLAN
<PAGE>
otherwise) that the Common Stock is being purchased only for investment and
without any present intention to sell or distribute the Common Stock in
violation of any law, rule or regulation. Further, each optionee shall
consent to the imposition of a legend on the shares of Common Stock subject
to this option restricting their transferability as may be required by
applicable laws, rules and regulations.
8. EMPLOYMENT OF OPTIONEE
Each optionee, if requested by the Plan Administrators, must agree in
writing as a condition of the granting of his option, that he will remain in
the employ of the Company or one of its subsidiaries following the date of
the granting of that option for a period specified by the Plan
Administrators, which period shall in no event exceed three (3) years.
Nothing in the Plan (including the foregoing sentence) or in any option
agreement entered into under the Plan shall confer upon any optionee any
right to continued employment by the Company or any subsidiary, or limit in
any way the right of the Company at any time to terminate or alter the terms
of that employment.
9. OPTION RIGHTS UPON TERMINATION OF EMPLOYMENT
If an optionee ceases to be employed by the Company, without regard to
the anticipated duration of that unemployment, for any reason other than
death or permanent and total disability, his option shall immediately
terminate, unless an option agreement allows the option to be exercised (to
the extent exercisable on the date of termination of employment or other
relationship) at any time within three (3) months after the date of
termination of employment.
10. OPTION RIGHTS UPON DEATH OR DISABILITY
Page 7-1996 STOCK OPTION PLAN
<PAGE>
Except as otherwise limited by the Plan Administrators at the time of
the grant of an option, if an optionee dies or becomes permanently and
totally disabled within the meaning of Section 22(e) (3) of the Code while
employed by the Company or a subsidiary, or dies within three (3) months
after ceasing to an employee thereof, his option shall expire six (6) months
after the date of death or the date of permanent and total disability, unless
either the option agreement or the Plan otherwise provides for earlier
termination. During that six (6) months (or shorter) period, the person or
persons to whom the optionee's rights under the option shall pass by will or
by the laws of descent and distribution, but only to the extent that the
optionee is entitled to exercise the option at the date of death or the date
of permanent and total disability, as the case may be.
11. PRIVILEGES OF STOCK OWNERSHIP
Notwithstanding the exercise of any option granted pursuant to the Plan,
no optionee shall have any of the rights or privileges of a shareholder of
the Company in respect of any shares of Common Stock issuable upon the
exercise of his or her option until the optionee becomes a shareholder of
record.
12. OPTIONS NOT TRANSFERABLE
Options granted pursuant to the terms of the Plan may not be sold,
pledged, assigned, or transferred in any manner other than by will or the
laws of descent or distribution and may be exercised during the lifetime of
an optionee only by that optionee.
13. ADJUSTMENTS
13.1 ADJUSTMENTS FOR CHANGES IN CAPITALIZATION OR ORGANIZATION: AND
ACCELERATION OF RIGHT TO EXERCISE OPTION. All options granted
Page 8 - 1996 STOCK OPTION PLAN
<PAGE>
pursuant to the Plan shall be adjusted in a manner prescribed
by this section.
13.1.1 If the outstanding shares of the Common Stock of the
Company are increased, decreased, changed into, or
exchanged for a different number or kind of shares or
securities through recapitalization, reclassification,
stock dividend, stock split, or reverse stock split, an
appropriate and proportionate adjustment shall be
granted under the Plan. A corresponding adjustment
changing the number or kind of shares of Common Stock
allocated to unexercised options or portions thereof,
which shall have been granted prior to any such change,
shall likewise be made. Any such adjustment in
outstanding options shall be made without change in the
aggregate purchase price applicable to the unexercised
portion of the option, but with a corresponding
adjustment in the price for each share of Common Stock
or other unit of any security covered by the option.
13.1.2 Upon the effective date of the dissolution or
liquidation of the Company, or of a reorganization,
merger, combination, or consolidation of the Company
with one or more other corporations in which the
Company is not the surviving corporation, or of the
transfer of substantially all of the assets or stock of
the Company to another corporation, the Plan and any
option theretofore granted hereunder shall terminate
unless provision is made in writing in connection with
that
Page 9 - 1996 STOCK OPTION PLAN
<PAGE>
transaction for the continuance of the Plan and for the
assumption of options theretofore granted hereunder, or
the substitution for those options of new options
covering the stock of the successor Corporation, or a
parent or subsidiary thereof, with appropriate
adjustments, as determined or approved by the Plan
Administrators, as to the number and kind of shares of
Common Stock subject to the substituted options and
prices therefor, in which event the Plan and the
options theretofore granted, or the new options
substituted therefor, shall continue in the manner and
under the terms so provided. For the purposes of the
preceding sentence, the excess of the aggregate fair
market value of the shares subject to the option
immediately after the substitution or assumption over
the aggregate option price of those shares shall not be
more than the excess of the aggregate fair market value
of the shares subject to the option immediately before
the substitution or assumption over the aggregate
option price of those shares, and the new option or
assumption of the old option shall not give the
optionee additional benefits which the optionee did not
have under the old option.
In the event of such dissolution, liquidation,
reorganization, merger, combination, consolidation, or
sale or transfer of assets or stock in which provision
is not made In the transaction for the continuance of
the Plan and for the
Page 10-1996 STOCK OPTION PLAN
<PAGE>
assumption of options theretofore granted or the
substitution for those options of new options covering
the securities of a successor corporation or a parent
or subsidiary thereof, or (ii) a difference between the
excess of the aggregate fair market value of the shares
subject to the option immediately after the
substitution or assumption over the aggregate option
price of those shares and the excess of the aggregate
fair market value of the shares subject to the option
immediately before the substitution or assumption over
the aggregate option price of those shares, each
optionee (or that person's estate or a person who
acquired the right to exercise the option from the
optionee by bequest or inheritance) shall be entitled,
prior to the effective date of the consummation of any
such transaction, to purchase, in whole or in part, in
full number of shares of common Stock under the option
or options granted to him which he would otherwise have
been entitled to purchase during the remaining term of
the option and without regard to any otherwise
applicable exercise restrictions set forth in the
option agreement. To the extent that any such exercise
relates to stock that is not otherwise available for
purchase through the exercise of the option by the
optionee at that time, the exercise shall be contingent
upon the consummation of that dissolution, liquidation,
Page 11-1996 STOCK OPTION PLAN
<PAGE>
reorganization, merger, combination, consolidation, or
sale or transfer of assets or stock.
13.1.3 Notwithstanding the foregoing, in the event of a
complete liquidation of a subsidiary corporation, or in
the event that such corporation ceases to be a
subsidiary corporation as that term is defined herein,
any unexercised options theretofore granted to an
employee of the subsidiary corporation shall be deemed
canceled three (3) months after the occurrence of any
such event unless the employee shall become employed by
the company or by any other subsidiary corporation on
or before the occurrence of any such event.
14. TERMINATION
14.1 TERMINATION AND AMENDMENT OF PLAN. The Plan shall terminate ten
(10) years after the earlier of its adoption by the Board of Directors or its
approval by the shareholders of the company, and no options shall be granted
under the Plan after that date; provided, however, that termination of the Plan
shall not terminate any option granted prior thereto, and options granted prior
to termination of the Plan and existing at the time of the termination of the
Plan shall continue to be subject to all the terms and conditions of the Plan as
if the Plan had not terminated. Subject to the limitation contained in Section
14.2, the Plan Administrators may at any time amend or revise the terms of the
Plan (including the form and substance of the option agreements to be used
hereunder), provided that no amendment or revision (unless a majority of the
shareholders of the company approve such amendment) shall (i) increase the
maximum aggregate number of shares of Common Stock provided for in section 3
that may be sold pursuant to options granted under the Plan, except with
Page 12-1996 STOCK OPTION PLAN
<PAGE>
the approval of the shareholders of the Company, or except as required under
the provisions of Section 13.1.1, (ii) permit the granting of an option to
anyone other than as provided for in Section 4, (iii) increase the maximum
term provided for in Section 5.2 and 5.4 of any option, or (iv) change the
minimum purchase price for shares of Common Stock under Sections 5.3 and 5.4.
14.2 PRIOR RIGHTS AND OBLIGATIONS. No amendment, suspension, or
termination of the Plan shall, without the consent of the optionee, alter or
impair any of that optionee's rights or obligations under any option granted
under the Plan prior to that amendment, suspension, or termination.
15. APPROVAL OF SHAREHOLDERS
Within twelve (12) months before or after its adoption by the Board of
Directors of the Company, the Plan must be approved by the shareholders of
the Company holding at least a majority of the voting stock of the Company
voting in person or by proxy at the duly held shareholders' meeting. Options
may be granted under the Plan prior to obtaining those approvals, subject to
the limitations of Section 14 concerning the period during which options may
be granted, but those options shall be contingent upon those approvals being
obtained and may not be exercised prior to the receipt of those approvals.
16. RESERVATION OF SHARES OF COMMON STOCK
The Company, during the term of the Plan, will at all times reserve and
keep available a sufficient number of shares of Common Stock to satisfy the
requirements of the Plan. In addition, the Company will from time to time,
as is necessary to accomplish the purposes of the Plan, seek to obtain from
any regulatory agency having jurisdiction any requisite authority in order to
grant options under the Plan and to issue and sell
Page 13-1996 STOCK OPTION PLAN
<PAGE>
shares of Common Stock hereunder. The inability of the Company to obtain
from any regulatory agency having jurisdiction the authority deemed by the
Company's counsel to be necessary to the lawful issuance and sale of Common
Stock hereunder shall relieve the Company of any liability in respect of the
nonissuance or sale of the stock as to which the requisite authority shall
not have been obtained.
17. HEADINGS
The headings of the sections of the Plan are for convenience only and
shall not be considered or referred to in resolving questions of
interpretation.
18. NO BROKER'S COMMISSIONS
No commissions may be paid to brokers on the sale by the Company to the
optionee of shares of Common Stock that is optioned and sold under the Plan.
19. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of shares of Common
Stock pursuant to options will be used for general corporate purposes.
20. NO OBLIGATION TO EXERCISE OPTION
The granting of an option shall impose no obligation upon the optionee
to exercise such option.
21. NAME
The Plan Is known as the "FirstLink Communications, Inc. 1996 Restated
Combined Incentive Stock Option and Nonqualified Stock Option Plan."
Page 14-1996 STOCK OPTION PLAN
<PAGE>
22. ADOPTION
The Plan was adopted by a resolution duly adopted by the Board of
Directors of the Company on July 1, 1996 and was approved by the shareholders
of the Company by action of such shareholders effective July 1, 1996.
23. SUPERCEDES PRIOR PLANS
The Plan supercedes and replaces the Company's 1996 Non-Qualified Stock
Option Plan and 1996 Incentive Stock Option Plan in their entirety.
Company:
FIRSTLINK COMMUNICATIONS, INC.
By:
---------------------------------
A. Roger Pease, President
CERTIFICATION
I hereby certify that the foregoing Plan was adopted by the Board of
Directors of the Company on July 1, 1996, and approved by the shareholders of
the Company effective July 1, 1996.
---------------------------------
Allan A. Fulsher, Secretary
Page 15-1996 STOCK OPTION PLAN
<PAGE>
Exhibit No. 10.2 Office Lease (190 SW Harrison, Portland, OR)
<PAGE>
Standard Form of OFFICE BUILDING LEASE Developed by PORTLAND METROPOLITAN
ASSOCIATION OF BUILDING OWNERS AND MANAGERS
OFFICE LEASE
This lease, made and entered into at Portland, Oregon, this 27th
day of August, 1996 by and between
LANDLORD: Oregon Portland Associates
and
TENANT FirstLink Communications, Inc
Landlord hereby leases to Tenant the following:
190 SW Harrison (the Premises)
in Portland Center (the Building)
at Portland, Oregon, containing approximately 2,011 rentable
square feet as shown an the attached floor plan. calculated using
a load factor of ten percent.
Tenant's Proportion Share for purposes of Section 19 shall be
12.00%.
This lease is for a term commencing November 1, 1996, and
continuing through October 31, 2001.
Monthly Base Rental as follows:
11/1/96-2/8/97: $0.00
3/1/97-10/31/2001: $2430.00
Rent is payable in advance on the lst day of each month
commencing November 1, 1996.
Landlord and Tenant covenant and agree as follows:
1.1 DELIVERY OF POSSESSION.
Should Landlord be unable to deliver possession of the Premises on
the dale fixed by the commencement of the term, commencement will
be deferred and Tenant shall Owe no rent until notice from Landlord
tendering possession to tenant If possession Is not SO tendered
within 90 days following commencement of the term, then Tenant may
elect to cancel this lease by notice to Landlord within 10 days
following expiration of the day period. Landlord shall have no
liability to Tenant for delay in delivering possession, nor shall
such delay extend the term of this lease in any manner unless the
parties execute a written extension agreement.
2.1 RENT PAYMENT
<PAGE>
Tenant shall pay the Base Rent for the Premises and any additional
rent provided herein without deduction or offset. Rent for any
partial month during the lease term shall be prorated to reflect
the number of days during the month that Tenant occupies the
premises. Additional rent means amounts determined under Section 19
of this Lease and any other sums payable by Tenant to Landlord
under this Lease. Rent not paid when due shall bear interest at the
rate of one-and-one-half percent per month until paid. Landlord may
at its option impose a late charge of $.05 for each $1 of rent for
rent payments made more than 10 days late in lieu of interest for
the first month of delinquency, without waiving any other remedies
available for default. Failure to impose a late charge shall not be
a waiver of Landlord's rights hereunder.
3.1 LEASE CONSIDERATION.
Upon execution of the lease Tenant has paid the Base Rent for the
first full month of the lease term for which rent is payable and in
addition has paid the sum of $2,430.00 as lease consideration.
Landlord may apply the lease consideration to pay the cost of
performing any obligation which Tenant fails to perform within the
time required by this lease, but such application by Landlord shall
not be the exclusive remedy for Tenant's default. If the lease
consideration is applied by Landlord, Tenant shall on demand pay
the sum necessary to replenish the lease consideration to Its
original amount. To the extent not applied by landlord to cure
defaults by Tenant, the lease consideration shall be applied
against the rent payable for the last month of the term. The lease
consideration shall not be refundable.
4.1 USE. Tenant shall use the Premises as business for general office use
and for no other purpose without Landlord's written consent. In
connection with its use Tenant shall at its expense promptly comply
and cause the Premises to comply with all applicable laws,
ordinances, rules and regulations of any public authority and shall
not annoy, obstruct, or interfere with the rights of other tenants
of the Building. Tenant shall create no nuisance nor allow any
objectionable fumes, noise, or vibrations to be emitted from the
Premises. Tenant shall not conduct any activities that will
increase Landlord's insurance rates for any portion of the Building
or that will in any manner degrade or damage the reputation of the
Building.
4.2 EQUIPMENT
Tenant shall install in the Premises only such office equipment as
is customary for general office use and shall not overload the
floors or electrical circuits of the Premises or Building or alter
the plumbing or wiring of the Premises or Building. Landlord must
approve in advance the location of and manner of installing any
wiring or electrical, heat generating or communication equipment or
exceptionally heavy articles. All telecommunications equipment,
conduit, cables and wiring, additional dedicated circuits and any
additional air conditioning required because of heat generating
equipment or special lighting installed by Tenant shall be
installed and operated at Tenant's expense. Landlord shall have no
obligation to permit the installation of equipment by any
telecommunications provider whose equipment is not then servicing
the Building.
4.3 SIGNS. No signs, awnings, antennas, or other apparatus shall be painted on
or attached to the
<PAGE>
Building or anything placed on any glass or woodwork of the
Premises or positioned so as to be visible from outside the
Premises without Landlord's written approval as to design, size.
location, and color. All signs installed by Tenant shall comply
with Landlord's standards for signs and all applicable codes and
all signs and sign hardware shall be removed upon termination of
this lease with the sign location restored to its former state
unless Landlord elects to retain all or any portion thereof.
5.1 UTILITIES AND SERVICES.
Landlord will furnish water and electricity to the Building at all
times and will furnish heat and air conditioning (if the Building
is air conditioned) during the normal Building hours as established
by Owner. Janitorial service will be provided in accordance with
the regular schedule of the Building, which schedule and service
may change from time to time. Tenant shall comply with all
government laws or regulations regarding the use or reduction of
use of utilities on the Premises. Interruption of services or
utilities shall not be deemed an eviction or disturbance of
Tenant's use and possession of the Premises, render Landlord liable
to Tenant for damages, or relieve Tenant from performance of
Tenant's obligations under this lease. Landlord shall take all
reasonable steps to correct any interruptions in service.
Electrical service furnished will be 110 volts unless different
service already exists in the Premises. Tenant shall provide its
own surge protection for power furnished to the Premises.
5.2 EXTRA USAGE.
If Tenant uses excessive amounts of utilities or services of any
kind because of operation outside of normal Building hours, high
demands from office machinery and equipment, nonstandard lighting,
or any other cause, Landlord may impose a reasonable charge for
supplying such extra utilities or services, which charge shall be
payable monthly by Tenant in conjunction with rent payments. In
case of dispute over any extra charge under this paragraph,
Landlord shall designate a qualified independent engineer whose
decision shall be conclusive on both parties. Landlord and Tenant
shall each pay one-half of the cost of such determination.
5.3 SECURITY.
Landlord may but shall have no obligation to provide security
service or to adopt security measures regarding the Premises, and
Tenant shall cooperate with all reasonable security measures
adopted by Landlord. Tenant may install a security system within
the leased Premises with Landlord's written consent which will not
be unreasonably withheld. Landlord will be provided with an access
coda to any security system and shall not have any liability for
accidentally setting off Tenant's security system. Landlord may
modify the type or amount of security measures or services provided
to the Building or the Premises at any time.
*
6.1 MAINTENANCE AND REPAIR.
Landlord shall have no liability for failure to perform required
maintenance and repair unless written notice of such maintenance or
repair is given by Tenant and
<PAGE>
Landlord fails to commence efforts to remedy the problem in a
reasonable time and manner, Landlord shall have the right to
erect scaffolding and other apparatus necessary for the purpose
of making repairs, and Landlord shall have no liability for
interference with Tenant's use because of repairs and
installations. Tenant shall have no claim against Landlord for
any interruption or reduction of services or interference with
Tenant's occupancy, and no such interruption or reduction shall
be construed as a constructive or other eviction of Tenant.
Repair of damage caused by negligent or intentional acts or
breach of this lease by Tenant, its employees or invitees shall
be at Tenant's expense.
6.2 ALTERATIONS.
Tenant shall not make any alterations, additions, or improvements
to the Premises, change the color of the interior, or install any
wall or floor covering without Landlord's prior written consent
which may be withheld in Landlord's sole discretion. Any such
improvements, alterations, wiring, cables or conduit installed by
Tenant shall at once become part of the Premises and belong to
Landlord except for removable machinery and unattached movable
trade fixtures. Landlord may at its option require that Tenant
remove any Improvements, alterations, wiring, cables or conduit
Installed by or for Tenant and restore the Premises to the original
condition upon termination of this lease. Landlord shall have the
right to approve the contractor used by Tenant for any work In the
Premises, and to post notices of nonresponsibility in connection
with work being performed by Tenant in the Premises. Work by Tenant
shall comply with all laws then applicable to the Premises.
7.1 INDEMNITY.
Tenant shall not allow any liens to attach to the Building or
Tenant's Interest in the Premises as a result of its activities.
Tenant shall Indemnify and defend Landlord and its managing agents
from any claim, liability, damage, or loss occurring on the
Premise, arising. Out of any activity by Tenant, its agents, or
invitees or resulting from Tenant's failure to comply with any term
of this lease. Neither Landlord nor its managing agent shall have
any liability to Tenant because of loss or damage to Tenant's
property or for death or bodily Injury caused by the acts or
omissions of other Tenants of the Building, or by third parties
including criminal acts).
7.2 INSURANCE.
Tenant shall carry liability insurance with limits of not less than
one Million Dollars ($1,000,000) combined single limit bodily
Injury and property damage which insurance shall have an
endorsement naming Landlord and Landlord's managing agent, if any,
as an additional insured, cover the liability insured under
paragraph 7.1 of this lease and be in form and with companies
reasonably acceptable to Owner. Prior to occupancy, Tenant shall
furnish a certificate evidencing such Insurance which shall state
that the coverage shall not be cancelled or materially changed
without 10 days advance notice to Landlord and Landlord's managing
agent, If any. A renewal certificate shall be furnished at least 10
days prior to expiration of any
<PAGE>
policy.
8.1 FIRE OR CASUALTY.
"Major Damage" means damage by fire or other casualty to the
Building or the Premises which causes the Premises or any
substantial portion of the Building to be unusable, or which will
cost more than 25 percent of the pre-damage value of the Building
to repair, or which is not covered by insurance. In case of Major
Damage, Landlord may elect to terminate this lease by notice in
writing to the Tenant within 30 days after such date. If this lease
is not terminated following Major Damage, or if damage occurs which
is not Major Damage, Landlord shall promptly restore the Premises
to the condition existing just prior to the damage. Tenant shall
promptly restore all damage to tenant improvements or alterations
installed by Tenant or pay the cost of such restoration to Landlord
if Landlord elects to do the restoration of such improvements.
Rent shall be reduced from the date of damage until the date
restoration work being performed by Landlord is substantially
complete, with the reduction to be in proportion to the area of the
Premises not useable by Tenant.
8.2 WAIVER OF SUBROGATION.
Tenant shall be responsible for insuring its personal property and
trade fixtures located on the Premises and any alterations or
tenant improvements it has made to the Premises. Neither Landlord,
its managing agent nor Tenant shall be liable to the other for any
loss or damage caused by water damage, sprinkler leakage, or any of
the risks that are or could be covered by a special all risk
property insurance policy, or for any business interruption, and
there shall be no subrogated claim by one party's insurance carrier
against the other party arising out of any such loss. This waiver
is binding only if it does not invalidate the insurance coverage of
either party hereto.
9.1 EMINENT DOMAIN.
If a condemning authority takes title by eminent domain or by
agreement in lieu thereof to the entire Building or a portion
sufficient to render the Premises unsuitable for Tenant's use, then
either party may elect to terminate this lease effective on the
date that possession is taken by the condemning authority. Rent
shall be reduced for the remainder of the term in an amount
proportionate to the reduction in area of the Premises caused by
the taking. All condemnation proceeds shall belong to Landlord, and
Tenant shall have no claim against Landlord or the condemnation
award because of the taking.
10.1 ASSIGNMENT AND SUBLETTING.
This lease shall bind and inure to the benefit of the parties,
their respective heirs, successors, and assigns, provided that
Tenant shall not assign its interest under this lease or sublet all
or any portion of the Premises without first obtaining Landlord's
consent in writing. This provision shall apply to all transfers by
operation of law including but not limited to mergers and changes
in control of Tenant. No assignment shall relieve Tenant of its
obligation to pay rent or perform other obligations required by
this lease, and no consent to one assignment or subletting shall be
a consent to any
<PAGE>
further assignment or subletting. Landlord shall not unreasonably
withhold its consent to any assignment or subletting provided the
effective rental paid by the subtenant or assignee is not less
than the current scheduled rental rate of the Building for
comparable space and the proposed Tenant is compatible with
Landlord's normal standards for the Building. If Tenant proposes
a subletting or assignment to which Landlord is required to
consent under this paragraph, Landlord shall have the option of
terminating this lease and dealing directly with the proposed
subtenant or assignee, or any third party. If an assignment or
subletting is permitted, any cash profit, or the net value of any
other consideration received by Tenant as a result of such
transaction shall be paid to Landlord promptly following its
receipt by Tenant. Tenant shall pay any costs incurred by
Landlord in connection with a request for assignment or
subletting, including reasonable attorneys' fees.
11.1 DEFAULT
Any of the following shall constitute a default by Tenant under
this lease:
(a) Tenant's failure to pay rent or any other charge under
this lease within 10 days after it is due, or failure to comply
with any other term or condition within 20 days following written
notice from Landlord specifying the noncompliance. If such
noncompliance cannot be cured within the 20-day period, this
provision shall be satisfied if Tenant commences correction
within such period and thereafter proceeds in good faith and with
reasonable diligence to effect compliance as soon as possible.
Time is of the essence of this lease.
(b) Tenant's insolvency, business failure or assignment for
the benefit of its creditors. Tenant's commencement of
proceedings under any provision of any bankruptcy or insolvency
law or failure to obtain dismissal of any petition filed against
it under such laws within the time required to answer; or the
appointment of a receiver for all or any portion of Tenant's
properties or financial records.
(c) Assignment or subletting by Tenant in violation of
paragraph 10.1.
(d) Vacation or abandonment of the Premises without the
written consent of Landlord or failure to occupy the Premises
within 20 days after notice from Landlord tendering possession.
11.2 REMEDIES FOR DEFAULT.
In case of default as described in paragraph 11.1 Landlord shall
have the right to the following remedies which are intended to be
cumulative and in addition to any other remedies provided under
applicable law:
(a) Landlord may at its option terminate the lease by notice to
Tenant, with or without termination. Landlord may retake possession
of the Premises and may use or relet the Premises without accepting
a surrender or waiving the right to damages. Following such
retaking of possession, efforts by Landlord to relet the Premises
shall be sufficient if Landlord follows is usual procedures for
finding tenants for the space at rates not less than the current
rates for other comparable space in the Building. If Landlord has
other vacant space in the Building, prospective tenants may be
placed in such other space without prejudice to Landlord's claim to
damages or loss of rentals from Tenant.
<PAGE>
(b) Landlord may recover all damages caused by Tenant's default
which shall include an amount equal to rentals lost because of the
default, lease commissions paid for this lease, and the unamortized
cost of any tenant improvements installed by Landlord to meet
Tenant's special requirements. Landlord may sue periodically to
recover damages as they occur throughout the lease term, and no
action for accrued damages shall bar a later action for damages
subsequently accruing. Landlord may elect in any one action to
recover accrued damages plus damages attributable to the remaining
term of the lease. Such damages shall be measured by the difference
between the rent under this lease and the reasonable rental value
of the Premises for the remainder of the term, discounted to the
time of judgement at the prevailing interest rate on judgements.
(c) Landlord may make any payment or perform any obligation
which Tenant has failed to perform, in which case Landlord shall be
entitled to recover from Tenant upon demand all amounts so
expended, plus interest from the date of the expenditure at the
rate of one-and-one-half percent per month. Any such payment or
performance by Landlord shall not waive Tenant's default.
12.1 SURRENDER.
On expiration or early termination of this lease Tenant shall
deliver all keys to Landlord and surrender the Premises vacuumed,
swept, and free of debris and in the same condition as at the
commencement of the term subject only to reasonable wear from
ordinary use. Tenant shall remove all of its furnishings and trade
fixtures that remain its property and repair all damage resulting
from such removal. Failure to remove shall be an abandonment of the
property, and Landlord may dispose of it in any manner without
liability. If Tenant fails to vacate the Premises when required,
including failure to remove all its personal property, Landlord may
elect either: (i) to treat Tenant as a tenant from month to month.
subject to the provisions of this lease except that rent shall be
one-and-one-half times the total rent being charged when the lease
term expired, and any option or other rights regarding extension of
the term or expansion of the Premises shall no longer apply; or
(ii) to eject Tenant from the Premises and recover damages caused
by wrongful holdover.
13.1 REGULATIONS.
Landlord shall have the right but shall not be obligated to make,
revise and enforce regulations or policies consistent with this
lease for the purpose of promoting safety, health (including
moving, use of common areas and prohibition of smoking), order,
economy, cleanliness, and good service to all tenants of the
Building. All such regulations and policies shall be complied with
as if part of this lease.
14.1 ACCESS.
During times other than normal Building hours Tenant's officers and
employees or those having business with Tenant may be required to
identify themselves or show passes in order to gain access to the
Building. Landlord shall have no liability for permitting or
refusing to permit access by anyone. Landlord may regulate access
to any Building elevators outside of normal Building hours.
Landlord shall have the right to enter upon the Premises at any
time by passkey or otherwise to determine
<PAGE>
Tenant's compliance with this lease, to perform necessary
services, maintenance and repairs or alterations to the Building
or the Premises, or to show the Premises to any prospective
tenant or purchasers. Except in case of emergency such entry
shall be at such times and in such manner as to minimize
interference with the reasonable business use of the Premises by
Tenant.
14.2 FURNITURE AND BULKY ARTICLES.
Tenant shall move furniture and bulky articles in and out of the
Building or make independent use of the elevators only at times
approved by Landlord following at least 24 hours written notice to
Landlord of the intended move. Landlord will not unreasonably
withhold its consent under this paragraph.
15.1 NOTICE.
Notices between the parties relating to this lease shall be in
writing, effective when delivered, or if mailed, effective on the
second day following mailing, postage prepaid, to the address for
the party stated in this lease or to such other address as either
party may specify by notice to the other. Notice to Tenant may
always be delivered to the Premises. Rent shall be payable to
Landlord at the same address and in the same manner, but shall be
considered paid only when received.
16.1 SUBORDINATION AND ATTORNMENT.
This lease shall be subject to and subordinate to any mortgages,
deeds of trust, or land sale contracts (hereafter collectively
referred to as encumbrances) now existing against the Building. At
Landlord's option this lease shall be subject and subordinate to
any future encumbrance hereafter placed against the Building
(including the underlying land) or any modifications of existing
encumbrances, and Tenant shall execute such documents as may
reasonably be requested by Landlord or the holder of the
encumbrance to evidence this subordination. If any encumbrance is
foreclosed, then if the purchaser at foreclosure sale gives to
Tenant a written agreement to recognize Tenant's lease, Tenant
shall attorn to such purchaser and this Lease shall continue.
16.2 TRANSFER OF BUILDING.
If the Building is sold or otherwise transferred by Landlord or any
successor, Tenant shall attorn to the purchaser or transferee and
recognize it as the lessor under this lease, and. provided the
purchaser or transferee assumes all obligations hereunder, the
transferor shall have no further liability hereunder.
16.3 ESTOPPELS.
Either party will within 10 days after notice from the other
execute, acknowledge and deliver to the other party a certificate
certifying whether or not this lease has been modified and is in
full force and effect; whether there are any modifications or
alleged breaches by the other party; the dates to which rent has
been paid in advance; and the amount of any security deposit or
prepaid rent; and any other facts that may reasonably be requested.
Failure to deliver the certificate within the specified time shall
be conclusive upon the party of whom the certificate was requested
that the
<PAGE>
lease is in full force and effect and has not been modified
except as may be represented by the party requesting the
certificate. If requested by the holder of any encumbrance, or
any ground lessor, Tenant will agree to give such holder or
lessor notice of and an opportunity to cure any default by
Landlord under this lease.
17.1 ATTORNEYS' FEES.
In any litigation arising out of this lease, the prevailing party
shall be entitled to recover attorneys' fees at trial and on any
appeal. If Landlord incurs attorneys' fees because of a default by
Tenant, Tenant shall pay all such fees whether or not litigation is
filed.
18.1 QUIET ENJOYMENT.
Landlord warrants that so long as Tenant complies with all terms of
this lease it shall be entitled to peaceable and undisturbed
possession of the Premises free from any eviction or disturbance by
Landlord. Neither Landlord nor its managing agent shall have any
liability to Tenant for loss or damages arising out of the acts,
including criminal acts, of other tenants of the Building or third
parties, nor any liability for any reason which exceeds the value
of its interest in the Building.
19.1 ADDITIONAL RENT-TAX ADJUSTMENT.
Whenever for any July 1 - June 30 tax year the real property taxes
levied against the Building and its underlying land exceed those
levied for the 1996 - 1997 tax year, then the monthly rental for
the next succeeding calendar year shall be increased by one-twelfth
of such tax increase times Tenant's Proportionate Share. Real
property taxes as used herein means all taxes and assessments of
any public authority against the Building and the land on which it
is located, the cost of contesting any tax and any form of fee or
charge imposed on Landlord as a direct consequence of owning or
leasing the Premises, including but not limited to rent taxes,
gross receipt taxes, leasing taxes, or any fee or charge wholly or
partially in lieu of or in substitution for ad valorem real
property taxes or assessments, whether now existing or hereafter
enacted. If any portion of the Building is occupied by a tax-exempt
tenant so that the Building has a partial tax exemption under ORS
307.112 or a similar statute, then real property taxes shall mean
taxes computed as if such partial exemption did not exist. If a
separate assessment or identifiable tax increase arises because of
improvements to the Premises, then Tenant shall pay 100 percent of
such increase.
19.2 ADDITIONAL RENT-COST-OF-LIVING ADJUSTMENT.
On each anniversary date of this lease, the Landlord shall adjust
the base rental in the same percentage as the increase, if any,
in the Consumer Price Index published by the United States
Department of Labor, Bureau of Labor Statistics. The change shall
be computed by comparing the schedule entitled -U.S. City
Average, All Items, All Urban Consumers, 1982-84 = 100" for the
latest available month preceding the month in which the lease
term commenced with the same figure for the same month in the
years for which the adjustment is computed. All comparisons shall
be index figures derived from the same base period and in
no event snail this provision operate to decrease the monthly
rental for the Premises below the initial stated
<PAGE>
monthly rental, plus property tax adjustments and operating
expense adjustments as provided in this Lease. If the index
cited above is revised or discontinued during the term of this
Lease then the index that is designated by the Portland
Metropolitan Association of Building Owners and Managers to
replace it shall be used.
19.3 OPERATING EXPENSE ADJUSTMENT
Tenant shall pay as additional rent Tenant's Proportionate Share of
the amount by which operating expenses for the Building increase
over those experienced by landlord during the calendar year 1996
(base year). Effective January 1 of each year Landlord shall
estimate the amount by which operating expenses are expected to
increase, if any, over those incurred in the base year. Monthly
rental for that year shall be increased by one-twelfth of Tenant's
share of the estimated increase. Following the end of each
calendar year, Landlord shall compute the actual increase in
operating expenses and bill Tenant for any deficiency or credit
Tenant with any excess collected. As used herein operating expenses
shall mean all costs of operating and maintaining the Building as
determined by standard real estate accounting practice, including,
but not limited to, all water and sewer charges; the cost of
natural gas and electricity provided to the Building; janitorial
and cleaning supplies and services; administration costs and
management fees; superintendent fees; security services, if any;
insurance premiums; licenses; permits for the operation and
maintenance of the Building and all of its component elements and
mechanical systems; the annual amortized capital improvement cost
(amortized over such a period as Landlord may select but not
shorter than the period allowed under the Internal Revenue Code and
at a current market interest rate) for any capital improvements to
the Building required by any governmental authority or those which
have a reasonable probability of improving the operating efficiency
of the Building.
19.4 DISPUTES.
If Tenant disputes any computation of additional rent or rent
adjustment under paragraphs 19.1 through 19.3 of this lease, it
shall give notice to Landlord not later than one year after the
notice from Landlord describing the computation in question, but in
any event not later than 30 days after expiration or earlier
termination of this lease. If Tenant fails to give such a notice,
the computation by Landlord shall be binding and conclusive between
the parties for the period in question. If Tenant gives a timely
notice, the dispute shall be resolved by an independent certified
public accountant selected by Landlord whose decision shall be
conclusive between the parties. Each party shall pay onehalf of
the fee for making such determination except that if the adjustment
in favor of Tenant does not exceed ten percent of the escalation
amounts for the year in question, Tenant shall pay (i) the entire
cost of any such third-party determination; and (ii) Landlord's
out-of-pocket costs and reasonable expenses for personnel time in
responding to the audit. Nothing herein shall reduce Tenant's
obligations to make all payments as required by this lease.
20.1 COMPLETE AGREEMENT; NO IMPLIED COVENANT.
This lease and the attached Exhibits and Schedules, if any,
constitute the entire agreement of the parties and supersede all
prior written and oral agreements and
<PAGE>
representations and there are no Implied covenants or other
agreements between the parties except as expressly set forth in
this Lease. Neither Landlord nor Tenant is relying on any
representations other than those expressly set forth herein.
20.2 SPACE LEASED AS IS.
Unless otherwise stated in this Lease, the Premises are leased As
IS in the condition now existing with no alterations or other work
to be performed by Landlord.
20.3 CAPTIONS.
The titles to the paragraphs of this lease are descriptive only and
are not intended to change or influence the meaning of any
paragraph or to be part of this lease.
20.4 NONWAIVER.
Failure by Landlord to promptly enforce any regulation, remedy or
right of any kind under this Lease shall not constitute a waiver of
the same and such right or remedy may be asserted at any time after
Landlord becomes entitled to the benefit thereof notwithstanding
delay in enforcement.
20.5 EXHIBITS.
The following Exhibits are attached hereto and incorporated as a
part of this lease:
Exhibit "A" - Additional Provisions
Exhibit "B" - Workletter Agreement
Exhibit "C" - Space Plan
IN WITNESS WHEREOF, the duly authorized representatives of the
parties have executed this lease as of the day and year first
written above.
LANDLORD:
Address for notices:
200 SW Harrison By:
Portland, OR 97201 ----------------------------------
Title:
-------------------------------
TENANT: By:
----------------------------------
Title:
-------------------------------
Address for notices:
Premises By:
----------------------------------
Title:
-------------------------------
Exhibit "A"
<PAGE>
Additional Provisions
Dated August 27, 1996
By and Between
Oregon Portland Associates, Inc. (Landlord)
and
FirstLink Communications, Inc. (Tenant)
21.1 Rights of Second
Offer: During the initial term of this Lease so long as Tenant is
not incurred default of any of Tenant's obligations under
the Lease, Tenant shall have the right of second offer,
subject to rights of Weststar Mortgage, to lease any space
that is contiguous to the initial premises. In the event
that Landlord desires to make a written offer (the "Offer")
to a third party to lease the Expansion Space, Landlord
shall first present the Offer to Tenant and give Tenant five
(5) business days within which to determine whether Tenant
will accept the Offer. If Tenant gives Landlord written
notice within such five (5) business day period that Tenant
elects to accept the Offer, then Tenant shall be bound to
enter into a written lease agreement in accordance with the
terms of the Offer. Under no circumstances shall Base Rent
for the expansion space be less than Tenant's current rent.
If Tenant does not give Landlord such written notice within
five (5) business day period, then Landlord shall be free to
close a transaction with the third party on the terms of the
offer.
22.1 Parking: Tenant shall have the right to rent on a monthly basis up to
six (6) day use parking stalls in the building parking
garage at no cost. Additional parking will be at the
prevailing monthly rate. One (1) additional stall, will be
located at the 255 garage, at no cost.
23.1 Temporary Premises: Tenant shall have the right to use Garden Office,
suite 2L at 222 S.W. Harrison at no cost until the Landlord
delivers the Suite at 190 SW Harrison to the Tenant.
24.1 Electrical: Tenants premises will be separately metered and all
electrical costs to the premises will be paid for by Tenant.
<PAGE>
25.1 Termination: In the event the telecommunication contract between Landlord
and Tenant is terminated, the Tenant shall have a one time
right to terminate this Lease upon giving the Landlord
thirty (30) days written notice.
AGREED AND ACCEPTED:
FirstLink Communications, Inc.
By:
---------------------------------
A. Roger Pease
Title:
----------------------------------
Chief Executive Officer
Pacific Union Property Services, Inc.
Managing Agent for:
Oregon Portland Associates, Inc.
By:
--------------------------------------
Title:
-----------------------------------
<PAGE>
EXHIBIT "B'(1)
WORK LETTER AGREEMENT
TENANT IMPROVEMENTS
A. Landlord to provide all tenant improvements per the space plan dated
September 4, 1996. All improvements shall include, but necessarily be
limited to, the following:
1. Building standard wall painted.
2. Building standard rubber base and carpet.
3. Building standard door and hardware.
4. Building standard electrical outlets and telephone tnud rings.
5. Building standard window coverings.
6. Building standard entry with building standard relite.
The following items are included as part of the Landlord's building
standard tenant improvement package:
1. BUILDING standard heating, ventilating, and airconditioning.
2. Building standard lighting to local governing codes.
3. Building standard drop ceiling.
B. Tenant shall be responsible for any revisions to the space which
exceed the Tenant Improvement budget of $65,360.00.
C. Tenant shall provide color choices for carpet, paint, rubber base
and other finishes and approve construction documents on or before
5:00 p.m., September 18, 1996.
AGREED AND ACCEPTED AGREED AND ACCEPTED
TENANT: LANDLORD:
FIRSTLINK COMMUNICATIONS, INC. OREGON PORTLAND ASSOCIATES, INC.
By By:
----------------------------- -------------------------------
<PAGE>
Exhibit No. 10.3 Telecommunications Services Agreement between Registrant and
Oregon Portland Associates (Portland Center Apartments)
<PAGE>
PAYLINE, INC.
TELECOMMUNICATIONS SERVICES AGREEMENT
This agreement ("Agreement") is entered into as of April 4, 1994, by and between
Payline Systems, Inc., an Oregon corporation ("Payline"), and Oregon Portland
Associates, an Oregon general partnership ("Owner").
1. PROPERTY. Owner owns the multifamily residential complex commonly
known as Portland Center Apartments, located at 111, 222, 255, 180 SW
Harrison, Oregon, which consists of 525 living units and an office complex
(the "Property").
2. GRANT OF RIGHTS.
(a) Owner grants Payline the sole and exclusive right, except as
provided in the last sentence of clause (b) below, to install, own, operate,
replace and maintain the System on, off and through the Property and the sole
and exclusive right to provide Telecommunication Services to residents of the
Property. "System" shall mean all electronic devices, cable, wire, hardware,
software and other material used to transmit and receive two way voice and
data communications, telephone service ("Telephone Service"), multi-channel
TV, video on demand, audio on demand, voice mail, data services and other
means of two-way communication distribution, whether now existing or
hereafter developed (collectively "Telecommunication Services") as between
the Property and the local and/or long distance telephone networks or other
outside distributor of these and other services.
It is anticipated that Telephone Services will include local and long
distance calling, voice mail and calling features such as conference calling,
call waiting and call forwarding. Additional services will be added from time
to time, as available and as warranted by tenant demand. Such additional
Telecommunication Services may include: multi-channel television, video
conferencing, on-line computer services, electronic mail, wireless services
(such as cellular telephone) and other types of services. There can be no
assurance that any or all of the above additional services will be made
available. Their availability is dependent upon many variables and factors
beyond Payline's control. Such factors include, but are not limited to,
technical feasibility, economic, regulatory and market considerations.
(b) In consideration of the substantial investment made by Payline in
the System, Owner agrees that it will not grant access to the Property to any
person or entity, other than Payline, for the purpose of operating or
maintaining the System, or permit the installation, maintenance or operation
at the Property of any other equipment, wire, cable, or material by any
person or entity that similarly provides Telecommunication Services. So long
as it is a requirement of law that a local
<PAGE>
telephone company also serve the Property, this exclusivity provision shall
not deny such local telephone company the right to serve residents of the
Property.
3. SYSTEM EXPENSES. Other than as set forth herein, Payline shall
bear all expenses to install, operate, maintain and repair the System. Owner
shall, at Owner's expense and cost, provide electrical power to the System
and shall pay for any damage to the System caused by the negligence or
misconduct of Owner or Owner's agent(s) or employees For the purposes of
this Agreement, "System Site" shall mean an adequate and secure space to
house Payline's System equipment, which shall consist of a rent-free, locked
room meeting Payline's specifications. Owner hereby grants Payline and its
authorized personnel access to the Property for any reasonable purposes
related to this Agreement including the installation of cabling or microwave
equipment to interconnect buildings and to connect to other telecommunication
systems and grants specific rights to Payline to use both existing coaxial
and twisted pair cabling in the Property. Payline agrees to notify the
Facility Manager when either Payline or its authorized personnel are on-site.
4. TERM. The term of this Agreement shall be * years from the date
hereof. The original term will automatically be renewed or up to * additional
periods of * years each unless either party otherwise notifies it in
writing at least 180 days prior to the end of the original term or any
renewal term. The original * year term may be extended to a * year original
term by mutual agreement of the parties at anytime during the initial *
years under this Agreement.
5. INSTALLATION. Payline shall commence installation of the System as
soon as practicable upon completion of cabling or other work as required by
the local telephone company and in a manner that minimizes interruption of
existing communication services. In no event shall Payline interrupt service
provided by US West for those tenants choosing to remain connected to US West
Telecommunication Services to the Property shall commence no later than 180
days from commencement of installation. Payline shall give Owner at least ten
(10) days notice prior to the commencement of installation. Payline may
subcontract activities related to the installation of the System, but shall
be responsible for any and all acts and/or omissions by any subcontractor.
6. OWNERSHIP AND CHARACTER OF THE SYSTEM. Except as otherwise stated
herein, the System, including any alterations and attachments, shall at all
times remain the sole property of Payline. It is the intention of the parties
that the System, and every component of the System, shall retain its
character as personal property following the installation of the System on
the Property, and shall not be deemed to be a fixture constituting a part of
the Property. No part of the System shall be or become subject to any
mortgage, deed of trust or lien upon the Property.
<PAGE>
7. SERVICE TO TENANTS. Payline shall provide Telephone Service and
other Telecommunication Services offered through the System to each resident
requesting them. Payline's obligation to provide or continue
Telecommunication Services shall be contingent on the resident paying service
charges and meeting other reasonable requirements as are established by
Payline from time to time. Residents electing to receive Telecommunication
Services offered by Payline shall do so through the execution and delivery to
Owner or Payline of a Tenant Services Agreement in the form provided, from
time to time, from Payline to Owner. Owner shall promptly provide such
executed documents to Payline. Residents requesting Telecommunication
Services shall be charged and billed individually for connection to the
System and for service at standard rates established solely by Payline from
time to time unless prohibited by applicable law or regulation. Payline
shall be solely responsible for invoicing, collections and bad debts related
to provision of Telecommunication Service to residents.
Both parties agree that neither the Owner nor the Owner's agent shall have
any liability regarding the number of residents electing to use
Telecommunications Services.
8. COMMISSIONS. Owner shall be entitled to Commissions as follows:
(a) During the initial six (6) months commencing upon the first date
Payline provides residential Telecommunications Services hereunder, Payline
shall pay Owner a commission on each living unit served by Payline pursuant
to this Agreement. The Commission shall be equal to * of all gross
revenues actually collected for services provided to each living unit served
by Payline hereunder.
(b) Following the initial six (6) month period set forth above,
Payline shall pay Owner a fixed dollar commission for each living unit served
by Payline hereunder. The fixed dollar commission per living unit shall be
based each quarter upon the applicable percentage of Baseline Revenues
determined in accordance with the Average Quarterly Penetration Rate for
Portland Center Apartments as follows:
Average Quarterly Percentage of Baseline
Penetration Revenue Payable as
Rate (%) Commission (%)
---------------------------- -----------------------------
* *
(c) All commission payments hereunder will be paid quarterly in
arrears.
(d) For purposes of this Section 8, the "Average Quarterly Penetration
Rate" shall be calculated as the average percentage of the total living units
in Portland
<PAGE>
Center Apartments that have been served by Payline for at least thirty (30)
days during the ninety (90) day period immediately preceding the Calculation
Date and the "Baseline Revenue" is calculated as the total actually collected
gross revenues during the initial six (6) months of service under this
Agreement for all living units served by Payline divided by the average
number of living units served by Payline during the initial six (6) months of
service hereunder divided by two (2). The initial Calculation Date occurs at
the ninetieth (90th) day following the commencement of service to the first
residential tenant. Subsequent Calculation Dates occur on the first day of
each new five (5) year term.
(e) The fixed dollar commission rate will be adjusted annually by
applying the annualized increase in the Consumer Price Index for the Portland
Standard Metropolitan Service Area. In no event shall the Consumer Price
Index provision operate to decrease the commission paid to Owner.
(f) The fixed dollar commission (baseline determined by initial six
(6) month's average billings) shall be adjusted at the beginning of each new
five (5) year term. The adjustment shall be made using the last six (6)
months of the previous term as the baseline calculation.
(g) Owner may initiate an independent audit, at owner's expense,
verifying revenues and penetration levels as submitted by Payline, but not
more than annually. In the event that such an audit identifies an error of
five percent (5%) or greater in favor of Payline, as compared to the
submissions provided by Payline, then Payline agrees to reimburse Owner for
reasonable costs associated with undertaking such an audit.
9. ADDITIONAL OBLIGATIONS OF PAYLINE. Payline shall:
(a) make a customer service representative available to receive
service requests or inquiries from Owner or residents and insure that it
responds to service requests within four (4) hours of receipt. Routine
maintenance services shall be performed by Payline during its normal working
hours. A technician shall arrive at the Property to commence maintenance
services promptly after request by a customer of such services, provided
however, where such request are made on, or on a day preceding a Saturday,
Sunday or holiday, Payline's system technician shall arrive at the Property
to commence maintenance services on the next normal working day.
(b) Payline's disaster recovery plan will address catastrophic
occurrences and the plan will also describe actions which Payline will take
should Payline's facilities or services threaten personal safety or the
building structure integrity. The plan will be made available for inspection
by Owner. Payline will provide Owner the name and telephone number of a
Payline representative to contact in case of an emergency.
<PAGE>
(c) provide Owner with marketing materials, sales support and sales
training to enable Owner and Owner's employees to market Telecommunications
Services in accordance with Section 10(b);
(d) provide training to Owner's staff to enable staff to perform the
duties specified in Section 10(c);
(e) repair or replace any damage to the Property resulting from
Installation, operation or removal of the System or any other acts by Payline
to the satisfaction of the Owner and restore Property to its original
condition;
(f) comply with all applicable regulatory requirements relating to the
provision of the Telecommunication Services provided by Payline as may be in
effect from time to time;
(g) maintain the System in good order, condition and repair; and
(h) Payline will provide Owner with business Telephone Services at the
Property and Owner shall be provided Telephone Services at the same favorable
rates as charged to tenants of the Property. Owner will pay the installation
costs for providing such business Telephone Services and will provide, at its
own cost, all necessary ancillary hardware such as keysets and operator
consoles for the dedicated use of the Owner; Such costs will be reasonable
and reflect customary installation charges for business telephone systems.
For the avoidance of doubt, the Owner shall bear none of the installation
costs associated with Payline's switching equipment.
(i) Payline shall pay all taxes resulting from the ownership or
operation of System and service.
10. OBLIGATIONS OF OWNER. Owner shall:
(a) make the System Site available on a rentfree basis to Payline
during the term of this Agreement. The construction and location of the
System Site shall be as Owner and Payline reasonably agree, subject to
technical and regulatory requirements as determined by Payline. Payline
shall have twenty-four hour, seven day a week access to the System Site, and
Owner's employees and agents shall not disturb the System;
(b) use reasonable efforts to encourage its staff, agents and
representatives to encourage and promote the use of the Telecommunications
Services to residents and prospective residents as part of the amenities
provided by Owner at the Property. Owner consents to Payline's use of
incentives and incentive programs with Property management personnel, leasing
staff and other Property personnel for the purpose of promoting the System
and Telecommunication Services provided through the System.
<PAGE>
Owner's staff will present the telecommunications service agreement and
related information to prospective tenants with the objective of securing
sales. It is envisioned that this selling process will require a minimal
amount of time on behalf of Owner's staff If tenants have additional
questions or require additional information, their sales lead will be
referred to Payline staff who will be responsible for responding to customer
inquiries and securing any resulting sales. Payline will also be fully
responsible for the initial sales conversion process. It is not expected that
Portland Center rental staff become expert in understanding the various
components of Payline's product lines;
(c) promptly provide to Payline requested specifications on the
Property, such as wiring schematics and/or building diagrams, a current list
of residents, addresses and their telephone numbers and other specific
information regarding resident transactions, such as rentals, move-ins,
move-outs transfers, intents to vacate, and the entering into or termination
of leases and other information necessary to market and operate the System
and provide the Telecommunications services according to this Agreement or to
comply with governmental or Utility Commission rules as may be determined by
Payline;
(d) cooperate with Payline in obtaining permits, consents, licenses and
other requirements which may be necessary for Payline to install and operate
System and furnish the Telecommunications Services; provided that Payline
shall all reasonable costs of the Owner associated therewith except that
Owner will installation costs as described in Section 9(g);
(e) provide reasonable access to the Property to Payline and its
employees and agents to enable Payline to perform the activities contemplated
by or necessary under this Agreement including access for the purpose of
soliciting customers. No marketing to the residents of Portland Center
Apartments will be undertaken and no resident will be contacted by Payline
until Payline has provided a written direct sales plan that has been approved
by Owner, such approval to be not unreasonably withheld. Unless Owner
indicates to the contrary, the plan shall be deemed approved ten (10) days
following submission to the Owner.
11. INSURANCE. Payline shall carry and maintain liability insurance of
$3,000,000 naming Owner and Owner's agent as additional insured covering
personal injury and property damage that may be caused to person(s), the
Property or its contents, by the System or Payline's employees or agents.
Owner and Payline each waive any right of recovery against each other for any
claims that may be brought for any loss that is covered by insurance upon or
relating to the Property or the System to the extent of the actual proceeds
received by waiving party. Owner shall carry and maintain general liability
insurance related to the Property.
12. TERMINATION OF THE AGREEMENT.
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<PAGE>
(a) This Agreement may be terminated by either party if there has been
a material breach of the terms of this Agreement by the other party and if
within forty-five (45) days after receiving notice of such breach from the
party seeking to terminate, such breach has not been cured.
(b) Payline may terminate this Agreement, or discontinue the provision
of any Telecommunications Services provided hereunder, if in the sole
discretion of Payline, it ceases to be feasible for legal, economic or
regulatory reasons to provide Telecommunications Services to the Property;
provided that Payline provides forty-five(45)days written notice to Owner.
(c) This Agreement may also be terminated by Payline if there is a
continuing material failure by Owner to provide the services to Payline
contemplated hereby.
(d) My termination of this Agreement shall be effective as of the date
of termination, but Payline shall continue to provide Telecommunications
Services until the earlier of (i) all Payline customers at the Property are
provided Telephone Service from another source or (ii) thirty (30) days from
the date of such termination. The provisions of this agreement necessary for
such continued services shall remain effective.
(e) Upon termination of this Agreement for any reason, Payline, or any
designee of Payline, including without limitation, any party providing
financing to Payline, shall have the right, after providing Owner with
written notice of at least forty-five (45) days, without further demand, to
enter upon the Property and to dismantle and remove or render inoperative any
and all equipment or other property comprising the System so long as such
right shall encompass Section 9 (d) herein.
13. ASSIGNMENT OF THE AGREEMENT. This Agreement and the rights
hereunder may be assigned by Payline to any majority owned subsidiary of
Payline or to an affiliate or party acquiring all or substantially all of the
assets of Payline upon prior written consent of Owner. Such consent shall
not be unreasonably withheld. Alternatively, the Agreement may be assigned by
Payline to any Payline subsidiary so long as Payline agrees in writing that
it shall remain liable for all obligations arising under this Agreement.
Payline may also assign this Agreement to any party providing financing to
Payline; provided that such assignment shall not relieve Payline from its
obligations hereunder. In connection with a sale or disposition of the
Property, owner shall request Payline's written consent to assign this
Agreement and shall require any subsequent owner of the Property to assume
this Agreement and the rights and obligations hereunder. Subject to the
foregoing, this Agreement shall be binding upon and shall inure to the
benefit of the successors and assigns of the respective parties to this
Agreement.
14. OWNER WARRANTIES; INFORMATION. Owner warrants that (i) it has full
power and authority to grant to Payline the exclusive rights set forth in
this Agreement, (ii) that
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<PAGE>
no party holds any rights or interests with respect to the Property that
conflict with any rights or interests that Owner grants to Payline under this
Agreement; (iii) that the Property is not presently part of bankruptcy
proceeding, foreclosure action, or deed in lieu of foreclosure transaction;
(iv) Owner is not in default of any mortgages or other encumbrances on the
Property; and (v) no purchase contracts presently exist as to the Property.
15. PAYLINE WARRANTY. Payline warrants that (i) it will comply with all
laws and licensing requirements concerning the installation and operation of
the System; (ii) the financial statements provided to Owner are accurate; and
(iii) Payline has not been involved in litigation pertaining to the operation
of comparable services as those described in this Agreement. Except as
expressly stated in this Agreement, Payline makes no representations or
warranties regarding the System or the provision of Telecommunications
Services, express or implied, including, but not limited to, any implied
warranty of merchantability or fitness for a particular purpose.
16. INDEPENDENT CONTRACTOR. Payline shall be and is an independent
contractor and Owner shall not control or direct the details and means by
which Payline performs its duties under this Agreement. This Agreement shall
not create the relationship of employer and employee, a partnership or a
joint venture.
17. EMERGENCY CALLS. Payline will use its reasonable best efforts to
pass all "911" emergency calls through the System to authorities but makes no
warranty or guaranty of any nature as to the promptness or adequacy of any
response to any such emergency call. Payline assumes no responsibility
whatsoever for any actions with respect to emergency calls other than to use
its reasonable best efforts to pass such traffic to authorities through the
System. In the event that the System has been adversely affected by any
situation described in Section 21, Payline shall have no liability whatsoever
for failure to pass on emergency telephone traffic.
18. INDEMNIFICATION. Subject to the provisions set forth in Section 19
below, (i) Payline and Owner hereby agree to indemnify, defend and hold each
other (and each other's officers, directors, owners, employees, and agents)
harmless from and against all claims, losses and liabilities in any way
relating to, growing out of, or resulting from a material breach of each of
their respective obligations under this Agreement; and (ii) Owner will
indemnify Payline for damages to the System as provided in Section 3 herein.
In addition, Payline agrees to indemnify, defend and hold harmless Owner and
Owner's partners, employees and agents from and against all damages, losses,
liabilities, costs, and expenses (including reasonable attorneys' fees)
resulting from claims made or causes of action asserted by third parties
(including, without limitation residents of the Property) arising out of or
relating to (i) the performance by Payline (or its employees or agents) of
its obligations under this Agreement, (ii) the provision of
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<PAGE>
Telecommunications Services or (iii) compliance of Payline and/or the System
with applicable laws and regulations, except to the extent such matters are
attributable to the gross negligence or willful misconduct of Owner.
19. LIMITATION OF REMEDIES. Notwithstanding any other provision of
this agreement but without limiting the mutual indemnification in Section 18,
neither Payline nor Owner shall be liable to any third party for any
incidental or consequential damages, including but not limited to lost
profits, of any nature whatsoever or for the condition or repair of any
telephone instrument or any property to which the System is attached.
20. ARBITRATION OF DISPUTES. Any controversy, dispute, or claim of
whatever nature arising out of, in connection with or in relation to the
interpretation, performance or breach of this Agreement, including any claim
based on contract, tort or statute, shall be resolved at the request of any
party to this Agreement, by final and binding arbitration before a single
arbitrator conducted at a location determined by the arbitrator in Portland,
Oregon, administered by and in accordance with the then existing rules of
practice and procedure established by the Arbitration Chapter of the Uniform
Trial Court Rules as then in effect in the State of Oregon, and judgment upon
any award rendered by the arbitrator may be entered by any state or federal
court having jurisdiction thereof. The arbitrator shall award attorney's
fees and costs of the arbitration procedure to the prevailing party. Both
parties acknowledge that they are giving up their right to have any such
claim decided in a court of law before a judge or jury, and hereby waive all
rights to appeal.
21. FORCE MAJEURE. If the performance of any of the obligations under
this Agreement is interfered with by any reason or any circumstances beyond
the reasonable control of the parties, including, but not limited to, fire,
earthquake, storm, volcanic eruption, explosion, power failure or power
surge, acts of God, war, revolution, civil commotion, or requirement of any
government or legal body or any representative of any such government or
legal body, labor unrest, including but not limited to, strikes, slowdowns,
picketing or boycotts, then the parties shall be excused from performance on
a day-by-day basis to the extent of such interference.
22. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement contains the entire Agreement
between the parties and may not be modified, amended or changed except by
written instrument signed byduly authorized executives of both parties.
(b) WAIVER. The failure by either party at any time to require
performance by the other party or to claim a breach of any provision of this
Agreement shall not be construed as affecting any subsequent breach or the
right to require performance or to claim a breach with respect thereto.
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<PAGE>
(c) GOVERNING LAW. The rights and obligations of the parties and all
interpretations and performances of this Agreement shall be governed in all
respects by the laws of the State of Oregon.
(d) NOTICES. Any notice to be given by either party to the other shall
be in writing and either personally delivered or sent by certified mail,
return receipt requested, to the addresses of the Owner and Payline provided
below. Notices shall be deemed given when received or refused. Each party may
change its address for notice to it by notice in accordance with the
foregoing provisions.
Payline: Owner:
Payline Systems, Inc. Oregon Portland Associates
921 SW Washington, Suite 250 c/o Pacific Union Property Services, Inc.
Portland, Oregon 97205 255 SW Harrison, Suite 1B
Portland, Oregon 97201
Facsimile: 503-227-1951 Facsimile: 503-243-3805
Telephone: 503-243-2930 Telephone: 503-227-7100
Attn: A Roger Pease, President Attn: Susan Bowlsby, Vice President
(e) VALIDITY. If any provision of this Agreement shall be held to be
invalid or unenforceable, such provisions shall not affect in any respect the
validity or enforceability of the remainder of this Agreement unless the
invalidity materially affects the ability of either party to perform as
contemplated hereunder.
(f) ATTORNEYS' FEES AND COSTS. If arbitration or other proceedings are
brought to enforce or interpret this Agreement, the substantially prevailing
party shall be entitled to recover reasonable attorneys' fees and other costs
incurred in such action, arbitration or proceeding from the other party, in
addition to any other relief to which such party may be entitled.
(g) AUTHORITY. Each individual signing this Agreement on behalf of a
corporation or partnership represents that he or she has the necessary
authority to execute this Agreement on behalf of such entity and that, in the
case of a corporation, all necessary corporate action has been taken
approving the execution of this Agreement.
Any person or entity executing this Agreement as "Owner" hereby represents
and warrants to Payline that it is fully authorized by Owner to execute this
Agreement and to bind Owner to the terms and obligations set forth in this
Agreement and the Owner is fully aware of the existence and contents of this
Agreement. Owner and any person or
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<PAGE>
entity executing this Agreement on Owner's behalf acknowledges that Owner
shall be estopped from claiming that this Agreement was executed by a person
or entity lacking actual authority to bind Owner.
(h) FURTHER ASSURANCES. Upon the reasonable request of either party,
the other party shall promptly and, at its own expense, execute and deliver
any additional documents or take such actions, as may be reasonably necessary
(subject to any other agreement binding on either patty) for the purpose of
evidencing or perfecting any rights or interest of either party arising under
this Agreement or arising under documents executed in accordance with this
Agreement.
This Agreement has been signed and delivered as of the above date.
Payline: Owner:
By: /s/ /ILLEGIBLE/ By: /s/ /ILLEGIBLE/
----------------------- -----------------------------
Title: President CEO Title: Vice President - Agent
----------------------- -----------------------------
PACIFIC UNION PROPERTY SERVICES, INC.
AS AGENT FOR: OREGON PORTLAND ASSOCIATES
Page 11 - Telecommunications Services Agreement
<PAGE>
Exhibit No. 10.4 Telecommunications Services Agreement between Registrant and
Riverplace II Joint Venture (Riverplace Development)
* = Confidential Information.
<PAGE>
FIRSTLINK COMMUNICATIONS, L.L.C.
TELECOMMUNICATIONS SERVICES AGREEMENT
This Telecommunications Services Agreement ("Agreement") is entered into as of
January 18th, 1995, by and among FirstLink Communications, LLC, an Oregon
limited liability company ("FirstLink"), and Riverplace II Joint Venture, an
Oregon general partnership, and TCR #520 Riverplace Limited Partnership, a Texas
limited partnership (collectively referred to as "Owner").
1. PROPERTY. The 108-unit multi-family residential rental complex and
commercial units known as the Existing RiverPlace Development, located at 308 SW
Montgomery, Portland, Oregon, and the adjacent 182-unit multi-family residential
rental complex and commercial units currently under construction known as the
New RiverPlace Development located at 2001 SW River Drive, Portland, Oregon (the
"Property").
2. GRANT OF RIGHTS
(a) Owner grants FirstLink the sole and exclusive right, except as
otherwise provided in this Agreement, to provide Telecommunication Services to
residents of the Property. "System" shall mean all electronic devices, cable,
wire, hardware, software and other material used or necessary to transmit and
receive Telecommunication Services. "Telecommunication Services" means
two-way voice and data communications, telephone service, multi-channel cable
television, video on demand, audio on demand, voicemail, data services, security
systems, and other means of two-way communication distribution, whether now
existing or hereafter developed as between the Property and the local and/or
long distance telephone networks or other outside distributor of these and other
services. Telephone services shall include local calling, long distance, and
enhanced features such as voicemail, call waiting, distinctive ringing, speed
dialing, wake-up service, restricted dialing, account codes, custom phone
number, unlisted phone number, unpublished phone number, and no solicitation.
Cable television services will include all services currently offered by TCI
Cablevision of Oregon, Inc., ("TCI") to its west Portland residential customers
FirstLink agrees to make available to the residents at the Property within 120
days after the introduction thereof to the market by FirstLink, TCI, or others
any and all new services that become available in the west Portland cable
television franchise area. FirstLink will ensure that the quality of the
Telecommunications Services and the features available through the
Telecommunications Services are comparable to or exceed Portland area
telecommunications standards.
(b) In consideration of the substantial investment made by FirstLink in
the System, Owner agrees that it will not grant access to the Property to any
person or
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entity, other than FirstLink, for the purpose of providing Telecommunication
Services, except for the local telephone company (who shall have the right to
provide both local and long distance service, including long distance service
through AT&T, MCI, Sprint, or other carriers) and, in the case of service for
the Existing RiverPlace Development, the Property's existing service providers
(including TCI Cable) and except as required by law or otherwise allowed by this
Agreement.
3. SYSTEM EXPENSES. ACCESS. Other than as set forth herein, FirstLink
shall bear all expenses to install, operate, maintain, and repair the System and
to upgrade the System Site as necessary to accommodate the System. Owner shall,
at Owner's expense and cost, provide electrical power to the System and a System
Site. For the purposes of this Agreement, "System Site" shall mean a secure
space to house FirstLink's System equipment, which shall consist of a rent-free,
locked room. Renovation of System Site is the responsibility of FirstLink.
Owner will not be responsible for any disruption in electrical supply or for
unauthorized entry to the System Site or damage to FirstLink equipment resulting
therefrom. Owner hereby grants FirstLink and its authorized personnel access to
the Property for any reasonable purposes related to this Agreement including the
installation of the System in accordance with plans and specifications provided
to and approved by Owner. FirstLink shall not install any equipment, cabling or
wiring or make any modifications to the Property unless Owner has first approved
in writing the plans and specifications for such equipment, cabling wiring, or
such modification. Owner grants specific rights to FirstLink to use any existing
coaxial and twisted pair cabling in the Property, but all such items shall
remain the property of Owner. FirstLink will provide Owner access to the System
Site on notice of twenty-four (24) hours.
4. TERM. The term of this Agreement shall be * years from the date
hereof. The original term will automatically be renewed for up to * additional
periods of * years each on the same terms and conditions unless either party
otherwise notifies the other in writing at least 180 days prior to the end of
the original term or the first renewal term, as applicable. FirstLink shall
conduct a performance appraisal meeting with Owner prior to expiration of the
180 day notice period and shall remind the Owner of the Owner's option not to
renew the term by a written notice delivered to Owner not more than 90 days and
not less than 30 days before the last day for Owner to exercise its option not
to renew; the time for Owner's notice of election not to renew will be extended
day-for-day for each day that such reminder from FirstLink is late.
5. INSTALLATION. FirstLink shall install the System as soon as
practicable but in no event shall FirstLink be required to complete installation
sooner than six (6) weeks from signing of this Agreement. In installing the
System, FirstLink shall maintain a schedule consistent with Owner's schedule for
construction of the New RiverPlace Development and completion of units (which
FirstLink acknowledges it has reviewed).
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In all events, Telecommunications Service will be available to each residential
unit in the New RiverPlace Development by the time that Owner makes such unit
available for occupancy. Telecommunication Service will be available in the
Existing RiverPlace Development no later than February 1, 1995, except as
provided above. The installation shall be in accordance with the plans and
specifications approved by Owner and shall meet or exceed industry standards for
shared tenant service providers. FirstLink shall use only qualified, experienced
subcontractors in installing the System, and FirstLink shall replace any
subcontractor if Owner objects to the quality of the work that the subcontractor
is performing. FirstLink shall replace any work that is found to be sub-standard
or not in accordance with the approved plans and specifications. FirstLink will
coordinate schedules so that it and its contractors do not interfere with
Owner's overall construction activity. FirstLink will pay for all costs
associated with the installation of the System, including interconnection of the
Existing and New RiverPlace Developments. Immediately upon execution of this
Agreement, FirstLink will provide Owner with a letter of credit or bond in the
amount of $30,000 to secure payment of such costs. FirstLink will also indemnify
Owner for its failure to pay FirstLink contractors or subcontractors. FirstLink
may subcontract activities related to the installation of the System, but shall
be responsible for any and all acts and/or omissions by any subcontractor.
Within 30 days after installation of the System is completed, FirstLink shall
provide Owner with a statement showing the cost of the System in reasonable
detail.
6. OWNERSHIP AND CHARACTER OF THE SYSTEM. Except as otherwise stated
herein (including in Section 3), the System, including any alterations and
attachments, shall at all times remain the sole property of FirstLink. It is the
intention of the parties that every component of the System installed by
FirstLink, shall retain its character as personal property following the
installation of the System on the Property, and shall not be deemed to be a
fixture constituting a part of the Property. No part of the System owned by
FirstLink shall be or become subject to any mortgage, deed of trust or lien upon
the Property. FirstLink shall not grant or allow any lien to exist against the
System without Owner's prior approval. At the end of the term of this Agreement
(regardless of how termination comes about), all wiring, cabling, jacks,
conduit, equipment, and other components of the System except any telephone
switch and other communications equipment installed by FirstLink at the System
Site that is not part of the residential telephone distribution network shall
become the property of Owner without any further action of FirstLink, Owner or
any other person. The residential telephone distribution network is deemed to
begin at the tenant termination block within the System Site. FirstLink may
remove any telephone switch or other communications equipment it has installed
within the System Site which is not part of the residential distribution
network; FirstLink may not otherwise remove any component of the System (except
worn or obsolete components that are replaced with like or better components)
without Owner's consent. If the term of this Agreement is terminated during the
first seven years because of Owner's default, Owner will pay FirstLink within 30
days after written
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demand an amount equal to the adjusted book value of the residential telephone
distribution network (excluding any capitalized operating deficits) assuming
amortization of cost on a straight-line basis over a seven-year term. FirstLink
will provide documentation of original wiring costs.
7. SERVICE TO TENANTS. FirstLink shall provide Telecommunication Services
offered through the System to each resident requesting them. FirstLink's
obligation to provide or continue Telecommunication Services shall be contingent
on the resident paying service charges and meeting other reasonable requirements
as are established by FirstLink from time to time. Residents ejecting to
receive Telecommunication Services offered by FirstLink shall do so through the
execution and delivery to Owner or FirstLink of a Tenant Services Agreement in
the form provided, from time to time, from FirstLink to Owner (which agreement
shall clearly state that Owner is not responsible for the System or its
operation or any activities of FirstLink). FirstLink shall submit its Tenant
Service Agreement to Owner prior to distribution to tenants, and FirstLink will
obtain Owner's approval of the form before using it with residents. Owner shall
promptly provide to FirstLink any Tenant Service Agreements executed by tenants
that are delivered to Owner. Residents requesting Telecommunication Services
shall be charged and billed individually for connection to the System and for
service at standard rates established solely by FirstLink from time to time
unless prohibited by applicable law or regulation. FirstLink will provide
consolidated billing for telephone, cable television, and security services.
FirstLink shall be solely responsible for invoicing, collections and bad debts
related to provision of Telecommunication Service to residents. Owner will not
be responsible for non-payment by tenants or other subscribers for
Telecommunications Services. FirstLink's rates for Telecommunications Services
will be at or below generally prevailing rates charged by other service
providers in the market in which the Property is located. FirstLink guarantees
unconditionally to return a resident to his or her original service provider for
any reason at any time.
8. REVENUE SHARING. Owner shall be entitled to revenue sharing as
described in Exhibit A.
Should the parties renegotiate and agree, prior to the end of the
initial * year term, to extend the contract for an additional * year period
then the revenue sharing percentage contained in Exhibit B shall apply.
FirstLink will provide revenue sharing to Owner on all gross receipts
generated by local and long distance telephone services and basic and
expanded cable television services, including HB0, Showtime, Disney, The Movie
Channel, STARZ, and ENCORE.
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All revenue sharing payments will be paid quarterly in arrears, within
15 days after the end of each calendar quarter, based on the average
penetration during the preceding calendar quarter. Penetration is defined to
mean (i) for cable television, the number of residential units for which the
residents subscribed to FirstLink's cable television service divided by the
total number of residential units in the Property and (ii) for telephone, the
number of lines to residential units connected to FirstLink's telephone
service divided by the total number of residential units in the Property.
(Although commercial users are not taken into account in determining
penetration, revenues from commercial service will be included in the revenue
base for determining Owner's revenue sharing.) Average penetration is defined
as the average of the penetration on the first day of the quarter and the
penetration on the last day of the quarter.
A * bonus will be paid to Owner for signing up each existing resident at
the Existing RiverPlace Development for both telephone and cable television
service and for signing up the first resident to lease each new unit in the
New RiverPlace Development to both telephone and cable television service. On
an ongoing basis, Owner will be paid a monthly incentive of * if telephone
penetration exceeds * percent, * if telephone penetration exceeds *
percent and * if telephone Penetration exceeds * percent. Such incentive
payments will be due within 15 days after the end of each calendar quarter.
All such incentive payments will be considered a deduction from gross
receipts prior to the revenue sharing percentages.
Owner shall have the right to inspect FirstLink's records and, if it so
elects, to conduct an audit thereof to verify that the amounts paid to it
pursuant to this Section 8 are correct. If any such audit discloses that
Owner has been underpaid, FirstLink shall, within ten (10) days after demand,
pay the Owner the balance with interest at ten percent (10%) per annum
calculated from the date that payment should have been made. In addition, if
any such audit discloses that Owner has been underpaid by more than five
percent (5%) for any year, FirstLink shall reimburse Owner for the cost of
the audit.
Owner's participation through revenue sharing and Incentives is not
intended to make Owner and FirstLink partners. FirstLink is an independent
contractor and has no relationship with Owner other than as an independent
contractor.
9. ADDITIONAL OBLIGATIONS OF FIRSTLINK.
(a) FirstLink shall provide 24-hour customer service seven days a week.
Routine repair services shall be performed by FirstLink during its normal
working hours. FirstLink will respond to a service problem within four (4) hours
from notification of service problem and will provide alternate means of service
pending correction of the problem if repairs are not effected immediately. Any
telephone faults which are System wide (defined as two (2) or more customers
experiencing the same fault) will be
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addressed within one hour. A technician shall arrive at the Property to commence
maintenance services promptly after request by a customer or Owner.
(b) FirstLink shall provide a comprehensive marketing program including
marketing materials, sales support and sales training.
(c) FirstLink shall provide training to Owner's staff to enable staff to
perform the duties specified in Section 10(b).
(d) FirstLink shall repair or replace any damage to the Property resulting
from installation, operation, or removal of the System or any other acts by
FirstLink or any defect or malfunction in the System to the satisfaction of the
Owner and restore Property to its original condition.
(e) FirstLink shall comply with all applicable regulatory requirements
relating to the provision of the Telecommunication Services provided by
FirstLink as may be in effect from time to time.
(f) FirstLink shall maintain the System (including any portion of the
System owned by Owner other than equipment described in (g) below) in good
order, condition and repair.
(g) FirstLink will provide Owner with business Telephone Services at the
Owner's leasing office and community room, at discounted commercial rates below
those being offered by US West. Owner will pay the installation costs for
providing such business Telephone Services and will provide, at its own cost,
all necessary ancillary hardware such as keysets and operator consoles for the
dedicated use of the Owner; such costs will be reasonable and reflect customary
installation charges for business telephone systems.
(h) FirstLink shall pay all taxes resulting from the ownership or
operation of System and Telecommunication Service.
(i) FirstLink will provide a dedicated channel for an Owner information
service. Owner will be responsible for the programming of the digital
information service, after adequate training on its use, which will be provided
by FirstLink without charge. FirstLink will convert Owner's existing personal
computer for use as the digital information service for the dedicated Owner
information channel at the Property. If this is not possible, FirstLink will
provide the necessary equipment.
(j) FirstLink shall install network facilities for personal computer
applications within the New RiverPlace Development and for easy access to
Internet gateways.
TELECOMMUNICATIONS SERVICES AGREEMENT--Page 6
<PAGE>
These facilities will be capable of delivering local area network services, ISDN
(integrated Digital Service Network) services, and desktop video conferencing
services.
(k) FirstLink will identify a security vendor acceptable to Owner. The
security vendor will pay for all security wiring, cameras, and related security
equipment, or FirstLink will cover the portion of installation costs the vendor
is unwilling to assume. The vendor will be selected based on its willingness to
assume those costs and its ability to meet the following requirements:
1. All first and second story doors and windows monitored for the
New RiverPlace Development.
2. A "panic button" available in the master bedroom for the New
RiverPlace Development.
3. The security provider is of good business reputation and carries
a minimum of $1 million in liability insurance.
4. The security provider provides a direct indemnity and coverage
under liability insurance to the Owner, its partners and affiliates and Owner's
lender.
While Property is under construction, all dwellings will be installed with
complete wiring, door and window switches, and finish trim places for key pad at
the expense of FirstLink or the security vendor. Upon occupancy and at the
resident's request, FirstLink will complete the installation of the alarm system
including Central Processing Unit, siren, and key pad. FirstLink will establish
monthly subscription rates for monitored alarm service, such rates to be usual
and customary. Final installation of alarm system will take place within five
(5) working days of the resident's request. The security system will be
installed in accordance with plans and specifications approved by Owner, and all
wiring, cabling, equipment and other components of the security system will
become the property of Owner when installed. The security system will come with
a warranty on parts and workmanship provided by the security vendor for the
longer of two years or so long as the security system is in use.
(l) FirstLink will pay for and install at the Existing RiverPlace
Development a video security system which will be comprised of five (5) video
cameras combined on a single video channel. This channel will be displayed on
the in-house cable system of the Existing RiverPlace Development A separate
video recorder will be provided to record images from the five (5) cameras at
the Existing RiverPlace Development. FirstLink will provide up to * for
channel equipment to place the security cameras on the dedicated in-house
monitoring channel. The in-house monitoring channel will be
TELECOMMUNICATIONS SERVICES AGREEMENT--Page 7
<PAGE>
available without charge to all units subscribing to cable television service
and is provided as a convenience to subscribing residents.
(m) FirstLink shall install an average of four (4) telephone outlets in
each apartment for the New RiverPlace Development; such locations to be
determined by Owner.
(n) FirstLink shall install an average of four (4) twisted pair wires and
a total of one (1) coaxial cable to each apartment for the New RiverPlace
Development; actual number of twisted pair per unit for each specific unit will
be mutually agreed.
(o) FirstLink will provide Owner with a customer list each month (the list
as of the end of a month being due by the 15th day of the following month).
FirstLink also shall provide Owner with a wiring diagram promptly upon
completion of the installation of the System.
(p) FirstLink shall comply with Owner's policies relating to entry into
residents' units and Owner's security regulations.
10. OBLIGATIONS OF OWNER.
(a) Owner shall make the System Site available on a rent-free basis to
FirstLink during the term of this Agreement. The System Site is located as
depicted on Exhibit C attached hereto. FirstLink shall have twenty-four hour,
seven day a week exclusive access to the System Site, and Owner's employees and
agents shall not be granted access without FirstLink's permission.
(b) Owner shall use reasonable efforts to encourage its staff; agents and
representatives to encourage and promote the use of the Telecommunications
Services to residents and prospective residents as part of the amenities at the
Property. Owner consents to FirstLink's use of incentives and incentive programs
with Property management personnel, leasing staff and other Property personnel
for the purpose of promoting the System and Telecommunication Services provided
through the System, subject to Owner's approval. Owner's staff will present the
telecommunications service agreement and related information to prospective
tenants.
(c) Owner shall promptly provide to FirstLink requested specifications on
the Property, such as wiring schematics and/or building diagrams, and provide
general information on leasing activity (of a non-confidential nature) to assist
FirstLink in its sales efforts and other information reasonably necessary to
enable FirstLink to comply with governmental or Oregon Public Utility Commission
rules. All information provided to FirstLink by Owner shall remain confidential
and shall not be made available to anyone other than FirstLink and its employees
and agents. FirstLink shall not sell any
TELECOMMUNICATIONS SERVICES AGREEMENT--Page 8
<PAGE>
information (including customer lists) obtained by it in connection with its
activities pursuant to this Agreement.
(d) Owner shall cooperate with FirstLink in obtaining permits, consents,
licenses and any other requirements which may be necessary for FirstLink to
install and operate the System and furnish the Telecommunications Services;
provided that FirstLink shall pay all reasonable costs of the Owner associated
therewith (except that Owner will pay installation costs as described in Section
9(g)).
(e) Owner shall provide reasonable access to the Property to FirstLink and
its employees and agents to enable FirstLink to perform the activities
contemplated by or necessary under this Agreement including access for the
purpose of soliciting customers. FirstLink shall submit all advertising
brochures and other solicitation materials and programs to Owner and shall not
distribute any of such brochures or other materials or implement any such
program until Owner has approved the same. All material and programs will be
deemed to be approved within ten (10) working days of submission if Owner has
not responded. FirstLink shall comply with all applicable truth-in-advertising
and debt collection laws in its dealings with residents at the Property and
prospective residents. FirstLink shall not make direct solicitation to
residents without prior approval from Owner authorizing such contact and the
content of the solicitation, which approval may be withheld by Owner in its
discretion.
(f) Owner shall pay to FirstLink the sum of * toward the cost of bulk
cable television service to the 108 units of the Existing RiverPlace
Development. Such payment is due before January 15, 1995. Based on this payment,
FirstLink will provide free expanded basic cable television service for a period
of one (1) year through December 31, 1995, to all residents in place at the
Existing RiverPlace Development as of January 1, 1995, whether or not the
resident subscribes to other FirstLink service. As new residents occupy units
following January 1, 1995, they will be offered cable television at retail rates
and revenue resulting from those residents will be subject to revenue sharing
with Owner as provided in Section 8.
11. INSURANCE. FirstLink shall carry and maintain commercial general
liability insurance (either through primary coverage policies or umbrella
policies) of $3,000,000 and automobile liability insurance in the amount of
$1,000,000 both on an occurrence basis naming Owner, its partners and affiliates
and Owner's lender as additional insured covering personal injury and property
damage that may be caused by the System or FirstLink or its employees or agents
including the security system vendor. Owner and FirstLink each waive any right
of recovery against each other for any loss that is covered by insurance upon or
relating to the Property or the System to the extent of the actual proceeds
received by waiving party; provided that this provision does not limit
FirstLink's liability under Section 15. In addition, FirstLink shall carry
workers compensation insurance as required by law FirstLink shall provided
Owner with a
TELECOMMUNICATIONS SERVICES AGREEMENT--Page 9
<PAGE>
certificate of insurance simultaneously with execution of this Agreement and ten
(10) days prior to each renewal date. All insurance coverage must provide for 30
days prior notice to Owner before any cancellation, change, or non-renewal, and
all certificates of insurance shall so specify.
12. TERMINATION OF THE AGREEMENT.
(a) The term of this Agreement may be terminated by either party if there
has been a material breach of the terms of this Agreement by the other party and
if within forty-five (45) days for non-monetary breaches and ten (10) days for
monetary breaches after receiving notice of such breach from the party seeking
to terminate, such breach has not been cured.
(b) FirstLink may terminate the term of this Agreement, or discontinue the
provision of any Telecommunications Services provided hereunder, if in the sole
discretion of FirstLink, it ceases to be feasible for legal or regulatory
reasons to provide Telecommunications Services to the Property; provided that
FirstLink provides forty-five (45) days written notice to Owner.
(c) Owner may terminate the term of this Agreement if Telecommunication
Services provided by FirstLink, compared to those provided by other suppliers in
the Portland-area market, places Owner at a competitive disadvantage, or if
FirstLink rates exceed those of other service suppliers in the market in which
the Property is located, or if FirstLink fails to provide maintenance and repair
service on a prompt basis. Owner also may terminate the term of this Agreement
if FirstLink allows any lien to attach against the Property, or if FirstLink
fails to pay any of its contractors, subcontractors or suppliers (including
suppliers of bulk telephone or cable television service) when and as due, or if
FirstLink seeks protection under any bankruptcy, insolvency or similar law, or
generally fails to pay its debts when due, or has a receiver, trustee,
liquidater or similar official appointed for it or a substantial part of its
property.
(d) Any termination of the term of this Agreement shall be effective as of
the date notice of termination is given, but FirstLink shall continue to provide
Telecommunications Services until the earlier of (i) the date on which all
FirstLink customers at the Property are provided Telephone Service from another
source or (ii) ninety (90) days from the date notice of termination is given.
The provisions of this Agreement necessary for such continued services shall
remain effective.
(e) Upon termination of this Agreement for any reason and completion of
FirstLink's continued service obligations under Section 12(d), FirstLink, or any
designee of FirstLink, including without limitation, any party providing
financing to FirstLink, shall have the right, after providing Owner with written
notice of at least forty-five (45) days, without further demand, to enter upon
the Property and to dismantle and remove or
TELECOMMUNICATIONS SERVICES AGREEMENT--Page 10
<PAGE>
render inoperative any and all equipment that FirstLink is entitled to remove
pursuant to Section 6. FirstLink shall repair all damage to the Property from
the dismantling and removal of System components. If FirstLink fails to remove
any System component to which it is entitled within 45 days after the
termination of this Agreement, FirstLink shall be deemed to have abandoned the
component.
(f) Owner (or its successor in interest) may terminate this Agreement in
connection with a sale of the Property (or, if the Property is sold in pieces,
as to any portion sold) if the buyer is unwilling to assume this Agreement. Such
termination option must be exercised within 90 days after the sale is completed.
If the Agreement is terminated pursuant to this paragraph (f), Owner (or its
successor in interest) shall pay FirstLink, within 30 days after demand by
FirstLink, an amount equal to the sum of (i) the adjusted book value of the
residential telephone distribution network, excluding any capitalized operating
deficits (or the portion of such cost attributable to the portion of the
Property that is sold), assuming amortization on a straight-line basis over a *
term, plus (ii) an amount equal to (A) * of the net operating income for the *
latest full calendar months preceding the termination date multiplied by (B) the
number of calendar months then-remaining in the term of this Agreement. For such
purpose, net operating income is the total revenues from the System collected by
FirstLink less operating expenses of the System. Total revenue will be
calculated (i) during the first * years of the term of this Agreement, by using
the penetration ratio for the System and revenues actually collected by
FirstLink from units serviced through the System and extrapolating to what
revenues would be at 95 percent occupancy and (ii) after the first * years of
the term of this Agreement, by using revenues actually collected by FirstLink
for the System. Revenue sharing and incentives paid to Owner pursuant to this
Agreement are operating expenses of the System. Amortization and depreciation
charges for the cost of the System also are an operating expense and will be
expensed for purposes of this provision on a straight-line basis over the
initial * year term of this Agreement.
13. ASSIGNMENT OF THE AGREEMENT. This Agreement and the rights hereunder
may be assigned by FirstLink to any party acquiring all or substantially all of
the assets of FirstLink, provided that (i) the assignee has three year's
experience in providing shared tenant services for both telephone and cable
television or, alternatively, hires FirstLink to manage the System, (ii) the
assignee has a net worth at least equal to FirstLink's net worth. and (iii) the
assignee's involvement with the System does not cause a conflict of interest or
an ERISA violation for the Owner or its partners. Alternatively, the Agreement
may be assigned by FirstLink to any FirstLink subsidiary so long as FirstLink
agrees in writing that it shall remain liable for all obligations arising under
this Agreement. FirstLink may also assign this Agreement to any lender
providing financing to FirstLink; provided that such assignment shall not
relieve FirstLink from its obligations hereunder and that lender agrees to
undertake FirstLink's obligations hereunder if it exercises any of its remedies.
FirstLink may pledge its right
TELECOMMUNICATIONS SERVICES AGREEMENT--Page 11
<PAGE>
to receive any payments hereunder to any lender providing financing to
FirstLink. In connection with a sale or disposition of the Property, Owner
shall require any subsequent owner of the Property to assume this Agreement
and the rights and obligations hereunder. Subject to the foregoing, this
Agreement shall be binding upon and shall inure to the benefit of the
successors and assigns of the respective parties to this Agreement. Other
than as specifically provided herein, neither FirstLink nor Owner may assign
this Agreement without the written consent of the other, consent not being
unreasonably withheld.
14. OWNER WARRANTIES: INFORMATION. Owner warrants that (i) it has full
power and authority to grant to FirstLink the exclusive rights set forth in this
Agreement, (ii) no party holds any rights or interests with respect to the
Property that conflict with any rights or interests that Owner grants to
FirstLink under this Agreement (except any lien against the New RiverPlace
Development held by the Owner's construction lender); (iii) the Property is not
presently part of bankruptcy proceeding, foreclosure action, or deed in lieu of
foreclosure transaction; (iv) Owner has not been notified that it is in default
of any mortgages or other encumbrances on the Property; and (v) no purchase
contracts presently exist as to the Property (except any agreement between the
parties comprising Owner).
15. FIRSTLINK WARRANTY. FirstLink warrants that (i) it will comply with
all laws and licensing requirements concerning the installation and operation of
the System; (ii) the financial statements provided to Owner are accurate; and
(iii) FirstLink has not been involved in litigation pertaining to the operation
of services comparable to those described in this Agreement.
16. INDEPENDENT CONTRACTOR. FirstLink shall be and is an independent
contractor, and Owner shall not control or direct the details and means by which
FirstLink performs its duties under this Agreement. This Agreement shall not
create the relationship of employer and employee, a partnership or a joint
venture.
17. EMERGENCY CALLS. FirstLink shall ensure that all 911 calls
automatically transmit the resident's phone number, name, and address (including
apartment number) to the emergency authority.
18. INDEMNIFICATION. FirstLink and Owner hereby each agrees to indemnify,
defend and hold the other (and the other's officers, directors, owners,
employees, and agents) harmless from and against all claims, losses and
liabilities in any way relating to, growing out of, or resulting from a material
breach of its obligations under this Agreement
FirstLink agrees to indemnify, defend and hold harmless Owner and Owner's
partners and affiliates and their respective employees and agents from and
against all
TELECOMMUNICATIONS SERVICES AGREEMENT--Page 12
<PAGE>
damages, losses, liabilities, costs, and expenses (including reasonable
attorneys' fees) resulting from claims made or causes of action asserted by
third parties (including, without limitation, residents of the Property)
arising out of or relating to (i) the performance by FirstLink (or its
contractors, subcontractors, employees, or agents) under this Agreement,
including damage to the Property or property of tenants caused by FirstLink
(or its contractors, subcontractors, employees or agents) while on or about
the Property, (ii) the provision of Telecommunications Services; (iii)
compliance of FirstLink and/or the System with applicable laws and
regulations; (iv) infringement upon patents, copyrights, and other
intellectual property rights; (v) any act or omission by FirstLink or its
contractors, subcontractors, employees, or agents with third-parties
(including residents of the Property), including advertising or other
solicitations and attempts to collect delinquent accounts; and (vi) defects
in the System or any malfunction of the System.
FirstLink shall promptly advise Owner in writing of any action,
administrative or legal proceeding or investigation as to which its
indemnification may apply, and FirstLink at FirstLink's expense, shall assume on
behalf of Owner and the other indemnitees and conduct with due diligence and in
good faith the defense thereof with counsel reasonably satisfactory to Owner,
provided, however, that any indemnitee shall have the right, at its option, to
be represented therein by advisory counsel of its own selection. In the event of
failure by FirstLink to fully perform in accordance with this indemnification
provision, Owner, at its option, and without relieving FirstLink of its
obligations hereunder, may so perform, but all costs and expenses so incurred by
Owner in that event must be reimbursed by FirstLink to Owner, together with
interest, from the date any such expense was paid by Owner until reimbursed by
FirstLink, at the rate of interest provided to be paid on judgments by the law
of the jurisdiction to which the interpretation of this Agreement is subject.
FirstLink's indemnification will not be limited to damages, compensation or
benefits payable under insurance policies, workers' compensation acts,
disability benefit acts or other employees' benefit acts. The provisions of this
Section 18 apply to all activities of FirstLink with respect to the Property,
whether occurring before or after the date of this Agreement and before or after
any termination of this Agreement.
Except for loss or damage to the System to the extent caused by the gross
negligence or willful misconduct of an indemnitee the indemnitees shall never be
liable in any manner to FirstLink for any injury to or death of persons or for
any loss of or damage to the property of FirstLink, its employees, agents,
customers, invitees, licensees, or others (whether such loss or damage is
occasioned by casualty, theft, or any other cause of whatsoever nature), even if
due in whole or part to the condition of the Property or the sole or concurrent
negligence of the indemnitees or any one of them and FirstLink hereby waives and
relinquishes forever any such claims it might have against the indemnitees now
or in the future. In no event shall the indemnitees ever be liable in any manner
to FirstLink or any other party as a result of the acts of omissions
TELECOMMUNICATIONS SERVICES AGREEMENT--Page 13
<PAGE>
of FirstLink, its agents, employees, contractors, customers, invitees,
licensees, or others, and FirstLink hereby waives and relinquishes forever
any such claims it might have against the indemnitees now or in the future.
All personal property of FirstLink upon the Property and any of FirstLink's
property affixed or attached to the Property shall be at the sole risk of
FirstLink.
Except as specified in the immediately preceding paragraph, no party will
have any right or claim against any indemnitee for any property damage (whether
caused by negligence or the condition of the Property or any part thereof),
except as otherwise specified in this paragraph by way of subrogation or
assignment, and FirstLink waives and relinquishes any such right. To the extent
FirstLink chooses to insure any of FirstLink's personal property upon the
Property or any of FirstLink's property affixed or attached to the Property,
FirstLink shall cause its insurance carrier(s) to endorse all applicable
policies waiving the carrier's right of recovery under subrogation or otherwise
in favor of the indemnitees and provide a certificate of insurance verifying
this waiver.
19. VENUE AND JURISDICTION. The parties agree that venue and jurisdiction
for any disputes or controversies arising hereunder shall be exclusively
reserved to the courts of Multnomah County, Oregon, except for any matters of
federal jurisdiction, which shall be reserved to the United States District
Court for the District of Oregon.
20. FORCE MAJEURE. If the performance of any of the obligations under this
Agreement is interfered with by any reason or any circumstances beyond the
reasonable control of the parties, including, but not limited to, fire,
earthquake, storm, volcanic eruption, explosion, power failure or power surge,
acts of God, war, revolution, civil commotion, or requirement of any government
or legal body or any representative of any such government or legal body, labor
unrest, including but not limited to, strikes, slowdowns, picketing or boycotts,
then the parties shall be excused from performance on a day-by-day basis to the
extent of such interference; provided that FirstLink shall be responsible for
compliance with all laws and regulations existing on the date of this Agreement,
notwithstanding this Section 20.
21. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement contains the entire Agreement
between the parties and may not be modified, amended or changed except by
written instrument signed by duly authorized executives of both parties.
(b) WAIVER. The failure by either party at any time to require
performance by the other party or to claim a breach of any provision of this
Agreement shall not be construed as affecting any subsequent breach or the right
to require performance or to claim a breach with respect thereto.
TELECOMMUNICATIONS SERVICES AGREEMENT--Page 14
<PAGE>
(c) GOVERNING LAW. The rights and obligations of the parties and all
interpretations and performances of this Agreement shall be governed in all
respects by the laws of the State of Oregon.
(d) NOTICES. Any notice to be given by either party to the other shall be
in writing and either personally delivered or sent by certified mail, return
receipt requested, to the addresses of the Owner and FirstLink provided below.
Notices shall be deemed given when received or refused. Each party may change
its address for notice to it by notice in accordance with the foregoing
provisions.
Owner:
The Prudential Insurance Company of America
Prudential Real Estate Investors
Attn.: Vice President, Acquisitions
2029 Century Park East, Suite 3600
Los Angeles, California 90067
and: The Prudential Insurance Company of America
Prudential Real Estate Investors
Attn.: Wes Ahrens
4309 Hacienda Drive, Suite 500
Pleasanton, California 94588-2740
and: The Prudential Insurance Company of America
The Prudential Realty Group
Attn.: Norman Chemin, Esq.
2029 Century Park East, 37th Floor
Los Angeles, California 90067
and: Trammell Crow Residential
Attn.: Clyde P. Holland, Jr.
5808 Lake Washington Boulevard, NE, Suite 101
Kirkland, Washington 98033-7350
Facsimile: 206-828-0904
Telephone: 206-828-3003
TELECOMMUNICATIONS SERVICES AGREEMENT--Page 15
<PAGE>
FirstLink:
FirstLink Communications, L.L.C.
Attn.: A. Roger Pease, CEO
921 SW Washington, Suite 250
Portland, Oregon 97205
Facsimile: 503-227-1951
Telephone: 503-306-4444
(e) VALIDITY. If any provision of this Agreement shall be held to be
invalid or unenforceable, such provisions shall not affect in any respect the
validity or enforceability of the remainder of this Agreement unless the
invalidity materially affects the ability of either party to perform as
contemplated hereunder.
(f) ATTORNEYS' FEES AND COSTS. If arbitration or other proceedings are
brought to enforce or interpret this Agreement, the prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs incurred in such
arbitration or proceeding from the other party, in addition to any other relief
to which such party may be entitled.
(g) AUTHORITY. Each party represents that any individual signing this
Agreement on behalf of a corporation or partnership has the necessary authority
to execute this Agreement on behalf of such entity and that, in the case of a
corporation, all necessary corporate action has been taken approving the
execution of this Agreement.
(h) FURTHER ASSURANCES. Upon the reasonable request of either party, the
other party shall promptly and, at its own expense, execute and deliver any
additional documents or take such actions, as may be reasonably necessary
(subject to any other agreement binding on either party) for the purpose of
evidencing or perfecting any rights or interest of either party arising under
this Agreement or arising under documents executed in accordance with this
Agreement.
22. TCI AGREEMENT. At FirstLink's request, simultaneous with this
Agreement, Owner is entering into a separate agreement with TCI Cablevision of
Oregon, Inc. ("TCI") providing for cable television service to the Property.
FirstLink and Owner agree that, so long as this Agreement is in effect,
FirstLink will deal with TCI and will be responsible for the performance of all
obligations of Owner under such agreement with TCI. Upon termination of this
Agreement, Owner will be entitled to deal with TCI, and TCI will be entitled to
use all components of the System that are beneficial for providing cable
television service to the Property. In the event of any dispute with TCI
(including as a result of FirstLink's failure to perform), Owner will be
entitled to terminate FirstLink's right to provide cable television service for
the Property and thereafter may deal directly with TCI or, to the extent allowed
by the TCI agreement, another service
TELECOMMUNICATIONS SERVICES AGREEMENT--Page 16
<PAGE>
provider. The relationship with TCI will not effect Owner's right to revenue
sharing as provided in this Agreement.
23. NO PUBLIC ANNOUNCEMENT: CONFIDENTIALITY FirstLink will not make any
public announcement or publicity release regarding this Agreement or the service
to be provided to the Property without Owner's prior written approval. FirstLink
agrees not to identify Owner or its partners or affiliates (including The
Prudential Insurance Company of America) or the Property in any advertising, or
use any photograph or likeness of the Property in any advertising, unless in any
such case Owner and each other person named in the advertising has approved the
advertising. FirstLink and Owner each agrees to keep confidential the terms of
this Agreement and all other related agreements and documents, as well as all
information provided by the other party in connection with this Agreement, and
FirstLink and Owner each agrees that it will not disclose any such information
to any person except for disclosure (i) to its counsel, accountants, employees,
and other persons advising it in connection with matters relating to this
Agreement who have a need to know the information given to them and who are
advised to keep such information confidential, (ii) to potential purchasers of
the Property who are advised to keep such information confidential, and (iii) as
required by law or court order.
24. SEPARATE OWNERSHIP. It is contemplated that Riverplace II Joint
Venture (the "JV") will acquire the New RiverPlace Development from TCR #520
Riverplace Limited Partnership ("TCR"). Until such acquisition occurs, and if
such acquisition is never completed, this Agreement will be construed as
separate agreements between FirstLink and TCR with respect to the New RiverPlace
Development and FirstLink and the JV with respect to the Existing RiverPlace
Development, in each case disregarding provisions that are not applicable to the
portion of the Development in question. Transfer of the New RiverPlace
Development from TCR to the JV may be completed without further consent or
approval from FirstLink, and after such transfer is completed, this Agreement
will be construed as an agreement solely between FirstLink and the JV with
respect to the entire Development. If, prior to acquisition of the New
RiverPlace Development by the JV, either TCR or the JV defaults under this
Agreement, such default shall not affect the other of them, nor shall FirstLink
be entitled to terminate this Agreement with respect to either TCR or the JV on
account of a default by the other of them. The JV agrees that it will continue
to allow FirstLink to use the System Site and related wiring and cabling running
through the Existing RiverPlace Development to service the New RiverPlace
Development even if this Agreement is terminated as between FirstLink and the
JV.
<PAGE>
This Agreement has been signed and delivered as of the above date.
FirstLink:
FIRSTLINK COMMUNICATIONS, L.L.C. an Oregon limited
liability company
By: /s/ A. Robert Pease
-----------------------------
A. Roger Pease
Chief Executive Officer
Owner:
TCR #520 RIVERPLACE LIMITED PARTNERSHIP, a Texas
limited partnership
By: TCR Northwest 1993, Inc., a Texas corporation, its sole
general partner
By: /s/ [ILLLEGIBLE]
-----------------------------
Clyde P. Holland, Jr.
President
RIVERPLACE II JOINT VENTURE, an Oregon general
partnership
By: The Prudential Insurance Company of America, a
New Jersey corporation, a general partner
By: /S/ Michael J. Tyre
-----------------------------
Michael J. Tyre
Vice President
By: TCR #520 Riverplace Limited Partnership, a Texas
limited partnership, a general partner
By: TCR Northwest 1993, Inc., a Texas
corporation, its sole general partner
By: /s/ [ILLEGIBLE]
------------------------
Clyde P. Holland, Jr.
President
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
TELECOMMUNICATIONS SERVICES AGREEMENT
EXHIBIT A
Revenue sharing to Owner based on * year agreement
PERCENT COMMISSION
PENETRATION PERCENTAGE
------------- ------------
* *
Revenue sharing percentages to Owner will increase based on adding additional
marketable dwellings to those currently under contract at the property.
Additional dwellings include those in the Portland/Vancouver area.
Upon the addition of * units in projects in which Trammell Crow Residential has
an interest, other than those at the RiverPlace Development, revenue sharing
percentage will increase to:
PERCENT COMMISSION
PENETRATION PERCENTAGE
------------- ------------
* *
Upon the addition of * units in projects in which Trammell Crow Residential has
an interest, other than those at the RiverPlace Development, revenue sharing
percentages will increase to:
PERCENT COMMISSION
PENETRATION PERCENTAGE
------------- ------------
* *
Upon the addition of * units in projects in which Trammell Crow Residential has
an interest, other than those at the RiverPlace Development, revenue sharing
percentages will increase to:
PERCENT COMMISSION
PENETRATION PERCENTAGE
------------- ------------
* *
<PAGE>
FIRSTLINK COMMUNICATIONS, LLC.
TELECOMMUNICATIONS SERVICES AGREEMENT
EXHIBIT B
Revenue sharing to Owner based on * year contract extension option:
PERCENT COMMISSION
PENETRATION PERCENTAGE
------------- ------------
* *
Revenue sharing percentages to Owner will increase based on -adding additional
marketable dwellings to those currently under contract at the property.
Additional dwellings include those in the Portland/Vancouver area.
Upon the addition of * units in projects in which Trammell Crow Residential has
an interest, other than those at the RiverPlace Development, revenue sharing
percentage will increase to:
PERCENT COMMISSION
PENETRATION PERCENTAGE
------------- ------------
* *
Upon the addition of * units in projects in which Trammell Crow Residential has
an interest, other than those at the RiverPlace Development, revenue sharing
percentages will increase to:
PERCENT COMMISSION
PENETRATION PERCENTAGE
------------- ------------
* *
Upon the addition of * units in projects in which Trammell Crow Residential has
an interest, other than those at the RiverPlace Development, revenue sharing
percentages will increase to:
PERCENT COMMISSION
PENETRATION PERCENTAGE
------------- ------------
* *
[MAP DELETED]
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Exhibit No. 10.5 Telecommunications Services Agreement between Registrant and
Elsie D. McIver U/A Trust Dated 1/4/72 (Vista St. Clair).
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FIRSTLINK COMMUNICATIONS, INC.
and
ELSIE D. MCIVER U/A TRUST DATED 1/4/72
VISTA ST. CLAIR
TELECOMMUNICATIONS SERVICES AGREEMENT
This agreement ("Agreement") is entered into as of July 11, 1996, by and
between FirstLink Communications, Inc., an Oregon corporation ("FirstLink"), and
Douglas D. McIver, Trustee of the Elsie D. McIver U/A Trust dated 1/4/72
("Owner").
1. PROPERTY. Owner owns the multi-family residential complex commonly
known as Vista St. Clair, located at 1000 SW Vista Avenue, Portland, Oregon,
which consists of 254 living units (the "Property").
2. GRANT OF RIGHTS
(a) Owner grants FirstLink the sole and exclusive right, except as
provided in the last sentence of clause (b) below, to install, own, operate,
replace and maintain the System on, off and through the Property and the sole
and exclusive right to provide Telecommunication Services to residents of the
Property. "System" shall mean all electronic devices, cable, wire, hardware,
software and other material used to transmit and receive two-way voice and data
communications, telephone service ("Telephone Service"), multi-channel TV, video
on demand, audio on demand, voice mail, data services and other means of two-way
communication distribution, whether now existing or hereafter developed
(collectively "Telecommunication Services") as between the Property and the
local and/or long distance telephone networks or other outside distributor of
these and other services.
It is anticipated that Telephone Services will include local and long distance
calling, multi-channel television, voice mail and calling features such as
conference calling, call waiting and call forwarding. Additional services will
be added from time to time, as available and as warranted by tenant demand.
Such additional Telecommunication Services may include: video conferencing,
on-line computer services, electronic mail, wireless services (such as cellular
telephone) and other types of services. There can be no assurance that any or
all of the above additional services will be made available. Their availability
is dependent upon many variables
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and factors beyond FirstLink's control. Such factors include, but are not
limited to, technical feasibility, economic, regulatory and market
considerations.
(b) In consideration of the substantial investment made by FirstLink in
the System, Owner agrees that it will not grant access to the Property to any
person or entity, other than FirstLink, for the purpose of operating or
maintaining the System, or permit the installation, maintenance or operation at
the Property of any other equipment, wire, cable, or material by any person or
entity that similarly provides Telecommunication Services. This exclusivity
provision shall not deny the local telephone company the right to serve
residents of the Property.
3. SYSTEM EXPENSES. Other than as set forth herein, FirstLink shall bear
all expenses to install, operate, maintain and repair the System. Owner shall,
at Owners expense and cost, provide electrical power to the System and shall pay
for any damage to the System caused by the negligence or misconduct of Owner or
Owner's agent(s) or employees. For the purposes of this Agreement, "System Site"
shall mean an adequate and secure space to house FirstLink's System equipment,
which shall consist of a rent-free, locked room meeting FirstLink's
specifications. The System Site shall be designated as provided in section
10(a). Owner hereby grants FirstLink and its authorized personnel access to the
Property for any reasonable purposes related to this Agreement including the
installation of cabling or microwave equipment to interconnect buildings and to
connect to other telecommunication systems and grants specific rights to
FirstLink to use both existing coaxial and twisted pair cabling in the Property.
FirstLink agrees to notify the Facility Manager when either FirstLink or its
authorized personnel are on-site. FirstLink will not have access to any rental
units without the tenant's consent.
4. TERM. The term of this Agreement shall be * years from the date
hereof. The original term will automatically be renewed for up to two (2)
additional periods of * years each unless either party otherwise notifies the
other in writing at least 180 days prior to the end of the original term or
any renewal term.
5. INSTALLATION. FirstLink shall commence installation of the System
as soon as practicable and in a manner that minimizes interruption of
existing communication services. In no event shall FirstLink interrupt
service to tenants by other providers, including US West. Telecommunication
Services to the Property shall commence no later than 180 days from
commencement of installation. FirstLink shall give Owner at least ten (10)
days notice prior to the
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commencement of installation. FirstLink may subcontract activities related to
the installation of the System, but shall be responsible for any and all acts
and/or omissions by any subcontractor.
6. OWNERSHIP AND CHARACTER OF THE SYSTEM. Except as otherwise stated
herein, the System, including any alterations and attachments, shall at all
times remain the sole property of FirstLink. It is the intention of the parties
that the System, and every component of the System, shall retain its character
as personal following the installation of the System on the Property, and shall
not be deemed to be a fixture constituting a part of the Property. No part of
the System shall be or become subject to any mortgage, deed of trust or lien
upon the Property.
7. SERVICE TO TENANTS. FirstLink shall provide Telephone Service and
other Telecommunication Services offered through the System to each resident
requesting them. FirstLink's obligation to provide or continue Telecommunication
Services shall be contingent on the resident paying service charges. Residents
electing to receive Telecommunication Services offered by FirstLink shall do so
through the execution and delivery to Owner or FirstLink of a Tenant Services
Agreement in the form provided, from time to time, from FirstLink to Owner.
Owner shall promptly provide such executed documents to FirstLink. Residents
requesting Telecommunication Services shall be charged and billed individually
for connection to the System and for service at standard rates established
solely by FirstLink from time to time unless prohibited by applicable law or
regulation. FirstLink shall be solely responsible for invoicing, collections and
bad debts related to provision of Telecommunication Service to residents.
Both parties agree that neither the Owner nor the Owner's agent shall have any
liability regarding the number of residents electing to use Telecommunications
Services.
8. COMMISSIONS. Owner shall be entitled to Commissions equal to *
percent * of all gross revenues actually collected for services provided to
each living unit served by FirstLink hereunder. All commission payments
hereunder will be paid quarterly in arrears. Commissions begin accruing upon
installation of service. The first commission payment will be for the quarter
ending September 30, 1999. Payments are made on the 15th of the month
following quarter end. Commissions accrued but unpaid prior to that date will
be due and payable: (1) on *, or (2) when the Property is sold and the
subsequent owner assumes this Agreement and the rights and obligations
hereunder, or (3) when Owner elects, at Owner's sole option, to amend this
Agreement to include an assumption clause requiring a subsequent owner to
assume this Agreement and the rights and obligations hereunder, whichever
occurs first.
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Owner shall have the right to inspect FirstLink's annual audited financials and
records relating to payments received by Owner from FirstLink pursuant to this
Section. Owner may elect to conduct an audit thereof to verify that the amounts
paid to it pursuant to this Section are correct. If any such audit discloses
that Owner has been underpaid, FirstLink shall, within ten (10) days after
demand, pay the Owner the balance with interest at ten percent (10%) per annum
calculated from the date that payment should have been made. In addition, if any
such audit discloses that Owner has been underpaid by more than five percent
(5%) for any year, FirstLink shall reimburse Owner for the cost of the audit.
9. ADDITIONAL OBLIGATIONS OF FIRSTLINK. FirstLink shall:
(a) Make a customer service representative available to receive service
requests or inquiries from Owner or residents and insure that it responds to
service requests within four (4) hours of receipt. Routine maintenance services
shall be performed by FirstLink during its normal working hours. A technician
shall arrive at the Property to commence maintenance services promptly after
request by a customer of such services, provided however, where such requests
are made on, or on a day preceding a Saturday, Sunday or holiday, FirstLink's
system technician shall arrive at the Property to commence maintenance services
on the next normal working day.
(b) Provide Owner with marketing materials, sales support and sales
training to enable Owner and Owner's employees to market Telecommunications
Services in accordance with Section 10(b);
(c) Provide training to Owner's staff to enable staff to perform the
duties specified in Section 10(b);
(d) Repair or replace any damage to the Property resulting from
installation, operation, or removal of the System or any other acts by FirstLink
to the satisfaction of the Owner and restore Property to its original condition;
(e) Comply with all applicable regulatory requirements relating to the
provision of the Telecommunication Services provided by FirstLink as may be in
effect from time to time;
(f) Maintain the System in good order, condition and repair;
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(g) Provide owner with business Telephone Services at the Property. Owner
will pay the installation costs for providing such business Telephone Services
and will provide, at its own cost, all necessary ancillary hardware such as
keysets and operator consoles for the dedicated use of the Owner; such costs
will be reasonable and reflect customary installation charges for business
telephone systems; and
(h) Pay all taxes resulting from the ownership or operation of System and
service.
10. OBLIGATIONS OF OWNER. Owner shall:
(a} Make the System Site available on a rent-free basis to FirstLink
during the term of this Agreement. The construction and location of the
System Site shall be as Owner and FirstLink reasonably agree, subject to
technical and regulatory requirements as determined by FirstLink. FirstLink
shall have twenty-four hour, seven day a week access to the System Site, and
Owner s employees and agents shall not disturb the System;
(b) Use reasonable efforts to encourage its staff, agents and
representatives to encourage and promote the use of the Telecommunications
Services to residents and prospective residents as part of the amenities
provided by Owner at the Property. Owner consents to FirstLink's use of
incentives and incentive programs with Property management personnel, leasing
staff and other Property personnel for the purpose of promoting the System and
Telecommunication Services provided through the System. Owner's staff will
present the telecommunications service agreement and related information to
prospective tenants with the objective of securing sales. It is envisioned that
this selling process will require a minimal amount of time on behalf of Owner's
staff. If tenants have additional questions or require additional information,
their sales lead will be referred to FirstLink staff who will be responsible for
responding to customer inquiries and securing any resulting sales. FirstLink
will also be fully responsible for the initial sales conversion process;
(c) Promptly provide to FirstLink requested specifications on the
Property, such as wiring schematics, building diagrams, and other specific
information regarding resident transactions, such as rentals, move-ins,
move-outs, transfers, intents to vacate, and the entering into or termination
of leases and other information necessary to market and operate the System
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and provide the Telecommunications services according to this Agreement or to
comply with governmental or Utility Commission rules as may be determined by
FirstLink;
(d) Cooperate with FirstLink in obtaining permits, consents, licenses and
any other requirements which may be necessary for FirstLink to install and
operate the System and furnish the Telecommunications Services; provided that
FirstLink shall pay all reasonable costs of the Owner associated therewith
except that Owner will pay installation costs as described in Section 9(g);
(e) Provide reasonable access to the Property to FirstLink and its
employees and agents to enable FirstLink to perform the activities contemplated
by or necessary under this Agreement including access for the purpose of
soliciting customers.
11. INSURANCE. FirstLink shall carry and maintain liability insurance of
$3,000,000 naming Owner and Owner's agent as additional insured covering
personal injury and property damage that may be caused to person(s), the
Property or its contents, by the System or FirstLink's employees or agents.
Owner and FirstLink each waive any right of recovery against each other for any
claims that may be brought for any loss that is covered by insurance upon or
relating to the Property or the System to the extent of the actual proceeds
received by waiving party. Owner shall carry and maintain general liability
insurance related to the Property.
12. TERMINATION OF THE AGREEMENT.
(a) This Agreement may be terminated by either party if there has been a
material breach of the terms of this Agreement by the other party and if within
forty-five (45) days (fifteen (15) days for a breach relating to service
interruption) after receiving notice of such breach from the party seeking to
terminate, such breach has not been cured.
(b) FirstLink may terminate this Agreement, or discontinue the provision
of any Telecommunications Services provided hereunder, if in the sole discretion
of FirstLink, it ceases to be feasible for legal, economic or regulatory reasons
to provide Telecommunications Services to the Property; provided that FirstLink
provides forty five (45) days written notice to Owner.
(c) This Agreement may also be terminated by FirstLink if there is a
continuing material failure by Owner to provide the services to FirstLink
contemplated hereby.
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(d) Owner may terminate this Agreement if FirstLink's services are found
to be not competitive with other providers of similar services in the Portland
area.
(e) Any termination of this Agreement shall be effective as of the date of
termination, but FirstLink shall continue to provide Telecommunications Services
until the earlier of ti) all FirstLink customers at the Property are provided
Telephone Service from another source or (ii) thirty (30) days from the date of
such termination. The provisions of this Agreement necessary for such continued
services shall remain effective.
(f) Upon termination of this Agreement for any reason, FirstLink, or any
designee of FirstLink, including without limitation, any party providing
financing to FirstLink, after providing Owner with written notice of at least
fifteen (15) days, without further demand, shall enter upon the Property and
dismantle and remove any and all equipment or other property comprising the
System so long as such right shall encompass Section 9 (d) herein. FirstLink
shall repair any damage to the property from the dismantling and removal of
System components.
13. ASSIGNMENT OF THE AGREEMENT. This Agreement and the rights hereunder
may be assigned by FirstLink to any majority-owned subsidiary of FirstLink or to
an affiliate or party acquiring all or substantially all of the assets of
FirstLink upon prior written consent of Owner. Such consent shall not be
unreasonably withheld. Alternatively, the Agreement may be assigned by FirstLink
to any FirstLink subsidiary so long as FirstLink agrees in writing that it shall
remain liable for all obligations arising under this Agreement. FirstLink may
also assign this Agreement to any party providing financing to FirstLink;
provided that such assignment shall not relieve FirstLink from its obligations
hereunder.
14. OWNER WARRANTIES: INFORMATION. Owner warrants that (i) it has full
power and authority to grant to FirstLink the exclusive rights set forth in this
Agreement, (ii) that no party holds any rights or interests with respect to the
Property that conflict with any rights or interests that Owner grants to
FirstLink under this Agreement; (iii) that the Property is not presently part of
bankruptcy proceeding, foreclosure action, or deed in lieu of foreclosure
transaction; (iv) Owner is not in default of any mortgages or other encumbrances
on the Property; and (v) no purchase contracts presently exist as to the
Property.
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15. FIRSTLINK WARRANTY. FirstLink warrants that it will comply with all
laws and licensing requirements concerning the installation and operation of the
System. Except as expressly stated in this Agreement, FirstLink makes no
representations or warranties regarding the System or the provision of
Telecommunications Services, express or implied, including, but not limited to,
any implied warranty of merchantability or fitness for a particular purpose.
16. INDEPENDENT CONTRACTOR. FirstLink shall be and is an independent
contractor and Owner shall not control or direct the details and means by which
FirstLink performs its duties under this Agreement. This Agreement shall not
create the relationship of employer and employee, a partnership or a joint
venture.
17. EMERGENCY CALLS. FirstLink will use its reasonable best efforts to
pass all "911" emergency calls through the System to authorities but makes no
warranty or guaranty of any nature as to the promptness or adequacy of any
response to any such emergency call. FirstLink assumes no responsibility
whatsoever for any actions with respect to emergency calls other than to use its
reasonable best efforts to pass such traffic to authorities through the System.
In the event that the System has been adversely affected by any situation
described in Section 21, FirstLink shall hove no liability whatsoever for
failure to pass on emergency telephone traffic.
18. INDEMNIFICATION. Subject to the provisions set forth in Section 19
below, (i) FirstLink and Owner hereby agree to indemnify, defend and hold each
other (and each other's officers, directors, owners, employees, and agents)
harmless from and against all claims, losses and liabilities in any way relating
to, growing out of, or resulting from a material breach of each of their
respective obligations under this Agreement; and (ii) Owner will indemnify
FirstLink for damages to the System as provided in Section 3 herein.
In addition, FirstLink agrees to indemnify, defend and hold harmless Owner
and Owners partners, employees and agents from and against all damages,
losses, liabilities, costs, and expenses (including reasonable attorneys'
fees) resulting from claims made or causes of action asserted by third
parties (including, without limitation, residents of the Property) arising
out of or relating to (i) the performance by FirstLink (or its employees or
agents) of its obligations under this Agreement, (ii) the provision of
Telecommunications Services or (iii) compliance of FirstLink and/or the
System with applicable laws and regulations, except to the extent such
matters are attributable to the gross negligence or willful misconduct of
Owner.
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19. LIMITATION OF REMEDIES. Notwithstanding any other provision of this
agreement but without limiting the mutual indemnification in Section 18, neither
FirstLink nor Owner shall be liable for any incidental or consequential damages,
including but not limited to lost profits, of any nature whatsoever or for the
condition or repair of any telephone instrument or any Property to which the
System is attached.
20. ARBITRATION OF DISPUTES. Any controversy, dispute, or claim of
whatever nature arising out of, in connection with or in relation to the
interpretation, performance or breach of this Agreement, including any claim
based on contract, tort or statute, shall be resolved at the request of any
party to this Agreement, by final and binding arbitration before a single
arbitrator conducted at a location determined by the arbitrator in Portland,
Oregon, administered by and in accordance with the then existing rules of
practice and procedure established by the Arbitration Chapter of the Uniform
Trial Court Rules as then in effect in the State of Oregon, and judgment upon
any award rendered by the arbitrator may be entered by any state or federal
court having jurisdiction thereof. The arbitrator shall award attorney's fees
and costs of the arbitration procedure to the prevailing party. Both parties
acknowledge that they are giving up their right to have any such claim decided
in a court of law before a judge or jury, and hereby waive all rights to appeal.
21. FORCE MAJEURE. If the performance of any of the obligations under this
Agreement is interfered with by any reason or any circumstances beyond the
reasonable control of the parties, including, but not limited to, fire,
earthquake, storm, volcanic eruption, explosion, power failure or power surge,
acts of God, war, revolution, civil commotion, or requirement of any government
or legal body or any representative of any such government or legal body, labor
unrest, including but not limited to, strikes, slowdowns, picketing or boycotts,
then the parties shall be excused from performance on a day-by-day basis to the
extent of such interference.
22. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement contains the entire Agreement between
the parties and may not be modified, amended or changed except by written
instrument signed by duly authorized executives of both parties.
(b) WAIVER. The failure by either party at any time to require performance
by the other party or to claim a breach of any provision of this Agreement shall
not be construed as
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affecting any subsequent breach or the right to require performance or to claim
a breach with respect thereto.
(c) GOVERNING LAW. The rights and obligations of the parties and all
interpretations and performances of this Agreement shall be governed in all
respects by the laws of the State of Oregon.
(d) NOTICES. Any notice to be given by either party to the other shall be
in writing and either personally delivered or sent by certified mail, return
receipt requested, to the addresses of the Owner and FirstLink provided below.
Notices shall be deemed given when received or refused. Each party may change
its address for notice to it by notice in accordance with the foregoing
provisions.
FIRSTLINK: OWNER:
FirstLink Communications, Inc. Elsie D. McIver U/A Trust dated 1/4/72
255 SW Harrison, Suite IA 1000 SW Vista Avenue, Suite 114
Portland, Oregon 97201 Portland, Oregon 97205
Facsimile: 503-306-4333 Facsimile: 503-228-3309
Telephone: 503-306-4444 Telephone: 503-224-3315
Attn.: A. Roger Pease, CEO Attn.: Mary McIver
(e) VALIDITY. If any provision of this Agreement shall be held to be
invalid or unenforceable, such provisions shall not affect in any respect the
validity or enforceability of the remainder of this Agreement unless the
invalidity materially affects the ability of either party to perform as
contemplated hereunder.
(f) ATTORNEYS' FEES AND COSTS. If arbitration or other proceedings are
brought to enforce or interpret this Agreement, the substantially prevailing
party shall be entitled to recover reasonable attorneys' fees and other costs
incurred in such action, arbitration or proceeding from the other party, in
addition to any other relief to which such party may be entitled.
(g) AUTHORITY. Each individual signing this Agreement on behalf of a
corporation or partnership represents that he or she has the necessary authority
to execute this Agreement on
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behalf of such entity and that, in the case of a corporation, all necessary
corporate action has been taken approving the execution of this Agreement.
Any person or entity executing this Agreement as "Owner" hereby represents and
warrants to FirstLink that it is fully authorized by Owner to execute this
Agreement and to bind Owner to the terms and obligations set forth in this
Agreement, and the Owner is fully aware of the existence and contents of this
Agreement. Owner and any person or entity executing this Agreement on Owner's
behalf acknowledges that Owner shall be estopped from claiming that this
Agreement was executed by a person or entity lacking actual authority to bind
Owner.
(h) FURTHER ASSURANCES. Upon the reasonable request of either party, the
other party shall promptly and, at its own expense, execute and deliver any
additional documents or take such actions, as may be reasonably necessary
(subject to any other agreement binding on either party) for the purpose of
evidencing or perfecting any right or interest of either party arising under
this Agreement or arising under documents executed in accordance with this
Agreement.
This Agreement has been signed and delivered as of the above date.
FIRSTLINK: OWNER:
/s/ A. Roger Pease /s/ [illegible] for:
- -------------------------------- --------------------------------
By: A. Roger Pease Douglas D. McIver, Trustee of the Elsie
Title: Chief Executive Officer D. McIver U/A Trust dated 1/4/72
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Exhibit No. 10.6 Telecommunications Services Agreement between Registrant and
Lloyd Place Apartments Limited Partnership (Lloyd Place).
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FIRSTLINK COMMUNICATIONS, INC.
AND
LLOYD PLACE APARTMENTS LIMITED PARTNERSHIP
LLOYD PLACE APARTMENTS
TELECOMMUNICATIONS SERVICES AGREEMENT
This agreement ("Agreement") is entered into as of June 28th, 1996, by and
between FirstLink Communications, Inc., an Oregon corporation ("FirstLink"), and
Lloyd Place Apartments Limited Partnership, an Oregon limited partnership
("Owner").
1. PROPERTY. The 202-unit multi-family residential rental and commercial
complex currently under construction and known as Lloyd Place Apartments,
located at 1411 NE 16th Avenue, Portland, Oregon ("the Property").
2. GRANT OF RIGHTS.
(a) Owner grants FirstLink the sole and exclusive right, except as
provided in the last sentence of clause (b) below, to install, own, operate,
replace and maintain the System on, off and through the Property and the sole
and exclusive right to provide Telecommunication Services to residents of the
Property. "System" shall mean all electronic devices, cable, wire, hardware,
software and other material used to transmit and receive two-way voice and data
communications, telephone service ("Telephone Service"), multi-channel TV, video
on demand, audio on demand, voice mail, data services and other means of two-way
communication distribution, whether now existing or hereafter developed
(collectively "Telecommunication Services") as between the Property and the
local and/or long distance telephone networks or other outside distributor of
these and other services. The term "System" does not, however, include any
equipment or facility on the tenant's side of the telephone jack within any
apartment unit at the property.
Telephone Services will include local and long distance calling, voice
mail and calling features including conference calling, call waiting, call
forwarding, extended area service, distinctive ringing, speed dialing,
wake-up service, restricted dialing, account code calling, non-listed
numbers, non-published numbers, custom phone numbers and no solicitation
listings. Additional services will be added from time to time, as available
and as warranted by tenant demand. Such
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additional Telecommunication Services may include: video conferencing,
on-line computer services, electronic mail, wireless services (such as
cellular telephone) and other types of services.
FirstLink will provide each Subscriber upon request the most recent telephone
book from the Local Exchange Carrier (including the Local Exchange Carrier's
Yellow Pages directory) and a telephone number which telephone number shall
be listed, at no additional charge, in such telephone book if desired by the
Subscriber. All telephone numbers will be assigned within 24 hours after a
Subscriber subscribes for the Telephone Service and pays any required
deposit. At all times during the Term, FirstLink shall, within a reasonable
period of time, make available to Subscribers substantially all
telephone-related features that are available through the local telephone
company serving the Property (the "Local Exchange Carrier").
Subscribers will, to the extent permitted by the Local Exchange Carrier and
applicable law, be allowed to retain their phone numbers upon termination of
service by FirstLink.
Multi-channel television services will include Paragon Cable's Lloyd Place
Apartments channel lineup shown in Exhibit A. Premium services such as HBO,
Showtime and The Disney Channel as well as Blazer Cable are also available
from Paragon.
There can be no assurance that any or all of the above additional services
will be made available. Their availability is dependent upon many variables
and factors beyond FirstLink's control. Such factors include, but are not
limited to, technical feasibility, economic, regulatory and market
considerations. If FirstLink elects not to provide a service it can be
offered and provided by others so long as FirstLink is offered the
opportunity to first provide the service.
(b) In consideration of the substantial investment made by FirstLink in
the System, Owner agrees that it will not grant access to the Property to any
person or entity, other than FirstLink, for the purpose of operating or
maintaining the System, or permit the installation, maintenance or operation
at the Property of any other equipment, wire, cable, or material by any
person or entity that provides Telecommunication Services; provided that (i)
the foregoing shall not restrict the use by Owner or any resident of any
wireless or remote telephone, radio or other communications system on the
Property, if such system does not require the installation of any equipment
or other material (other than the telephone itself) on the Property; and (ii)
the foregoing is not intended to restrict use by Owner or any resident of
personal computers. This
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exclusivity provision shall not deny the local telephone company the right to
serve residents of the Property with telephone services.
3. SYSTEM EXPENSES. Other than as set forth herein, FirstLink shall
bear all expenses to install, operate, maintain and repair the System. Owner
shall, at Owner's expense and cost, provide wiring limited to two (2) 30 amp
110V circuits for electrical power to the System. Owner will invoice or hove
the power company invoice FirstLink for the monthly cost of electric power
for the System. Owner shall not be responsible for any interruption of
electrical supply. For the purposes of this Agreement, "System Site" shall
mean an adequate and secure space mutually agreed upon by FirstLink and Owner
to house FirstLink's System equipment, which shall consist of a rent-free,
locked room meeting FirstLink's specifications. Owner hereby grants FirstLink
and its authorized personnel access to the Property for any reasonable
purposes related to this Agreement including the installation of cabling or
microwave equipment to interconnect buildings and to connect the Property to
other telecommunication systems, subject to Owner's approval, such approval
to be not unreasonably withheld.
4. TERM. The term of this Agreement shall be * years from the date
hereof. The original term will automatically be renewed for up to two (2)
additional periods of * years each unless either party otherwise notifies the
other in writing at least 180 days prior to the end of the original term or
any renewal term. FirstLink shall conduct a performance appraisal meeting
with Owner prior to expiration of the 180 day notice period and shall remind
the Owner not more than 90 days and not less than 30 days before the last day
for Owner to exercise its option not to renew; the time for Owner's notice of
election not to renew will be extended day-for-day for each day that such
reminder from FirstLink is late.
5. INSTALLATION. FirstLink shall install the System as soon as
practicable but in no event shall FirstLink be required to complete
installation sooner than eight (8) weeks from signing of this Agreement. In
installing the System, FirstLink shall maintain a schedule consistent with
Owner's schedule for construction of the Property. FirstLink will cause its
subcontractors and suppliers to cooperate with reasonable requirements of
Owner's construction superintendent for coordination of their work with work
of Owner's subcontractors and suppliers. FirstLink will assure that its
subcontractors and suppliers perform their work on a schedule that does not
delay Owner's construction of the Property. Paragon Cable, under a separate
agreement with FirstLink, will be installing all telephone and cable
television wiring and security systems.
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Owner agrees to provide FirstLink with reasonable notice of anticipated
building construction completion dates. FirstLink will make Telecommunication
Service available to the units within five (5) business days after receipt of
notice that the units are ready For first occupancy. Owner also will provide
FirstLink with reasonable notice of anticipated tenant occupancy dates.
FirstLink will make Telecommunications Service available to each tenant within
two (2) business days after occupancy of the unit.
Telephone wiring will be four (4) pair category 3 and one (1) category 5
wire home run to each jack. Cable television wiring will be home run to each
outlet. Each one bedroom apartment will have three telephone, data and
television outlets; each two bedroom will have four each. The cost associated
with the telephone and cable outlets in each kitchen will be borne by Owner
(see section 10(f)).
Security system will include eight (8) Sanyo high resolution low light
cameras, with appropriate lenses, enclosures and mounts; two (2) Sanyo monitors;
and two (2) Door King hands-free entry systems. Specifications for the security
system are to be approved by Earl Downs or his designee prior to installation,
such approval to be not unreasonably withheld (see details in Exhibit B).
FirstLink may subcontract activities related to the installation of the
System, but shall be responsible for any and all acts and/or omissions by any
subcontractor.
FirstLink shall not make any modifications to the Property unless Owner has
first approved in writing the plans and specifications for such equipment.
6. OWNERSHIP AND CHARACTER OF THE SYSTEM. Except as otherwise stated
herein, the System, including any alterations and attachments, shall at all
times remain the sole property of FirstLink. It is the intention of the parties
that the System, and every component of the System, shall retain its character
as personal property following the installation of the System on the Property,
and shall not be deemed to be a fixture constituting a part of the Property. No
part of the System shall be or become subject to any mortgage, deed of trust or
lien upon the Property. Notwithstanding the foregoing, all wiring, cabling,
jacks, conduit, equipment, and other components of the System except any
telephone switch and other communications equipment installed by FirstLink at
the System Site that is not part of the residential telephone distribution
network ("Excluded Equipment") shall remain on the Property throughout the term
of this Agreement and, upon expiration or earlier termination of this Agreement
shall become the property of Owner without any further action of FirstLink,
Owner or any other person. The residential telephone distribution network is
deemed to begin at the tenant termination block within the System Site.
FirstLink may remove any telephone switch or other communications
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equipment it has installed within the System Site which is not part of the
residential distribution network.
7. SERVICE TO TENANTS. FirstLink shall provide, at rates no higher than
other local providers of comparable services, Telephone Service and other
Telecommunication Services offered through the System to each resident
requesting them. FirstLink's obligation to provide or continue Telecommunication
Services shall be contingent on the resident paying service charges and meeting
other reasonable requirements as are established by FirstLink from time to time.
Residents electing to receive Telecommunication Services offered by FirstLink
shall do so through the execution and delivery to Owner or FirstLink of a Tenant
Services Agreement in the form provided, from time to time, from FirstLink to
Owner. Such Agreement shall clearly state that Owner is not responsible for the
System or its operation or any activities of FirstLink. FirstLink will submit
the Agreement to Owner prior to distribution to tenants and will obtain approval
of the form before using it with residents. Such approval will not be
unreasonably withheld and will be deemed to have been given after 10 days have
passed since FirstLink's submittal of form to Owner if no written objections or
modifications are submitted by Owner to FirstLink. Owner shall promptly provide
such executed documents to FirstLink. Residents requesting Telecommunication
Services shall be charged and billed individually for connection to the System
and for service at standard rates established solely by FirstLink from time to
time unless prohibited by applicable law or regulation. FirstLink shall be
solely responsible for invoicing, collections and bad debts related to provision
of Telecommunication Service to residents. FirstLink's rates for
Telecommunications Service shall, nevertheless, be competitive. FirstLink will
provide, add and update its Telecommunications Service consistent with standards
and services customarily provided by other telecommunication providers to
comparable apartment building complexes in Portland, Oregon. FirstLink
guarantees unconditionally to return a resident to the local exchange telephone
company upon request of the resident for any reason at any time at the sole cost
of FirstLink.
Both parties agree that neither the Owner nor the Owner's agent shall have any
liability regarding the number of residents electing to use Telecommunications
Services.
8. COMMISSIONS. Owner shall be entitled to Commissions equal to *
percent * of all gross revenues (from local and long distance telephone
services and expanded basic television services) actually collected for
services provided to each living unit served by FirstLink hereunder. All
commission payments hereunder will be paid quarterly in arrears. FirstLink
will bill customers monthly and will use reasonable diligence to collect for
services. Owner has the right to audit the
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books of FirstLink relative to the Property and its customers' account
activity. Owner shall have the right to inspect FirstLink's records and, if
it so elects, to conduct an audit thereof to verify that the amounts paid to
it pursuant to this Section 8 are correct. If any such audit discloses that
Owner has been underpaid, FirstLink shall, within ten (10) days after demand,
pay the Owner the balance with interest at ten percent (10%) per annum
calculated from the date that payment should have been made. In addition, if
any such audit discloses that Owner has been underpaid by more than five
percent (5%) for any year, FirstLink shall reimburse Owner for the reasonable
out-of-pocket cost of the audit. In the event an overpayment is disclosed,
Owner will remit within ten (10) days after demand, by FirstLink the balance
with interest at ten percent (10%) per annum calculated from the date that
payment was made.
9. ADDITIONAL OBLIGATIONS OF FIRSTLINK. FirstLink shall:
(a) Make a customer service representative available to receive service
requests or inquiries from Owner or residents and insure that it responds to
service requests within four (4) hours of receipt. Routine maintenance services
shall be performed by FirstLink during its normal working hours. A technician
shall arrive at the Property to commence maintenance services promptly after
request by a customer of such services, provided however, where such request are
made on, or on a day preceding a Saturday, Sunday or holiday, FirstLink's system
technician shall arrive at the Property to commence maintenance services on the
next normal working day.
(b) Provide Owner with marketing materials, sales support and sales
training to enable Owner and Owner's employees to market Telecommunication
Services in accordance with Section 1 0(b); FirstLink will not distribute or
make use of such materials without prior written approval of Owner, which
approval shall not be unreasonably withheld. Such approval will be deemed given
if Owner does not submit written objection to the materials to FirstLink within
ten (10) days of their submission by FirstLink to Owner.
(c) Provide training to Owner's staff to enable staff to perform the
duties specified in Section 10(b);
(d) FirstLink shall comply with Owner's policies relating to entry into
residents' units and Owner's security regulations.
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(e) Repair or replace any damage to the Property resulting from
installation, operation, or removal of the System or any other acts by FirstLink
to the satisfaction of the Owner and restore Property to its original condition;
(f) Comply with all applicable regulatory requirements relating to the
provision of the Telecommunication Services provided by FirstLink as may be in
effect from time to time;
(g) Maintain the System in good order, condition and repair; and
(h) Pay all taxes resulting From the ownership or operation of System and
provision of Telecommunications Services; and
(i) Provide a telephone number to access FirstLink customer service on a
24 hour basis in the event of a System emergency.
10. OBLIGATIONS OF OWNER. Owner shall:
(a) Make the System Site available on a rent-Free basis to FirstLink
during the term of this Agreement. The construction and location of the
System Site shall be as Owner and FirstLink reasonably agree, subject to
technical and regulatory requirements as determined by FirstLink. FirstLink
shall have twenty-four hour, seven day a week access to the System Site, and
Owners employees and agents shall not disturb the System;
(b) Use reasonable efforts to encourage its staff, agents and
representatives to encourage and promote the use of the Telecommunication
Services to residents and prospective residents as part of the amenities
provided by Owner at the Property. Owner consents to FirstLink's use from time
to time of incentives and incentive programs with Property management personnel,
leasing staff and other Property personnel for the purpose of promoting the
System and Telecommunication Services provided through the System. Owner's staff
will present the Tenant Service Agreement and related information to prospective
tenants with the objective of securing sales. It is envisioned that this selling
process will require a minimal amount of time on behalf of Owner's staff. If
tenants have additional questions or require additional information, their sales
lead will be referred to FirstLink staff who will be responsible for responding
to customer inquiries and securing any resulting sales.
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(c) Promptly provide to FirstLink requested specifications on the
Property, such as wiring schematics and/or building diagrams, a current list
of residents, addresses and their telephone numbers and other specific
information regarding resident transactions, such as rentals, move-ins,
move-outs, transfers, intents to vacate, and the entering into or termination
of leases and other information necessary to market and operate the
System and provide the Telecommunication Services according to this
Agreement or to comply with governmental or Utility Commission rules as may
be determined by FirstLink;
(d) Cooperate with FirstLink in obtaining permits, consents, licenses
and any other requirements which may be necessary for FirstLink to install
and operate the System and furnish the Telecommunication Services, provided
that FirstLink shall pay all reasonable costs of the Owner associated
therewith.
(e) Provide reasonable access to the Property to FirstLink and its
employees and agents to enable FirstLink to perform the activities contemplated
by or necessary under this Agreement including access for the purpose of
soliciting customers.
(f) Upon receipt of the certificate of occupancy for the first unit,
Owner will remit $10,750 Paragon Cable representing the cost of installing
one telephone outlet and one cable outlet in each kitchen.
11. INSURANCE. FirstLink shall carry and maintain liability insurance
of $3,000,000 naming Owner and Owner's agent as additional insured covering
personal injury and Property damage that may be caused to person(s), the
Property or its contents, by the System or FirstLink's employees or agents.
Owner and FirstLink each waive any right of recovery against each other for
any claims that may be brought for any loss that is covered by insurance upon
or relating to the Property or the System to the extent of the actual
proceeds received by waiving party, and for themselves, their successors and
assigns waive rights of recovery and any rights of subrogation with respect
to any loss that would have been covered by insurance if the party had
maintained a so-called "all risk" form of casualty insurance on the property
owned by it. Owner shall carry and maintain general liability insurance
related to the Property.
12. TERMINATION OF THE AGREEMENT.
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(a) This Agreement may be terminated by either party if there has been a
material breach of the terms of this Agreement by the other party and if within
thirty (30) days after receiving notice of such breach from the party seeking to
terminate, such breach has not been cured.
(b} FirstLink may terminate this Agreement, or discontinue the provision
of any Telecommunication Services provided hereunder, if in the sole discretion
of FirstLink, it ceases to be feasible for legal, economic or regulatory reasons
to provide Telecommunication Services to the Property, provided that FirstLink
provides sixty (60) days written notice to Owner.
(c) This Agreement may also be terminated by FirstLink if there is a
material failure by Owner to provide the services to FirstLink contemplated in
Section 10 which Owner fails to cure within a commercially reasonable time
(using best efforts to cure)after written notice to Owner containing reasonable
particularity as to the service(s) which FirstLink believes are not being
provided in accordance with this Agreement
(d) Owner may terminate the term of this Agreement if the quality (but
not the revenue generated to Owner) of the Telecommunications Services
provided by FirstLink when compared to the quality of the Telecommunications
Services provided by other suppliers in the Portland area market, places
Owner at a competitive disadvantage, or if FirstLink fails to provide
maintenance and repair service within 15 days after notice of such deficiency
in maintenance or repair service is delivered to FirstLink by Owner, together
with a detailed written explanation of such deficiency. Owner also may
terminate the term of this Agreement if FirstLink allows any lien to attach
against the Property and fails to have the lien removed within ten (10) days
after receiving written notice by Owner to FirstLink that a lien has
attached, or if FirstLink fails to pay any of its contractors, subcontractors
or suppliers (including suppliers of bulk telephone service) when and as due
and FirstLink does not allege any good faith defense to such payment within
ten (10) days of receiving written notice by Owner to FirstLink that it
believes such a condition exists, or if FirstLink seeks protection under any
bankruptcy, insolvency or similar law, or generally fails to pay, its debts
when due, or has a receiver, trustee, liquidater or similar official
appointed for it or a substantial part of its property.
(e) If either party defaults in its obligations under this Agreement, the
other party will have all remedies available at law or in equity for breach of
contract, including (without limitation) collection of damages, specific
enforcement and collection of attorney's fees and costs in connection with such
default, subject only to the limitations in Section 19 below.
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(f) Any termination of this Agreement shall be effective as of the date of
termination, but FirstLink shall continue to provide Telecommunication Services
until the earlier of (i) all FirstLink customers at the Property are provided
Telephone Service from another source or (ii) thirty (30) days from the date of
such termination. Upon termination or expiration of this Agreement for any
reason, FirstLink shall promptly take all actions necessary on its part to
return all Telephone Service to the Local Exchange Carrier so that there is no
interruption of telephone services to the tenants and, if requested by Owner,
shall use its reasonable efforts to make arrangements for assumption of cable
television service by a local franchise operator. The provisions of this
agreement necessary for such continued services shall remain effective.
(g) Upon termination of this Agreement for any reason, FirstLink, or any
designee of FirstLink, including without limitation, any party providing
financing to FirstLink, shall have the right, after providing Owner with written
notice of at least thirty (30) days, without further demand, to enter upon the
Property and to dismantle and remove or render inoperative any and all Excluded
Equipment.
13. ASSIGNMENT OF THE AGREEMENT. This Agreement and the rights hereunder
may be assigned by FirstLink to any majority-owned subsidiary of FirstLink or to
an affiliate or party acquiring all or substantially all of the assets of
FirstLink. Alternatively, the Agreement may be assigned by FirstLink to any
FirstLink subsidiary so long as FirstLink agrees in writing that it shall remain
liable for ail obligations arising under this Agreement. FirstLink may also
assign this Agreement to any party providing financing to FirstLink; provided
that such assignment shall not relieve FirstLink from its obligations hereunder
In connection with a sale or disposition of the Property, Owner shall require
any subsequent owner of the Property to assume this Agreement and the rights and
obligations of Owner accruing from and after the date of such assignment. Except
as otherwise provided above, FirstLink will not assign or otherwise transfer its
interest in this Agreement or in the System without Owner's prior written
consent, which will not be unreasonably withheld or delayed. Subject to the
foregoing, this Agreement shall be binding upon and shall inure to the benefit
of the successors and assigns of the respective parties to this Agreement.
14. OWNER WARRANTIES; INFORMATION. Owner warrants that (i) it has full
power and authority to grant to FirstLink the exclusive rights set forth in this
Agreement, (ii) that no party holds any rights or interests with respect to the
Property that conflict with any rights or interests
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that Owner grants to FirstLink under this Agreement; (iii) that the Property
is not presently part of bankruptcy proceeding, foreclosure action, or deed
in lieu of foreclosure transaction; (iv) Owner is not in default of any
mortgages or other encumbrances on the Property; and (v) no purchase
contracts presently exist as to the Property.
15. FIRSTLINK WARRANTY. FirstLink warrants that it will comply with all
laws and licensing requirements regarding the design and installation and
operation of the System as well as all building codes and regulations enforced
by the City of Portland building department, fire marshal or other appropriate
agencies of the City. Except as expressly stated in this Agreement, FirstLink
makes no representations or warranties regarding the System or the
provision of Telecommunication Services, express or implied, including, but not
limited to, any implied warranty of merchantability or fitness for a particular
purpose.
16. INDEPENDENT CONTRACTOR. FirstLink shall be and is an independent
contractor and Owner shall not control or direct the details and means by which
FirstLink performs its duties under this Agreement. This Agreement shall not
create the relationship of employer and employee, a partnership or a joint
venture.
17. EMERGENCY CALLS. FirstLink will pass all "911" emergency calls through
the System to authorities using equipment and software for such "911" calls that
are in accordance with leading industry standards for telecommunication
providers to comparable apartment building complexes in Portland, Oregon, but
FirstLink, makes no warranty or guaranty of any nature as to the promptness or
adequacy of any response to any such emergency call. FirstLink assumes no
responsibility whatsoever for any actions with respect to emergency calls other
than as set forth above. In the event that the System has been adversely
affected by any situation described in Section 20, FirstLink shall have no
liability whatsoever for failure to pass on emergency telephone traffic.
FirstLink's E-9 11 service shall, in all events, provide the emergency services
operator with the apartment number of the caller, unless the necessary
technology cannot be supported by the Local Exchange Carrier.
18. INDEMNIFICATION. Subject to the provisions set forth in Section 1 9
below, (i) FirstLink and Owner hereby agree to indemnify, defend and hold each
other (and each other's officers, directors, owners, employees, and agents)
harmless from and against all claims, losses and liabilities in any way relating
to, growing out of, or resulting from a material breach of each of
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their respective obligations under this Agreement; and (ii) Owner will
indemnify FirstLink for damages to the System as provided in Section 3 herein.
In addition, FirstLink agrees to indemnify, defend and hold harmless Owner
and Owner 5 partners, employees and agents from and against all damages,
losses, liabilities, costs, and expenses (including reasonable attorneys'
fees) resulting from claims made or causes of action asserted by third
parties (including, without limitation, residents of the Property) arising
out of or relating to (i) the performance by FirstLink (or its employees or
agents) of its obligations under this Agreement, (ii) the provision of
Telecommunication Services or (iii) compliance of FirstLink and/or the System
with applicable laws and regulations, except to the extent such matters are
attributable to the gross negligence or willful misconduct of Owner.
19. LIMITATION OF REMEDIES. Notwithstanding any other provision of this
agreement but without limiting the mutual indemnification in Section 18, neither
FirstLink nor Owner shall be liable to any third party for any incidental or
consequential damages, including but not limited to lost profits, of any nature
whatsoever or for the condition or repair of any telephone instrument or any
Property to which the System is attached.
20. FORCE MAJEURE. If the performance of any of the obligations under this
Agreement is interfered with by any reason or any circumstances beyond the
reasonable control of the parties, including, but not limited to, fire,
earthquake, storm, volcanic eruption, explosion, power failure or power surge,
acts of God, war, revolution, civil commotion, or requirement of any government
or legal body or any representative of any such government or legal body, labor
unrest, including but not limited to, strikes, slowdowns, picketing or boycotts,
then the parties shall be excused from performance on a day-by-day basis to the
extent of such interference.
21. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement contains the entire Agreement
between the parties and may not be modified, amended or changed except by
written instrument signed by duly authorized executives of both parties.
(b) WAIVER. The failure by either party at any time to require performance
by the other party or to claim a breach of any provision of this Agreement shall
not be construed as
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affecting any subsequent breach or the right to require performance or to
claim a breach with respect thereto.
(c) GOVERNING LAW. The rights and obligations of the parties and all
interpretations and performances of this Agreement shall be governed in all
respects by the laws of the State of Oregon.
(d) NOTICES. Any notice to be given by either party to the other shall be
in writing and either personally delivered or sent by certified mail, return
receipt requested, to the addresses of the Owner and FirstLink provided below.
Notices shall be deemed given when received or refused. Each party may change
its address for notice to it by notice in accordance with the foregoing
provisions.
<TABLE>
<S> <C>
FIRSTLINK: OWNER:
FirstLink Communications, Inc. Lloyd Place Apartments Limited Partnership
255 SW Harrison, Suite 1A c/o Enterprise Development
Portland, Oregon 97201 1750 SW Harbor Way, Suite 340
Facsimile: 503-306-4333 Facsimile: 503-224-1472
Telephone: 503-306-4444 Telephone: 503-241-1500
Attn: A. Roger Pease, CEO Attn: W. Earl Downs, President
</TABLE>
(e) VALIDITY. If any provision of this Agreement shall be held to be
invalid or unenforceable, such provisions shall not affect in any respect the
validity or enforceability of the remainder of this Agreement unless the
invalidity materially affects the ability of either party to perform as
contemplated hereunder.
(f) ATTORNEYS' FEES AND COSTS. If arbitration or other proceedings are
brought to enforce or interpret this Agreement, the substantially prevailing
party shall be entitled to recover reasonable attorneys' fees and other costs
incurred in such action, arbitration or proceeding from the other party, in
addition to any other relief to which such party may be entitled, including
(without limitation) such attorneys' fees and costs on any appeal and on
petition for review or in connection with any action for recission
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(g) AUTHORITY. Each individual signing this Agreement on behalf of a
corporation or partnership represents that he or she has the necessary authority
to execute this Agreement on behalf of such entity and that, in the case of a
corporation, all necessary corporate action has been taken approving the
execution of this Agreement.
Any person or entity executing this Agreement as "Owner" hereby represents and
warrants to FirstLink that it is fully authorized by Owner to execute this
Agreement and to bind Owner to the terms and obligations set forth in this
Agreement and the Owner is fully aware of the existence and contents of this
Agreement. Owner and any person or entity executing this Agreement on Owner's
behalf acknowledges that Owner shall be e5topped from claiming that this
Agreement was executed by a person or entity lacking actual authority to bind
Owner.
(h) FURTHER ASSURANCES. Upon the reasonable request of either party, the
other party shall promptly and, at its own expense, execute and deliver any
additional documents or take such actions, as may be reasonably necessary
(subject to any other agreement binding on either party) for the purpose of
evidencing or perfecting any rights or interest of either party arising under
this Agreement or arising under documents executed in accordance with this
Agreement.
(i) OVERDUE PAYMENTS. All payments that either party owes to the other
hereunder that are not paid when due shall bear interest from the due date until
fully paid at the rate of 9 percent per annum, but not in any event at a rate
greater than the maximum rate of interest permitted by law.
(j) TIME OF THE ESSENCE. Time is of the essence of the performance of this
Agreement.
(k) SUBORDINATION TO MORTGAGES. This Agreement is subordinate to any
existing trust deed or mortgage lien on the real property at which the Property
is situated. In addition, this Agreement shall be subordinate to the lien of any
trust deed, mortgage or other security instrument (collectively, "Mortgage")
hereafter placed upon the Building or Property, and to any and all advances made
on the security thereof, and to all renewals, modifications, consolidations,
replacements, and extensions thereof. If any such party elects (in its
discretion) to have this agreement prior to the lien of its Mortgage, and shall
give written notice thereof to Tenant, this Agreement shall be deemed prior to
such Mortgage held by such party so electing and will survive any termination of
Landlord's interest in the Property or under the Master Agreement, as
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applicable, whether this Agreement is dated prior or subsequent to the date of
such Master Agreement or Mortgage or the date of recording thereof.
(l) Status Certificate. Within 10 days after receipt of written request,
either party shall deliver to the other a written statement confirming the
status of this Agreement, whether the Agreement is unmodified and in full force
and effect, and any other matters that may reasonably be requested, which
statement may be relied upon by third parties.
22. OPTION OF OWNER TO TERMINATE.
(a) TERMINATION BY OWNER. Owner will have the option to terminate this
Agreement at any time during the term of this Agreement, without the necessity
for "cause" or default or breach by FirstLink, provided that Owner follows the
procedures and satisfies the requirements of this Section 22. If Owner exercises
its right to terminate, then such termination will be effected by written notice
of termination of this Agreement to FirstLink at least sixty (60) days prior to
the effective date of such termination, and this Agreement shall terminate as of
the effective date for such termination stated in Owner's notice. In such
event, the parties will comply with the provisions and requirements of
paragraphs 22(b) through 22(d) below.
(b) CALCULATION OF TERMINATION PAYMENT. On the effective date for
termination of the Agreement, the residential telephone distribution System
and security system will be surrendered to and belong to Owner, and Owner
will pay to FirstLink as consideration therefor and in compensation for the
early termination of this Agreement the following as a termination fee: (a)
the ad1usted book value of the residential telephone distribution network
assuming amortization on a straight line basis over a ten (10) year term from
the date of installation of such network (except that the security system
shall be amortized over a fifteen (15) year term on a straight line basis);
and (b) the present value of the Net Operating Income (as defined below) that
FirstLink would reasonably have received for the remaining term of this
Agreement, calculated as provided in Section 22(c) below.
(c) CALCULATION OF TERMINATION FEE AND NET OPERATING INCOME. For purposes
of Section 22(b), the "Net Operating Income" for the remainder of the term of
this Agreement will be determined on a profit and loss basis, in accordance with
generally accepted accounting principles, using the higher of: (i) the net
operating income realized by FirstLink in connection with the provision of
services pursuant to this Agreement, on a profit and loss basis, in accordance
with
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generally accepted accounting principles, in the last full calendar year; or
(ii) the average net operating income realized by FirstLink in connection
with the provision of services pursuant to this Agreement, on a profit and
loss basis, in accordance with generally accepted accounting principles, in
the last two full calendar years. The termination fee calculation will be
based on the assumption that FirstLink would have achieved the same amount of
Net Operating Income for the remainder of the term. If such termination
occurs before June 30, 1 998, the annual Net Operating Income will be
estimated based on projections for the Lloyd Place Apartments. The "present
value" of such Net Operating Income will be determined by discounting, to the
date of payment by Owner to FirstLink, the amount of Net Operating Income for
the remainder of the term, utilizing a discount rate equal to the higher of
the publicly announced prime (or reference} rate of interest of Wells Fargo
Bank (or if such designated bank's prime rate is not publicly available, then
the prime rate of such other regional or national bank as the parties
mutually approve, for purposes of the above calculation).
FirstLink will provide, upon request after the completion of installation of the
telephone distribution System and security system, a written statement,
certified by FirstLink, as to the original cost and book value of the telephone
distribution System and security system. In addition, within 30 days after
notice at any time during the term of this Agreement, Owner may request, and
FirstLink will promptly provide within such 30 day period a statement of the Net
Operating Income of FirstLink for the last two calendar years. Owner will have
reasonable rights of examination or audit of FirstLink' s records and
County/State/Federal tax returns to verify the calculation of Net Operating
Income in connection with any exercise of Owner's right to terminate.
(d) SURRENDER OF PROPERTY. In the event of termination under this Section
22, Owner and FirstLink shall have no further rights, duties or obligations
under this Agreement from and after the effective date of termination, except
that Owner will make the payment described in Section 22(b). No provision of
this Section 22 or of this Agreement will be deemed to require a payment to
FirstLink under this Section 22 in connection with any termination of this
Agreement for FirstLink's default or material breach of the Agreement or on any
voluntary surrender or other termination pursuant to any other Section of the
Agreement (other than this Section 22).
This Agreement has been signed and delivered as of the above date.
FIRSTLINK: OWNER:
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By: /s/ A. ROGER PEASE By: /s/ JON McCEMTAST JR
----------------------------- ------------------------------
Title: CEO Title: Partner
Page 17
<PAGE>
JOINDER BY PARAGON
By execution below, the undersigned ("Paragon") agrees to provide cable
television services to the Property for the benefit of Owner and to join
with FirstLink Communications, Inc. for purposes of agreeing to the
provisions of the Agreement. Owner will permit Paragon to cure any default or
breach by FirstLink hereunder within the time periods provided herein, and
Paragon will be deemed a party to this Agreement as related to cable
television services. In the event FirstLink seeks to withdraw from this
Agreement, at Owner's option Paragon will assume, as of the date of such
withdrawal, the performance of: the obligations of FirstLink hereunder that
accrue from and after the date of such withdrawal as they relate to providing
cable television services.
PARAGON:
------------------------------------------------------
By: /s/ Freeman Kilpatrick
---------------------------------------------------
DATED: JULY 5, 1996
- ----------------------------
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<PAGE>
EXHIBIT A
[LOGO]
PARAGON
C A B L E
LLOYD PLACE APARTMENTS
CHANNEL LINE UP
2) Prevue Guide 39) Nickelodeon
3) C-Span 40) Arts and Entertainment
4) ABC 41) The Nashville Network
5) WGN 42) Video Hits One
6) CBS 43) SHOWTIME
7) TBS 44) SHOWTIME 2
8) NBC 45) HOME BOX OFFICE
9) Trinity Broadcasting 46) HOME BOX OFFICE 2
10) Oregon Public Broadcasting 47) Cinemax
11) Community Access 48) FIRST CHOICE 1
12) UPN 49) FIRST CHOICE 2
13) Fox 50) FIRST CHOICE 3
14) Lifetime 51) TURNER MOVIE CLASSICS
15) Prime Sports 52) THE MOVIE CHANNEL
16) ESPN 53) Mind Extension University
17) Turner Network Television 54) KBLE/EWTN
18) USA Network 55) Univision
19) FIRST CHOICE PAY-PER VIEW PREVIEWS 56) The Weather Channel
20) Sci-Fi 57) QVC Shopping
21) Multnoman County TV 98) CNBC
22) Home Shopping Network
23) The Learning Channel
24) Discovery Channel * INDICATES PREMIUM SERVICES
25) Music Television
26) American Movie Classics * INDICATES ALA CARTE SERVICES
27) Portland City TV PAY PER VIEW
28) THE DISNEY CHANNEL
29) CARTOON NETWORK ALL PREMIUM, ALA CARTE AND PAY PER
30) Government Access VIEW REQUIRE A CONVERTER BOX.
31) Community Education
32) Warner Bros.
33) Portland Cable Access
34) The Family Channel
35) Cable News Network
36) Headline News
37) Comedy Central
38) Black Entertainment T
<PAGE>
SECURITY SYSTEM DESCRIPTION EXHIBIT B
The telephone entry and close circuit television system equipment list is as
follows:
TELEPHONE ENTRY SYSTEM by DoorKing Inc. - Model 1814
Includes 2 hands free LCD display entry controls and 2 flush mount trim kits
DoorKing's model 1814 combines the telephone entry system and electronic
directory into a single compact unit. The 20 character alpha numeric super
twist LCD display can be seen in sunlight, is easily readable from side and
top views, does not require any cooling fans or sunscreens, and
eliminates the need for additional add-on directories. To operate the
system a visitor simply uses the big A and Z push buttons to scan through the
alphabetically sorted directory. Holding either of the scroll buttons down
will cause the directory to scan rapidly, while pressing and releasing the
scroll buttons will scroll one name at a time. Once the tenants name is
displayed, the visitor simply presses the CALL button to establish
communication. Tenants can grant the visitor access by simply pressing 9 on
their telephone. The 1814 utilizes a state of the art microprocessor control
board, and uses full duplex circuitry for crystal clear two way voice
communication.
Features include:
1. One touch calling - The visitor simply presses the CALL button after
locating the name in the directory to establish communication.
2. The single line LCD display features easy to read 1/2 inch characters.
3. The full duplex communication is hands free.
4. The user programmable message scrolls from right to left when the
system is not in use.
5. A metal keypad and push buttons.
6. A 2 year limited warranty
<PAGE>
CLOSED CIRCUIT VIDEO SECURITY SYSTEM by SANYO
The closed circuit video security system consists of (8) 1/2 inch black and
white CCD cameras with high-resolution picture and back light compensation, 2
black and white 12" monitors, 8 auto iris lenses, 8 (environmentally
protected) camera enclosures and 8 camera mounts
VIDEO CAMERAS by Sanyo - Model VCB-3524 Features include:
1. A 1/2 inch CCD Image Sensor with approximately 410,000 picture
elements that uses the interline transfer method to deliver low-smear,
anti-bloom images with low-lag delivery, all with virtually no burn-in
and no geometric distortion
2. A high resolution picture, with more than 570 lines of horizontal
resolution, provides sharp, clear images.
3. A minimum light requirement of 0.09 lux with an fO.95 lens and a 0.15
lux with an fl.2 lens delivers excellent low-light images even under
incandescent illumination.
4. The backlight compensation activates automatically with auto-iris lens
to increase the exposure level when the background is brighter than
the subject. Backlight compensation allows more light to reach the
image sensor so that faces and the foreground will appear clearer and
brighter
5. An electronic auto-iris helps assure proper exposure under variable
lighting conditions indoors
6. The CS/C-Mount lens includes a built-in CS-Mounting or Mounting with a
supplied adapter.
7. The camera is magnetic/electrostatically-shielded from interference
due to magnetic or electrostatic fields.
8. The solid-state components resist shock and vibration.
9. 24 Volt AC with Line-locked PLL 2:1 Interlace
<PAGE>
The Sanyo VCB-3524 camera has a compact, versatile design that includes a
metal cabinet, quick start, low power consumption and an adjustable
flanged-back adjustment mechanism.
Accessories include:
A protective lens cap, 4-pin iris plug and C-Mount Adaptor.
MONITORS by Sanyo - Model VM-55l2 Features include:
A 12-inch, 90-degree deflection angle CRT with over 900 lines of resolution,
15 MBZ bandwidth, Geornetric distortion Bridged video input/output with a 75
ohm termination switch and a modern metal cabinet design. The front panel
controls power, contrast, brightness, horizontal and vertical hold.
ADDITIONAL DETAIL TO FOLLOW
<PAGE>
EXHIBIT C
[LOGO]
PARAGON
C A B L E
EASEMENT FOR CABLE TELEVISION SERVICE
THIS EASEMENT, executed and given this 22nd day of May, 1996, by Lloyd
Place Apartments, Limited Partnership, hereinafter "Grantor" to KBL
Cablesystems Of The Southwest, d/b/a Paragon Cable, whose address is 3075 NE
Sandy Blvd., Portland, OR 97232, hereinafter "Grantee":
WITNESSETH:
That for and in consideration of the sum of one dollar ($1.00) and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged:
1. Grantor does hereby grant, sell and convey to Grantee an easement and
right of way to install, construct, operate, maintain, repair, replace and
remove such cable television cables, lines and other telecommunications or
ancillary equipment and facilities as Grantee deems necessary or convenient for
the provision of cable communications and other television or telecommunications
services to occupants of the real property located at 1411 NE 16th Avenue,
Portland, OR 97232 and described in Exhibit "A", below or attached hereto (the
"Premises"), together with rights of ingress and egress on and over the Premises
as necessary for the use and enjoyment of the said easement.
2. This easement shall remain in full force and effect 508 total cable
television outlets for fifteen years.
3. Grantor shall acquire no right, title or interest in any cable
television lines, equipment or facilities placed on, over or under the Premises
pursuant to this easement. All cable communications equipment and facilities
constructed or installed by Grantee upon the Premises shall be and remain the
personal property of Grantee, unannexed and unattorned to the realty, unlienable
and unalienable by Grantor, it's heirs, successors and assigns, and removable or
replaceable by Grantee at any time without notice in Grantee's sole and absolute
discretion.
4. This Grant of Easement shall inure to the benefit of and be binding
upon Grantor and Grantee and their respective heirs, executors, successors and
assigns.
IN WITNESS WHEREOF. Grantor has caused this instrument to be executed the
day and year first above written.
BY:
--------------------------------
STATE OF OREGON )
)ss:
COUNTY OF MULTNOMAH
Before me _________________________, a notary public, personally appeared
_________________ known to me (or proved to me on the oath of ) to be the
person whose name is subscribed to the foregoing instrument, and known to me to
be the___________________ (title) of __________________________ a(corporation)
(partnership) and acknowledged to me that he/she executed said instrument for
the purposes and consideration therein expressed, and as the act of said
(corporation) (partnership).
Given under by hand and seal this ____ day of _____________, 199__.
---------------------------------
Notary Public
<PAGE>
[LOGO]
PARAGON
C A B L E
EXHIBIT 'C'
Door Entry and Security System Specifications
CAMERA System
9 Sanyo B & W Hi Res Lo Light Sanyo Cameras
7 Rainbo Manual Lenses, 35 mm
5 Pelco Environmental Housing Units
1 Pelco Low Profile Ceiling Enclosure
5 Pelco Wall Mounts
3 Pelco Light Duty Indoor Scanners
3 Pelco Wall Mounts
1 16 inch, Sanyo B & W Monitor
1 Sanyo TLS Time Lapse Recorder
2 Covert Camera Enclosures
2 Rainbo Manual lenses, 16 mm
Door Entry System
2 Door King Entry Controls Item # 1815
2 Flush Mount Trim Kits
2 Von Duprin Door Strikes
I Altron Multi Camera Power Supply
L GYYR 9 CAMERA Multiplexer
This list of equipment supersedes the list in exhibit "B", but does not
supersede any additional cable television and telephone installation in
exhibit "B."
Approved by;
/s/ Earl Downs 9-13-96
- --------------------------------------------------------
W. Earl Downs, President Date
Enterprise Development Corporation
<PAGE>
Exhibit No. 10.7 Telecommunications Services Agreement between Registrant
and Harsch Investment Corp. (King Tower Apartments).
* = Confidential Information.
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
AND
HARSCH INVESTMENT CORP.
KING TOWER APARTMENTS AND PORTLAND TOWERS APARTMENTS
TELECOMMUNICATIONS SERVICES AGREEMENT
This agreement ("Agreement") is entered into as of November 18 1996, by and
between FirstLink Communications, Inc., an Oregon corporation ("FirstLink"), and
Harsch Investment Corp., an Oregon corporation ("Owner")
1. PROPERTIES. Owner owns the multi-family residential complexes
commonly known as King Tower Apartments, located at 901 SW King, Portland
Oregon, which consists of 190 living units, and Portland Towers Apartments,
located at 950 SW 21st Street, Portland, Oregon, which consists of 180 living
units (together known as "the Properties").
2. GRANT OF RIGHTS.
(a) Owner grants FirstLink the sole and exclusive right, except as
provided in the last sentence of clause (b) below, to install, own, operate,
replace and maintain the System on, off and through the Properties and the sole
and exclusive right to provide Telecommunication Services to residents of the
Properties. "System" shall mean all electronic devices, cable, wire, hardware,
software and other material used to transmit and receive two-way voice and data
communications, telephone service ("Telephone Service"), multi-channel TV, video
on demand, audio on demand, voice mail, data services and other means of two-way
communication distribution, whether now existing or hereafter developed
(collectively "Telecommunication Services") as between the Properties and the
local and/or long distance telephone networks or other outside distributor of
these and other services.
It is anticipated that Telephone Services will include local and long
distance calling, multi-channel television, voice mail and calling features such
as conference calling, call waiting and call forwarding. Additional services
will be added from time to time, as available and as warranted by tenant demand.
Such additional Telecommunication Services may include: video conferencing,
on-line computer services, electronic mail, wireless services (such as cellular
telephone) and other types of services. There can be no assurance that any or
all of the above
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<PAGE>
additional services will be made available. Their availability is dependent upon
many variables and factors beyond FirstLink's control. Such factors include,
but are not limited to, technical feasibility, economic, regulatory and market
considerations.
(b) In consideration of the substantial investment made by FirstLink in
the System, Owner agrees that it will not grant access to the Properties to any
person or entity, other than FirstLink, for the purpose of operating or
maintaining the System, or permit the installation, maintenance or operation at
the Properties of any other equipment, wire, cable, or material by any person or
entity that similarly provides Telecommunication Services. So long as it is a
requirement of law that a local telephone company also serve the Properties,
this exclusivity provision shall not deny such local telephone company the right
to serve residents of the Properties.
3. SYSTEM EXPENSES. Other than as set forth herein, FirstLink shall
bear all expenses to install, operate, maintain and repair the System including
wiring within each apartment. Owner shall, at Owner's expense and cost, provide
electrical power to the System and shall pay for any damage to the System caused
by the negligence or misconduct of Owner or Owner's agent(s) or employees. For
the purposes of this Agreement, "System Site" shall mean an adequate and secure
space at each of the Properties to house FirstLink's System equipment, which
shall consist of a rent-free, locked room meeting FirstLink's specifications.
FirstLink will pay for constructing such a room if one does not exist. Owner
hereby grants FirstLink and its authorized personnel access to the Properties
for any reasonable purposes related to this Agreement including the installation
of cabling or microwave equipment to interconnect buildings and to connect to
other telecommunication systems and grants specific rights to FirstLink to use
both existing coaxial and twisted pair cabling in the Properties. FirstLink
agrees to notify the Facility Manager when either FirstLink or its authorized
personnel are on-site.
4. TERM. The term of this Agreement shall be * years from the date
hereof. The original term maybe renewed for up to * additional periods of *
years each at the same terms and conditions upon written notice of at least 180
days prior to the end of the original term or any renewal term. Owner has the
right to cancel this agreement with 180 days notice at each anniversary date.
5. INSTALLATION. FirstLink shall commence installation of the System
as soon as practicable and in a manner that minimizes interruption of existing
communication services. In no
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<PAGE>
event shall FirstLink interrupt service provided by US West for those tenants
choosing to remain connected to US West. Telecommunication Services to the
Properties shall commence no later than 180 days from commencement of
installation. FirstLink shall give Owner at least ten (10) days notice prior to
the commencement of installation. FirstLink may subcontract activities related
to the installation of the System, but shall be responsible for any and all acts
and/or omissions by any subcontractor.
6. OWNERSHIP AND CHARACTER OF THE SYSTEM. Except as otherwise stated
herein, the System, including any alterations and attachments, shall at all
times remain the sole property of FirstLink. It is the intention of the parties
that the System, and every component of the System, shall retain its character
as personal property following the installation of the System on the Properties,
and shall not be deemed to be a fixture constituting a part of the Properties.
No part of the System shall be or become sub1ect to any mortgage, deed of trust
or lien upon the Properties.
7. SERVICE TO TENANTS. FirstLink shall provide Telephone Service and
other Telecommunication Services offered through the System to each resident
requesting them. FirstLink's obligation to provide or continue Telecommunication
Services shall be contingent on the resident paying service charges and meeting
other reasonable requirements as are established by FirstLink from time to time.
Residents electing to receive Telecommunication Services offered by FirstLink
shall do so through the execution and delivery to Owner or FirstLink of a Tenant
Services Agreement in the form provided, from time to time, from FirstLink to
Owner. Owner shall promptly provide such executed documents to FirstLink.
Residents requesting Telecommunication Services shall be charged and billed
individually for connection to the System and for service at standard rates
established solely by FirstLink from time to time unless prohibited by
applicable law or regulation. FirstLink shall be solely responsible for
invoicing, collections and bad debts related to provision of Telecommunication
Service to residents.
FirstLink shall at all times keep the rates charged Owner's tenants competitive
with like-kind companies offering similar services. Owner's properties shall at
no time be significantly disadvantaged to other buildings offering similar
services. FirstLink further guarantees to continuously offer first class
service, with prompt response to service calls, change in service requests, and
to maintain their equipment and installations in a first class condition.
FirstLink further guarantees to at all times compete with like-kind companies
with the latest technology and service packages. If FirstLink fails to perform
according to the foregoing, Owner may cancel this
Page 3
<PAGE>
Agreement after thirty (30) day notice to cure. If FirstLink disagrees with
Owner's interpretation of the quality of FirstLink's service, both parties
hereby agree to arbitrate the dispute.
Both parties agree that neither the Owner nor the Owner's agent shall have
any liability regarding the number of residents electing to use
Telecommunications Services.
8. COMMISSIONS. Owner shall be entitled to Commissions according to the
following schedule:
Penetration Rate Commission Percent
- --------------------------------------------------------------------------------
* *
Commissions are paid on all gross revenues actually collected for telephone or
cable television services provided to each living unit served by FirstLink
hereunder. For telephone and cable television service penetration rate is the
number of living units subscribing to FirstLink's services divided by the total
number of living units in the Property at the start of the quarter for which
commissions are payable. All commi5sion payments hereunder will be paid
quarterly in arrears within thirty days of each quarter end.
9. ADDITIONAL OBLIGATIONS OF FIRSTLINK. FirstLink shall:
(a) Make a customer service representative available to receive service
requests or inquiries from Owner or residents and insure that it responds to
service requests within four (4) hours of receipt. Routine maintenance services
shall be performed by FirstLink during its normal working hours. A technician
shall arrive at the Properties to commence maintenance services promptly after
request by a customer of such services, provided however, where such requests
are made on, or on a day preceding a Saturday, Sunday or holiday, FirstLink's
system technician shall arrive at the Properties to commence maintenance
services on the next normal working day. A technician shall be dispatched within
four (4) hours of receipt of an emergency service request or notification of a
service problem affecting more than one resident.
Page 4
<PAGE>
(b) Provide Owner with marketing materials, sales support and sales
training to enable Owner and Owner's employees to market Telecommunications
Services in accordance with Section 10(b);
(c) Provide training to Owner's staff to enable staff to perform the
duties specified in Section 10(b);
(d) Repair or replace any damage to the Properties resulting from
Installation, operation, or removal of the System or any other acts by FirstLink
to the satisfaction of the Owner and restore Properties to their original
condition;
(e) Comply with all applicable regulatory requirements relating to the
provision of the Telecommunication Services provided by FirstLink as may be in
effect from time to time;
(f) Maintain the System in good order, condition and repair; and
(g) Provide Owner with business Telephone Services at the Properties.
Owner will pay the installation costs for providing such business Telephone
Services and will provide, at its own cost, all necessary ancillary hardware
such as keysets and operator consoles for the dedicated use of the Owner; such
costs will be reasonable and reflect customary installation charges for business
telephone systems.
(h) Pay all taxes resulting from the ownership or operation of System
and service.
10. OBLIGATIONS OF OWNER. Owner shall:
(a) Make the System Site available on a rent-free basis to FirstLink
during the term of this Agreement. The construction and location of the
System Site shall be as Owner and FirstLink reasonably agree, sub~1ect to
technical and regulatory requirements as determined by FirstLink. FirstLink
shall have twenty-four hour, seven day a week access to the System Site, and
Owner 5 employees and agents shall not disturb the System. It is understood
that Owner currently has no emergency power generator at the Properties.
FirstLink's system at each System Site will include backup battery capacity
of 3.3 10.0 hours depending on resident load. If power is interrupted to the
System, a FirstLink technician will be automatically paged, allowing
sufficient time for a
Page 5
<PAGE>
portable generator to be delivered to the System Site to provide temporary power
until normal power Is restored.
(b) Use reasonable efforts to encourage its staff, agents and
representatives to encourage and promote the use of the Telecommunications
Services to residents and prospective residents as part of the amenities
provided by Owner at the Properties. Owner consents to FirstLink's use of
incentives and incentive programs with management personnel, leasing staff and
other personnel at the Properties for the purpose of promoting the System and
Telecommunication Services provided through the System. Such incentives will be
paid directly by FirstLink to the recipients, Owner's staff will present the
telecommunications service agreement and related information to prospective
tenants with the objective of securing sales. It is envisioned that this selling
process will require a minimal amount of time on behalf of Owner's staff. If
owner determines that FirstLink incentives or incentive programs are causing
Owner's personnel to spend excessive time promoting FirstLink services, Owner
may request FirstLink to modify or cease such incentives or incentive programs,
such request to be not unreasonably made. Upon such reasonable request by Owner
FirstLink will modify or cease such incentives or incentive programs. If tenants
have additional questions or require additional information, their sales lead
will be referred to FirstLink staff who will be responsible for responding to
customer inquiries and securing any resulting sales. FirstLink will also be
fully responsible for the initial sales conversion process;
(c) Promptly provide to FirstLink requested specifications on the
Properties, such as wiring schematics and/or building diagrams, a current
list of residents, addresses and their telephone numbers and other specific
information regarding resident transactions, such as rentals, move-ins,
move-outs, transfers, Tenents to vacate, and the entering into or termination
of leases and other information necessary to market and operate the
System and provide the Telecommunications services according to this
Agreement or to comply with governmental or Utility Commission rules as may
be determined by FirstLink Telephone numbers of residents are to be kept
confidential by FirstLink and used for operational - not marketing - purposes
(such as determining whether a resident can retain a previous telephone
number).
(d) Cooperate with FirstLink in obtaining permits, consents, licenses
and any other requirements which may be necessary for FirstLink to install and
operate the System and furnish the Telecommunications Services; provided that
FirstLink shall pay all reasonable costs of the
Page 6
<PAGE>
Owner associated therewith except that Owner will pay installation costs as
described in Section 9(g);
(e) Provide reasonable access to the Properties to FirstLink and its
employees and agents to enable FirstLink to perform the activities contemplated
by or necessary under this Agreement including access for the purpose of
soliciting customers.
11. INSURANCE. FirstLink shall carry and maintain liability insurance
of $1,000,000 naming Owner and Owner's agent as additional insured covering
personal injury and property damage that may be caused to person(s), the
Properties or their contents, by the System or FirstLink's employees or agents.
Owner and FirstLink each waive any right of recovery against each other for any
claims that may be brought for any loss that is covered by insurance upon or
relating to the Properties or the System to the extent of the actual proceeds
received by waiving party. Owner shall carry and maintain general liability
insurance related to the Properties.
12. TERMINATION OF THE AGREEMENT.
(a) This Agreement may be terminated by either party if there has been a
material breach of the terms of this Agreement by the other party and if within
forty-five (45) days after receiving notice of such breach from the party
seeking to terminate, such breach has not been cured.
(b) FirstLink may terminate this Agreement, or discontinue the provision
of any Telecommunications Services provided hereunder, if in the sole discretion
of FirstLink, it ceases to be feasible for legal, economic or regulatory reasons
to provide Telecommunications Services to the Properties; provided that
FirstLink provides forty-five (45) days written notice to Owner.
(c) Any termination of this Agreement shall be effective as of the date
of termination, but FirstLink shall continue to provide Telecommunications
Services until the earlier of (i) all FirstLink customers at the Properties are
provided Telephone Service from another source or (ii) thirty (30) days from the
date of such termination. The provisions of this agreement necessary for such
continued services shall remain effective.
(d) Upon termination of this Agreement for any reason, FirstLink, or any
designee of FirstLink, including without limitation, any party providing
financing to FirstLink, shall have the right, after providing Owner with written
notice of at least forty-five (45) days, without further
Page 7
<PAGE>
demand, to enter upon the Properties and to dismantle and remove or render
inoperative any and all equipment or other property comprising the System so
long as such right shall conform to Sections 9 (d) and 12 (c) herein.
13. ASSIGNMENT OF THE AGREEMENT. This Agreement and the rights hereunder
may be assigned by FirstLink to any majority-owned subsidiary of FirstLink or to
an affiliate or party acquiring all or substantially all of the assets of
FirstLink upon prior written consent of Owner. Such consent shall not be
unreasonably withheld. Alternatively, the Agreement may be assigned by FirstLink
to any FirstLink subsidiary so long as FirstLink agrees in writing that it shall
remain liable for all obligations arising under this Agreement. FirstLink may
also assign this Agreement to any party providing financing to FirstLink;
provided that such assignment shall not relieve FirstLink from its obligations
hereunder. In connection with a sale or disposition of the Properties, Owner
shall request FirstLink's written consent to assign this Agreement and shall
require any subsequent owner of the Properties to assume this Agreement and the
rights and obligations hereunder. Sub1ect to the foregoing, this Agreement shall
be binding upon and shall inure to the benefit of the successors and assigns of
the respective parties to this Agreement.
14. OWNER WARRANTIES; INFORMATION. Owner warrants that (i) it has full
power and authority to grant to FirstLink the exclusive rights set forth in this
Agreement, (ii) that no party holds any rights or interests with respect to the
Properties that conflict with any rights or interests that Owner grants to
FirstLink under this Agreement; (iii) that the Properties is not presently part
of bankruptcy proceeding, foreclosure action, or deed in lieu of foreclosure
transaction; (iv) Owner is not in default of any mortgages or other encumbrances
on the Properties; and (v) no purchase contracts presently exist as to the
Properties.
15. FIRSTLINK WARRANTY. FirstLink warrants that it will comply with all
laws and licensing requirements concerning the installation and operation of the
System. Except as expressly stated in this Agreement, FirstLink makes no
representations or warranties regarding the System, express or implied,
including, but not limited to, any implied warranty of merchantability or
fitness for a particular purpose.
16. INDEPENDENT CONTRACTOR. FirstLink shall be and is an independent
contractor and Owner shall not control or direct the details and means by which
FirstLink performs its duties under this Agreement. This Agreement shall not
create the relationship of employer and employee, a partnership or a joint
venture.
Page 8
<PAGE>
17. EMERGENCY CALLS. FirstLink will use its reasonable best efforts to
pass all "911" emergency calls through the System to authorities but makes no
warranty or guaranty of any nature as to the promptness or adequacy of any
response to any such emergency call. FirstLink assumes no responsibility
whatsoever for any actions with respect to emergency calls other than to use its
reasonable 6est efforts to pass such traffic to authorities through the System.
In the event that the System has been adversely affected by any situation
described in Section 21, FirstLink shall have no liability whatsoever for
failure to pass on emergency telephone traffic.
18. INDEMNIFICATION. Subject to the provisions set forth in Section 19
below, (i) FirstLink and Owner hereby agree to indemnify, defend and hold each
other (and each other's officers, directors, owners, employees, and agents)
harmless from and against all claims, losses and liabilities in any way relating
to, growing out of, or resulting from a material breach of each of their
respective obligations under this Agreement ; and (ii) Owner will indemnify
FirstLink for damages to the System as provided in Section 3 herein.
In addition, FirstLink agrees to indemnify, defend and hold harmless Owner and
Owner's partners, employees, agents and successors from and against all damages,
losses, liabilities, costs, and expenses (including reasonable attorneys' fees)
resulting from claims made or causes of action asserted by third parties
(including, without limitation, residents of the Properties) arising out of or
relating to (i) the performance by FirstLink (or its employees or agents) of its
obligations under this Agreement, (ii) the provision of Telecommunications
Services or (iii) compliance of FirstLink and/or the System with applicable laws
and regulations, except to the extent such matters are attributable to the gross
negligence or willful misconduct of Owner.
19. LIMITATION OF REMEDIES. Notwithstanding any other provision of this
agreement but without limiting the mutual indemnification in Section 18, neither
FirstLink nor Owner shall be liable to any third party for any incidental or
consequential damages, including but not limited to lost profits, of any nature
whatsoever or for the condition or repair of any telephone instrument or any
property to which the System is attached.
20. ARBITRATION OF DISPUTES. Any controversy, dispute, or claim of
whatever nature arising out of, in connection with or in relation to the
interpretation, performance or breach of this Agreement, including any claim
based on contract, tort or statute, shall be resolved at the request of any
party to this Agreement, by final and binding arbitration before a single
arbitrator conducted at a location determined by the arbitrator in Portland,
Oregon, administered by and in
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<PAGE>
accordance with the then existing rules of practice and procedure established by
the Arbitration Chapter of the Uniform Trial Court Rules as then in effect in
the State of Oregon, and judgment upon any award rendered by the arbitrator may
be entered by any state or federal court having jurisdiction thereof. If the
parties cannot mutually agree on an arbitrator, either party may petition the
Presiding Judge of the Multnomah County Circuit Court to appoint an arbitrator.
The arbitrator shall award attorney's fees and costs of the arbitration
procedure to the prevailing party. Both parties acknowledge that they are
giving up their right to have any such claim decided in a court of law before a
judge or jury, and hereby waive all rights to appeal.
21. FORCE MAJEURE. If the performance of any of the obligations under
this Agreement is interfered with by any reason or any circumstances beyond the
reasonable control of the parties, including, but not limited to, fire,
earthquake, storm, volcanic eruption, explosion, power failure or power surge,
acts of God, war, revolution, civil commotion, or requirement of any government
or legal body or any representative of any such government or legal body, labor
unrest, including but not limited to, strikes, slowdowns, picketing or boycotts,
then the parties shall be excused from performance on a day-by-day basis to the
extent of such interference.
22. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement contains the entire Agreement
between the parties and may not be modified, amended or changed except by
written instrument signed by duly authorized executives of both parties.
(b) WAIVER. The failure by either party at any time to require
performance by the other party or to claim a breach of any provision of this
Agreement shall not be construed as affecting any subsequent breach or the right
to require performance or to claim a breach with respect thereto.
(c) GOVERNING LAW. The rights and obligations of the parties and all
interpretations and performances of this Agreement shall be governed in all
respects by the laws of the State of Oregon.
(d) NOTICES. Any notice to be given by either party to the other shall
be in writing and either personally delivered or sent by certified mail, return
receipt requested, to the addresses of the Owner and FirstLink provided below.
Notices shall be deemed given when received or
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<PAGE>
refused. Each party may change its address for notice to it by notice in
accordance with the foregoing provisions.
<TABLE>
<CAPTION>
FIRSTLINK: OWNER:
<S> <C>
FirstLink Communications, Inc. Harsch Investment Corp.
255 SW Harrison, Suite lA 1121 SW Salmon Street
Portland, Oregon 97201 Portland, Oregon 97205
Facsimile: 503-306-4333 Facsimile: 503-274-2093
Telephone: 503-306-4444 Telephone: 503-242-2900
Attn: A. Roger Pease, CEO Attn: Susan S. Bowlsby
</TABLE>
(e) VALIDITY. If any provision of this Agreement shall be held to be
invalid or unenforceable, such provisions shall not affect in any respect the
validity or enforceability of the remainder of this Agreement unless the
invalidity materially affects the ability of either party to perform as
contemplated hereunder.
(f) ATTORNEYS' FEES AND COSTS. If arbitration or other proceedings are
brought to enforce or interpret this Agreement, the substantially prevailing
party shall be entitled to recover reasonable attorneys' fees and other costs
incurred in such action, arbitration or proceeding from the other party, in
addition to any other relief to which such party may be entitled.
(g) AUTHORITY. Each individual signing this Agreement on behalf of a
corporation or partnership represents that he or she has the necessary authority
to execute this Agreement on behalf of such entity and that, in the case of a
corporation, all necessary corporate action has been taken approving the
execution of this Agreement.
Any person or entity executing this Agreement as "Owner" hereby represents and
warrants to FirstLink that it is fully authorized by Owner to execute this
Agreement and to bind Owner to the terms and obligations set forth in this
Agreement and the Owner is fully aware of the existence and contents of this
Agreement. Owner and any person or entity executing this Agreement on Owner's
behalf acknowledges that Owner shall be estopped from claiming that this
Agreement was executed by a person or entity lacking actual authority to bind
Owner.
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<PAGE>
(h) FURTHER ASSURANCES. Upon the reasonable request of either party, the
other party shall promptly and, at its own expense, execute and deliver any
additional documents or take such actions, as may be reasonably necessary
(subject to any other agreement binding on either party) for the purpose of
evidencing or perfecting any rights or interest of either party arising under
this Agreement or arising under documents executed in accordance with this
Agreement.
This Agreement has been signed and delivered as of the above date.
FIRSTLINK: OWNER:
By: /s/ A. Roger Pease By: /s/ ILLEGIBLE
------------------------------------ ----------------------------
Title: CEO Title: ILLEGIBLE
--------------------------------- -------------------------
11/19/96
Page 12
<PAGE>
Exhibit No. 10.8 Telecommunications Services Agreement between Registrant and
Harsch Investment Corp. (Park Plaza Apartments).
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
AND
HARSCH INVESTMENT CORP.
PARK PLAZA APARTMENTS TELECOMMUNICATIONS SERVICES AGREEMENT
This agreement ("Agreement") is entered into as of September 25, 1997, by
and between FirstLink Communications, Inc., an Oregon corporation ("FirstLink"),
and Harsch Investment Corp., an Oregon corporation ("Owner").
1. PROPERTIES. Owner owns the multi-family residential complex commonly
known as Park Plaza Apartments located at 1969 SW Park Street, Portland, Oregon
which consists of 149 units ( "the Property").
2. GRANT OF RIGHTS.
(a) Owner grants FirstLink the sole and exclusive right, except as
provided in the last sentence of clause (b) below, to install, own, operate,
replace and maintain the System on, off and through the Properties and the sole
and exclusive right to provide Telecommunication Services to residents of the
Properties. "System shall mean all electronic devices, cable, wire, hardware,
software and other material used to transmit and receive two-way voice and data
communications, telephone service ("Telephone Service"), multi-channel TV, video
on demand, audio on demand, voice mail, data services and other means of two-way
communication distribution, whether now existing or hereafter developed
(collectively "Telecommunication Services") as between the Properties and the
local and/or long distance telephone networks or other outside distributor of
these and other services.
It is anticipated that Telephone Services will include local and long distance
calling, multi-channel television, voice mail and calling features such as
conference calling, call waiting and call forwarding. Additional services will
be added from time to time, as available and as warranted by tenant demand.
Such additional Telecommunication Services may include: video conferencing,
on-line computer services, electronic mail, wireless services (such as cellular
telephone) and other types of services. There can be no assurance that any or
all of the above additional services will be made available. Their availability
is dependent upon many variables
Harsch Investment Telecommunications Services Agreement Page 1
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and factors beyond FirstLink's control. Such factors include, but are not
limited to, technical feasibility, economic, regulatory and market
considerations.
(b) In consideration of the substantial investment made by FirstLink in
the System, Owner agrees that IT will not grant access to the Properties to any
person or entity, other than FirstLink, for the purpose of operating or
maintaining the System, or permit the installation, maintenance or operation at
the Properties of any other equipment, wire, cable, or material by any person or
entity that similarly provides Telecommunication Services. So long as it is a
requirement of law that a local telephone company also serve the Properties,
this exclusivity provision shall not deny such local telephone company the right
to serve residents of the Properties.
3. SYSTEM EXPENSES. Other than as set forth herein, FirstLink shall bear
all expenses to install, operate, maintain and repair the System including
wiring within each apartment. Owner shall, at Owner's expense and cost, provide
electrical power to the System (except emergency power generator costs) and
shall pay for any damage to the System caused by the negligence or misconduct of
Owner or Owner's agent(s) or employees. For the purposes of this Agreement,
"System Site" shall mean an adequate and secure space at each of the Properties
to house FirstLink's System equipment, which shall consist of a rent-free,
locked room meeting FirstLink's specifications. FirstLink will pay for
constructing such a room if one does not exist. Owner hereby grants FirstLink
and its authorized personnel access to the Properties for any reasonable
purposes related to this Agreement including the installation of cabling or
microwave equipment to interconnect buildings and to connect to other
telecommunication systems and grants specific rights to FirstLink to use both
existing coaxial and twisted pair cabling in the Properties. FirstLink agrees to
notify the Facility Manager when either FirstLink or its authorized personnel
are on-site.
4. TERM. The term of this Agreement shall be * years from the date
hereof. The original term maybe renewed for up to * additional periods of -
years each at the same terms and conditions upon written notice of at least 180
days prior to the end of the original term or any renewal term. Owner has the
right to cancel this Agreement within 90 days of receipt of FirstLink's renewal
notice to be effective on the anniversary date
5. INSTALLATION. FirstLink shall commence installation of the System as
soon as practicable and in a manner that minimizes interruption of existing
communication services. In no event shall FirstLink interrupt service provided
by US West for those tenants choosing to remain
Harsch Investment Telecommunications Services Agreement Page 2
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connected to US West. Telecommunication Services to the Properties shall
commence no later than 180 days from commencement of installation. FirstLink
shall give Owner at least ten (10) days notice prior to the commencement of
installation. FirstLink may subcontract activities related to the installation
of the System, but shall be responsible for any and all acts and/or omissions by
any subcontractor.
6. OWNERSHIP AND CHARACTER OF THE SYSTEM. Except as otherwise stated
herein which includes pre-existing coaxial and twisted pair cabling, the System,
including any alterations and attachments, shall at all times remain the sole
property of FirstLink. It is the intention of the parties that the System, and
every component of the System, shall retain its character as personal property
following the installation of the System on the Properties, and shall not be
deemed to be a fixture constituting a part of the Properties. No part of the
System shall be or become subject to any mortgage, deed of trust or lien upon
the Properties.
7. SERVICE TO TENANTS. FirstLink shall provide Telephone Service and
other Telecommunication Services offered through the System to each resident
requesting them. FirstLink's obligation to provide or continue Telecommunication
Services shall be contingent on the resident paying service charges and meeting
other reasonable requirements as are established by FirstLink from time to time.
Residents electing to receive Telecommunication Services offered by FirstLink
shall do so through the execution and delivery to Owner or FirstLink of a Tenant
Services Agreement in the form provided, from time to time, from FirstLink to
Owner. Owner shall promptly provide such executed documents to FirstLink.
Residents requesting Telecommunication Services shall be charged and billed
individually for connection to the System and for service at standard rates
established solely by FirstLink from time to time unless prohibited by
applicable law or regulation. FirstLink shall be solely responsible for
invoicing, collections and bad debts related to provision of Telecommunication
Service to residents.
FirstLink shall at all times keep the rates charged Owner's tenants competitive
with like-kind companies offering similar services. Owner's properties shall at
no time be significantly disadvantaged to other buildings offering similar
services. FirstLink further guarantees to continuously offer first class
service, with prompt response to service calls, change in service requests, and
to maintain their equipment and installations in a first class condition.
FirstLink further guarantees to at all times compete with like-kind companies
with the latest technology and service packages. If FirstLink fails to perform
according to the foregoing, Owner may cancel this
Harsch Investment Telecommunications Services Agreement Page 3
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Agreement after thirty (30) day notice to cure. If FirstLink disagrees with
Owner's interpretation of the quality of FirstLink's service, both parties
hereby agree to arbitrate the dispute.
Both parties agree that neither the Owner nor the Owner's agent shall have any
liability regarding the number of residents electing to use Telecommunications
Services.
8. COMMISSIONS. Owner shall be entitled to Commissions according to the
following schedule:
<TABLE>
<CAPTION>
Penetration Rate Commission Percent
- -------------------------------------------------------------------------------
<S> <C>
* *
</TABLE>
Commissions are paid on all gross revenues actually collected for
telecommunications services, including internet access services, calling
cards, paging services, and cellular services provided to each living unit
served by FirstLink hereunder. Penetration rate is the number of living
units subscribing to any of FirstLink's services divided by the total number
of living units in the Property at the start of the quarter for which
commissions are payable. All commission payments hereunder will be paid
quarterly in arrears within thirty days of each quarter end.
9. ADDITIONAL OBLIGATIONS OF FIRSTLINK. FirstLink shall:
(a) Make a customer service representative available to receive service
requests or inquiries from Owner or residents and insure that it responds to
service requests within four (4) hours of receipt. Routine maintenance services
shall be performed by FirstLink during its normal working hours. A technician
shall arrive at the Properties to commence maintenance services promptly after
request by a customer of such services, provided however, where such requests
are made on, or on a day preceding a Saturday, Sunday or holiday, FirstLink's
system technician shall arrive at the Properties to commence maintenance
services on the next normal working day. A technician shall be dispatched within
four (4) hours of receipt of an emergency service request or notification of a
service problem affecting more than one resident.
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(b) Provide Owner with marketing materials, sales support and sales
training to enable Owner and Owner's employees to market Telecommunications
Services in accordance with Section 10(b);
(c) Provide training to Owner's staff to enable staff to perform the
duties specified in Section 10(b);
(d) Repair or replace any damage to the Properties resulting from
installation, operation, or removal of the System or any other acts by FirstLink
to the satisfaction of the Owner and restore Properties to their original
condition;
(e) Comply with all applicable regulatory requirements relating to the
provision of the Telecommunication Services provided by FirstLink as may be in
effect from time to time;
(f) Maintain the System in good order, condition and repair; and
(g) Provide Owner with business Telephone Services at the Properties.
Owner will pay the installation costs for providing such business Telephone
Services and will provide, at its own cost, all necessary ancillary hardware
such as keysets and operator consoles for the dedicated use of the Owner; such
costs will be reasonable and reflect customary installation charges for business
telephone systems.
(h) Pay all taxes resulting from the ownership or operation of System and
service.
10. OBLIGATIONS OF OWNER. Owner shall:
(a) Make the System Site available on a rent-free basis to FirstLink
during the term of this Agreement. The construction and location of the
System Site shall be as Owner and FirstLink reasonably agree, sub1ect to
technical and regulatory requirements as determined by FirstLink. FirstLink
shall have twenty-four hour, seven day a week access to the System Site, and
Owner's employees and agents shall not disturb the System. It is understood
that Owner currently has no emergency power generator at the Properties.
FirstLink's system at each System Site will include backup battery capacity
of 3.3 - 10.0 hours depending on resident load. If power is interrupted to
the System, a FirstLink technician will be automatically paged, allowing
sufficient time for a
Harsch Investment Telecommunications Services Agreement Page 5
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portable generator to be delivered to the System Site to provide temporary power
until normal power is restored.
(b) Use reasonable efforts to encourage its staff, agents and
representatives to encourage and promote the use of the Telecommunications
Services to residents and prospective residents as part of the amenities
provided by Owner at the Properties. Owner consents to FirstLink's use of
incentives and incentive programs with management personnel, leasing staff and
other personnel at the Properties for the purpose of promoting the System and
Telecommunication Services provided through the System. Such incentives will be
paid directly by FirstLink to the recipients. Owner's staff will present the
telecommunications service agreement and related information to prospective
tenants with the objective of securing sales. It is envisioned that this selling
process will require a minimal amount of time on behalf of Owner's staff. If
Owner determines that FirstLink incentives or incentive programs are causing
Owner's personnel to spend excessive time promoting FirstLink services, Owner
may request FirstLink to modify or cease such incentives or incentive programs,
such request to be not unreasonably made. Upon such reasonable request by Owner
FirstLink will modify or cease such incentives or incentive programs. If tenants
have additional questions or require additional information, their sales lead
will be referred to FirstLink staff who will be responsible for responding to
customer inquiries and securing any resulting sales. FirstLink will also be
fully responsible for the initial sales conversion process;
(c) Promptly provide to FirstLink requested specifications on the
Properties, such as wiring schematics and/or building diagrams, a current
list of residents, addresses and their telephone numbers and other specific
information regarding resident transactions, such as rentals, move-ins,
move-outs, transfers, intents to vacate, and the entering into or termination
of leases and other information necessary to market and operate the
System and provide the Telecommunications Services according to this
Agreement or to comply with governmental or Utility Commission rules as may
be determined by FirstLink . Telephone numbers of residents are to be kept
confidential by FirstLink and used for operational - not marketing - purposes
(such as determining whether a resident can retain a previous telephone
number).
(d) Cooperate with FirstLink in obtaining permits, consents, licenses and
any other requirements which may be necessary for FirstLink to install and
operate the System and furnish the Telecommunications Services; provided that
FirstLink shall pay all reasonable costs of the
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Owner associated therewith except that Owner will pay installation costs as
described in Section 9(g).
(e) Provide reasonable access to the Properties to FirstLink and its
employees and agents to enable FirstLink to perform the activities contemplated
by or necessary under this Agreement including access for the purpose of
soliciting customers.
11. INSURANCE. FirstLink shall carry and maintain liability insurance of
$1,000,000 naming Owner and Owner's agent as additional insured covering
personal injury and property damage that may be caused to person(s), the
Properties or their contents, by the System or FirstLink's employees or agents,
including but not limited to the duties described in paragraph 17. Owner and
FirstLink each waive any right of recovery against each other for any claims
that may be brought for any loss that is covered by insurance upon or relating
to the Properties or the System to the extent of the actual proceeds received by
waiving party. Owner shall carry and maintain general liability insurance
related to the Properties.
12. TERMINATION OF THE AGREEMENT.
(a) This Agreement may be terminated by either party if there has been a
material breach of the terms of this Agreement by the other party and if within
forty-five (45) days after receiving notice of such breach from the party
seeking to terminate, such breach has not been cured.
(b) FirstLink may terminate this Agreement, or discontinue the provision
of any Telecommunications Services provided hereunder, if in the sole discretion
of FirstLink, it ceases to be feasible for legal, economic or regulatory reasons
to provide Telecommunications Services to the Properties; provided that
FirstLink provides forty-five (45) days written notice to Owner.
(c) Any termination of this Agreement shall be effective as of the date of
termination, but FirstLink shall continue to provide Telecommunications Services
until the earlier of (i) all FirstLink customers at the Properties are provided
Telephone Service from another source or (ii) thirty (30) days from the date of
such termination. The provisions of this agreement necessary for such continued
services shall remain effective.
(d) Upon termination of this Agreement for any reason, FirstLink, or any
designee of FirstLink, including without limitation, any party providing
financing to FirstLink, shall have the
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right, after providing Owner with written notice of at least forty-five (45)
days, without further demand, to enter upon the Properties and to dismantle
and remove or render inoperative any and all equipment or other property
comprising the System so long as such right shall conform to Sections 9 (d)
and 1 2 (c) herein.
13. ASSIGNMENT OF THE AGREEMENT. This Agreement and the rights hereunder
may be assigned by FirstLink to any majority-owned subsidiary of FirstLink or to
an affiliate or party acquiring all or substantially all of the assets of
FirstLink upon prior written consent of Owner. Such consent shall not be
unreasonably withheld. Alternatively, the Agreement may be assigned by FirstLink
to any FirstLink subsidiary so long as FirstLink agrees in writing that it shall
remain liable for all obligations arising under this Agreement. FirstLink may
also assign this Agreement to any party providing financing to FirstLink;
provided that such assignment shall not relieve FirstLink from its obligations
hereunder. In connection with a sale or disposition of the Properties, Owner
shall request FirstLink's written consent to assign this Agreement and shall
require any subsequent owner of the Properties to assume this Agreement and the
rights and obligations hereunder. Subject to the foregoing, this Agreement shall
be binding upon and shall inure to the benefit of the successors and assigns of
the respective parties to this Agreement.
14. OWNER WARRANTIES; INFORMATION. Owner warrants that (i) it has full
power and authority to grant to FirstLink the exclusive rights set forth in this
Agreement, (ii) that no party holds any rights or interests with respect to the
Properties that conflict with any rights or interests that Owner grants to
FirstLink under this Agreement; (iii) that the Properties is not presently part
of bankruptcy proceeding, foreclosure action, or deed in lieu of foreclosure
transaction; (iv) Owner is not in default of any mortgages or other encumbrances
on the Properties; and (v) no purchase contracts presently exist as to the
Properties.
15. FIRSTLINK WARRANTV. FirstLink warrants that it will comply with all
laws and licensing requirements concerning the installation and operation of the
System. Except as expressly stated in this Agreement, FirstLink makes no
representations or warranties regarding the System, express or implied,
including, but not limited to, any implied warranty of merchantability or
fitness for a particular purpose.
16. INDEPENDENT CONTRACTOR. FirstLink shall be and is an independent
contractor and Owner shall not control or direct the details and means by which
FirstLink performs its duties
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under this Agreement. This Agreement shall not create the relationship of
employer and employee, a partnership or a joint venture.
17. EMERGENCY CALLS. FirstLink will use its commercially reasonable best
efforts to pass all "911" emergency calls through the System to authorities and
to assure identity of each dwelling unit placing such call but makes no warranty
or guaranty of any nature as to the promptness or adequacy of any response to
any such emergency call. FirstLink assumes no responsibility whatsoever for any
actions with respect to emergency calls other than to use its reasonable best
efforts to pass such traffic to authorities through the System. In the event
that the System has been adversely affected by any situation described in
Section 2 1, FirstLink shall have no liability whatsoever for failure to pass on
emergency telephone traffic.
18. INDEMNIFICATION. Subject to the provisions set forth in Section 19
below, (i) FirstLink and Owner hereby agree to indemnify, defend and hold each
other (and each other's officers, directors, owners, employees, and agents)
harmless from and against all claims, losses and liabilities in any way relating
to, growing out of, or resulting from a material breach of each of their
respective obligations to the other under this Agreement ; and (ii) Owner will
indemnify FirstLink for damages to the System as provided in Section 3 herein.
In addition, FirstLink agrees to indemnify, defend and hold harmless Owner and
Owners partners, employees, agents and successors from and against all damages,
losses, liabilities, costs, and expenses (including reasonable attorneys' fees)
resulting from claims made or causes of action asserted by third parties
(including, without limitation, residents of the Properties) arising out of or
relating to (i) the performance by FirstLink (or its employees or agents) of its
obligations under this Agreement, (ii) the provision of Telecommunications
Services or (iii) compliance of FirstLink and/or the System with applicable laws
and regulations, except to the extent such matters are attributable to the gross
negligence or willful misconduct of Owner.
19. LIMITATION OF REMEDIES. Notwithstanding any other provision of this
agreement but without limiting the mutual indemnification in Section 18, neither
FirstLink nor Owner shall be liable to any third party for any incidental or
consequential damages, including but not limited to lost profits, of any nature
whatsoever or for the condition or repair of any telephone instrument or any
property to which the System is attached.
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20. ARBITRATION OF DISPUTES. Any controversy, dispute, or claim of
whatever nature arising out of, in connection with or in relation to the
interpretation, performance or breach of this Agreement, including any claim
based on contract, tort or statute, shall be resolved at the request of any
party to this Agreement, by final and binding arbitration before a single
arbitrator conducted at a location determined by the arbitrator in Portland,
Oregon, ( or jurisdiction where property 5 located, at Owner's election)
administered by and in accordance with the then existing rules of practice and
procedure established by the Arbitration Chapter of the Uniform Trial Court
Rules as then in effect in the State of Oregon, (or jurisdiction where property
is located, at Owner's election) and judgment upon any award rendered by the
arbitrator may be entered by any state or federal court having jurisdiction
thereof. If the parties cannot mutually agree on an arbitrator, either party may
petition the Presiding Judge of the Multnomah County Circuit Court (or
jurisdiction where property is located, at Owner's election) to appoint an
arbitrator. The arbitrator shall award attorney's fees and costs of the
arbitration procedure to the prevailing party. Both parties acknowledge that
they are giving up their right to have any such claim decided in a court of law
before a judge or jury, and hereby waive all rights to appeal.
21. FORCE MAJEURE. If the performance of any of the obligations under this
Agreement is interfered with by any reason or any circumstances beyond the
reasonable control of the parties, including, but not limited to, fire,
earthquake, storm, volcanic eruption, explosion, power failure or power surge,
acts of God, war, revolution, civil commotion, or requirement of any government
or legal body or any representative of any such government or legal body, labor
unrest, including but not limited to, strikes, slowdowns, picketing or boycotts,
then the parties shall be excused from performance on a day-by-day basis to the
extent of such interference.
22. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement contains the entire Agreement
between the parties and may not be modified, amended or changed except by
written instrument signed by duly authorized executives of both parties.
(b) WAIVER. The failure by either party at any time to require performance
by the other party or to claim a breach of any provision of this Agreement shall
not be construed as affecting any subsequent breach or the right to require
performance or to claim a breach with respect thereto.
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(c) GOVERNING LAW. The rights and obligations of the parties and all
interpretations and performances of this Agreement shall be governed in all
respects by the laws of the State of Oregon.
(d) NOTICES. Any notice to be given by either party to the other shall be
in writing and either personally delivered or sent by certified mail, return
receipt requested, to the addresses of the Owner and FirstLink provided below.
Notices shall be deemed given when received or refused. Each party may change
its address for notice to it by notice in accordance with the foregoing
provisions.
FIRSTLINK: OWNER:
FirstLink Communications, Inc. Harsch Investment Corp.
255 SW Harrison, Suite 1A 1121 SW Salmon Street
Portland, Oregon 97201 Portland, Oregon 97205
Facsimile: 503-306-4333 Facsimile: 503-274-2093
Telephone: 503-306-4444 Telephone: 503-242-2900
Attn: A. Roger Pease Attn: Susan S. Bowlsby
(e) VALIDITY. If any provision of this Agreement shall be held to be
invalid or unenforceable, such provisions shall not affect in any respect the
validity or enforceability of the remainder of this Agreement unless the
invalidity materially affects the ability of either party to perform as
contemplated hereunder.
(f) ATTORNEYS' FEES AND COSTS. If arbitration or other proceedings are
brought to enforce or interpret this Agreement, the substantially prevailing
party shall be entitled to recover reasonable attorneys' fees and other costs
incurred in such action, arbitration or proceeding from the other party, in
addition to any other relief to which such party may be entitled.
(g) AUTHORITY. Each individual signing this Agreement on behalf of a
corporation or partnership represents that he or she has the necessary authority
to execute this Agreement on behalf of such entity and that, in the case of a
corporation, all necessary corporate action has been taken approving the
execution of this Agreement.
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Any person or entity executing this Agreement as "Owner" hereby represents and
warrants to FirstLink that it is fully authorized by Owner to execute this
Agreement and to bind Owner to the terms and obligations set forth in this
Agreement and the Owner is fully aware of the existence and contents of this
Agreement. Owner and any person or entity executing this Agreement on Owner's
behalf acknowledges that Owner shall be estopped from claiming that this
Agreement was executed by a person or entity lacking actual authority to bind
Owner.
(h) FURTHER ASSURANCES. Upon the reasonable request of either party, the
other party shall promptly and, at its own expense, execute and deliver any
additional documents or take such actions, as may be reasonably necessary
(subject to any other agreement binding on either party) for the purpose of
evidencing or perfecting any rights or interest of either party arising under
this Agreement or arising under documents executed in accordance with this
Agreement.
This Agreement has been signed and delivered as of the above date.
FIRSTLINK: OWNER
By: /s/ A. Roger Pease By: /s/ [ILLEGIBLE]
--------------------------- -----------------------------
Title: CEO Title: V.P.
------------------------ --------------------------
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Exhibit No. 10.9 Telecommunications Services Agreement between Registrant and
Security Investments; LP (Ione Plaza Apartments).
* = Confidential Information.
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
AND
LONE PLAZA APARTMENTS
TELECOMMUNICATIONS SERVICES AGREEMENT
This agreement ("Agreement") is entered into as of October 20, 997, by and
between FirstLink Communications, Inc., an Oregon corporation ("FirstLink"),
and Security Investments, L.P., an Oregon limited partnership ("Owner").
1. PROPERTY. Owner owns the multi-family residential complex commonly
known as lone Plaza Apartments, located at 1717 SW Park Avenue, Portland
Oregon, 97201, which consists of 305 living units ("the Property").
2. GRANT OF RIGHTS.
(a) Owner grants FirstLink the sole and exclusive right, except as
provided in the last sentence of clause (b) below, to install, own, operate,
replace and maintain the System on, off and through the Property and the sole
and exclusive right to provide Telecommunication Services to residents of the
Property. "System" shall mean all electronic devices, cable, wire, hardware,
software and other material used to transmit and receive two-way voice and
data communications, telephone service ("Telephone Service"), multi-channel
TV, video on demand, audio on demand, voice mail, data services and other
means of two-way communication distribution, whether now existing or
hereafter developed (collectively "Telecommunication Services") as between
the Property and the local and/or long distance telephone networks or other
outside distributor of these and other services. FirstLink's rights hereunder
in regard to multi-channel TV shall be subject to an agreement to be entered
into between TCI Cablevision of Oregon and FirstLink.
It is anticipated that Telephone Services will include local and long
distance calling, multi-channel television, voice mail and calling features
such as conference calling, call waiting and call forwarding. Additional
services will be added from time to time, as available and as warranted by
tenant demand. Such additional Telecommunication Services may include: video
conferencing, on-line computer services, electronic mail, wireless services
(such as cellular telephone) and other types of services. There can be no
assurance that any or all of the above
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additional services will be made available. Their availability is dependent
upon many variables and factors beyond FirstLink's control. Such factors
include, but are not limited to, technical Feasibility, economic, regulatory
and market considerations.
(b) In consideration of the substantial investment made by FirstLink in
the System, Owner agrees that it will not grant access to the Property to any
person or entity, other than FirstLink, for the purpose of operating or
maintaining the System, or permit the installation, maintenance or operation
at the Property of any other equipment, wire, cable, or material by any
person or entity that similarly provides Telecommunication Services. So long
as it is a requirement of law that a local telephone company also serve the
Property, this exclusivity provision shall not deny such local telephone
company the right to serve residents of the Property.
3. SYSTEM EXPENSES. Other than as set forth herein, FirstLink shall
bear all expenses to install, operate, maintain and repair the telephone
switching equipment included in the System. Owner shall, at Owner's expense
and cost, provide electrical power to the System and shall pay for any damage
to the System caused by the negligence or misconduct of Owner or Owners
agent(s) or employees. For the purposes of this Agreement, "System Site"
shall mean an adequate and secure space to house FirstLink's System
equipment, which shall consist of a rent-free, locked roam meeting
FirstLink's specifications. Owner hereby grants FirstLink and its authorized
personnel access to the Property for any reasonable purposes related to this
Agreement including the installation of cabling or microwave equipment to
interconnect buildings and to connect to other telecommunication systems and
grants specific rights to FirstLink to use both existing coaxial and twisted
pair cabling in the Property.
4. TERM. The term of this Agreement shall be * years from the date
hereof. The original term will automatically be renewed for up to *
additional periods of * years each unless either party otherwise notifies
the other in writing at least 180 days prior to the end of the original term
or any renewal term.
5. INSTALLATION. FirstLink shall commence installation of the System
switching equipment as soon as practicable. Telecommunication Services to the
Property shall commence no later than 90 days from commencement of
installation. FirstLink shall give Owner at least ten (10) days notice prior
to the commencement of installation. FirstLink may subcontract activities
related to the installation of the System, but shall be responsible for any
and all acts and/or omissions by any subcontractor.
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6. OWNERSHIP, AND CHARACTER OF THE SYSTEM. Except as otherwise stated
herein, the System, including any alterations and attachments, shall at all
times remain the sole Property of FirstLink. It is the intention of the
parties that the System, and every component of the System, shall retain its
character as personal Property following the installation of the System on
the Property, and shall not be deemed to be a fixture constituting a part of
the Property. No part of the System shall be or become subject to any
mortgage, deed of trust or lien upon the Property.
7. SERVICE TO TENANTS. FirstLink shall provide Telephone Service and
other Telecommunication Services offered through the System to each resident
requesting them. FirstLink's obligation to provide or continue
Telecommunication Services shall be contingent on the resident paying service
charges and meeting other reasonable requirements as are established by
FirstLink from time to time. Residents electing to receive Telecommunication
Services offered by FirstLink shall do so through the execution and delivery
to Owner or FirstLink of a Tenant Services Agreement in the form provided,
from time to time, from FirstLink to Owner. Owner shall promptly provide such
executed documents to FirstLink. Residents requesting Telecommunication
Services shall be charged and billed individually for connection to the
System and for service at standard rates established solely by FirstLink from
time to time unless prohibited by applicable law or regulation. FirstLink
shall be solely responsible for invoicing, collections and bad debts related
to provision of Telecommunication Service to residents
8. COMMISSIONS. Owner shall be entitled to Commissions equal to *
of all gross revenues annually collected for local and long distance services
originating at the Property, and expanded basic cable television service. All
commission payments hereunder will be paid quarterly in arrears.
9. ADDITIONAL OBLIGATIONS OF FIRSTLINK. FirstLink shall:
(a) Make a customer service representative available to receive service
requests or inquiries from Owner or residents and insure that it responds to
service requests within four (4) hours of receipt. Routine maintenance services
shall be performed by FirstLink during its normal working hours. A technician
shall arrive at the Property to commence maintenance services promptly after
request by a customer of such services, provided however, where such request are
mode on, or on a day preceding a Saturday, Sunday or holiday, FirstLink's system
technician shall arrive at the Property to commence maintenance services on the
next normal working day.
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(b) Provide Owner with marketing materials, sales support and sales
training to enable Owner and Owner1s employees to market Telecommunications
Services in accordance with Section 10(b);
(c) Install a telephone in the lobby of the Property to facilitate
residents in contacting FirstLink for installation or service purposes.
(d) Provide training to Owner's staff to enable staff to perform the
duties specified in Section 10(b);
(e) Repair or replace any damage to the Property resulting From
Installation, operation, or removal of the System or any other acts by
FirstLink to the satisfaction of the Owner and restore Property to its
original condition;
(f) Comply with all applicable regulatory requirements relating to the
provision of the Telecommunication Services provided by FirstLink as may be
in effect from time to time;
(g) Maintain the System in good order, condition and repair; and
(h) Pay all taxes resulting from the ownership or operation of System
and service.
10. OBLIGATIONS OF OWNER. Owner shall:
(a) Make the System Site available on a rent-free basis to FirstLink
during the term of this Agreement. The construction and location of the
System Site shall be as Owner and FirstLink reasonably agree, subject to
technical and regulatory requirements as determined by FirstLink. FirstLink
shall have twenty-four hour, seven day a week access to the System Site, and
Owners employees and agents shall not disturb the System;
(b) Use reasonable efforts to have its staff, agents and
representatives present and explain the use of the Telecommunications
Services to residents and prospective residents as part of the amenities
provided by Owner at the Property. Owner's staff will present the
telecommunications service agreement and related information to prospective
tenants. It is envisioned that this process will require a minimal amount of
time on behalf of Owner's staff. If
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tenants have additional questions or require additional information, they
will be referred to FirstLink staff who will be responsible for responding to
customer inquiries.
(c) Promptly provide to FirstLink requested specifications on the
Property, such as wiring schematics and/or building diagrams, a current list of
residents, addresses and their telephone numbers and other specific information
regarding resident transactions, such as rentals, move-ins, move-outs,
transfers, intents to vacate, and the entering into or termination of leases and
other information necessary to market and operate the System and
provide the Telecommunications services according to this Agreement or to
comply with governmental or Utility Commission rules as may be determined by
FirstLink;
(d) Cooperate with FirstLink in obtaining permits, consents, licenses
and any other requirements which may be necessary for FirstLink to install and
operate the System and furnish the Telecommunications Services; provided that
FirstLink shall pay all reasonable costs of the Owner associated therewith.
(e) Provide reasonable access to the Property to FirstLink and its
employees and agents to enable FirstLink to perform the activities contemplated
by or necessary under this Agreement including access for the purpose of
soliciting customers.
11. INSURANCE. FirstLink shall carry and maintain liability insurance of
$1,000,000 naming Owner and Owner's agent as additional insured covering
personal injury and Property damage that may be caused to person(s), the
Property or its contents, by the System or FirstLink's employees or agents.
Owner and FirstLink each waive any right of recovery against each other for any
claims that may be brought for any loss that is covered by insurance upon or
relating to the Property or the System to the extent of the actual proceeds
received by waiving party. Owner shall carry and maintain general liability
insurance related to the Property.
12. TERMINATION OF THE AGREEMENT.
(a) This Agreement may be terminated by either party if there has been a
material breach of the terms of this Agreement by the other party and if within
forty-five (45) days after receiving notice of such breach from the party
seeking to terminate, such breach has not been cured.
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(b) FirstLink may terminate this Agreement, or discontinue the provision
of any Telecommunications Services provided hereunder, if in the sole discretion
of FirstLink, it ceases to be feasible for legal, economic or regulatory reasons
to provide Telecommunications Services to the Property; provided that FirstLink
provides forty-five (45) days written notice to Owner.
(c) This Agreement may also be terminated by FirstLink if there is a
continuing material failure by Owner to provide the services to FirstLink
contemplated hereby.
(d) Any termination of this Agreement shall be effective as of the date of
termination, but FirstLink shall continue to provide Telecommunications Services
until the earlier of (i) all FirstLink customers at the Property are provided
Telephone Service from another source or (ii) thirty (30) days from the date of
such termination. The provisions of this agreement necessary for such continued
services shall remain effective.
(e) Upon termination of this Agreement for any reason, FirstLink, or any
designee of FirstLink, including without limitation, any party providing
financing to FirstLink, shall have the right, after providing Owner with written
notice of at least forty-five (45) days, without further demand, to enter upon
the Property and to dismantle and remove or render inoperative any and all
equipment or other Property comprising the System so long as such right shall
encompass Section 9 (d) herein.
13. ASSIGNMENT OF THE AGREEMENT. This Agreement and the rights hereunder
may be assigned by FirstLink to any majority-owned subsidiary of FirstLink or to
an affiliate or party acquiring all or substantially all of the assets of
FirstLink upon prior written consent of Owner. Such consent shall not be
unreasonably withheld. Alternatively, the Agreement may be assigned by FirstLink
to any FirstLink subsidiary so long as FirstLink agrees in writing that it shall
remain liable for all obligations arising under this Agreement. FirstLink may
also assign this Agreement to any party providing financing to FirstLink;
provided that such assignment shall not relieve FirstLink from its obligations
hereunder. In connection with a sale or disposition of the Property, Owner shall
request FirstLink's written consent to assign this Agreement and shall require
any subsequent owner of the Property to assume this Agreement and the rights and
obligations hereunder. Subject to the foregoing, this Agreement shall be
binding upon and shall inure to the benefit of the successors and assigns of the
respective parties to this Agreement.
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14. OWNER WARRANTIES: INFORMATION. Owner warrants that (i) it has full
power and authority to grant to FirstLink the exclusive rights set forth in this
Agreement, (ii) that no party holds any rights or interests with respect to the
Property that conflict with any rights or interests that Owner grants to
FirstLink under this Agreement; (iii) that the Property is not presently part of
bankruptcy proceeding, foreclosure action, or deed in lieu of foreclosure
transaction; (iv) Owner is not in default of any mortgages or other encumbrances
on the Property; and (v) no purchase contracts presently exist as to the
Property.
15. FIRSTLINK WARRANTY. FirstLink warrants that it will comply with all
laws and licensing requirements concerning the installation and operation of the
System. Except as expressly stated in this Agreement, FirstLink makes no
representations or warranties regarding the System or the provision of
Telecommunications Services, express or implied, including, but not limited to,
any implied warranty of merchantability or fitness for a particular purpose.
16. INDEPENDENT CONTRACTOR. FirstLink shall be and is an independent
contractor and Owner shall not control or direct the details and means by which
FirstLink performs its duties under this Agreement. This Agreement shall not
create the relationship of employer and employee, a partnership or a joint
venture.
17. EMERGENCY CALLS. FirstLink will use its reasonable best efforts to
pass all "911" emergency calls, in a manner which identifies the unit number
from which the call originates, through the System to authorities but makes no
warranty or guaranty of any nature as to the promptness or adequacy of any
response to any such emergency call. FirstLink assumes no responsibility
whatsoever for any actions with respect to emergency calls other than to use its
reasonable best efforts to pass such traffic to authorities through the System.
In the event that the System has been adversely affected by any situation
described in Section 21, FirstLink shall have no liability whatsoever for
failure to pass on emergency telephone traffic.
18. INDEMNIFICATION. Subject to the provisions set forth in Section 19
below, (i) FirstLink and Owner hereby agree to indemnify, defend and hold each
other (and each other's officers, directors, owners, employees, and agents)
harmless from and against all claims, losses and liabilities in any way relating
to, growing out of, or resulting from a material breach of each of their
respective obligations under this Agreement ; and (ii) Owner will indemnify
FirstLink for damages to the System as provided in Section 3 herein.
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In addition, FirstLink agrees to indemnify, defend and hold harmless Owner
and Owner's partners, employees and agents from and against all damages, losses,
liabilities, costs, and expenses (including reasonable attorneys' fees)
resulting from claims made or causes of action asserted by third parties
(including, without limitation, residents of the Property) arising out of or
relating to (i) the performance by FirstLink (or its employees or agents) of its
obligations under this Agreement, (ii) the provision of Telecommunications
Services or (iii) compliance of FirstLink and/or the System with applicable laws
and regulations, except to the extent such matters are attributable to the gross
negligence or willful misconduct of Owner.
19. LIMITATION OF REMEDIES. Notwithstanding any other provision of this
agreement but without limiting the mutual indemnification in Section 18,
neither FirstLink nor Owner shall be liable to any third party for any
incidental or consequential damages, including but not limited to lost profits,
of any nature whatsoever or for the condition or repair of any telephone
instrument or any Property to which the System is attached.
20. ARBITRATION OF DISPUTES. Any controversy, dispute, or claim of
whatever nature arising out of, in connection with or in relation to the
interpretation, performance or breach of this Agreement, including any claim
based on contract, tort or statute, shall be resolved at the request of any
party to this Agreement, by final and binding arbitration before a single
arbitrator conducted at a location determined by the arbitrator in Portland,
Oregon, administered by and in accordance with the then existing rules of
practice and procedure established by the Arbitration Chapter of the Uniform
Trial Court Rules as then in effect in the State of Oregon, and judgment upon
any award rendered by the arbitrator may be entered by any state or federal
court having jurisdiction thereof. The arbitrator shall award attorney's fees
and costs of the arbitration procedure to the prevailing party. Both parties
acknowledge that they are giving up their right to have any such claim decided
in a court of law before a judge or jury, and hereby waive all rights to appeal.
21. FORCE MAJEURE. If the performance of any of the obligations under this
Agreement is interfered with by any reason or any circumstances beyond the
reasonable control of the parties, including, but not limited to, fire,
earthquake, storm, volcanic eruption, explosion, power Failure or power surge,
technological obsolescence, acts of God, war, revolution, civil commotion, or
requirement of any government or legal body or any representative of any such
government or legal body, labor unrest, including but not limited to, strikes,
slowdowns, picketing or boycotts,
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then the parties shall be excused from performance on a day-by-day basis to
the extent of such interference.
22. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement contains the entire Agreement
between the parties and may not be modified, amended or changed except by
written instrument signed by duly authorized executives of both parties.
(b) WAIVER. The failure by either party at any time to require performance
by the other party or to claim a breach of any provision of this Agreement shall
not be construed as affecting any subsequent breach or the right to require
performance or to claim a breach with respect thereto.
(c) GOVERNING LAW. The rights and obligations of the parties and all
interpretations and performances of this Agreement shall be governed in all
respects by the laws of the State of Oregon.
(d) NOTICES. Any notice to be given by either party to the other shall be
in writing and either personally delivered or sent by certified mail, return
receipt requested, to the addresses of the Owner and FirstLink provided below.
Notices shall be deemed given when received or refused. Each party may change
its address for notice to it by notice in accordance with the foregoing
provisions.
FlRSTLINK: OWNER:
FirstLink Communications, Inc. Security Investments, L.P.
190 SW Harrison 621 SW Broadway, Suite 740
Portland, Oregon 97201 Portland, Oregon 97204
Facsimile: 503-306-4333 Facsimile: 503-916-4674
Telephone: 503-306-4444 Telephone: 503-223-5116
Attn: A. Roger Pease, CEO Attn: Ron Peterson,_________
(e) VALIDITY. If any provision of this Agreement shall be held to be
invalid or unenforceable, such provisions shall not affect in any respect the
validity or enforceability of the
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remainder of this Agreement unless the invalidity materially affects the
ability of either party to perform as contemplated hereunder.
(f) ATTORNEYS' FEES AND COSTS. If arbitration or other proceedings are
brought to enforce or interpret this Agreement, the substantially prevailing
party shall be entitled to recover reasonable attorneys' fees and other costs
incurred in such action, arbitration or proceeding from the other party, in
addition to any other relief to which such party may be entitled.
(g) AUTHORITY. Each individual signing this Agreement on behalf of a
corporation or partnership represents that he or she has the necessary authority
to execute this Agreement on behalf of such entity and that, in the case of a
corporation, all necessary corporate action has been taken approving the
execution of this Agreement.
Any person or entity executing this Agreement as "Owner" hereby represents
and warrants to FirstLink that it is fully authorized by Owner to execute this
Agreement and to bind Owner to the terms and obligations set forth in this
Agreement and the Owner is fully aware of the existence and contents of this
Agreement. Owner and any person or entity executing this Agreement on Owner's
behalf acknowledges that Owner shall be estopped from claiming that this
Agreement was executed by a person or entity lacking actual authority to bind
Owner.
(h) FURTHER ASSURANCES. Upon the reasonable request of either party,
the other party shall promptly and, at its own expense, execute and deliver any
additional documents or take such actions, as may be reasonably necessary
(subject to any other agreement binding on either party) for the purpose of
evidencing or perfecting any rights or interest of either party arising under
this Agreement or arising under documents executed in accordance with this
Agreement.
This Agreement has been signed and delivered as of the above date.
FIRSTLINK OWNER:
FIRSTLINK COMMUNICATIONS, INC. SECURITY INVESTMENTS, L.P
BY: /s/ A. Roger Pease BY:
-------------------------------- --------------------------------
A. Roger Pease /s/ Ron Peterson
--------------------------------
Chief Executive Officer
--------------------------------
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Exhibit No. 10.10 Telecommunications Services Agreement between Registrant and
Housing Authority of Portland (Pearl Court Apartments).
*=Confidential information
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
AND
HOUSING AUTHORITY OF PORTLAND
TELECOMMUNICATIONS SERVICES AGREEMENT
This agreement ("Agreement") is entered into as of July 7, 1997, by and
between FirstLink Communications, Inc., an Oregon corporation ("FirstLink"),
and the Housing Authority of Portland, an Oregon Public corporation ("Owner").
1 PROPERTY. Owner owns the multi-family residential complex commonly
known as Pearl Court Apartments, located at 920 NW Kearny, Portland, Oregon
97209, which consists of 1299 living units (the "Property").
2. GRANT OF RIGHTS
(a) Owner grants FirstLink the sole and exclusive right, except as
provided in the last sentence of clause (b) below, to install, own, operate,
replace and maintain the System on, off and through the Property and the
sole and exclusive right to provide Telecommunication Services to residents
of the Property. "System" shall mean all electronic devices, cable, wire,
hardware, software and other material used to transmit and receive two-way
voice and data communications, telephone service ("Telephone Service"),
multi-channel TV, video on demand, audio on demand, voice mail, data services
and other means of two-way communication distribution, whether now existing
or hereafter developed (collectively "Telecommunication Services") as
between the Property and the local and/or long distance telephone networks or
other outside distributor of these and other services. FirstLink's rights
hereunder in regard to multi-channel TV shall be subject to an agreement to
be entered into between TCI Cablevision of Oregon and FirstLink.
It is anticipated that Telephone Services will include local and long
distance calling, multi-channel television, voice mail and calling features
such as conference calling, call waiting and call forwarding. Additional
services will be added from time to time, as available and as warranted by
tenant demand. Such additional Telecommunication Services may include: video
conferencing, on-line computer services, electronic mail, wireless services
(such as cellular telephone) and other types of services. There can be no
assurance that any or all of the above additional services will be made
available. Their availability is dependent upon many variables
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and factors beyond FirstLink's control. Such factors include, but are not
limited to, technical feasibility, economic, regulatory and market
considerations.
(b) In consideration of the substantial investment made by FirstLink in
the System, Owner agrees that it will not grant access to the Property to any
person or entity, other than FirstLink, for the purpose of operating or
maintaining the System, or permit the installation, maintenance or operation
at the Property of any other equipment, wire, cable, or material by any
person or entity that similarly provides Telecommunication Services. So long
as it is a requirement of law that a local telephone company also serve the
Property, this exclusivity provision shall not deny such local telephone
company the right to serve residents of the Property.
3. SYSTEM EXPENSES. Other than as set forth herein, FirstLink shall
bear all expenses to install, operate, maintain and repair the telephone
switching equipment included in the System. Owner shall, at Owner's expense
and cost, provide electrical power to the System and shall pay for any damage
to the System caused by the negligence or misconduct of Owner or Owner's
agent(s) or employees. For the purposes of this Agreement, "System Site"
shall mean an adequate and secure space to house FirstLink's System
equipment, which shall consist of a rent-free, locked room meeting
FirstLink's specifications. Owner hereby grants FirstLink and its authorized
personnel access to the Property for any reasonable purposes related to this
Agreement including the installation of cabling or microwave equipment to
interconnect buildings and to connect to other telecommunication systems and
grants specific rights to FirstLink to use both existing coaxial and twisted
pair cabling in the Property.
4. TERM. The term of this Agreement shall be * years from the date
hereof. The original term will automatically be renewed for up to *
additional periods of * years each unless either party otherwise notifies the
other in writing at least 180 days prior to the end of the original term or
any renewal term.
5. INSTALLATION. FirstLink shall commence installation of the System
switching equipment as soon as practicable. Telecommunication Services to the
Property shall commence no later than 90 days from commencement of
installation. FirstLink shall give Owner at least ten (10) days notice prior
to the commencement of installation. FirstLink may subcontract activities
related to the installation of the System, but shall be responsible for any
and all acts and/or omissions by any subcontractor.
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6. OWNERSHIP AND CHARACTER OF THE SYSTEM. Except as otherwise stated
herein, the System, including any alterations and attachments, shall at all
times remain the sole Property of FirstLink. It is the intention of the
parties that the System, and every component of the System, shall retain its
character as personal Property following the installation of the System on
the Property, and shall not be deemed to be a fixture constituting a part of
the Property. No part of the System shall be or become subject to any
mortgage, deed of trust or lien upon the Property.
7. SERVICE TO TENANTS. FirstLink shall provide Telephone Service and
other Telecommunication Services offered through the System to each resident
requesting them. FirstLink's obligation to provide or continue
Telecommunication Services shall be contingent on the resident paying service
charges and meeting other reasonable requirements as are established by
FirstLink from time to time. Residents electing to receive Telecommunication
Services offered by FirstLink shall do so through the execution and delivery
to Owner or FirstLink of a Tenant Services Agreement in the form provided,
from time to time, from FirstLink to Owner. Owner shall promptly provide
such executed documents to FirstLink. Residents requesting Telecommunication
Services shall be charged and billed individually for connection to the
System and for service at standard rates established solely by FirstLink from
time to time unless prohibited by applicable law or regulation. FirstLink
shall be solely responsible for invoicing, collections and bad debts related
to provision of Telecommunication Service to residents. As requested by the
Owner, each resident requesting FirstLink telephone or cable television
service shall not be charged for normal installation.
Both parties agree that neither the Owner nor the Owner's agent shall have
any liability regarding the number of residents electing to use
Telecommunications Services.
8. Commissions. Owner shall be entitled to Commissions equal to * of
all gross revenues actually collected for local and long distance services
originating at the Property, and * on all gross revenues actually collected
for basic and expanded basic cable television service. All commission
payments hereunder will be paid quarterly in arrears.
9. ADDITIONAL OBLIGATIONS OF FIRSTLINK. FirstLink shall:
(a) Make a customer service representative available to receive service
requests or inquiries from Owner or residents and insure that it responds to
service requests within four (4) hours of receipt. Routine maintenance
services shall be performed by FirstLink during its normal
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working hours. A technician shall arrive at the Property to commence
maintenance services promptly after request by a customer of such services,
provided however, where such request are made on, or on a day preceding a
Saturday, Sunday or holiday, FirstLink's system technician shall arrive at
the Property to commence maintenance services on the next normal working day.
(b) Provide Owner with marketing materials, sales support and sales
training to enable Owner and Owner's employees to market Telecommunications
Services in accordance with Section 10(b);
(c) Install a telephone in the lobby of the Property to facilitate
residents in contacting FirstLink for installation or service purposes.
(d) Provide training to Owner's staff to enable staff to perform the
duties specified in Section 10(b);
(e) Repair or replace any damage to the Property resulting from
installation, operation, or removal of the System or any other acts by
FirstLink to the satisfaction of the Owner and restore Property to its
original condition;
(f) Comply with all applicable regulatory requirements relating to the
provision of the Telecommunication Services provided by FirstLink as may be
in effect from time to time;
(g) Maintain the System in good order, condition and repair; and
(h) Pay all taxes resulting from the ownership or operation of System
and service.
10. OBLIGATIONS OF OWNER. Owner shall:
(a) Make the System Site available on a rent-free basis to FirstLink
during the term of this Agreement. The construction and location of the
System Site shall be as Owner and FirstLink reasonably agree, subject to
technical and regulatory requirements as determined by FirstLink. FirstLink
shall have twenty-four hour, seven day a week access to the System Site, and
Owner's employees and agents shall not disturb the System;
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(b) Use reasonable efforts to have its staff, agents and
representatives present and explain the use of the Telecommunications
Services to residents and prospective residents as part of the amenities
provided by Owner at the Property. Owner's staff will present the
telecommunications service agreement and related information to prospective
tenants. It is envisioned that this process will require a minimal amount of
time on behalf of Owner's staff. If tenants have additional questions or
require additional information, they will be referred to FirstLink staff who
will be responsible for responding to customer inquiries.
(c) Promptly provide to FirstLink requested specifications on the
Property, such as wiring schematics and/or building diagrams, a current list
of residents, addresses and their telephone numbers and other specific
information regarding resident transactions, such as rentals, move-ins,
move-outs, transfers, intents to vacate, and the entering into or termination
of leases and other information necessary to market and operate the
System and provide the Telecommunications services according to this
Agreement or to comply with governmental or Utility Commission rules as may
be determined by FirstLink;
(d) Cooperate with FirstLink in obtaining permits, consents, licenses
and any other requirements which may be necessary for FirstLink to install
and operate the System and furnish the Telecommunications Services; provided
that FirstLink shall pay all reasonable costs of the Owner associated
therewith.
(e) Provide reasonable access to the Property to FirstLink and its
employees and agents to enable FirstLink to perform the activities
contemplated by or necessary under this Agreement including access for the
purpose of soliciting customers.
11. INSURANCE. FirstLink shall carry and maintain liability insurance
of $1,000,000 naming Owner and Owner's agent as additional insured covering
personal injury and Property damage that may be caused to person(s), the
Property or its contents, by the System or FirstLink's employees or agents.
Owner and FirstLink each waive any right of recovery against each other for
any claims that may be brought for any loss that is covered by insurance upon
or relating to the Property or the System to the extent of the actual
proceeds received by waiving party. Owner shall carry and maintain general
liability insurance related to the Property.
12. TERMINATION OF THE AGREEMENT.
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(a) This Agreement may be terminated by either party if there has been
a material breach of the terms of this Agreement by the other party and if
within forty-five (45) days after receiving notice of such breach from the
party seeking to terminate, such breach has not been cured.
(b) FirstLink may terminate this Agreement, or discontinue the
provision of any Telecommunications Services provided hereunder, if in the
sole discretion of FirstLink, it ceases to be feasible for legal, economic or
regulatory reasons to provide Telecommunications Services to the Property;
provided that FirstLink provides forty-five (45) days written notice to Owner.
(c) This Agreement may also be terminated by FirstLink if there is a
continuing material failure by Owner to provide the services to FirstLink
contemplated hereby.
(d) Any termination of this Agreement shall be effective as of the date
of termination, but FirstLink shall continue to provide Telecommunications
Services until the earlier of (i) all FirstLink customers at the Property are
provided Telephone Service from another source or (ii) thirty (30) days from
the date of such termination. The provisions of this agreement necessary for
such continued services shall remain effective.
(e) Upon termination of this Agreement for any reason, FirstLink, or
any designee of FirstLink, including without limitation, any party providing
financing to FirstLink, shall have the right, after providing Owner with
written notice of at least forty-five (45) days, without further demand, to
enter upon the Property and to dismantle and remove or render inoperative any
and all equipment or other Property comprising the System so long as such
right shall encompass Section 9 (d) herein.
13. ASSIGNMENT OF THE AGREEMENT. This Agreement and the rights
hereunder may be assigned by FirstLink to any majority-owned subsidiary of
FirstLink or to an affiliate or party acquiring all or substantially all of
the assets of FirstLink upon prior written consent of Owner. Such consent
shall not be unreasonably withheld. Alternatively, the Agreement may be
assigned by FirstLink to any FirstLink subsidiary so long as FirstLink agrees
in writing that it shall remain liable for all obligations arising under this
Agreement. FirstLink may also assign this Agreement to any party providing
financing to FirstLink; provided that such assignment shall not relieve
FirstLink from its obligations hereunder. In connection with a sale or
disposition of the Property, Owner shall request FirstLink's written consent
to assign this Agreement and shall require any subsequent owner of the
Property to assume this Agreement and the rights and obligations hereunder.
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Subject to the foregoing, this Agreement shall be binding upon and shall
inure to the benefit of the successors and assigns of the respective parties
to this Agreement.
14. OWNER WARRANTIES: INFORMATION. Owner warrants that (i) it has full
power and authority to grant to FirstLink the exclusive rights set forth in
this Agreement, (ii) that no party holds any rights or interests with respect
to the Property that conflict with any rights or interests that Owner grants
to FirstLink under this Agreement; (iii) that the Property is not presently
part of bankruptcy proceeding, foreclosure action, or deed in lieu of
foreclosure transaction; (iv) Owner is not in default of any mortgages or
other encumbrances on the Property; and (v} no purchase contracts presently
exist as to the Property.
15. FIRSTLINK WARRANTY. FirstLink warrants that it will comply with all
laws and licensing requirements concerning the installation and operation of the
System. Except as expressly stated in this Agreement, FirstLink makes no
representations or warranties regarding the System or the provision of
Telecommunications Services, express or implied, including, but not limited to,
any implied warranty of merchantability or fitness for a particular purpose.
16. INDEPENDENT CONTRACTOR. FirstLink shall be and is an independent
contractor and Owner shall not control or direct the details and means by
which FirstLink performs its duties under this Agreement. This Agreement
shall not create the relationship of employer and employee, a partnership or
a joint venture.
17. EMERGENCY CALLS. FirstLink will use its reasonable best efforts to
pass all "911" emergency calls, in a manner which identities the unit number
from which the call originates, through the System to authorities but makes
no warranty or guaranty of any nature as to the promptness or adequacy of any
response to any such emergency call. FirstLink assumes no responsibility
whatsoever for any actions with respect to emergency calls other than to use
its reasonable best efforts to pass such traffic to authorities through the
System In the event that the System has been adversely affected by any
situation described in Section 21, FirstLink shall have no liability
whatsoever for failure to pass on emergency telephone traffic.
18. INDEMNIFICATION. Subject to the provisions set forth in Section 19
below, (i) FirstLink and Owner hereby agree to indemnify, defend and hold
each other (and each other's officers, directors, owners, employees, and
agents) harmless from and against all claims, losses and liabilities in any
way relating to, growing out of, or resulting from a material breach of each
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of their respective obligations under this Agreement ; and (ii) Owner will
indemnify FirstLink for damages to the System as provided in Section 3 herein.
In addition, FirstLink agrees to indemnify, defend and hold harmless Owner
and Owner 5 partners, employees and agents from and against all damages,
losses, liabilities, costs, and expenses (including reasonable attorneys'
fees) resulting from claims made or causes of action asserted by third
parties (including, without limitation, residents of the Property) arising
out of or relating to (i) the performance by FirstLink (or its employees or
agents) of its obligations under this Agreement, (ii) the provision of
Telecommunications Services or (iii) compliance of FirstLink and/or the
System with applicable laws and regulations, except to the extent such
matters are attributable to the gross negligence or willful misconduct of
Owner.
19. LIMITATION OF REMEDIES. Notwithstanding any other provision of
this agreement but without limiting the mutual indemnification in Section 18,
neither FirstLink nor Owner shall be liable to any third party for any
incidental or consequential damages, including but not limited to lost
profits, of any nature whatsoever or for the condition or repair of any
telephone instrument or any Property to which the System is attached.
20. ARBITRATION OF DISPUTES. Any controversy, dispute, or claim of
whatever nature arising out of, in connection with or in relation to the
interpretation, performance or breach of this Agreement, including any claim
based on contract, tort or statute, shall be resolved at the request of any
party to this Agreement, by final and binding arbitration before a single
arbitrator conducted at a location determined by the arbitrator in Portland,
Oregon, administered by and in accordance with the then existing rules of
practice and procedure established by the Arbitration Chapter of the Uniform
Trial Court Rules as then in effect in the State of Oregon, and judgment upon
any award rendered by the arbitrator may be entered by any state or federal
court having jurisdiction thereof. The arbitrator shall award attorney's
fees and costs of the arbitration procedure to the prevailing party. Both
patties acknowledge that they are giving up their right to have any such
claim decided in a court of law before a judge or jury, and hereby waive all
rights to appeal.
21. FORCE MAJEURE. If the performance of any of the obligations under
this Agreement is interfered with by any reason or any circumstances beyond
the reasonable control of the parties, including, but not limited to, fire,
earthquake, storm, volcanic eruption, explosion, power failure or power
surge, acts of God, war, revolution, civil commotion, or requirement of any
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government or legal body or any representative of any such government or
legal body, labor unrest, including but not limited to, strikes, slowdowns,
picketing or boycotts, then the parties shall be excused from performance on
a day-by-clay basis to the extent of such interference.
22. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement contains the entire Agreement
between the parties and may not be modified, amended or changed except by
written instrument signed by duly authorized executives of both parties.
(b) WAIVER. The failure by either party at any time to require
performance by the other party or to claim a breach of any provision of this
Agreement shall not be construed as affecting any subsequent breach or the
right to require performance or to claim a breach with respect thereto.
(c) GOVERNING LAW. The rights and obligations of the parties and all
interpretations and performances of this Agreement shall be governed in all
respects by the laws of the State of Oregon.
(d) NOTICES. Any notice to be given by either party to the other shall
be in writing and either personally delivered or sent by certified mail,
return receipt requested, to the addresses of the Owner and FirstLink
provided below. Notices shall be deemed given when received or refused. Each
party may change its address for notice to it by notice in accordance with
the foregoing provisions.
FIRSTLINK: OWNER:
FirstLink Communications, Inc. Housing Authority of Portland
90 SW Harrison 135 Southwest Ash Street
Portland, Oregon 97201 Portland, Oregon 97204
Facsimile: 503-06-4333 Facsimile: 503-273-1481
Telephone: 503-306-4444 Telephone: 503-273-1482
Attn: A. Roger Pease, CEO
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(e) VALIDITY. If any provision of this Agreement shall be held to be
invalid or unenforceable, such provisions shall not affect in any respect the
validity or enforceability of the remainder of this Agreement unless the
invalidity materially affects the ability of either party to perform as
contemplated hereunder.
(f) ATTORNEYS' FEES AND COSTS. If arbitration or other proceedings are
brought to enforce or interpret this Agreement, the substantially prevailing
party shall be entitled to recover reasonable attorneys' fees and other costs
incurred in such action, arbitration or proceeding from the other party, in
addition to any other relief to which such party may be entitled.
(g) AUTHORITY. Each individual signing this Agreement on behalf of a
corporation or partnership represents that he or she has the necessary
authority to execute this Agreement on behalf of such entity and that, in the
case of a corporation, all necessary corporate action has been taken
approving the execution of this Agreement.
Any person or entity executing this Agreement as "Owner" hereby represents
and warrants to FirstLink that it is fully authorized by Owner to execute
this Agreement and to bind Owner to the terms and obligations set forth in
this Agreement and the Owner is fully aware of the existence and contents of
this Agreement. Owner and any person or entity executing this Agreement on
Owner's behalf acknowledges that Owner shall be estopped from claiming that
this Agreement was executed by a person or entity lacking actual authority to
bind Owner.
(h) FURTHER ASSURANCES. Upon the reasonable request of either party,
the other party shall promptly and, at its own expense, execute and deliver
any additional documents or take such actions, as may be reasonably necessary
(subject to any other agreement binding on either party) for the purpose of
evidencing or perfecting any rights or interest of either party arising under
this Agreement or arising under documents executed in accordance with this
Agreement.
This Agreement has been signed and delivered as of the above date.
FIRSTLINK OWNER:
Firstlink Communications, Inc. Housing Authority Of Portland
By: /s/ A. Roger Pease By: /s/ Barrett Philpott
------------------------------- --------------------------------
A. Roger Pease Barrett Philpott
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Exhibit No. 10.11 Telecommunications Services Agreement between Registrant and
Harsch Investment Corp. (The Clay Towers Apartments).
* = Confidential Information.
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
AND
HARSCH INVESTMENT CORP.
CLAY TOWER APARTMENTS TELECOMMUNICATIONS SERVICES AGREEMENT
This agreement ("Agreement") is entered into as of September 25, 1997, by and
between FirstLink Communications, Inc., an Oregon corporation ("FirstLink"),
and Harsch Investment Corp., an Oregon corporation ("Owner").
1. PROPERTIES. Owner owns the multi-family residential complex
commonly known as The Clay Tower Apartments located at 1430 SW 12th Avenue,
Portland, Oregon 97201 which consists of 235 units ( "the Property").
2. GRANT OF RIGHTS.
(a) Owner grants FirstLink the sole and exclusive right, except as
provided in the last sentence of clause (b) below, to install, own, operate,
replace and maintain the System on, off and through the Properties and the
sole and exclusive right to provide Telecommunication Services to residents
of the Properties. "System shall mean all electronic devices, cable, wire,
hardware, software and other material used to transmit and receive two-way
voice and data communications, telephone service ("Telephone Service"),
multi-channel TV, video on demand, audio on demand, voice mail, data services
and other means of two-way communication distribution, whether now existing
or hereafter developed (collectively "Telecommunication Services") as
between the Properties and the local and/or long distance telephone networks
or other outside distributor of these and other services.
It is anticipated that Telephone Services will include local and long
distance calling, multi-channel television, voice mail and calling features
such as conference calling, call waiting and call forwarding. Additional
services will be added from time to time, as available and as warranted by
tenant demand. Such additional Telecommunication Services may include:
video conferencing, on-line computer services, electronic mail, wireless
services (such as cellular telephone) and other types of services. There can
be no assurance that any or all of the above additional services will be made
available. Their availability is dependent upon many variables
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and factors beyond FirstLink's control. Such factors include, but are not
limited to, technical feasibility, economic, regulatory and market
considerations.
(b) In consideration of the substantial investment made by
FirstLink in the System, Owner agrees that it will not grant access to the
Properties to any person or entity, other than FirstLink, for the purpose of
operating or maintaining the System, or permit the installation, maintenance
or operation at the Properties of any other equipment, wire, cable, or
material by any person or entity that similarly provides Telecommunication
Services. So long as it is a requirement of law that a local telephone
company also serve the Properties, this exclusivity provision shall not deny
such local telephone company the right to serve residents of the Properties.
3. SYSTEM EXPENSES. Other than as set forth herein, FirstLink
shall bear all expenses to install, operate, maintain and repair the System
including wiring within each apartment. Owner shall, at Owner's expense and
cost, provide electrical power to the System (except emergency power
generator costs) and shall pay for any damage to the System caused by the
negligence or misconduct of Owner or Owner's agent(s) or employees. For the
purposes of this Agreement, "System Site" shall mean an adequate and secure
space at each of the Properties to house FirstLink's System equipment, which
shall consist of a rent-free, locked room meeting FirstLink's specifications.
FirstLink will pay for constructing such a room if one does not exist. Owner
hereby grants FirstLink and its authorized personnel access to the Properties
for any reasonable purposes related to this Agreement including the
installation of cabling or microwave equipment to interconnect buildings and
to connect to other telecommunication systems and grants specific rights to
FirstLink to use both existing coaxial and twisted pair cabling in the
Properties. FirstLink agrees to notify the Facility Manager when either
FirstLink or its authorized personnel are on-site.
4. TERM. The term of this Agreement shall be * years from the
date hereof. The original term maybe renewed for up to * additional periods
of * years each at the same terms and conditions upon written notice of at
least 180 days prior to the end of the original term or any renewal term.
Owner has the right to cancel this Agreement within 90 days of receipt of
FirstLink's renewal notice to be effective on the anniversary date.
5. INSTALLATION. FirstLink shall commence installation of the
System as soon as practicable and in a manner that minimizes interruption of
existing communication services. In no event shall FirstLink interrupt
service provided by US West for those tenants choosing to remain
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connected to US West. Telecommunication Services to the Properties shall
commence no later than 180 days from commencement of installation. FirstLink
shall give Owner at least ten (10) days notice prior to the commencement of
installation. FirstLink may subcontract activities related to the installation
of the System, but shall be responsible for any and all acts and/or omissions by
any subcontractor.
6. OWNERSHIP AND CHARACTER OF THE SYSTEM. Except as otherwise
stated herein which includes pre-existing coaxial and twisted pair cabling,
the System, including any alterations and attachments, shall at all times
remain the sole property of FirstLink. It is the intention of the parties
that the System, and every component of the System, shall retain its
character as personal property following the installation of the System on
the Properties, and shall not be deemed to be a fixture constituting a part
of the Properties. No part of the System shall be or become subject to any
mortgage, deed of trust or lien upon the Properties.
7. SERVICE TO TENANTS. FirstLink shall provide Telephone
Service and other Telecommunication Services offered through the System to
each resident requesting them. FirstLink's obligation to provide or continue
Telecommunication Services shall be contingent on the resident paying service
charges and meeting other reasonable requirements as are established by
FirstLink from time to time. Residents electing to receive Telecommunication
Services offered by FirstLink shall do so through the execution and delivery
to Owner or FirstLink of a Tenant Services Agreement in the form provided,
from time to time, from FirstLink to Owner. Owner shall promptly provide
such executed documents to FirstLink. Residents requesting Telecommunication
Services shall 6e charged and billed individually for connection to the
System and for service at standard rates established solely by FirstLink from
time to time unless prohibited by applicable law or regulation. FirstLink
shall be solely responsible for invoicing, collections and bad debts related
to provision of Telecommunication Service to residents.
FirstLink shall at all times keep the rates charged Owner's tenants competitive
with like-kind companies offering similar services. Owner's properties shall at
no time be significantly disadvantaged to other buildings offering similar
services. FirstLink further guarantees to continuously offer first class
service, with prompt response to service calls, change in service requests, and
to maintain their equipment and installations in a first class condition.
FirstLink further guarantees to at all times compete with like-kind companies
with the latest technology and service packages. If FirstLink fails to perform
according to the foregoing, Owner may cancel this
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Agreement after thirty (30) day notice to cure. If FirstLink disagrees with
Owner's interpretation of the quality of FirstLink's service, both parties
hereby agree to arbitrate the dispute.
Bath parties agree that neither the Owner nor the Owner's agent shall have
any liability regarding the number of residents electing to use
Telecommunications Services.
a. COMMISSIONS. Owner shall be entitled to Commissions according
to the following schedule:
Penetration Rate Commission Percent
- -------------------------------------------------------------------------------
* *
Commissions are paid on all gross revenues actually collected for
telecommunications services, including internet access services, calling
cards, paging services, and cellular services provided to each living unit
served by FirstLink hereunder. Penetration rate is the number of living
units subscribing to any of FirstLink's services divided by the total number
of living units in the Property at the start of the 9uarter for which
commissions are payable. All commission payments hereunder will be paid
quarterly in arrears within thirty days of each quarter end.
9. ADDITIONAL OBLIGATIONS OF FIRSTLINK. FirstLink shall:
(a) Make a customer service representative available to receive
service requests or inquiries from Owner or residents and insure that it
responds to service requests within four (4) hours of receipt. Routine
maintenance services shall be performed by FirstLink during its normal
working hours. A technician shall arrive at the Properties to commence
maintenance services promptly after request by a customer of such services,
provided however, where such requests are made on, or on a day preceding a
Saturday, Sunday or holiday, FirstLink's system technician shall arrive at
the Properties to commence maintenance services on the next normal working
day. A technician shall be dispatched within four (4) hours of receipt of an
emergency service request or notification of a service problem affecting more
than one resident.
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(b) Provide Owner with marketing materials, sales support and sales
training to enable Owner and Owner's employees to market Telecommunications
Services in accordance with Section 10(b);
(c) Provide training to Owner's staff to enable staff to perform
the duties specified in Section 10(b);
(d) Repair or replace any damage to the Properties resulting from
Installation, operation, or removal of the System or any other acts by
FirstLink to the satisfaction of the Owner and restore Properties to their
original condition;
(e) Comply with all applicable regulatory requirements relating to
the provision of the Telecommunication Services provided by FirstLink as may
be in effect from time to time;
(f) Maintain the System in good order, condition and repair; and
(g) Provide Owner with business Telephone Services at the
Properties. Owner will pay the installation costs for providing such business
Telephone Services and will provide, at its own cost, all necessary ancillary
hardware such as keysets and operator consoles for the dedicated use of the
Owner; such costs will be reasonable and reflect customary installation
charges for business telephone systems.
(h) Pay all taxes resulting from the ownership or operation of
System and service.
10. OBLIGATIONS OF OWNER. Owner shall:
(a) Make the System Site available on a rent-free basis to
FirstLink during the term of this Agreement. The construction and location of
the System Site shall be as Owner and FirstLink reasonably agree, subject to
technical and regulatory requirements as determined by FirstLink. FirstLink
shall have twenty-four hour, seven day a week access to the System Site, and
Owner 5 employees and agents shall not disturb the System. It is understood
that Owner currently has no emergency power generator at the Properties.
FirstLink's system at each System Site will include backup battery capacity
of 3.3 - 10.0 hours depending on resident load. If power is interrupted to
the System, a FirstLink technician will be automatically paged, allowing
sufficient time for a
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portable generator to be delivered to the System Site to provide temporary
power until normal power is restored.
(b) Use reasonable efforts to encourage its staff, agents and
representatives to encourage and promote the use of the Telecommunications
Services to residents and prospective residents as part of the amenities
provided by Owner at the Properties. Owner consents to FirstLink's use of
incentives and incentive programs with management personnel, leasing staff
and other personnel at the Properties for the purpose of promoting the System
and Telecommunication Services provided through the System. Such incentives
will be paid directly by FirstLink to the recipients. Owner's staff will
present the telecommunications service agreement and related information to
prospective tenants with the objective of securing sales. It is envisioned
that this selling process will require a minimal amount of time on behalf of
Owner's staff. If Owner determines that FirstLink incentives or incentive
programs are causing Owner's personnel to spend excessive time promoting
FirstLink services, Owner may request FirstLink to modify or cease such
incentives or incentive programs, such request to be not unreasonably made.
Upon such reasonable request by Owner FirstLink will modify or cease such
incentives or incentive programs. If tenants have additional questions or
require additional information, their sales lead will be referred to
FirstLink staff who will be responsible for responding to customer inquiries
and securing any resulting sales. FirstLink will also be fully responsible
for the initial sales conversion process;
(c) Promptly provide to FirstLink requested specifications on the
Properties, such as wiring schematics and/or building diagrams, a current
list of residents, addresses and their telephone numbers and other specific
information regarding resident transactions, such as rentals, move-ins,
move-outs, transfers, intents to vacate, and the entering into or termination
of leases and other information necessary to market and operate the
System and provide the Telecommunications Services according to this
Agreement or to comply with governmental or Utility Commission rules as may
be determined by FirstLink . Telephone numbers of residents are to be kept
confidential by FirstLink and used for operational -- not marketing --
purposes (such as determining whether a resident can retain a previous
telephone number).
(d) Cooperate with FirstLink in obtaining permits, consents,
licenses and any other requirements which may be necessary for FirstLink to
install and operate the System and furnish the Telecommunications Services;
provided that FirstLink shall pay all reasonable costs of the
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Owner associated therewith except that Owner will pay installation costs as
described in Section 9(g);
(e) Provide reasonable access to the Properties to FirstLink and its
employees and agents to enable FirstLink to perform the activities
contemplated by or necessary under this Agreement including access for the
purpose of soliciting customers.
11. INSURANCE. FirstLink shall carry and maintain liability insurance
of $1,000,000 naming Owner and Owner's agent as additional insured covering
personal injury and property damage that may be caused to person(s), the
Properties or their contents, by the System or FirstLink's employees or
agents, including but not limited to the duties described in paragraph 17.
Owner and FirstLink each waive any right of recovery against each other for
any claims that may be brought for any loss that is covered by insurance upon
or relating to the Properties or the System to the extent of the actual
proceeds received by waiving party. Owner shall carry and maintain general
liability insurance related to the Properties.
12. TERMINATION OF THE AGREEMENT.
(a) This Agreement may be terminated by either party if there has been
a material breach of the terms of this Agreement by the other party and if
within forty-five (45) days after receiving notice of such breach from the
party seeking to terminate, such breach has not been cured.
(b) FirstLink may terminate this Agreement, or discontinue the
provision of any Telecommunications Services provided hereunder, if in the
sole discretion of FirstLink, it ceases to be feasible for legal, economic or
regulatory reasons to provide Telecommunications Services to the Properties;
provided that FirstLink provides forty-five (45) days written notice to Owner.
(c) Any termination of this Agreement shall be effective as of the date
of termination, but FirstLink shall continue to provide Telecommunications
Services until the earlier of (i) all FirstLink customers at the Properties
are provided Telephone Service from another source or (ii) thirty (30) days
from the date of such termination. The provisions of this agreement necessary
for such continued services shall remain effective.
(d) Upon termination of this Agreement for any reason, FirstLink, or any
designee of FirstLink, including without limitation, any party providing
financing to FirstLink, shall have the
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right, after providing Owner with written notice of at least forty-five (45)
days, without further demand, to enter upon the Properties and to dismantle
and remove or render inoperative any and all equipment or other property
comprising the System so long as such right shall conform to Sections 9 (d)
and 12 (c) herein.
13. ASSIGNMENT OF THE AGREEMENT. This Agreement and the rights
hereunder may be assigned by FirstLink to any majority-owned subsidiary of
FirstLink or to an affiliate or party acquiring all or substantially all of
the assets of FirstLink upon prior written consent of Owner. Such consent
shall not be unreasonably withheld. Alternatively, the Agreement may be
assigned by FirstLink to any FirstLink subsidiary so long as FirstLink agrees
in writing that it shall remain liable for all obligations arising under this
Agreement. FirstLink may also assign this Agreement to any party providing
financing to FirstLink; provided that such assignment shall not relieve
FirstLink from its obligations hereunder. In connection with a sale or
disposition of the Properties, Owner shall request FirstLink's written
consent to assign this Agreement and shall require any subsequent owner of
the Properties to assume this Agreement and the rights and obligations
hereunder. Subject to the foregoing, this Agreement shall be binding upon and
shall inure to the benefit of the successors and assigns of the respective
parties to this Agreement.
14. OWNER WARRANTIES; INFORMATION. Owner warrants that (i) it has full
power and authority to grant to FirstLink the exclusive rights set forth in
this Agreement, (ii) that no party holds any rights or interests with respect
to the Properties that conflict with any rights or interests that Owner
grants to FirstLink under this Agreement; (iii) that the Properties is not
presently part of bankruptcy proceeding, foreclosure action, or deed in lieu
of foreclosure transaction; (iv) Owner is not in default of any mortgages or
other encumbrances on the Properties; and (v) no purchase contracts presently
exist as to the Properties.
15. FIRSTLINK WARRANTY. FirstLink warrants that it will comply with all
laws and licensing requirements concerning the installation and operation of
the System. Except as expressly stated in this Agreement, FirstLink makes no
representations or warranties regarding the System, express or implied,
including, but not limited to, any implied warranty of merchantability or
fitness for a particular purpose.
16. INDEPENDENT CONTRACTOR. FirstLink shall be and is an independent
contractor and Owner shall not control or direct the details and means by
which FirstLink performs its duties
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under this Agreement. This Agreement shall not create the relationship of
employer and employee, a partnership or a joint venture.
17. EMERGENCY CALLS. FirstLink will use its commercially reasonable
best efforts to pass all "911" emergency calls through the System to
authorities and to assure identity of each dwelling unit placing such call
but makes no warranty or guaranty of any nature as to the promptness or
adequacy of any response to any such emergency call. FirstLink assumes no
responsibility whatsoever for any actions with respect to emergency calls
other than to use its reasonable best efforts to pass such traffic to
authorities through the System. In the event that the System has been
adversely affected by any situation described in Section 2 1, FirstLink shall
have no liability whatsoever for failure to pass on emergency telephone
traffic.
18. INDEMNIFICATION. Subject to the provisions set forth in Section 19
below, (i) FirstLink and Owner hereby agree to indemnify, defend and hold each
other (and each other's officers, directors, owners, employees, and agents)
harmless from and against all claims, losses and liabilities in any way relating
to, growing out of, or resulting from a material breach of each of their
respective obligations to the other under this Agreement ; and (ii) Owner will
indemnify FirstLink for damages to the System as provided in Section 3 herein.
In addition, FirstLink agrees to indemnify, defend and hold harmless Owner and
Owners partners, employees, agents and successors from and against all damages,
losses, liabilities, costs, and expenses (including reasonable attorneys' fees)
resulting from claims made or causes of action asserted by third parties
(including, without limitation, residents of the Properties) arising out of or
relating to (i) the performance by FirstLink (or its employees or agents) of its
obligations under this Agreement, (ii) the provision of Telecommunications
Services or (iii) compliance of FirstLink and/or the System with applicable laws
and regulations, except to the extent such matters are attributable to the gross
negligence or willful misconduct of Owner.
19. LIMITATION OF REMEDIES. Notwithstanding any other provision of this
agreement but without limiting the mutual indemnification in Section 18,
neither FirstLink nor Owner shall be liable to any third party for any
incidental or consequential damages, including but not limited to lost
profits, of any nature whatsoever or for the condition or repair of any
telephone instrument or any property to which the System is attached.
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20. ARBITRATION OF DISPUTES. Any controversy, dispute, or claim of
whatever nature arising out of, in connection with or in relation to the
interpretation, performance or breach of this Agreement, including any claim
based on contract, tort or statute, shall be resolved at the request of any
party to this Agreement, by final and binding arbitration before a single
arbitrator conducted at a location determined by the arbitrator in Portland,
Oregon, ( or jurisdiction where property is located, at Owner's election)
administered by and in accordance with the then existing rules of practice
and procedure established by the Arbitration Chapter of the Uniform Trial
Court Rules as then in effect in the State of Oregon, (or jurisdiction where
property is located, at Owner's election) and judgment upon any award
rendered by the arbitrator may be entered by any state or federal court
having jurisdiction thereof. If the parties cannot mutually agree on an
arbitrator, either party may petition the Presiding Judge of the Multnomah
County Circuit Court (or jurisdiction where property is located, at Owner's
election) to appoint an arbitrator. The arbitrator shall award attorney's
fees and costs of the arbitration procedure to the prevailing party. Both
parties acknowledge that they are giving up their right to have any such
claim decided in a court of law before a judge or jury, and hereby waive all
rights to appeal.
21. FORCE MAJEURE. If the performance of any of the obligations under
this Agreement is interfered with by any reason or any circumstances beyond
the reasonable control of the parties, including, but not limited to, fire,
earthquake, storm, volcanic eruption, explosion, power failure or power
surge, acts of God, war, revolution, civil commotion, or requirement of any
government or legal body or any representative of any such government or
legal body, labor unrest, including but not limited to, strikes, slowdowns,
picketing or boycotts, then the parties shall be excused from performance on
a day-by-day basis to the extent of such interference.
22. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement contains the entire Agreement
between the parties and may not be modified, amended or changed except by
written instrument signed by duly authorized executives of both parties.
(b) WAIVER. The failure by either party at any time to require
performance by the other party or to claim a breach of any provision of this
Agreement shall not be construed as affecting any subsequent breach or the
right to require performance or to claim a breach with respect thereto.
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(c) GOVERNING LAW. The rights and obligations of the parties and all
interrpetations and performances of this Agreement shall be governed in all
respects by the laws of the State of Oregon.
(d) NOTICES. Any notice to be given by either party to the other shall be
in writing and either personally delivered or sent by certified mail, return
receipt requested, to the addresses of the Owner and FirstLink provided below.
Notices shall be deemed given when received or refused. Each party may change
its address for notice to it by notice in accordance with the foregoing
provisions.
FIRSTLINK: OWNER:
FirstLink Communications, Inc. Harsch Investment Corp.
255 SW Harrison, Suite IA 1121 SW Salmon Street
Portland, Oregon 97201 Portland, Oregon 97205
Facsimile: 503~06-4333 Facsimile: 503-274-2093
Telephone: 503~06-4444 Telephone: 503-242-2900
Attn: A. Roger Pease, CEO Attn: Susan S. Bowlsby
(e) VALIDITY. If any provision of this Agreement shall be held to be
invalid or unenforceable, such provisions shall not affect in any respect the
validity or enforceability of the remainder of this Agreement unless the
invalidity materially affects the ability of either party to perform as
contemplated hereunder.
(f) ATTORNEYS' FEES AND COSTS. If arbitration or other proceedings are
brought to enforce or interpret this Agreement, the substantially prevailing
party shall be entitled to recover reasonable attorneys' fees and other costs
incurred in such action, arbitration or proceeding from the other party, in
addition to any other relief to which such party may be entitled.
(g) AUTHORITY. Each individual signing this Agreement on behalf of a
corporation or partnership represents that he or she has the necessary authority
to execute this Agreement on behalf of such entity and that, in the case of a
corporation, all necessary corporate action has been taken approving the
execution of this Agreement.
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Any person or entity executing this Agreement as "Owner" hereby represents and
warrants to FirstLink that it is fully authorized by Owner to execute this
Agreement and to bind Owner to the terms and obligations set forth in this
Agreement and the Owner is fully aware of the existence and contents of this
Agreement. Owner and any person or entity executing this Agreement on Owner's
behalf acknowledges that Owner shall be estopped from claiming that this
Agreement was executed by a person or entity lacking actual authority to bind
Owner.
(h) FURTHER ASSURANCES. Upon the reasonable request of either party, the
other party shall promptly and, at its own expense, execute and deliver any
additional documents or take such actions, as may be reasonably necessary
(subject to any other agreement binding on either party) for the purpose of
evidencing or perfecting any rights or interest of either party arising under
this Agreement or arising under documents executed in accordance with this
Agreement.
This Agreement has been signed and delivered as of the above date.
FIRSTLINK: OWNER
By: /s/ A. Roger Pease By: [ILLEGIBLE]
------------------------------- --------------------------------
Title: CEO Title: VP
---------------------------- --------------------------------
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Exhibit No. 10.12 Telecommunications Services Agreement between Registrant and
Crossing Development Corporation (Legends).
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
AND
CROSSINGS DEVELOPMENT CORPORATION, ON BEHALF OF LEGENDS
CONDOMINIUM ASSOCIATION
CORPORATION
TELECOMMUNICATIONS SERVICES AGREEMENT
This agreement ("Agreement") is entered into as of September 25, 1997, by and
between FirstLink Communications, Inc., an Oregon corporation ("FirstLink"),
and the Crossings Development Corporation, a Washington corporation
("Owner"), on behalf of Legends Condominium Association.
1. PROPERTY. Owner owns the multi-family residential complex commonly
known as Legends, located at 1 132 SW 19th, Portland, Oregon 97205 which
consists of 80 living units (the "Property").
2. GRANT OF RIGHTS.
(a) Owner grants FirstLink the sole and exclusive right, except as
provided in the last sentence of clause (b) below, to operate and maintain
the System on, off and through the Property and the sole and exclusive right
to provide Telecommunication Services to residents of the Property. "System"
shall mean all electronic devices, cable, wire, hardware, software and other
material used to transmit and receive two-way voice and data communications,
telephone service ("Telephone Service"), multi-channel TV, video on demand,
audio on demand, voice mail, data services and other means of two-way
communication distribution, whether now existing or hereafter developed
(collectively "Telecommunication Services") as between the Property and the
local and/or long distance telephone networks or other outside distributor of
these and other services.
It is anticipated that Telephone Services will include local and long
distance calling, multi-channel television, voice mail and calling features
such as conference calling, call waiting and call forwarding. Additional
services will be added from time to time, as available and as warranted by
resident demand. Such additional Telecommunication Services may include:
video conferencing, on-line computer services, electronic mail, wireless
services (such as cellular telephone) and other types of services. There can
be no assurance that any or all of the above
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additional services will be made available. Their availability is dependent
upon many variables and factors beyond FirstLink's control. Such factors
include, but are not limited to, technical feasibility, economic, regulatory
and market considerations.
(b) Owner agrees that it will not grant access to the Property to any
person or entity, other than FirstLink, for the purpose of operating or
maintaining the System, or permit the installation, maintenance or operation
at the Property of any other equipment, wire, cable, or material by any
person or entity that similarly provides Telecommunication Services. So long
as it is a requirement of law that a local telephone company also serve the
Property, this exclusivity provision shall not deny such local telephone
company the right to serve residents of the Property.
3. SYSTEM EXPENSES. Other than as set forth herein, Owner shall bear
all expenses to install, operate, maintain and repair the telephone switching
equipment included in the System. Owner shall pay to FirstLink a quarterly
maintenance fee of $1 200 , due on the fifteenth day of the first month of
each calendar quarter, for FirstLink's day4o~ay maintenance of the system.
The quarterly amount due will be deducted from commissions due Owner under
section 7 below. If commissions due Owner in any quarter are less than $1200,
then Owner will remit the remaining amount due to FirstLink. The quarterly
maintenance fee will be $900 in any quarter in which FirstLink telephone
subscri6ers exceed 60 units. All equipment and materials expense shall be the
responsibility of the owner. Owner shall, at Owner's expense and cost,
provide electrical power to the System and shall pay for any damage to the
System caused by Owner or Owner's agent(s) or employees. FirstLink shall pay
for any damage to the System caused by FirstLink or FirstLink's agent(s) or
employees. Upon mutual agreement of FirstLink and Owner, such agreement not
to be unreasonably withheld by either party, FirstLink and its authorized
personnel shall have access to the Property for any reasonable purposes
related to this Agreement.
4. TERM. The term of this Agreement shall be * from the date
hereof. The original term will automatically be renewed for up to *
additional periods of - years each unless either party otherwise notifies the
other in writing at least 180 days prior to the end of the original term or
any renewal term.
5. OWNERSHIP AND CHARACTER OF THE SYSTEM. Except as otherwise stated
herein, the System, including any alterations and attachments, shall at all
times remain the sole Property of Owner.
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<PAGE>
6. SERVICE TO RESIDENTS. FirstLink shall provide Telephone Service
and other Telecommunication Services offered through the System to each
resident requesting them. FirstLink's obligation to provide or continue
Telecommunication Services shall be contingent on the resident paying service
charges and meeting other reasonable requirements as are established by
FirstLink from time to time. If a resident fails to pay service charges or
meet other requirements, FirstLink will notify Owner before sending
disconnect notice so that Owner may intervene and pay the required service
charge or meet the other requirements on behalf of the resident. Such notice
will be given owner only if resident has given prior authorization to
FirstLink to do so. Disconnect notices are sent no earlier than 45 days after
bills are rendered. Residents electing to receive Telecommunication Services
offered by FirstLink shall do so through the execution and delivery to Owner
or FirstLink of a Resident Services Agreement in the form provided (see
Attachment A), from time to time, from FirstLink to Owner. Owner shall
promptly provide such executed documents to FirstLink and may retain a copy
for Owner's use. FirstLink will provide Owner monthly a copy of FirstLink's
Resident Document (ResDoc) for the Property. Residents requesting
Telecommunication Services shall be charged and billed individually for
connection to the System. Billing rates, promotional programs and services
offered to residents by FirstLink shall be competitive and consistent with
those rates and rate structures offered by FirstLink to other FirstLink
customers in the Greater Metropolitan Portland Area (see Attachment B).
FirstLink shall be solely responsible for invoicing, collections and bad
debts related to provision of Telecommunication Service to residents.
7 COMMISSIONS. Owner shall be entitled to Commissions equal to * of
all gross revenues actually collected for basic local telephone services. All
commission payments hereunder will be paid quarterly in arrears net of
FirstLink's quarterly maintenance fee (Section 3, above).
8. ADDITIONAL OBLIGATIONS OF FIRSTLINK. FirstLink shall:
(a) Make a customer service representative available to receive service
requests or inquiries from Owner or residents and insure that it responds to
service requests within four (4) hours of receipt. Routine maintenance
services shall be performed by FirstLink during its normal working hours. A
technician shall arrive at the Property to commence maintenance services
promptly after request by a customer of such services, provided however,
where such request are
Page 3
<PAGE>
made on, or on a day preceding a Saturday, Sunday or holiday, FirstLink's
system technician shall arrive at the Property to commence maintenance
services on the next normal working day.
(b) Provide Owner with marketing materials, sales support and sales
training to enable Owner and Owner's employees to market Telecommunications
Services En accordance with Section 9(b);
(c) Provide training to Owner's staff to enable staff to perform the
duties specified in Section 9(b);
(d) Comply with all applicable regulatory requirements relating to the
provision of the Telecommunication Services provided by FirstLink as may be
in effect from time to time;
(e) Maintain the System in good order, condition and repair.
9. ADDITIONAL OBLIGATIONS OF OWNER. Owner shall:
(a) Make the System available to FirstLink during the term of this
Agreement on a twenty-four hour, seven day a week basis. Owner's employees
and agents shall not disturb the System;
(b) Use reasonable efforts to have its staff, agents and
representatives present and explain the use of the Telecommunications
Services to residents and prospective residents as part of the amenities
provided by Owner at the Property. Owner's staff will present the
telecommunications service agreement and related information to prospective
residents. It is envisioned that this process will require a minimal
amount of time on behalf of Owner's staff. If residents have additional
questions or require additional information, they will be referred to
FirstLink staff who will be responsible for responding to customer
inquiries.
(c) Promptly provide to FirstLink requested specifications on the
Property, such as wiring schematics and/or building diagrams, a current list
of residents, addresses and their telephone numbers and other specific
information regarding resident transactions, such as move-ins, move-outs,
transfers, intents to vacate, and the entering into or termination of
purchase agreements and other information necessary to market and operate the
System and provide the Telecommunications services according to this
Agreement or to comply with governmental or
Page 4
<PAGE>
Utility Commission rules as may be determined by FirstLink; promptly provide
to FirstLink all manuals and equipment information relating to the Cortelco
switch and any other equipment used in the System.
(d) Cooperate with FirstLink in obtaining permits, consents, licenses
and any other requirements which may be necessary for FirstLink to operate
the System and furnish the Telecommunications Services.
(e) Provide reasonable access agents to enable FirstLink to perform the
Agreement including access for the purpose to the Property to FirstLink and
its employees and activities contemplated by or necessary under this of
soliciting customers.
(f) Owner shall retain and bear the expenses related to retention of
the existing trunk facilities between the System and MCI and shall install
and bear the costs of installation and operation of one additional trunks
between the System and FirstLink's switching facility. Upon removal of the
MCI trunk, an additional trunk between the System and FirstLink's switching
facility may be substituted at owner's expense.
10. INSURANCE. FirstLink shall carry and maintain liability insurance
of $1,000,000 naming Owner and Owner's agent as additional insured covering
personal injury and Property damage that may be caused to person(s), the
Property or its contents, by the System or FirstLink's employees or agents.
Owner and FirstLink each waive any right of recovery against each other for
any claims that may be brought for any loss that is covered by insurance upon
or relating to the Property or the System to the extent of the actual
proceeds received by waiving party. Owner shall carry and maintain general
liability insurance related to the Property.
11. TERMINATION OF THE AGREEMENT.
(a) This Agreement may be terminated at any time by mutual agreement of
the parties.
(b) Any termination of this Agreement shall be effective as of the
date of termination, but FirstLink shall continue to provide
Telecommunications Services until the earlier of (i) all FirstLink customers
at the Property are provided Telephone Service from another source or (ii)
thirty (30) days from the date of such termination. The provisions of this
agreement necessary for such continued services shall remain effective.
Page 5
<PAGE>
(c) Upon termination of this Agreement for any reason, FirstLink, or
any designee of FirstLink, including without limitation, any party providing
financing to FirstLink, shall have the right, after providing Owner with
written notice of at least sixty (60) days, without further demand, to enter
upon the Property and to dismantle and remove or render inoperative any and
all equipment or other Property purchased or owned by FirstLink.
12. ASSIGNMENT OF THE AGREEMENT. This Agreement and the rights
hereunder may be assigned by FirstLink to any majority-owned subsidiary of
FirstLink or to an affiliate or party acquiring all or substantially all of
the assets of FirstLink upon prior written consent of Owner. Such consent
shall not be unreasonably withheld. Alternatively, the Agreement may be
assigned by FirstLink to any FirstLink subsidiary so long as FirstLink agrees
in writing that it shall remain liable for all obligations arising under this
Agreement. FirstLink may also assign this Agreement to any party providing
financing to FirstLink; provided that such assignment shall not relieve
FirstLink from its obligations hereunder. In connection with a sale or
disposition of the Property, Owner shall request FirstLink's written consent
to assign this Agreement and shall require any subsequent owner of the
Property to assume this Agreement and the rights and obligations hereunder.
Subject to the foregoing, this Agreement shall be binding upon and shall
inure to the benefit of the successors and assigns of the respective parties
to this Agreement.
13. OWNER WARRANTIES: INFORMATION. Owner warrants that (i) it has full
power and authority to grant to FirstLink the exclusive rights set forth in
this Agreement, (ii) that no party holds any rights or interests with respect
to the Property that conflict with any rights or interests that Owner grants
to FirstLink under this Agreement; (iii) that the Property is not presently
part of bankruptcy proceeding, foreclosure action, or deed in lieu of
foreclosure transaction; (iv) Owner is not in default of any mortgages or
other encumbrances on the Property; (v) no purchase contracts presently exist
as to the Property; and (vi) it has entered into an agreement with the
Legends Condominium Association that upon 75% percent of the units at the
Property being sold ownership of the System will transfer to the Association
and this Agreement will continue to be binding on the Association after such
transfer.
14. FIRSTLINK WARRANTY. FirstLink warrants that it will comply with
all laws and licensing requirements concerning the installation and operation
of the System. Except as expressly stated in this Agreement, FirstLink makes
no express representations or warranties regarding the provision of
Telecommunications Services, however, implied warranty of merchantability or
fitness for a particular purpose is not waived.
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<PAGE>
15. INDEPENDENT CONTRACTOR. FirstLink shall be and is an independent
contractor and Owner shall not control or direct the details and means by
which FirstLink performs its duties under this Agreement. This Agreement
shall not create the relationship of employer and employee, a partnership or
a joint venture.
16. EMERGENCY CALLS. FirstLink will use its reasonable best efforts to
pass all "911" emergency calls, in a manner which identifies the unit number
from which the call originates, through the System to authorities but makes
no warranty or guaranty of any nature as to the promptness or adequacy of
any response to any such emergency call. FirstLink assumes no responsibility
whatsoever for any actions with respect to emergency calls other than to use
its reasonable best efforts to pass such traffic to authorities through the
System. In the event that the System has been adversely affected by any
situation described in Section 20, FirstLink shall have no liability
whatsoever for failure to pass on emergency telephone traffic.
17. INDEMNIFICATION. Subject to the provisions set forth in Section 18
below, FirstLink and Owner hereby agree to indemnify, defend and hold each
other (and each other's officers, directors, owners, employees, and agents)
harmless from and against all claims, losses and liabilities in any way
relating to, growing out of, or resulting from a material breach of each of
their respective obligations under this Agreement.
In addition, FirstLink agrees to indemnify, defend and hold harmless Owner
and Owner's partners, employees and agents from and against all damages,
losses, liabilities, costs, and expenses (including reasonable attorneys'
fees) resulting from claims made or causes of action asserted by third
parties (including, without limitation, residents of the Property) arising
out of or relating to (i) the performance by FirstLink (or its employees or
agents) of its obligations under this Agreement, (ii) the provision of
Telecommunications Services or (iii) compliance of FirstLink with applicable
laws and regulations, except to the extent such matters are attributable to
the gross negligence or willful misconduct of Owner.
18. LIMITATION OF REMEDIES. Notwithstanding any other provision of
this agreement but without limiting the mutual indemnification in Section 17,
neither FirstLink nor Owner shall be liable to any third party for any
incidental or consequential damages, including but not limited to lost
profits, of any nature whatsoever or for the condition or repair of any
telephone instrument or any Property to which the System is attached.
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<PAGE>
19. ARBITRATION OF DISPUTES. Any controversy, dispute, or claim of
whatever nature arising out of, in connection with or in relation to the
interpretation, performance or breach of this Agreement, including any claim
based on contract, tort or statute, shall be resolved at the request of any
party to this Agreement, by final and binding arbitration before a single
arbitrator conducted at a location determined by the arbitrator in Portland,
Oregon, administered by and in accordance with the then existing rules of
practice and procedure established by the Arbitration Chapter of the Uniform
Trial Court Rules as then in effect in the State of Oregon, and judgment upon
any award rendered by the arbitrator may be entered by any state or federal
court having jurisdiction thereof. The arbitrator shall award attorney's
fees and costs of the arbitration procedure to the prevailing party. Both
parties acknowledge that they are giving up their right to have any such
claim decided in a court of law before a judge or jury, and hereby waive all
rights to appeal.
20. FORCE MAJEURE. If the performance of any of the obligations under
this Agreement is interfered with by any reason or any circumstances beyond
the reasonable control of the parties, including, but not limited to, fire,
earthquake, storm, volcanic eruption, explosion, power failure or power
surge, technological obsolescence, acts of God, war, revolution, civil
commotion, or requirement of any government or legal body or any
representative of any such government or legal body, labor unrest, including
but not limited to, strikes, slowdowns, picketing or boycotts, then the
parties shall be excused from performance on a day-by-day basis to the extent
of such interference.
21. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement contains the entire Agreement
between the parties and may not be modified, amended or changed except by
written instrument signed by duly authorized officers of both parties.
(b) WAIVER. The failure by either party at any time to require
performance by the other party or to claim a breach of any provision of this
Agreement shall not be construed as
Page 8
<PAGE>
affecting any subsequent breach or the right to require performance or to
claim a breach with respect thereto.
(c) GOVERNING LAW. The rights and obligations of the parties and all
interpretations and performances of this Agreement shall be governed in all
respects by the laws of the State of Oregon.
(d) NOTICES. Any notice to be given by either party to the other shall
be in writing and either personally delivered or sent by certified mail,
return receipt requested, to the addresses of the Owner and FirstLink
provided below. Notices shall be deemed given when received or refused. Each
party may change its address for notice to it by notice in accordance with
the foregoing provisions.
FIRSTLINK:
FirstLink Communications, Inc.
255 SW Harrison, Suite 1A
Portland, Oregon 97201
Facsimile: 503-306-4333
Telephone: 503-306-4444
Attn: A. Roger Pease, CEO
LEGENDS CONDOMINIUM ASSOCIATION:
Crossings Development Corporation on behalf of Legends Condominium Association
1132 SW 19th Avenue
Portland, Oregon 97205
Facsimile: 503-525-9302
Telephone: 503-205-6174
Attn: Carol L. Hardie, Vice President
OWNER:
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<PAGE>
Crossings Development Corporation
1302 26th Avenue Northwest
Gig Harbor, Washington 98335
Facsimile: 253-851-2365
Telephone: 253-851-2381
Attn: Gary Soule, Vice President Development Technology, or Rick Boehlke, CEO
(e) VALIDITY. If any provision of this Agreement shall be held to be
invalid or unenforceable, such provisions shall not affect in any respect the
validity or enforceability of the remainder of this Agreement unless the
invalidity materially affects the ability of either party to perform as
contemplated hereunder.
(f) ATTORNEYS' FEES AND COSTS. IF arbitration or other proceedings
are brought to enforce or interpret this Agreement, the substantially
prevailing party shall be entitled to recover reasonable attorneys' fees and
other costs incurred in such action, arbitration or proceeding from the other
party, in addition to any other relief to which such party may be entitled.
(g) AUTHORITY. Each individual signing this Agreement on behalf of a
corporation or partnership represents that he or she has the necessary
authority to execute this Agreement on behalf of such entity and that, in the
case of a corporation, all necessary corporate action has been taken
approving the execution of this Agreement.
Any person or entity executing this Agreement as "Owner" hereby represents
and warrants to FirstLink that it is fully authorized by Owner to execute
this Agreement and to bind Owner to the terms and obligations set forth in
this Agreement and the Owner is fully aware of the existence and contents of
this Agreement. Owner and any person or entity executing this Agreement on
Owner's behalf acknowledges that Owner shall be estopped from claiming that
this Agreement was executed by a person or entity lacking actual authority to
bind Owner.
(h) FURTHER ASSURANCES. Upon the reasonable request of either party,
the other party shall promptly and, at its own expense, execute and deliver
any additional documents or take such actions, as may be reasonably necessary
(subject to any other agreement binding on either party) for the purpose of
evidencing or perfecting any rights or interest of either party ansing under
this Agreement or arising under documents executed in accordance with this
Agreement.
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<PAGE>
THIS AGREEMENT HAS BEEN SIGNED AND DELIVERED AS OF THE ABOVE DATE.
FIRSTLINK COMMUNICATIONS, INC.
BY: /s/ A. Roger Pease
---------------------------
A. Roger Pease
Chief Executive Officer
LEGENDS CONDOMINIUM ASSOCIATION:
Crossings Development Corporation on behalf of Legends Condominium Association
BY: /s/ Carol L. Hardie
---------------------------
Carol L. Hardie
Vice President
OWNER:
Crossings Development Corporation
BY: /s/ Gary D. [ILLEGIBLE]
---------------------------
Vice President Development
---------------------------
& Technology
---------------------------
Page 11
<PAGE>
ATTACHMENT A
FIRSTLINK
RESIDENT SERVICE AGREEMENT: LEGENDS
I WANT TO BE CONNECTED. LET'S CRUNCH MY PHONE AND CABLE RATES DOWN TO SIZE!
/ / LOCAL AND LONG DISTANCE PHONE PROVIDED BY FIRSTLINK
/ / EXPANDED BASIC CABLE TELEVISION (54 CHANNELS)
/ / PREMIUM CHANNELS: HBO / SHOWTIME / THE DISNEY CHANNEL / THE MOVIE CHANNEL
/ / I AM INTERESTED IN A FIRSTLINK CALLING CARD
MY MONTHLY RATE WILL BE:
- ---------------------------------------------
TELEPHONE AND BASIC CABLE ($-) $
----------
TELEPHONE ONLY ($-) $
----------
CABLE TELEVISION ONLY ($-) $
----------
OTHER $
----------
TOTAL $
----------
----------
- - *ALL TAXES AND FEES INCLUDED
MY NEW TELEPHONE NUMBER WILL BE: .
-------------
TELEPHONE NUMBER WE CAN CONTACT YOU AT PRIOR TO SERVICE ACTIVATION: .
------------
PLEASE ACTIVATE MY FIRSTLINK SERVICES ON AT THE ADDRESS
-------------------
BELOW.
1132 SW 19TH APT. ______
PORTLAND, OR 97205
- ------------------------------------------------------------------------------
SIGNATURE DATE
--------------------- -----------------------
PRINT NAME SOCIAL SECURITY #
----------------------- ----------
ACCOUNT REPRESENTATIVE DATE
----------- -----------------------
- ------------------------------------------------------------------------------
THE ABOVE SIGNATURE VERIFIES THAT I HAVE READ, UNDERSTOOD AND AGREE WITH THE
TERMS AND CONDITIONS FOR THE SERVICE CONTAINED ON BOTH SIDES OF THIS AGREEMENT.
<PAGE>
ATTACHMENT B
FIRSTLINK
LEGENDS
WE'RE CRUNCHING YOUR CABLE AND PHONE RATES DOWN TO SIZE!!!
<TABLE>
<CAPTION>
----------------------------
RATES
----------------------------
TCI/US WEST/ YOUR
SELECTED SERVICE PACKAGES FIRSTLINK AT&T SAVINGS
- ---------------------------------------------- --------- ------------ -------
<S> <C> <C> <C>
- - TCI Expanded Basic Cable Television Only $27.00 $28.93 7%
- With Cable/Phone Combination $24.00 17%
- - Residence Telephone Line and EAS* $21.00 $21.24 1%
- With Cable/Phone Combination $19.00 11%
- - Cable TV + Phone Package $43.00 $50.17 14%
- - Call Waiting $3.65 $3.85 5%
- - Call Forwarding $2.40 $2.50 4%
- - Three-Way Calling $2.40 $2.50 4%
- - Voicemail $6.60 $6.95 5%
</TABLE>
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LONG DISTANCE
PROGRAMS: TELEPHONE TELEPHONE AND
RATE ONLY CABLE
------------------- ---- -------------------
5% LOCAL 15%
DISCOUNT OFF FLAT MONTHLY TELEPHONE 5% PACKAGE MINIMUM
PROGRAM AT&T RATE FEE DISCOUNT DISCOUNT DISCOUNT USAGE
- ------- ------------ ---- ------- --------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
PLAN 1 X none X X none
Volume Discount
PLAN 2 $.15 none X X none
$.15 Flat
PLAN 3 $.10 $4.95 X X none
$.10 Flat
PLAN 4 $.09 $4.95 X X $200.00(1)
$.09 Flat
</TABLE>
(1) $.15 per minute in which domestic (continental U.S.) long distance usage
is less than $200; month-to-month carryovers are not allowed.
<PAGE>
Exhibit No. 10.13 Telecommunications Services Agreement between Registrant and
Parkside Place (Parkside Plaza).
* = Confidential Information.
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
and
PARKSIDE PLAZA
This agreement ("Agreement") is entered into as of January 6, 1998 (the
"Effective Date"), by and between FirstLink Communications, Inc., an Oregon
corporation ("FirstLink"), and Parkside Plaza, an Oregon general partnership
("Owner").
Definitions. For purposes of this Agreement, the following terms shall
have the meanings set forth in this section:
(a) Additional Telecommunications Services" shall mean services not
included in the definition of "Telecommunications Services," and may include
Prolink-SM-direct Internet access, video conferencing, on-line computer
services, electronic mail, wireless services (such as cellular telephone) and
other types of services.
(b) "Adequate Records" shall mean such records as would be necessary
for a complete audit by a certified public accountant of gross revenues
actually collected by FirstLink or its agents for Telephone Service
originating at the Property and for Basic Cable Television Service provided
to residents.
(c) "Basic Cable Television Services" shall mean a standard package of
cable television services and shall include an expanded selection of cable
channels.
(d) "Enhanced Calling Features" shall mean additional features not
included in the definition of "Telephone Service," including, but not limited
to, conference calling, call waiting, and call forwarding.
(e) "Enhanced Services" shall mean other optional services provided to
Telephone Service subscribers, including, but not limited to, voicemail.
(f) "Inside Wire" shall mean the conduits, wires, cables, and outlets
affixed to the Property and owned and installed by Owner.
CONFIDENTIAL
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<PAGE>
(g) "Premium Cable Television Services" shall mean a premium package of
cable television services, including Basic Cable Television Services and
additional services.
(h) "Property" shall mean the multi-family residential complex commonly
known as Parkside Plaza, located at 301 S.W. Lincoln Street, Portland, Oregon
97201, consisting of 208 residential units.
(i) "The System" shall mean all of FirstLink's electronic devices,
cable, wire, hardware, software and other material used to transmit and
receive Telecommunications Services and Additional Telecommunications
Services. The System shall not include Inside Wire.
(j) "System Site" shall mean an adequate and secure space to house the
switch and other fixed parts of the System.
(k) "Telephone Service" shall mean the provision of dial tone and
access to the local and long-distance telecommunications networks for two-way
transmission of voice and data.
(i) "Telecommunications Services" shall mean Telephone Service,
Enhanced Services and Enhanced Calling Features, Basic Cable Television
Services and Premium Cable Television Services.
1. STATEMENT OF AUTHORITY. Owner owns the Property, including the
Inside Wire, and has the authority to enter into this Agreement. FirstLink
is a provider of shared telecommunications services, authorized to provide
such services to the Property under the laws of the State of Oregon and is
authorized to enter into this Agreement.
CONFIDENTIAL
Page 2
<PAGE>
2. GRANT OF RIGHTS.
(a) Owner grants FirstLink the sole and exclusive right, except as
provided in Section 10(h) of this Agreement, to install, own, operate,
replace and maintain the System on and through the Property for the term of
this Agreement.
(b) Owner grants FirstLink a license to use and occupy the System Site
without charge for so long as this Agreement is in effect. The system site
shall be at a location to be mutually agreed upon by FirstLink and Owner. The
System Site must meet technical and regulatory requirements identified by
FirstLink. FirstLink shall have twenty-four hour, seven-day-a-week access to
the System Site, subject to reasonable rules and security procedures imposed
by Owner, and Owner's employees and agents shall not disturb the System.
(c) Owner grants FirstLink and its authorized personnel access to the
Property for any reasonable purposes related to this Agreement, subject to
reasonable rules and security procedures imposed by Owner.
(d) Owner grants FirstLink the right to use the coaxial and twisted
pair cabling in the Property.
3. DUTY TO PROVIDE SERVICE.
(a) FirstLink agrees to provide Telecommunications Services to any
resident of the Property who has the ability to pay and orders such services.
(b) FirstLink agrees to offer Additional Telecommunications Services
from time to time to any resident of the Property who has the ability to pay
and orders such services if the provision of such services is technically
feasible, economically rational, and warranted by resident demand.
(c) FirstLink shall not have the obligation to provide or continue
services to any resident of the Property who does not pay service charges in
a timely manner, subject to the requirements of state law governing
disconnection of Telecommunications Services or any of the individual
services that make up
CONFIDENTIAL
Page 3
<PAGE>
Telecommunications Services. In addition, FirstLink's obligation to provide
or continue services to any resident of the Property shall be contingent on
the resident completing a Tenant Services Agreement and meeting other
reasonable and lawful requirements as may be established by FirstLink from
time to time.
4. DUTY TO PAY COMMISSIONS.
(a) FirstLink shall pay Owner commissions equal to * of all gross
revenues actually collected by FirstLink or its agents for Telephone Service
originating at the Property and for Basic Cable Television Service provided
to residents. All commission payments will be paid quarterly in arrears.
(b) FirstLink shall maintain adequate records for a period of three (3)
years following the payment of commissions as described in subparagraph (a)
of this paragraph.
(c) At any time during that three (3) year period, Owner or its agents
may inspect and/or audit such records during normal business hours. In the
event that any such inspection or audit discloses that FirstLink was
obligated to pay commissions in excess of those it actually paid, an
appropriate adjustment shall be made immediately. In the event the amount of
under compensation exceeds five percent (5%) of the sum that should have been
paid to Owner by FirstLink, FirstLink shall reimburse Owner for all expenses
of such inspection or audit.
5. SYSTEM EXPENSES.
(a) FirstLink shall be solely responsible for all expenses related to
the installation, operation, maintenance and repair of the System.
(b) Owner shall provide access to electrical power for the System.
FirstLink shall be responsible for the expense of connecting to the power.
Based upon FirstLink's representation that the power consumed by the System
is approximately 144 Kwh per month, Owner agrees to provide all power
consumed by the System.
CONFIDENTIAL
Page 4
<PAGE>
(c) Owner shall be solely responsible for damage to the System caused
by the negligence or misconduct of Owner or Owner's agent(s) or employees.
6. TERM. The term of this Agreement shall be * years from the
Effective Date of this Agreement.
7. INSTALLATION
(a) FirstLink shall install the System as soon as practicable.
(b) FirstLink shall give Owner at least ten (10) days' notice prior to
the commencement of installation.
(c) FirstLink may subcontract activities related to the installation of
the System, but shall be responsible for any and all acts and/or omissions by
any subcontractor.
(d) FirstLink shall not permit any person to place any lien upon the
Property.
(e) FirstLink shall, at its sole expense, repair or replace any damage
to the Property resulting from installation, operation, or removal of the
System to the satisfaction of Owner.
8. OWNERSHIP AND CHARACTER OF THE SYSTEM. Except as otherwise stated
herein, the System, including any alterations and attachments, shall at all
times remain the sole property of FirstLink. It is the intention of the
parties that the System, and every component of the System, shall retain its
character as personal property following the installation of the System on
the Property and shall not be deemed to be a fixture of the Property. No part
of the System shall be or become subject to any mortgage, deed of trust or
lien upon the Property.
CONFIDENTIAL
Page 5
<PAGE>
9. MAINTENANCE OF THE SYSTEM.
(a) FirstLink shall maintain the System in good order, condition and
repair.
(b) Routine maintenance services shall be performed by FirstLink during
normal working hours.
10. SERVICE TO TENANTS OF THE PROPERTY.
(a) FirstLink shall provide Owner with copies of its current form
Tenant Services Agreement from time to time. FirstLink may update its Tenant
Services Agreement from time to time, and it shall be the sole responsibility
of FirstLink to remove any out-of-date forms from circulation and to ensure
that Owner has sufficient copies of the current form.
(b) Any resident electing to receive Telecommunications Services from
FirstLink shall do so through the execution and delivery to FirstLink of a
Tenant Services Agreement. Owner shall provide a location where tenants may
deposit executed Tenant Services Agreements for pick-up by FirstLink, in a
manner to be determined by mutual agreement.
(c) To the extent permitted by applicable law or regulation, FirstLink
shall have the sole authority to establish standard rates for services
("Standard Rates") and may revise the Standard Rates from time to time. Rates
must be reasonable from a market perspective.
(d) Each resident receiving Telecommunications Services from FirstLink
shall be charged and billed individually at FirstLink's standard rates for
connection to the System and for service. In no event shall Owner be
responsible for the payment of any resident bills for such services.
(e) FirstLink shall be solely responsible for invoicing, collections
and bad debts related to provision of service to residents. FirstLink shall
strictly abide by
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all local, state and federal laws, regulations and rules concerning the
collection of debts and other payments due from customers.
(f) FirstLink shall make a customer service representative available to
receive service requests or inquiries from Owner or residents and to ensure
that all service requests are responded to within four (4) hours.
(g) FirstLink shall install a telephone in the lobby of the Property
for use by tenants wishing to contact FirstLink for installation or service
purposes.
(h) To the extent a resident wishes to purchase Telecommunications
Services from another provider, FirstLink shall cooperate with the resident
and the resident's chosen authorized service provider(s) to allow the
provider(s) reasonable access to the System to establish and maintain service
to the resident. As allowed by law, FirstLink may charge a reasonable
non-recurring fee to cover its costs in providing access and switching over
service to the resident's provider.
11. Marketing of Telecommunications Services.
(a) Owner agrees to instruct its agents to present the FirstLink Tenant
Services Agreement and related information to current and prospective
residents and to refer them to FirstLink customer service staff for
additional information.
(b) Owner agrees to provide FirstLink with information for use in
marketing its Telecommunications Services, including lists of move-ins,
move-outs, transfers, and intents to vacate.
(c) FirstLink shall provide Owner with marketing materials and training
necessary to enable Owner and its employees and agents to inform prospective
residents and residents about the Telecommunications Services provided by
FirstLink.
(d) FirstLink shall provide qualified and knowledgeable staff support
to respond to inquiries from Owner, its agents, and employees on behalf of
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prospective residents and residents, and to respond to inquiries and requests
for service from residents.
(e) FirstLink shall provide current tenants of the Property with
incentives to subscribe to FirstLink for Telecommunications Services. The
duration and composition of these incentives shall be determined by mutual
agreement.
12. TAXES. FirstLink shall pay all taxes resulting from the ownership
or operation of the System and the provision of Telecommunications Services
under this Agreement.
13. COMPLIANCE WITH REGULATIONS.
(a) FirstLink shall comply with all applicable federal, state, and local
regulatory requirements relating to the provision of the Telecommunications
Services by FirstLink.
(b) Owner will provide FirstLink with any information FirstLink shall
reasonably require to comply with such regulatory requirements.
(c) Owner shall cooperate with FirstLink in obtaining permits,
consents, licenses and any other requirements that may be necessary for
FirstLink to install and operate the System and furnish the
Telecommunications Services; provided that FirstLink shall pay all reasonable
costs of the Owner associated therewith.
14. INSURANCE. FirstLink shall have sole responsibility to insure the
System against loss or damage. In addition, FirstLink shall carry and
maintain commercial liability insurance of $1,000,000, naming Owner and
Owner's agent as additional insureds covering personal injury and Property
damage that may be caused to person(s), the Property or its contents, by the
System or FirstLink's employees or agents. Such policy shall not be canceled
without thirty (30) days' written notice to Owner. Owner shall carry and
maintain general liability insurance related to the Property.
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15. TERMINATION OF THE AGREEMENT.
(a) This Agreement may be terminated by either party prior to its
stated term if there has been a material breach of the terms of this
Agreement by the other party and if within forty-five (45) days after
receiving notice of such breach from the party seeking to terminate, such
breach has not been cured.
(b) FirstLink may terminate this Agreement, or discontinue the
provision of any Telecommunications Services provided hereunder, if in the
sole discretion of FirstLink, it ceases to be feasible for legal, economic or
regulatory reasons to provide Telecommunications Services to the Property;
provided that FirstLink provides forty-five (45) days' written notice to
Owner.
(c) This Agreement may also be terminated by FirstLink if there is a
continuing material failure by Owner to provide the services to FirstLink
contemplated hereby.
(d) Any termination of this Agreement shall be effective as of the date
of termination, but FirstLink shall continue to provide Telecommunications
Services for a period of sixty (60) days from the date that FirstLink
provides notice of the termination to its customers, or until all FirstLink
customers at the Property are provided Telephone Service from another
source, whichever is sooner ("continuation period"). All provisions of this
Agreement necessary for the continued provision of Telecommunications
Services during this continuation period shall remain in effect throughout
the continuation period.
(e) Upon termination of this Agreement for any reason, FirstLink, or
any designee of FirstLink, including, without limitation, any party providing
financing to FirstLink, shall have the right, after providing Owner with
written notice of at least forty-five (45) days, without further demand, to
enter upon the Property and to dismantle and remove the System or render it
inoperative.
16. ASSIGNMENT OF THE AGREEMENT. This Agreement and the rights
hereunder may be assigned by FirstLink to any subsidiary of FirstLink or to
an affiliate or party acquiring all or substantially all of the assets of
FirstLink, upon
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prior written consent of Owner. Such consent shall not be unreasonably
withheld. Alternatively, the Agreement may be assigned by FirstLink to any
FirstLink subsidiary so long as FirstLink agrees in writing that it shall
remain liable for all obligations arising under this Agreement. FirstLink
may also assign this Agreement for security purposes to any party providing
financing to FirstLink; provided that such assignment shall not relieve
FirstLink from its obligations hereunder and further provided that, in the
event that the financing party attempts to realize on the assignment for
security purposes, the financing party agrees to perform each and every term
of this Agreement to be performed by FirstLink. In connection with a sale or
disposition of the Property, Owner shall request FirstLink's written consent
to assign this Agreement and shall require any subsequent owner of the
Property to assume this Agreement and the rights and obligations hereunder.
Notwithstanding the requirement of this paragraph that Owner shall require
any subsequent owner of the Property to assume this Agreement, this
Agreement is a personal agreement between FirstLink and Owner, and the rights
granted to FirstLink herein shall not run with or burden the Property.
Subject to the foregoing, this Agreement shall be binding upon and shall
inure to the benefit of the successors and assigns of the respective parties
to this Agreement.
17. OWNER WARRANTIES; INFORMATION. Owner warrants that (i) it owns the
Property and the Inside Wire, and has full power and authority to grant to
FirstLink the exclusive rights set forth in this Agreement, (ii) it has not
granted to any other party the rights or interests Owner grants to FirstLink
under this Agreement; (iii) the Property is not presently part of a
bankruptcy proceeding, foreclosure action, or deed-in-lieu-of-foreclosure
transaction; (iv) Owner is not in default of any mortgages or other
encumbrances on the Property; and (v) no purchase contracts presently exist
as to the Property.
18. FIRSTLINK WARRANTY. FirstLink warrants that it will comply with all
laws and licensing requirements concerning the installation and operation of
the System. Except as expressly stated in this Agreement, FirstLink makes
no representations or warranties regarding the System, express or implied,
including, but not limited to, any implied warranty of merchantability or
fitness for a particular purpose.
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19. INDEPENDENT CONTRACTOR. FirstLink shall be and is an independent
contractor and Owner shall not control or direct the details and means by
which FirstLink performs its duties under this Agreement. This Agreement
shall not create the relationship of employer and employee, a partnership or
a joint venture.
20. EMERGENCY CALLS. FirstLink will comply with all applicable laws and
regulations regarding "911" emergency calls.
21. INDEMNIFICATION.
(a) FirstLink and Owner hereby agree to indemnify, defend and hold each
other (and each other's officers, directors, owners, employees, and agents)
harmless from and against all claims, losses and liabilities in any way
relating to, growing out of, or resulting from a material breach of each of
their respective obligations or warranties under this Agreement.
(b) In addition, FirstLink agrees to indemnify, defend and hold
harmless Owner and Owner's partners, employees and agents from and against
all damages, losses, liabilities, costs, and expenses (including reasonable
attorney fees) resulting from claims made or causes of action asserted by
third parties (including, without limitation, residents of the Property)
arising out of or relating to (i) the performance by FirstLink (or its
employees or agents) of its obligations under this Agreement, (ii) the
provision of Telecommunications Services, or (iii) compliance of FirstLink
and/or the System with applicable laws and regulations, except to the extent
such matters are attributable to the gross negligence or willful misconduct
of Owner.
22. LIMITATION OF REMEDIES. Notwithstanding any other provision of
this Agreement but without limiting the mutual indemnification in Section 21,
neither FirstLink nor Owner shall be liable to the other party for any
incidental or consequential damages, including, but not limited to, lost
profits of any nature whatsoever or for the condition or repair of any
telephone instrument or any property to which the System is attached.
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<PAGE>
23. ARBITRATION OF DISPUTES. Any controversy, dispute, or claim of
whatever nature arising out of, in connection with or in relation to, the
interpretation, performance or breach of this Agreement, including any claim
based on contract, tort or statute, shall be resolved at the request of any
party to this Agreement, by final and binding arbitration before a single
arbitrator conducted at a location determined by the arbitrator in Portland,
Oregon, administered by and in accordance with the then-existing rules of
practice and procedure established by the Arbitration Chapter of the Uniform
Trial Court Rules as then in effect in the State of Oregon, and judgment upon
any award rendered by the arbitrator may be entered by any state or federal
court having jurisdiction thereof. The arbitrator shall award attorney fees
and costs of the arbitration procedure to the prevailing party. Both parties
acknowledge that they are giving up their right to have any such claim
decided in a court of law before a judge or jury.
24. FORCE MAJEURE. If the performance of any of the obligations under
this Agreement is interfered with by any reason or any circumstances beyond
the reasonable control of the parties, including, but not limited to, fire,
earthquake, storm, volcanic eruption, explosion, power failure or power
surge, acts of God, war, revolution, civil commotion, or requirement of any
government or legal body or any representative of any such government or
legal body, labor unrest, including, but not limited to, strikes, slowdowns,
picketing or boycotts, then the parties shall be excused from performance on
a day-by-day basis to the extent of such interference.
25. MISCELLANEOUS.
(a) ENTIRE AGREEMENT; This Agreement contains the entire agreement
between the parties and may not be modified, amended or changed except by
written instrument signed by duly authorized executives of both parties.
(b) WAIVER. The failure by either party at any time to require
performance by the other party or to claim a breach of any provision of this
Agreement shall not be construed as affecting any subsequent breach or the
right to require performance or to claim a breach with respect thereto.
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(c) GOVERNING LAW. The rights and obligations of the parties and all
interpretations and performances of this Agreement shall be governed in all
respects by the laws of the State of Oregon.
(d) NOTICES. Any notice to be given by either party to the other shall
be in writing and either personally delivered or sent by certified mail,
return receipt requested, to the addresses of the Owner and FirstLink
provided below. Notices shall be deemed given when received or refused. Each
party may change its address for notice to it by notice in accordance with
the foregoing provisions.
<TABLE>
<S> <C>
FIRSTLINK: OWNER:
FirstLink Communications, Inc. Parkside Plaza, an Oregon
general partnership
c/o Oregon Pacific Investment
and Development Company
190 S.W. Harrison 1800 S.W. First Avenue
Portland, Oregon 97201 Suite 600
Facsimile: 503-306-4333 Portland, Oregon 97201
Telephone: 503-306-4444 Facsimile: 503-273-8612
Attn: A. Roger Pease, CEO Telephone: 503-225-1102
Attn: Julie S. Leuvrey, Vice President
</TABLE>
(e) VALIDITY. If any provision of this Agreement shall be held to be
invalid or unenforceable, such provisions shall not affect in any respect the
validity or enforceability of the remainder of this Agreement unless the
invalidity materially affects the ability of either party to perform as
contemplated hereunder.
(f) ATTORNEY FEES AND COSTS. If arbitration or other proceedings are
brought to enforce or interpret this Agreement, the substantially prevailing
party shall be entitled to recover its reasonable attorney fees and other
costs incurred in such action, arbitration or proceeding from the other
party, in addition to any other relief to which such party may be entitled.
(g) AUTHORITY. Each individual signing this Agreement on behalf of a
corporation or partnership represents that he or she has the necessary
authority to
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execute this Agreement on behalf of such entity and that, in the case of a
corporation, all necessary corporate action has been taken approving the
execution of this Agreement.
Any person or entity executing this Agreement as "Owner" hereby represents
and warrants to FirstLink that it is fully authorized by Owner to execute this
Agreement and to bind Owner to the terms and obligations set forth in this
Agreement and Owner is fully aware of the existence and contents of this
Agreement. Owner and any person or entity executing this Agreement on Owner's
behalf acknowledges that Owner shall be estopped from claiming that this
Agreement was executed by a person or entity lacking actual authority to bind
Owner.
(h) FURTHER ASSURANCES. Upon the reasonable request of either party,
the other party shall promptly and, at its own expense, execute and deliver
any additional documents or take such actions, as may be reasonably necessary
(subject to any other agreement binding on either party) for the purpose of
evidencing or perfecting any rights or interest of either party arising under
this Agreement or arising under documents executed in accordance with this
Agreement.
This Agreement has been signed and delivered as of the above date.
FIRSTLINK: OWNER:
COMMUNICATIONS, INC. FIRSTLINK PARKSIDE PLAZA, an Oregon
general partnership
By: /s/ A. ROGER PEASE By: OREGON PACIFIC INVESTMENT
------------------------ AND DEVELOPMENT COMPANY,
A. Roger Pease its General Partner
Chief Executive Officer
By: /s/ RANDY W. LOVRE
-------------------------------
Randy W. Lovre
Vice President
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Exhibit No. 10.14 Telecommunications Services Agreement between Registrant
and Housing Authority of the City of Vancouver,
Washington (Cougar Creek Apartments).
* = Confidential Information.
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
AND
HOUSING AUTHORITY OF THE CITY OF VANCOUVER, WASHINGTON
TELECOMMUNICATIONS SERVICES AGREEMENT
This agreement ("Agreement") is entered into as of March 27, 1997, by and
between FirstLink Communications, Inc., an Oregon corporation ("FirstLink"),
and the Housing Authority of the City of Vancouver, Washington, a Washington
public housing authority ("Owner").
1. PROPERTY. Owner owns the multi-family residential complex commonly
known as Cougar Creek Apartments located at 8415 NE Hazel Dell Ave.,
Vancouver, WA 98665 consisting of 72 living units ("the Property").
GRANT OF RIGHTS.
(a) Owner grants FirstLink the sole and exclusive right, except as
provided in the last sentence of clause (b) below, to install, own, operate,
replace and maintain the System on, off and through the Property and the sole
and exclusive right to provide Telecommunication Services to residents of the
Property. "System" shall mean all electronic devices, cable, wire, hardware,
software and other material used to transmit and receive two-way voice and
data communications, telephone service ("Telephone Service"), multi-channel
TV, video on demand, audio on demand, voice mail, data services and other
means of two-way communication distribution, whether now existing or
hereafter developed (collectively "Telecommunication Services") as between
the Property and the local and/or long distance telephone networks or other
outside distributor of these and other services. The system shall not include
existing wiring within the building.
It is anticipated that Telephone Services will include local and long
distance calling, multi-channel television, voice mail and calling features
such as conference calling, call waiting and call forwarding. Additional
services will be added from time to time, as available and as warranted by
tenant demand. Such additional Telecommunication Services may include: video
conferencing, on-line computer services, electronic mail, wireless services
(such as cellular telephone) and other types of services. There can be no
assurance that any or all of the above additional services will be made
available. Their availability is dependent upon many variables
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and factors beyond FirstLink's control. Such factors include, but are
not limited to, technical feasibility, economic, regulatory and market
considerations.
(b) In consideration of the substantial investment made by FirstLink in
the System, Owner agrees that it will not grant access to the Property to any
person or entity, other than FirstLink, for the purpose of operating or
maintaining the System, or permit the installation, maintenance or operation
at the Property of any other equipment, wire, cable, or material by any
person or entity that similarly provides Telecommunication Services, except
as mandated by the Telecommunications Act of 1996 and subsequent laws
affecting telecommunications.
3. SYSTEM EXPENSES. Other than as set forth herein, FirstLink shall
bear all expenses to install, operate, maintain and repair the System. Owner
shall, at Owner's expense and cost, provide electrical power to the System
and shall pay for any damage to the System caused by the negligence or
misconduct of Owner or Owner's agent(s) or employees. For the purposes of
this Agreement, "System Site" shall mean an adequate and secure space to
house FirstLink's System equipment, which shall consist of a rent-free,
locked room meeting FirstLink's specifications. If a suitable system site
cannot be identified within the existing buildings, FirstLink will be
responsible for providing the specifications of such a site and constructing
the site at FirstLink's cost. Such site would always remain the property of
VHA. Owner hereby grants FirstLink and its authorized personnel access to the
Property for any reasonable purposes related to this Agreement including the
installation of cabling or microwave equipment to interconnect buildings and
to connect to other telecommunication Systems and grants specific rights to
FirstLink to use both existing coaxial and twisted pair cabling in the
Property. FirstLink agrees to notify the Facility Manager when either
FirstLink or its authorized personnel are on-site.
4. TERM. The term of this Agreement shall be * years from the date
hereof. The original term will automatically be renewed for up to *
additional periods of * years each unless either party otherwise notifies the
other in writing at least 180 days prior to the end of the original term or
any renewal term.
5. INSTALLATION. FirstLink shall commence installation of the
System as soon as practicable and in a manner that minimizes interruption of
existing communication services. In no event shall FirstLink interrupt
service provided by US West for those tenants choosing to remain connected to
US West. Telecommunication Services to the Property shall commence no later
than 180 days from commencement of installation. FirstLink shall give Owner
at least ten
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(10) days notice prior to the commencement of installation. FirstLink may
subcontract activities related to the installation of the System, but shall
be responsible for any and all acts and/or omissions by any subcontractor.
6. OWNERSHIP AND CHARACTER OF THE SYSTEM. Except as otherwise stated
herein. the System, including any alterations and attachments, shall at all
times remain the sole Property of FirstLink. It Is the intention of the
parties that the System, and every component of the System, shall retain its
character as personal Property following the installation of the System on
the Property, and shall not be deemed to be a fixture constituting a part of
the Property. No part of the System shall be or become subject to any
mortgage, deed of trust or lien upon the Property.
7. SERVICE TO TENANTS. FirstLink shall provide Telephone Service and
other Telecommunication Services offered through the System to each resident
requesting them. FirstLink's obligation to provide or continue
Telecommunication Services shall be contingent on the resident paying service
charges and meeting other reasonable requirements as are established by
FirstLink from time to time. Residents electing to receive Telecommunication
Services offered by FirstLink shall do so through the execution and delivery
to Owner or FirstLink of a Tenant Services Agreement in the form provided,
from time to time, from FirstLink to Owner. Owner shall promptly provide such
executed documents to FirstLink. Residents requesting Telecommunication
Services shall be charged and billed individually for connection to the
System and for service at standard rates established solely by FirstLink from
time to time unless prohibited by applicable law or regulation. FirstLink
shall be solely responsible for invoicing, collections and bad debts related
to provision of Telecommunication Service to residents.
Both parties agree that neither the Owner nor the Owner's agent shall have
any liability regarding the number of residents electing to use
Telecommunications Services.
8. COMMISSIONS. Owner shall be entitled to Commissions equal to *
of all gross revenues actually collected for services provided to each living
unit served by FirstLink hereunder. All commission payments hereunder will be
paid quarterly in arrears.
9. ADDITIONAL OBLIGATIONS OF FIRSTLINK. FirstLink shall:
(a) Make a customer service representative available to receive service
requests or inquiries from Owner or residents and insure that it responds to
service requests within four (4)
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hours of receipt. Routine maintenance services shall be performed by
FirstLink during its normal working hours. A technician shall arrive at the
Property to commence maintenance services promptly after request by a
customer of such services, provided however, where such request are made on,
or on a day preceding a Saturday, Sunday or holiday, FirstLink's system
technician shall arrive at the Property to commence maintenance services on
the next normal working day.
(b) Provide Owner with marketing materials, sales support and sales
training to enable Owner and Owner's employees to market Telecommunications
Services in accordance with Section 10(b);
(c) Provide training to Owners staff to enable staff to perform the
duties specified in Section 10(b);
(d) Repair or replace any damage to the Property resulting from
Installation, operation, or removal of the System or any other acts by
FirstLink to the satisfaction of the Owner and restore Property to its
original condition;
(e) Comply with all applicable regulator requirements relating to
the provision of the Telecommunication Services provided by FirstLink as may
be in effect from time to time;
(f) Maintain the System in good order, condition and repair; and
(g) Provide Owner with business Telephone Services at the Property at
monthly service rates at or below comparable market prices. Owner will not
be charged for the installation costs for providing such business Telephone
Services. Owner will provide, at its own cost, all necessary ancillary
hardware such as keysets and operator consoles for the dedicated use of the
Owner.
(h) Pay all taxes resulting from the ownership or operation of System
and service.
(i) FirstLink will ensure that quality of the Telecommunications
Services are comparable to industry standards in the Portland Metropolitan
Area.
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(j) FirstLink will ensure that rates charged to residents for
telecommunications services will be competitive with rates charged for
comparable services in the Portland Metropolitan Area.
(k) FirstLink will ensure that any resident desiring to be reconnected
to the local exchange carrier will be reconnected at no cost to the resident.
(l) FirstLink will ensure that Telecommunications Services provided to
the residents are generally comparable to or exceed services being offered in
the Portland Metropolitan Area.
10. OBLIGATIONS OF OWNER. Owner shall:
(a) Make the System Site available on a rent-free basis to FirstLink
during the term of this Agreement. The construction and location of the
System Site shall be as Owner and FirstLink reasonably agree, subject to
technical and regulatory requirements as determined by FirstLink. FirstLink
shall have twenty-four hour, seven day a week access to the System Site, and
Owner's employees and agents shall not disturb the System;
(b) Use reasonable efforts to encourage its staff, agents and
representatives to encourage and promote the use of the Telecommunications
Services to residents and prospective residents as part of the amenities
provided by Owner at the Property. Owner consents to FirstLink's use of
incentives and incentive programs with Property management personnel, leasing
staff and other Property personnel for the purpose of promoting the System
and Telecommunication Services provided through the System. Owner's staff
will present the telecommunications service agreement and related information
to prospective tenants with the objective of securing sales. It is envisioned
that this selling process will require a minimal amount of time on behalf of
Owner's staff. If tenants have additional questions or require additional
information, their sales lead will be referred to FirstLink staff who will be
responsible for responding to customer inquiries and securing any resulting
sales. FirstLink will also be fully responsible for the initial sales
conversion process;
(c) Promptly provide to FirstLink requested specifications on the
Property, such as wiring schematics and/or building diagrams, a current list
of residents, addresses and their telephone numbers and other specific
information regarding resident transactions, such as rentals, move-ins,
move-outs, transfers, intents to vacate, and the entering into or termination
of leases
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and other information necessary to market and operate the System and
provide the Telecommunications services according to this Agreement or to comply
with governmental or Utility Commission rules as may be determined by FirstLink;
(d) Cooperate with FirstLink in obtaining permits, consents, licenses and
any other requirements which may be necessary for FirstLink to install and
operate the System and furnish the Telecommunications Services; provided that
FirstLink shall pay all reasonable costs of the Owner associated therewith
except that Owner will pay installation costs as described in Section 9(g);
(e) Provide reasonable access to the Property to FirstLink and its
employees and agents to enable FirstLink to perform the activities contemplated
by or necessary under this Agreement including access for the purpose of
soliciting customers.
11. INSURANCE. FirstLink shall carry and maintain liability insurance
of $1,000,000 naming Owner and Owner's agent as additional insured covering
personal injury and Property damage that may be caused to person(s), the
Property or its contents, by the System or FirstLink's employees or agents.
Owner and FirstLink each waive any right of recovery against each other for
any claims that may be brought for any loss that is covered by insurance upon
or relating to the Property or the System to the extent of the actual
proceeds received by waiving party. Owner shall carry and maintain general
liability insurance related to the Property.
12. TERMINATION OF THE AGREEMENT.
(a) This Agreement may be terminated by either party if there has been
a material breach of the terms of this Agreement by the other party and if
within forty-five (45) days after receiving notice of such breach from the
party seeking to terminate, such breach has not been cured.
(b) FirstLink may terminate this Agreement, or discontinue the
provision of any Telecommunications Services provided hereunder, if in the
sole discretion of FirstLink, it ceases to be feasible for legal, economic or
regulatory reasons to provide Telecommunications Services to the Property;
provided that FirstLink provides forty-five (45) days written notice to Owner.
(c) This Agreement may also be terminated by FirstLink if there is a
continuing material failure by Owner to provide the services to FirstLink
contemplated hereby.
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(d) Any termination of this Agreement shall be effective as of the date
of termination, but FirstLink shall continue to provide Telecommunications
Services until the earlier of (i) all FirstLink customers at the Property are
provided Telephone Service from another source or (ii) thirty (30) days from
the date of such termination. The provisions of this agreement necessary for
such continued services shall remain effective.
(e) Upon termination of this Agreement for any reason, FirstLink, or
any designee of FirstLink, including without limitation, any party providing
financing to FirstLink, shall have the right, after providing Owner with
written notice of at least forty-five (45) days, without further demand, to
enter upon the Property and to dismantle and remove or render inoperative any
and all equipment or other Property comprising the System so long as such
right shall encompass Section 9 (d) herein.
13. ASSIGNMENT OF THE AGREEMENT. This Agreement and the rights
hereunder may be assigned by FirstLink to any majority---owned subsidiary of
FirstLink or to an affiliate or party acquiring all or substantially all of
the assets of FirstLink upon prior written consent of Owner. Such consent
shall not be unreasonably withheld. Alternatively, the Agreement may be
assigned by FirstLink to any FirstLink subsidiary so long as FirstLink agrees
in writing that it shall remain liable for all obligations arising under this
Agreement. FirstLink may also assign this Agreement to any party providing
financing to FirstLink; provided that such assignment shall not relieve
FirstLink from its obligations hereunder. In connection with a sale or
disposition of the Property, Owner shall require any subsequent owner of the
Property to assume this Agreement and the rights and obligations hereunder.
Subject to the foregoing, this Agreement shall be binding upon and shall
inure to the benefit of the successors and assigns of the respective parties
to this Agreement.
14. OWNER WARRANTIES: INFORMATION. Owner warrants that (i) it has full
power and authority to grant to FirstLink the exclusive rights set forth in
this Agreement, (ii) that no party holds any rights or interests with respect
to the Property that conflict with any rights or interests that Owner grants
to FirstLink under this Agreement; (iii) that the Property is not presently
part of bankruptcy proceeding, foreclosure action, or deed in lieu of
foreclosure transaction; (iv) Owner is not in default of any mortgages or
other encumbrances on the Property; and (v) no purchase contracts presently
exist as to the Property.
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15. FIRSTLINK WARRANTY. FirstLink warrants that it will comply with
all laws and licensing requirements concerning the installation and operation
of the System. Except as expressly stated in this Agreement, FirstLink makes
no representations or warranties regarding the System or the provision of
Telecommunications Services, express or implied, including, but not limited
to, any implied warranty of merchantability or fitness for a particular
purpose.
16. INDEPENDENT CONTRACTOR. FirstLink shall be and is an independent
contractor and Owner shall not control or direct the details and means by
which FirstLink performs its duties under this Agreement. This Agreement
shall not create the relationship of employer and employee, a partnership or
a joint venture.
17. EMERGENCY CALLS. Commencing upon installation of the system,
FirstLink will use its reasonable best efforts to pass all "911" emergency
calls through the System to authorities but makes no warranty or guaranty of
any nature as to the promptness or adequacy of any response to any such
emergency call. FirstLink assumes no responsibility whatsoever for any
actions with respect to emergency calls other than to use its reasonable best
efforts to pass such traffic to authorities through the System. In the event
that the System has been adversely affected by any situation described in
Section 21, FirstLink shall have no liability whatsoever for failure to pass
on emergency telephone traffic.
I8. INDEMNIFICATION. Subject to the provisions set forth in Section 19
below, (i) FirstLink and Owner hereby agree to indemnify, defend and hold
each other (and each other's officers, directors, owners, employees, and
agents) harmless from and against all claims, losses and liabilities in any
way relating to, growing out of, or resulting from a material breach of each
of their respective obligations under this Agreement ; and (ii) Owner will
indemnify FirstLink for damages to the System as provided in Section 3 herein.
In addition, FirstLink agrees to indemnify, defend and hold harmless Owner
and Owner's partners, employees and agents from and against all damages,
losses, liabilities, costs, and expenses (including reasonable attorneys'
fees) resulting from claims made or causes of action asserted by third
parties (including, without limitation, residents of the Property) arising
out of or relating to (i) the performance by FirstLink (or its employees or
agents) of its obligations under this Agreement, (ii) the provision of
Telecommunications Services or (iii) compliance of FirstLink and/or the
System with applicable laws and regulations, except to the extent such
matters are attributable to the gross negligence or willful misconduct of
Owner.
Page 8
<PAGE>
19. LIMITATION OF REMEDIES. Notwithstanding any other provision of this
agreement but without limiting the mutual indemnification in Section 18,
neither FirstLink nor Owner shall be liable to any third party for any
incidental or consequential damages, including but not limited to lost
profits, of any nature whatsoever or for the condition or repair of any
telephone instrument or any Property to which the System is attached.
20. ARBITRATION OF DISPUTES. Any controversy, dispute, or claim of
whatever nature arising out of, in connection with or in relation to the
interpretation, performance or breach of this Agreement, including any claim
based on contract, tort or statute, shall be resolved at the request of any
parry to this Agreement, by final and binding arbitration before a single
arbitrator conducted at a location determined by the arbitrator in Vancouver,
Washington administered by and in accordance with the then existing rules of
practice and procedure established by the Arbitration Chapter of the Uniform
Trial Court Rules as then in effect in the State of Washington, and judgment
upon any award rendered by the arbitrator may be entered by any state or
federal court having jurisdiction thereof. The arbitrator shall award
attorney's fees and costs of the arbitration procedure to the prevailing
party. Both parties acknowledge that they are giving up their right to have
any such claim decided in a court of law before a judge or jury, and hereby
waive all rights to appeal.
21. FORCE MAJEURE. If the performance of any of the obligations under
this Agreement is interfered with by any reason or any circumstances beyond
the reasonable control of the parties, including, but not limited to, fire,
earthquake, storm, volcanic eruption, explosion, power failure or power
surge, acts of God, war, revolution, civil commotion, or requirement of any
government or legal body or any representative of any such government or
legal body, labor unrest, including but not limited to, strikes, slowdowns,
picketing or boycotts, then the parties shall be excused from performance on
a day-by-day basis to the extent of such interference.
22. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement contains the entire Agreement
between the parties and may not be modified, amended or changed except by
written instrument signed by duly authorized executives of both parties.
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<PAGE>
(b) WAIVER. The failure by either party at any time to require
performance by the other party or to claim a breach of any provision of this
Agreement shall not be construed as affecting any subsequent breach or the
right to require performance or to claim a breach with respect thereto.
(c) GOVERNING LAW. The rights and obligations of the parties and all
interpretations and performances of this Agreement shall be governed in all
respects by the laws of the State of Washington.
(d) NOTICES. Any notice to be given by either party to the other shall
be in writing and either personally delivered or sent by certified mail,
return receipt requested, to the addresses of the Owner and FirstLink
provided below. Notices shall be deemed given when received or refused. Each
party may change its address for notice to it by notice in accordance with
the foregoing provisions.
<TABLE>
<CAPTION>
FIRSTLINK: OWNER:
<S> <C>
FirstLink Communications, Inc. Housing Authority of the City
of Vancouver, Washington,
190 SW Harrison St. 500 Omaha Way
Portland, Oregon 97201 Vancouver, Washington 98661
Facsimile: 503-306-4333 Facsimile: 360-694-5369
Telephone: 503-306-4444 Telephone: 360-694-2501
Attn: A. Roger Pease, CEO Attn: Alice Porter
</TABLE>
(e) VALIDITY. If any provision of this Agreement shall be held to be
invalid or unenforceable, such provisions shall not affect in any respect the
validity or enforceability of the remainder of this Agreement unless the
invalidity materially affects the ability of either party to perform as
contemplated hereunder.
(f) ATTORNEYS' FEES AND COSTS. If arbitration or other proceedings are
brought to enforce or interpret this Agreement, the substantially prevailing
party shall be entitled to recover reasonable attorneys' fees and other costs
incurred in such action, arbitration or proceeding from the other party, in
addition to any other relief to which such party may be entitled.
Page 10
<PAGE>
(g) AUTHORITY. Each individual signing this Agreement on behalf of a
corporation or partnership represents that he or she has the necessary
authority to execute this Agreement on behalf of such entity and that, in the
case of a corporation, all necessary corporate action has been taken
approving the execution of this Agreement.
Any person or entity executing this Agreement as "Owner" hereby represents
and warrants to FirstLink that it is fully authorized by Owner to execute
this Agreement and to bind Owner to the terms and obligations set forth in
this Agreement and the Owner is fully aware of the existence and contents of
this Agreement. Owner and any person or entity executing this Agreement on
Owner's behalf acknowledges that Owner shall be estopped from claiming that
this Agreement was executed by a person or entity lacking actual authority to
bind Owner.
(h) FURTHER ASSURANCES. Upon the reasonable request of either party,
the other party shall promptly and, at its own expense, execute and deliver
any additional documents or take such actions. as may be reasonably necessary
(subject to any other agreement binding on either party) for the purpose of
evidencing or perfecting any rights or interest of either party arising under
this Agreement or arising under documents executed in accordance with this
Agreement.
This Agreement has been signed and delivered as of the above date.
FIRSTLINK: OWNER
FIRSTLINK COMMUNICATIONS, INC. [illegble]
--------------------------------
BY: /S/ A. Roger Pease [illegble]
---------------------------- --------------------------------
A. Roger Pease Exec. Director
--------------------------------
Chief Executive Officer VHA
--------------------------------
Page 11
<PAGE>
Exhibit No. 10.15 Telecommunications Services Agreement between Registrant and
Housing Authority of the City of Vancouver, Washington
(ParkLane Apartments).
* = Confidential Information.
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
AND
HOUSING AUTHORITY OF THE CITY OF VANCOUVER, WASHINGTON
TELECOMMUNICATIONS SERVICES AGREEMENT
This agreement ("Agreement") is entered into as of March 27, 1997, by and
between FirstLink Communications, Inc., an Oregon corporation ("FirstLink"),
and the Housing Authority of the City of Vancouver, Washington, a Washington
public housing authority ("Owner").
1. PROPERTY. Owner owns the multi-family residential complex commonly
known as ParkLane Apartments located at 10223 NE Notchlog Dr., Vancouver, WA
98685 consisting of 220 living units ("the Property").
2. GRANT OF RIGHTS.
(a) Owner grants FirstLink the sole and exclusive right, except as
provided in the last sentence of clause (b) below, to install, own, operate,
replace and maintain the System on, off and through the Property and the sole
and exclusive right to provide Telecommunication Services to residents of the
Property "System" shall mean all electronic devices, cable, wire, hardware,
software and other material used to transmit and receive two-way voice and
data communications, telephone service ("Telephone Service"), multi-channel
TV, video on demand, audio on demand, voice mail, data services and other
means of two-way communication distribution, whether now existing or
hereafter developed (collectively "Telecommunication Services") as between
the Property and the local and/or long distance telephone networks or other
outside distributor of these and other services. The system shall not include
existing wiring within the building.
It is anticipated that Telephone Services will include local and long
distance calling, multi-channel television, voice mail and calling features
such as conference calling, call waiting and call forwarding. Additional
services will be added from time to time, as available and as warranted by
tenant demand. Such additional Telecommunication Services may include: video
conferencing, on-line computer services, electronic mail, wireless services
(such as cellular telephone) and other types of services. There can be no
assurance that any or all of the above additional services will be made
available. Their availability is dependent upon many variables
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<PAGE>
and factors beyond FirstLink's control. Such factors include, but are not
limited to, technical feasibility, economic, regulatory and market
considerations.
(b) In consideration of the substantial investment made by FirstLink in
the System, Owner agrees that it will not grant access to the Property to any
person or entity, other than FirstLink, for the purpose of operating or
maintaining the System, or permit the installation, maintenance or operation
at the Property of any other equipment, wire, cable, or material by any
person or entity that similarly provides Telecommunication Services, except
as mandated by the Telecommunications Act of 1996 and subsequent laws
affecting telecommunications.
3. SYSTEM EXPENSES. Other than as set forth herein, FirstLink shall
bear all expenses to install, operate, maintain and repair the System. Owner
shall. at Owner's expense and cost, provide electrical power to the System
and shall pay for any damage to the System caused by the negligence or
misconduct of Owner or Owner's agent(s) or employees. For the purposes of
this Agreement, "System Site" shall mean an adequate and secure space to
house FirstLink's System equipment, which shall consist of a rent-free,
locked room meeting FirstLink's specifications. If a suitable system site
cannot be identified within the existing buildings, FirstLink will be
responsible for providing the specifications of such a site and constructing
the site at FirstLink's cost. Such site would always remain the property of
VHA. Owner hereby grants FirstLink and its authorized personnel access to the
Property for any reasonable purposes related to this Agreement including the
installation of cabling or microwave equipment to interconnect buildings and
to connect to other telecommunication systems and grants specific rights to
FirstLink to use both existing coaxial and twisted pair cabling in the
Property. FirstLink agrees to notify the Facility Manager when either
FirstLink or its authorized personnel are on-site.
4. TERM. The term of this Agreement shall be * years from the date
hereof. The original term will automatically be renewed for up to *
additional periods of * years each unless either party otherwise notifies the
other in writing at least 180 days prior to the end of the original term or
any renewal term.
5. INSTALLATION. FirstLink shall commence installation of the System
as soon as practicable and in a manner that minimizes interruption of
existing communication services. In no event shall FirstLink interrupt
service provided by US West for those tenants choosing to remain connected to
US West. Telecommunication Services to the Property shall commence no later
than 180 days from commencement of installation. FirstLink shall give Owner
at least ten
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<PAGE>
(10) days notice prior to the commencement of installation. FirstLink may
subcontract activities related to the installation of the System, but shall
be responsible for any and all acts and/or omissions by any subcontractor.
6. OWNERSHIP AND CHARACTER OF THE SYSTEM. Except as otherwise stated
herein, the System, including any alterations and attachments. shall at all
times remain the sole Property of FirstLink. It is the intention of the
parties that the System, and every component of the System, shall retain its
character as personal Property following the installation of the System on
the Property, and shall not be deemed to be a fixture constituting a part of
the Property. No part of the System shall be or become subject to any
mortgage, deed of trust or lien upon the Property.
7. SERVICE TO TENANTS. FirstLink shall provide Telephone Service and
other Telecommunication Services offered through the System to each resident
requesting them. FirstLink's obligation to provide or continue
Telecommunication Services shall be contingent on the resident paying service
charges and meeting other reasonable requirements as are established by
FirstLink from time to time. Residents electing to receive Telecommunication
Services offered by FirstLink shall do so through the execution and delivery
to Owner or FirstLink of a Tenant Services Agreement in the form provided,
from time to time, from FirstLink to Owner. Owner shall promptly provide such
executed documents to FirstLink. Residents requesting Telecommunication
Services shall be charged and billed individually for connection to the
System and for service at standard rates established solely by FirstLink from
time to time unless prohibited by applicable law or regulation. FirstLink
shall be solely responsible for invoicing, collections and bad debts related
to provision of Telecommunication Service to residents.
Both parties agree that neither the Owner nor the Owner's agent shall have
any liability regarding the number of residents electing to use
Telecommunications Services.
8. COMMISSIONS. Owner shall be entitled to Commissions equal to * of
all gross revenues actually collected for services provided to each living
unit served by FirstLink hereunder. All commission payments hereunder will
be paid quarterly in arrears.
9. ADDITIONAL OBLIGATIONS OF FIRSTLINK. FirstLink shall:
(a) Make a customer service representative available to receive service
requests or inquiries from Owner or residents and insure that it responds to
service requests within four (4)
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<PAGE>
hours of receipt. Routine maintenance services shall be performed by
FirstLink during its normal working hours. A technician shall arrive at the
Property to commence maintenance services promptly after request by a
customer of such services, provided however, where such request are made on,
or on a day preceding a Saturday, Sunday or holiday, FirstLink's system
technician shall arrive at the Property to commence maintenance services on
the next normal working day.
(b) Provide Owner with marketing materials, sales support and sales
training to enable Owner and Owner's employees to market Telecommunications
Services in accordance with Section 10(b);
(c) Provide training to Owner's staff to enable STAFF to perform the
duties specified in Section 10(b);
(d) Repair or replace any damage to the Property resulting from
Installation, operation, or removal of the System or any other acts by
FirstLink to the satisfaction of the Owner and restore Property to its
original condition;
(e) Comply with all applicable regulatory requirements relating to the
provision of the Telecommunication Services provided by FirstLink as may be
in effect from time to time;
(f) Maintain the System in good order, condition and repair; and
(g) Provide Owner with business Telephone Services at the Property at
monthly service rates at or below comparable market prices. Owner will not
be charged for the installation costs for providing such business Telephone
Services. Owner will provide, at its own cost, all necessary ancillary
hardware such as keysets and operator consoles for the dedicated use of the
Owner.
(h) Pay all taxes resulting from the ownership or operation of System
and service.
(i) FirstLink will ensure that quality of the Telecommunications
Services are comparable to industry standards in the Portland Metropolitan
Area.
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<PAGE>
(j) FirstLink will ensure that rates charged to residents for
telecommunications services will be competitive with rates charged for
comparable services in the Portland Metropolitan Area.
(k) FirstLink will ensure that any resident desinng to be reconnected
to the local exchange carrier will be reconnected at no cost to the resident.
(1) FirstLink will ensure that Telecommunications Services provided to
the residents are generally comparable to or exceed services being offered in
the Portland Metropolitan Area.
10. OBLIGATIONS OF OWNER. Owner shall
(a) Make the System Site available on a rent-free basis to FirstLink
during the term of this Agreement. The construction and location of the
System Site shall be as Owner and FirstLink reasonably agree, subject to
technical and regulatory requirements as determined by FirstLink. FirstLink
shall have twenty-four hour, seven day a week access to the System Site, and
Owner's employees and agents shall not disturb the System;
(b) Use reasonable efforts to encourage its staff, agents and
representatives to encourage and promote the use of the Telecommunications
Services to residents and prospective residents as part of the amenities
provided by Owner at the Property. Owner consents to FirstLink's use of
incentives and incentive programs with Property management personnel, leasing
staff and other Property personnel for the purpose of promoting the System
and Telecommunication Services provided through the System. Owner's staff
will present the telecommunications service agreement and related information
to prospective tenants with the objective of securing sales. It is envisioned
that this selling process will require a minimal amount of time on behalf of
Owner's staff. If tenants have additional questions or require additional
information, their sales lead will be referred to FirstLink staff who will be
responsible for responding to customer inquiries and securing any resulting
sales. FirstLink will also be fully responsible for the initial sales
conversion process;
(c) Promptly provide to FirstLink requested specifications on the
Property, such as wiring schematics and/or building diagrams, a current list
of residents, addresses and their telephone numbers and other specific
information regarding resident transactions, such as rentals, move-ins,
move-outs, transfers, intents to vacate, and the entering into or termination
of leases
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<PAGE>
and other information necessary to market and operate the System and provide
the Telecommunications services according to this Agreement or to comply with
governmental or Utility Commission rules as may be determined by FirstLink.
(d) Cooperate with FirstLink in obtaining permits, consents, licenses
and any other requirements which may be necessary for FirstLink to install
and operate the System and furnish the Telecommunications Services, provided
that FirstLink shall pay all reasonable costs of the Owner associated
therewith except that Owner will pay installation costs as described in
Section 9(g);
(e) Provide reasonable access to the Property to FirstLink and its
employees and agents to enable FirstLink to perform the activities
contemplated by or necessary under this Agreement including access for the
purpose of soliciting customers.
11. INSURANCE. FirstLink shall carry and maintain liability insurance of
$1,000,000 naming Owner and Owner's agent as additional insured covering
personal injury and Property damage that may be caused to person(s), the
Property or its contents, by the System or FirstLink's employees or agents.
Owner and FirstLink each waive any right of recovery against each other for
any claims that may be brought for any loss that is covered by insurance upon
or relating to the Property or the System to the extent of the actual
proceeds received by waiving party. Owner shall carry and maintain general
liability insurance related to the Property.
12. TERMINATION OF THE AGREEMENT.
(a) This Agreement may be terminated by either party if there has been a
material breach of the terms of this Agreement by the other party and if
within forty-five (45) days after receiving notice of such breach from the
party seeking to terminate, such breach has not been cured.
(b) FirstLink may terminate this Agreement, or discontinue the provision
of any Telecommunications Services provided hereunder, if in the sole
discretion of FirstLink, it ceases to be feasible for legal, economic or
regulatory reasons to provide Telecommunications Services to the Property;
provided that FirstLink provides forty-five (45) days written notice to Owner.
(c) This Agreement may also be terminated by FirstLink if there is a
continuing material failure by Owner to provide the services to FirstLink
contemplated hereby.
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<PAGE>
(d) Any termination of this Agreement shall be effective as of the date
of termination, but FirstLink shall continue to provide Telecommunications
Services until the earlier of (i) all FirstLink customers at the Property are
provided Telephone Service from another source or (ii) thirty (30) days from
the date of such termination. The provisions of this agreement necessary for
such continued services shall remain effective.
(e) Upon termination of this Agreement for any reason, FirstLink, or any
designee of FirstLink including without limitation. any party providing
financing to FirstLink, shall have the right, after providing Owner with
written notice of at least forty-five (45) days, without further demand, to
enter upon the Property and to dismantle and remove or render inoperative any
and all equipment or other Property comprising the System so long as such
right shall encompass Section 9 (d) herein.
13. ASSIGNMENT OF THE AGREEMENT. This Agreement and the rights hereunder
may be assigned by FirstLink to any majority---owned subsidiary of FirstLink
or to an affiliate or party acquiring all or substantially all of the assets
of FirstLink upon prior written consent of Owner. Such consent shall not be
unreasonably withheld. Alternatively, the Agreement may be assigned by
FirstLink to any FirstLink subsidiary so long as FirstLink agrees in writing
that it shall remain liable for all obligations arising under this Agreement.
FirstLink may also assign this Agreement to any party providing financing to
FirstLink; provided that such assignment shall not relieve FirstLink from its
obligations hereunder. In connection with a sale or disposition of the
Property, Owner shall require any subsequent owner of the Property to assume
this Agreement and the rights and obligations hereunder. Subject to the
foregoing, this Agreement shall be binding upon and shall inure to the
benefit of the successors arid assigns of the respective parties to this
Agreement.
14. OWNER WARRANTIES. INFORMATION. Owner warrants that (i) it has full
power and authority to grant to FirstLink the exclusive rights set forth in
this Agreement, (ii) that no party holds any rights or interests with respect
to the Property that conflict with any rights or interests that Owner grants
to FirstLink under this Agreement; (iii) that the Property is not presently
part of bankruptcy proceeding, foreclosure action, or deed in lieu of
foreclosure transaction; (iv) Owner is not in default of any mortgages or
other encumbrances on the Property; and (v) no purchase contracts presently
exist as to the Property.
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<PAGE>
15. FIRSTLINK WARRANTY. FirstLink warrants that it will comply with all
laws and licensing requirements concerning the installation and operation of
the System. Except as expressly stated in this Agreement. FirstLink makes no
representations or warranties regarding the System or the provision of
Telecommunications Services, express or implied, including, but not limited
to, any implied warranty of merchantability or fitness for a particular
purpose.
16. INDEPENDENT CONTRACTOR. FirstLink shall be and is an independent
contractor and Owner shall not control or direct the details and means by
which FirstLink performs its duties under this Agreement. This Agreement
shall not create die relationship of employer and employee. a partnership or
a joint venture.
17. EMERGENCY CALLS. Commencing upon installation of the system.
FirstLink will use its reasonable best efforts to pass all "911,' emergency
calls through the System to authorities but makes no warranty or guaranty of
any nature as to the promptness or adequacy of any response to any such
emergency call. FirstLink assumes no responsibility whatsoever for any
actions with respect to emergency calls other than to use its reasonable best
efforts to pass such traffic to authorities through the System. In the event
that the System has been adversely affected by any situation described in
Section 21, FirstLink shall have no liability whatsoever for failure to pass
on emergency telephone traffic
18. INDEMNIFICATION. Subject to the provisions set forth in Section 19
below, (i) FirstLink and Owner hereby agree to indemnify, defend and hold
each other (and each other's officers, directors, owners, employees, and
agents) harmless from and against all claims, losses and liabilities in any
way relating to, growing out of, or resulting from a material breach of each
of their respective obligations under this Agreement ; and (ii) Owner will
indemnify FirstLink for damages to the System as provided in Section 3 herein.
In addition, FirstLink agrees to indemnify, defend and hold harmless Owner
and Owner's partners, employees and agents from and against all damages,
losses, liabilities, costs, and expenses (including reasonable attorneys
fees) resulting from claims made or causes of action asserted by third
parties (including, without limitation, residents of the Property) arising
out of or relating to (i) the performance by FirstLink (or its employees or
agents) of its obligations under this Agreement, (ii) the provision of
Telecommunications Services or (iii) compliance of FirstLink and/or the
System with applicable laws and regulations, except to the extent such
matters are attributable to the gross negligence or willful misconduct of
Owner.
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<PAGE>
19. LIMITATION OF REMEDIES. Notwithstanding any other provision of this
agreement but without limiting the mutual indemnification in Section 18.
neither FirstLink nor Owner shall be liable to any third party for any
incidental or consequential damages, including but not limited to lost
profits, of any nature whatsoever or for the condition or repair of any
telephone instrument or any Property to which the System is attached.
20. ARBITRATION OF DISPUTES. Any controversy, dispute, or claim of
whatever nature arising out of, in connection with or in relation to the
interpretation, performance or breach of this Agreement, including any claim
based on contract, tort or statute, shall be resolved at the request of any
party to this Agreement, by final and binding arbitration before a single
arbitrator conducted at a location determined by the arbitrator in Vancouver,
Washington administered by and in accordance with the then existing rules of
practice and procedure established by the Arbitration Chapter of the Uniform
Trial Court Rules as then in effect in the State of Washington, and judgment
upon any award rendered by the arbitrator may be entered by any state or
federal court having jurisdiction thereof. The arbitrator shall award
attorney's fees and costs of the arbitration procedure to the prevailing
panty. Both parties acknowledge that they are giving up their right to have
any such claim decided in a court of law before a judge or jury, and hereby
waive all rights to appeal.
21. FORCE MAJEURE. If the performance of any of the obligations under
this Agreement is interfered with by any reason or any circumstances beyond
the reasonable control of the parties, including, but not limited to, fire,
earthquake, storm, volcanic eruption, explosion, power failure or power
surge, acts of God, war, revolution, civil commotion, or requirement of any
government or legal body or any representative of any such government or
legal body, labor unrest, including but not limited to, strikes, slowdowns,
picketing or boycotts, then the parties shall be excused from performance on
a day-by-day basis to the extent of such interference.
22. MISCELLANEOUS.
(a) ENTIRE AGREEMENT This Agreement contains the entire Agreement
between the parties and may not be modified, amended or changed except by
written instrument signed by duly authorized executives of both parties
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<PAGE>
(b) WAIVER. The failure by either party at any time to require
performance by the other party or to claim a breach of any provision of this
Agreement shall not be construed as affecting any subsequent breach or the
right to require performance or to claim a breach with respect thereto.
(c) GOVERNING LAW The rights and obligations of the parties and all
interpretations and performances of this Agreement shall be governed in all
respects by the laws of the State of Washington.
(d) NOTICES. Any notice to be given by either party to the other shall
be in writing and either personally delivered or sent by certified mail,
return receipt requested, to the addresses of the Owner and FirstLink
provided below. Notices shall be deemed given when received or refused. Each
party may change its address for notice to it by notice in accordance with
the foregoing provisions.
FIRSTLINK: OWNER:
FirstLink Communications, Inc. Housing Authority of the City of Vancouver,
Washington
190 SW Harrison, Suite 1A 500 Omaha Way
Portland, Oregon 97201 Vancouver, Washington 98661
Facsimile: 503-306-4333 Facsimile: 360-694-5369
Telephone: 503-306-4444 Telephone: 360-694-2502
Attn: A. Roger Pease Attn: Alice Porter
(e) VALIDITY. If any provision of this Agreement shall be held to be
invalid or unenforceable, such provisions shall not affect in any respect the
validity or enforceability of the remainder of this Agreement unless the
invalidity materially affects the ability of either party to perform as
contemplated hereunder.
(f) ATTORNEYS' FEES AND COSTS. If arbitration or other proceedings are
brought to enforce or interpret this Agreement, the substantially prevailing
party shall be entitled to recover reasonable attorneys' fees and other costs
incurred in such action, arbitration or proceeding from the other party, in
addition to any other relief to which such party may be entitled.
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<PAGE>
(g) AUTHORITY. Each individual signing this Agreement on behalf of a
corporation or partnership represents that he or she has the necessary
authority to execute this Agreement on behalf of such entity and that, in the
case of a corporation, all necessary corporate action has been taken
approving the execution of this Agreement.
Any person or entity executing this Agreement as "Owner" hereby represents
and warrants to FirstLink that it is filly authorized by Owner to execute
this Agreement and to bind Owner to the terms and obligations set forth in
this Agreement and the Owner is fully aware of the existence and contents of
this Agreement. Owner and any person or entity executing this Agreement on
Owner's behalf acknowledges that Owner shall be estopped from claiming that
this Agreement was executed by a person or entity lacking actual authority to
bind Owner.
(h) FURTHER ASSURANCES. Upon the reasonable request of either party, the
other party shall promptly and, at its own expense, execute and deliver any
additional documents or take such actions, as may be reasonably necessary
(subject to any other agreement binding on either party) for the purpose of
evidencing or perfecting any rights or interest of either party arising under
this Agreement or arising under documents executed in accordance with this
Agreement.
This Agreement has been signed and delivered as of the above date.
FIRSTLINK: OWNER: /s/ Illegible
FIRSTLINK COMMUNICATIONS, INC. --------------------------
BY:/s/ A. Roger Pease BY: Illegible
----------------------------- ----------------------
A. Roger Pease Executive Director
Chief Executive Officer ----------------------
Illegible
----------------------
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<PAGE>
Exhibit No. 10.16 Telecommunications Services Agreement between Registrant and
Housing Authority of the City of Vancouver, Washington
(Cougar Creek Apartments).
*=Confidential information
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
AND
HOUSING AUTHORITY OF THE CITY OF VANCOUVER, WASHINGTON
TELECOMMUNICATIONS SERVICES AGREEMENT
This agreement ("Agreement") is entered into as of March 27, 1997, by
and between FirstLink Communications, Inc., an Oregon corporation
("FirstLink"), and the Housing Authority of the City of Vancouver,
Washington, a Washington public housing authority ("Owner").
1. PROPERTY. Owner owns the multi-family residential complex commonly
known as Cougar Creek Apartments located at 8415 NE Hazel Dell Ave.,
Vancouver, WA 98665 consisting of 72 living units ("the Property").
2. GRANT OF RIGHTS.
(a) Owner grants FirstLink the sole and exclusive right, except as
provided in the last sentence of clause (b) below, to install, own, operate,
replace and maintain the System on, off and through the Property and the sole
and exclusive right to provide Telecommunication Services to residents of the
Property. "System" shall mean all electronic devices, cable, wire, hardware,
software and other material used to transmit and receive two-way voice and
data communications, telephone service ("Telephone Service"), multi-channel
TV, video on demand, audio on demand, voice mail, data services and other
means of two-way communication distribution, whether now existing or
hereafter developed (collectively "Telecommunication Services") as between
the Property and the local and/or long distance telephone networks or other
outside distributor of these and other services. The system shall not include
existing wiring within the building.
It is anticipated that Telephone Services will include local and long
distance calling, multi-channel television, voice mail and calling features
such as conference calling, call waiting and call forwarding. Additional
services will be added from time to time, as available and as warranted by
tenant demand. Such additional Telecommunication Services may include: video
conferencing, on-line computer services, electronic mail, wireless services
(such as cellular telephone) and other types of services. There can be no
assurance that any or all of the above additional services will be made
available. Their availability is dependent upon many variables
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<PAGE>
and factors beyond FirstLink's control. Such factors include, but are not
limited to, technical feasibility, economic, regulatory and market
considerations.
(b) In consideration of the substantial investment made by FirstLink in
the System, Owner agrees that it will not grant access to the Property to any
person or entity, other than FirstLink, for the purpose of operating or
maintaining the System, or permit the installation, maintenance or operation
at the Property of any other equipment, wire, cable, or material by any
person or entity that similarly provides Telecommunication Services, except
as mandated by the Telecommunications Act of 1996 and subsequent laws
affecting telecommunications.
3. SYSTEM EXPENSES. Other than as set forth herein, FirstLink shall
bear all expenses to install, operate, maintain and repair the System. Owner
shall, at Owner's expense and cost, provide electrical power to the System
and shall pay for any damage to the System caused by the negligence or
misconduct of Owner or Owner's agent(s) or employees. For the purposes of
this Agreement, "System Site" shall mean an adequate and secure space to
house FirstLink's System equipment, which shall consist of a rent-free,
locked room meeting FirstLink's specifications. If a suitable system site
cannot be identified within the existing buildings, FirstLink will be
responsible for providing the specifications of such a site and constructing
the site at FirstLink's cost. Such site would always remain the property of
VHA. Owner hereby grants FirstLink and its authorized personnel access to the
Property for any reasonable purposes related to this Agreement including the
installation of cabling or microwave equipment to interconnect buildings and
to connect to other telecommunication Systems and grants specific rights to
FirstLink to use both existing coaxial and twisted pair cabling in the
Property. FirstLink agrees to notify the Facility Manager when either
FirstLink or its authorized personnel are on-site.
4. TERM. The term of this Agreement shall be * years from the date
hereof. The original term will automatically be renewed for up to *
additional periods of * years each unless either party otherwise notifies the
other in writing at least 180 days prior to the end of the original term or
any renewal term.
5. INSTALLATION. FirstLink shall commence installation of the System
as soon as practicable and in a manner that minimizes interruption of
existing communication services. In no event shall FirstLink interrupt
service provided by US West for those tenants choosing to remain connected to
US West. Telecommunication Services to the Property shall commence no later
than 180 days from commencement of installation. FirstLink shall give Owner
at least ten
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<PAGE>
(10) days notice prior to the commencement of installation. FirstLink may
subcontract activities related to the installation of the System, but shall
be responsible for any and all acts and/or omissions by any subcontractor.
6. OWNERSHIP AND CHARACTER OF THE SYSTEM. Except as otherwise stated
herein. the System, including any alterations and attachments, shall at all
times remain the sole Property of FirstLink. It Is the intention of the
parties that the System, and every component of the System, shall retain its
character as personal Property following the installation of the System on
the Property, and shall not be deemed to be a fixture constituting a part of
the Property. No part of the System shall be or become subject to any
mortgage, deed of trust or lien upon the Property.
7. SERVICE TO TENANTS. FirstLink shall provide Telephone Service and
other Telecommunication Services offered through the System to each resident
requesting them. FirstLink's obligation to provide or continue
Telecommunication Services shall be contingent on the resident paying service
charges and meeting other reasonable requirements as are established by
FirstLink from time to time. Residents electing to receive Telecommunication
Services offered by FirstLink shall do so through the execution and delivery
to Owner or FirstLink of a Tenant Services Agreement in the form provided,
from time to time, from FirstLink to Owner. Owner shall promptly provide such
executed documents to FirstLink. Residents requesting Telecommunication
Services shall be charged and billed individually for connection to the
System and for service at standard rates established solely by FirstLink from
time to time unless prohibited by applicable law or regulation. FirstLink
shall be solely responsible for invoicing, collections and bad debts related
to provision of Telecommunication Service to residents.
Both parties agree that neither the Owner nor the Owner's agent shall have
any liability regarding the number of residents electing to use
Telecommunications Services.
8. COMMISSIONS. Owner shall be entitled to Commissions equal to * of
all gross revenues actually collected for services provided to each living
unit served by FirstLink hereunder. All commission payments hereunder will be
paid quarterly in arrears.
9. ADDITIONAL OBLIGATIONS OF FIRSTLINK. FirstLink shall:
(a) Make a customer service representative available to receive service
requests or inquiries from Owner or residents and insure that it responds to
service requests within four (4)
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hours of receipt. Routine maintenance services shall be performed by
FirstLink during its normal working hours. A technician shall arrive at the
Property to commence maintenance services promptly after request by a
customer of such services, provided however, where such request are made on,
or on a day preceding a Saturday, Sunday or holiday, FirstLink's system
technician shall arrive at the Property to commence maintenance services on
the next normal working day.
(b) Provide Owner with marketing materials, sales support and sales
training to enable Owner and Owner's employees to market Telecommunications
Services in accordance with Section 10(b);
(c) Provide training to Owner's staff to enable staff to perform the
duties specified in Section 10(b);
(d) Repair or replace any damage to the Property resulting from
Installation, operation, or removal of the System or any other acts by
FirstLink to the satisfaction of the Owner and restore Property to its
original condition;
(e) Comply with all applicable regulatory requirements relating to
the provision of the Telecommunication Services provided by FirstLink as may
be in effect from time to time;
(f) Maintain the System in good order, condition and repair; and
(g) Provide Owner with business Telephone Services at the Property at
monthly service rates at or below comparable market prices. Owner will not
be charged for the installation costs for providing such business Telephone
Services. Owner will provide, at its own cost. all necessary ancillary
hardware such as keysets and operator consoles for the dedicated use of the
Owner.
(h) Pay all taxes resulting from the ownership or operation of System
and service.
(i) FirstLink will ensure that quality of the Telecommunications
Services are comparable to industry standards in the Portland Metropolitan
Area.
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(j) FirstLink will ensure that rates charged to residents for
telecommunications services will be competitive with rates charged for
comparable services in the Portland Metropolitan Area.
(k) FirstLink will ensure that any resident desiring to be reconnected
to the local exchange carrier will be reconnected at no cost to the resident.
(l) FirstLink will ensure that Telecommunications Services provided to
the residents are generally comparable to or exceed services being offered in
the Portland Metropolitan Area.
10. OB1IGATIONS OF OWNER. Owner shall:
(a) Make the System Site available on a rent-free basis to FirstLink
during the term of this Agreement. The construction and location of the
System Site shall be as Owner and FirstLink reasonably agree, subject to
technical and regulatory requirements as determined by FirstLink. FirstLink
shall have twenty-four hour, seven day a week access to the System Site, and
Owner's employees and agents shall not disturb the System;
(b) Use reasonable efforts to encourage its staff, agents and
representatives to encourage and promote the use of the Telecommunications
Services to residents and prospective residents as part of the amenities
provided by Owner at the Property. Owner consents to FirstLink's use of
incentives and incentive programs with Property management personnel, leasing
staff and other Property personnel for the purpose of promoting the System
and Telecommunication Services provided through the System. Owner's staff
will present the telecommunications service agreement and related information
to prospective tenants with the objective of securing sales. It is envisioned
that this selling process will require a minimal amount of time on behalf of
Owner's staff. If tenants have additional questions or require additional
information, their sales lead will be referred to FirstLink staff who will be
responsible for responding to customer inquiries and securing any resulting
sales. FirstLink will also be fully responsible for the initial sales
conversion process;
(c) Promptly provide to FirstLink requested specifications on the
Property, such as wiring schematics and/or building diagrams, a current list
of residents, addresses and their telephone numbers and other specific
information regarding resident transactions, such as rentals, move-ins,
move-outs, transfers, intents to vacate, and the entering into or termination
of leases
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and other information necessary to market and operate the System and provide
the Telecommunications services according to this Agreement or to comply with
governmental or Utility Commission rules as may be determined by FirstLink;
(d) Cooperate with FirstLink in obtaining permits, consents, licenses
and any other requirements which may be necessary for FirstLink to install
and operate the System and furnish the Telecommunications Services; provided
that FirstLink shall pay all reasonable costs of the Owner associated
therewith except that Owner will pay installation costs as described in
Section 9(g);
(e) Provide reasonable access to the Property to FirstLink and its
employees and agents to enable FirstLink to perform the activities
contemplated by or necessary under this Agreement including access for the
purpose of soliciting customers.
11. INSURANCE. FirstLink shall carry and maintain liability insurance
of $1,000,000 naming Owner and Owner's agent as additional insured covering
personal injury and Property damage that may be caused to person(s), the
Property or its contents, by the System or FirstLink's employees or agents.
Owner and FirstLink each waive any right of recovery against each other for
any claims that may be brought for any loss that is covered by insurance upon
or relating to the Property or the System to the extent of the actual
proceeds received by waiving party. Owner shall carry and maintain general
liability insurance related to the Property.
12. TERMINATION OF THE AGREEMENT.
(a) This Agreement may be terminated by either party if there has been
a material breach of the terms of this Agreement by the other party and if
within forty-five (45) days after receiving notice of such breach from the
patty seeking to terminate, such breach has not been cured.
(b) FirstLink may terminate this Agreement, or discontinue the
provision of any Telecommunications Services provided hereunder, if in the
sole discretion of FirstLink, it ceases to be feasible for legal, economic or
regulatory reasons to provide Telecommunications Services to the Property;
provided that FirstLink provides forty-five (45) days written notice to Owner.
(c) This Agreement may also be terminated by FirstLink if there is a
continuing material failure by Owner to provide the services to FirstLink
contemplated hereby.
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(d) Any termination of this Agreement shall be effective as of the date
of termination, but FirstLink shall continue to provide Telecommunications
Services until the earlier of (i) all FirstLink customers at the Property are
provided Telephone Service from another source or (ii) thirty (30) days from
the date of such termination. The provisions of this agreement necessary for
such continued services shall remain effective.
(e) Upon termination of this Agreement for any reason, FirstLink, or
any designee of FirstLink, including without limitation, any party providing
financing to FirstLink, shall have the right, after providing Owner with
written notice of at least forty-five (45) days, without further demand, to
enter upon the Property and to dismantle and remove or render inoperative any
and all equipment or other Property comprising the System so long as such
right shall encompass Section 9 (d) herein.
13. ASSIGNMENT OF THE AGREEMENT. This Agreement and the rights
hereunder may be assigned by FirstLink to any majority---owned subsidiary of
FirstLink or to an affiliate or party acquiring all or substantially all of
the assets of FirstLink upon prior written consent of Owner. Such consent
shall not be unreasonably withheld. Alternatively, the Agreement may be
assigned by FirstLink to any FirstLink subsidiary so long as FirstLink agrees
in writing that it shall remain liable for all obligations arising under this
Agreement. FirstLink may also assign this Agreement to any party providing
financing to FirstLink; provided that such assignment shall not relieve
FirstLink from its obligations hereunder. In connection with a sale or
disposition of the Property, Owner shall require any subsequent owner of the
Property to assume this Agreement and the rights and obligations hereunder.
Subject to the foregoing, this Agreement shall be binding upon and shall
inure to the benefit of the successors and assigns of the respective parties
to this Agreement.
14. OWNER WARRANTIES: INFORMATION. Owner warrants that (i) it has full
power and authority to grant to FirstLink the exclusive rights set forth in
this Agreement, (ii) that no party holds any rights or interests with respect
to the Property that conflict with any rights or interests that Owner grants
to FirstLink under this Agreement; (iii) that the Property is not presently
part of bankruptcy proceeding, foreclosure action, or deed in lieu of
foreclosure transaction; (iv) Owner is not in default of any mortgages or
other encumbrances on the Property; and (v) no purchase contracts presently
exist as to the Property.
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15. FIRSTLINK WARRANTY. FirstLink warrants that IT will comply with
all laws and licensing requirements concerning the installation and operation
of the System. Except as expressly stated in this Agreement, FirstLink makes
no representations or warranties regarding the System or the provision of
Telecommunications Services, express or implied, including, but not limited
to, any implied warranty of merchantability or fitness for a particular
purpose.
16. INDEPENDENT CONTRACTOR. FirstLink shall be and is an independent
contractor and Owner shall not control or direct the details and means by
which FirstLink performs its duties under this Agreement. This Agreement
shall not create the relationship of employer and employee, a partnership or
a joint venture.
17. EMERGENCY CALLS. Commencing upon installation of the system,
FirstLink will use its reasonable best efforts to pass all "911" emergency
calls through the System to authorities but makes no warranty or guaranty of
any nature as to the promptness or adequacy of any response to any such
emergency call. FirstLink assumes no responsibility whatsoever for any
actions with respect to emergency calls other than to use its reasonable best
efforts to pass such traffic to authorities through the System. In the event
that the System has been adversely affected by any situation described in
Section 21, FirstLink shall have no liability whatsoever for failure to pass
on emergency telephone traffic.
18. INDEMNIFICATION. Subject to the provisions set forth in Section 19
below, (i) FirstLink and Owner hereby agree to indemnify, defend and hold
each other (and each other's officers, directors, owners, employees, and
agents) harmless from and against all claims, losses and liabilities in any
way relating to, growing out of, or resulting from a material breach of each
of their respective obligations under this Agreement ; and (ii) Owner will
indemnify FirstLink for damages to the System as provided in Section 3 herein.
In addition, FirstLink agrees to indemnify, defend and hold harmless Owner
and Owner's partners, employees and agents from and against all damages,
losses, liabilities, costs, and expenses (including reasonable attorneys'
fees) resulting from claims made or causes of action asserted by third
parties (including, without limitation, residents of the Property) arising
out of or relating to (i) the performance by FirstLink (or its employees or
agents) of its obligations under this Agreement, (ii) the provision of
Telecommunications Services or (iii) compliance of FirstLink and/or the
System with applicable laws and regulations, except to the extent such
matters are attributable to the gross negligence or willful misconduct of
Owner.
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19. LIMITATION OF REMEDIES. Notwithstanding any other provision of this
agreement but without limiting the mutual indemnification in Section 8,
neither FirstLink nor Owner shall be liable to any third party for any
incidental or consequential damages, including but not limited to lost
profits, of any nature whatsoever or for the condition or repair of any
telephone instrument or any Property to which the System is attached.
20. ARBITRATION OF DISPUTES. Any controversy, dispute, or claim of
whatever nature arising out of, in connection with or in relation to the
interpretation, performance or breach of this Agreement, including any claim
based on contract, tort or statute, shall be resolved at the request of any
parry to this Agreement, by final and binding arbitration before a single
arbitrator conducted at a location determined by the arbitrator in Vancouver,
Washington administered by and in accordance with the then existing rules of
practice and procedure established by the Arbitration Chapter of the Uniform
Trial Court Rules as then in effect in the State of Washington, and judgment
upon any award rendered by the arbitrator may be entered by any state or
federal court having jurisdiction thereof. The arbitrator shall award
attorney's fees and costs of the arbitration procedure to the prevailing
patty. Both parties acknowledge that they are giving up their right to have
any such claim decided in a court of law before a judge or jury, and hereby
waive all rights to appeal.
21. FORCE MAJEURE. If the performance of any of the obligations under
this Agreement is interfered with by any reason or any circumstances beyond
the reasonable control of the parties, including, but not limited to, fire,
earthquake, storm, volcanic eruption, explosion, power failure or power
surge, acts of God, war, revolution, civil commotion, or requirement of any
government or legal body or any representative of any such government or
legal body, labor unrest, including but not limited to, strikes, slowdowns,
picketing or boycotts, then the parties shall be excused from performance on
a day-by-day basis to the extent of such interference.
22. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement contains the entire Agreement
between the parties and may not be modified, amended or changed except by
written instrument signed by duly authorized executives of both parties.
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(b) WAIVER. The failure by either party at any time to require
performance by the other party or to claim a breach of any provision of this
Agreement shall not be construed as affecting any subsequent breach or the
right to require performance or to claim a breach with respect thereto.
(c) GOVERNING LAW The rights and obligations of the parties and all
interpretations and performances of this Agreement shall be governed in all
respects by the laws of the State of Washington.
(d) NOTICES. Any notice to be given by either party to the other shall
be in writing and either personally delivered or sent by certified mail,
return receipt requested, to the addresses of the Owner and FirstLink
provided below. Notices shall be deemed given when received or refused. Each
party may change its address for notice to it by notice in accordance with
the foregoing provisions.
<TABLE>
<CAPTION>
FIRSTLINK: OWNER:
- ---------- ------
<S> <C>
FirstLink Communications, Inc. Housing Authority of the City of Vancouver,
190 SW Harrison St. Washington, 500 Omaha Way
Portland, Oregon 97201 Vancouver, Washington 98661
Facsimile: 503-306-4333 Facsimile: 360-694-5369
Telephone: 503-306-4444 Telephone: 360-694-2501
Attn: A. Roger Pease, CEO Attn: Alice Porter
</TABLE>
(e) VALIDITY. If any provision of this Agreement shall be held to be
invalid or unenforceable, such provisions shall not affect in any respect the
validity or enforceability of the remainder of this Agreement unless the
invalidity materially affects the ability of either party to perform as
contemplated hereunder.
(f) ATTORNEYS' FEES AND COSTS. If arbitration or other proceedings are
brought to enforce or interpret this Agreement, the substantially prevailing
party shall be entitled to recover reasonable attorneys' fees and other costs
incurred in such action, arbitration or proceeding from the other patty, in
addition to any other relief to which such party may be entitled.
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(g) AUTHORITY. Each individual signing this Agreement on behalf of a
corporation or partnership represents that he or she has the necessary
authority to execute this Agreement on behalf of such entity and that, in the
case of a corporation. all necessary corporate action has been taken
approving the execution of this Agreement.
Any person or entity executing this Agreement as "Owner" hereby represents
and warrants to FirstLink that it is fully authorized by Owner to execute
this Agreement and to bind Owner to the terms and obligations set forth in
this Agreement and the Owner is fully aware of the existence and contents of
this Agreement. Owner and any person or entity executing this Agreement on
Owner's behalf acknowledges that Owner shall be estopped from claiming that
this Agreement was executed by a person or entity lacking actual authority to
bind Owner.
(h) FURTHER ASSURANCES. Upon the reasonable request of either party,
the other party shall promptly and, at its own expense, execute and deliver
any additional documents or take such actions. as may be reasonably necessary
(subject to any other agreement binding on either party) for the purpose of
evidencing or perfecting any rights or interest of either party arising under
this Agreement or arising under documents executed in accordance with this
Agreement.
This Agreement has been signed and delivered as of the above date.
FIRSTLINK: OWNER:
FIRSTLINK COMMUNICATIONS, INC. /s/ Kurt Creager
--------------------------------
BY: /s/ A. Roger Pease
---------------------------------- BY: Kurt Creager
A. Roger Pease -----------------------------
Chief Executive Officer Exec. Director
-----------------------------
VHH
-----------------------------
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Exhibit No. 10.17 Telecommunications Services Agreement between Registrant and
Harsch Development Corp. (Sherman Tower).
* = Confidential Information.
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
AND
HARSCH INVESTMENT CORP.
SHERMAN TOWER TELECOMMUNICATIONS SERVICES AGREEMENT
This agreement ("Agreement") is entered into as of September 25, 1997, by and
between FirstLink Communications, Inc., an Oregon corporation ("FirstLink"), and
Harsch Investment Corp., an Oregon corporation ("Owner").
1. PROPERTIES. Owner owns the multi-family residential complex
commonly known as Sherman Tower located at 901 Sherman Street, Denver,
Colorado which consists of 350 units ( "the Property").
2. GRANT OF RIGHTS.
(a) Owner grants FirstLink the sole and exclusive right, except as
provided in the last sentence of clause (b) below, to install, own, operate,
replace and maintain the System on, off and through the Properties and the
sole and exclusive right to provide Telecommunication Services to residents
of the Properties. "System" shall mean all electronic devices, cable, wire,
hardware, software and other material used to transmit and receive two-way
voice and data communications, telephone service ("Telephone Service"),
multi-channel TV, video on demand, audio on demand, voice mail, data services
and other means of two-way communication distribution, whether now existing
or hereafter developed (collectively "Telecommunication Services") as
between the Properties and the local and/or long distance telephone networks
or other outside distributor of these and other services.
It is anticipated that Telephone Services will include local and long distance
calling, multi-channel television, voice mail and calling features such as
conference calling, call waiting and call forwarding. Additional services will
be added from time to time, as available and as warranted 6y tenant demand.
Such additional Telecommunication Services may include: video conferencing,
on-line computer services, electronic mail, wireless services (such as cellular
telephone) and other types of services. There can be no assurance that any or
all of the above additional services will be made available. Their availability
is dependent upon many variables
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and factors beyond FirstLink's control. Such factors include, but are not
limited to, technical feasibility, economic, regulatory and market
considerations.
(b) In consideration of the substantial investment made by FirstLink
in the System, Owner agrees that it will not grant access to the Properties
to any person or entity, other than FirstLink, for the purpose of operating
or maintaining the System, or permit the installation, maintenance or
operation at the Properties of any other equipment, wire, cable or material
by any person or entity that similarly provides Telecommunication Services.
So long as it is a requirement of law that a local telephone company also
serve the Properties, this exclusivity provision shall not deny such local
telephone company the right to serve residents of the Properties.
3. SYSTEM EXPENSES. Other than as set forth herein, FirstLink shall
bear all expenses to install, operate, maintain and repair the System
including wiring within each apartment. Owner shall, at Owner's expense and
cost, provide electrical power to the System (except emergency power
generator costs) and shall pay for any damage to the System caused by the
negligence or misconduct of Owner or Owner's agent(s) or employees. For the
purposes of this Agreement, "System Site" shall mean an adequate and secure
space at each of the Properties to house FirstLink's System equipment, which
shall consist of a rent-free, locked room meeting FirstLink's specifications.
FirstLink will pay for constructing such a room if one does not exist. Owner
hereby grants FirstLink and its authorized personnel access to the Properties
for any reasonable purposes related to this Agreement including the
installation of cabling or microwave equipment to interconnect buildings and
to connect to other telecommunication systems and grants specific rights to
FirstLink to use both existing coaxial and twisted pair cabling in the
Properties. FirstLink agrees to notify the Facility Manager when either
FirstLink or its authorized personnel are on-site.
4. TERM. The term of this Agreement shall be * from the date hereof.
The original term may be renewed for up to * additional periods of * years
each at the same terms and conditions upon written notice of at least 180
days prior to the end of the original term or any renewal term. Owner has the
right to cancel this Agreement within 90 days of receipt of FirstLink's
renewal notice to be effective on the anniversary date.
5. INSTALLATION. FirstLink shall commence installation of the
System as soon as practicable and in a manner that minimizes interruption of
existing communication services. In no event shall FirstLink interrupt
service provided by US West for those tenants choosing to remain
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connected to US West. Telecommunication Services to the Properties shall
commence no later than 180 days from commencement of Installation. FirstLink
shall give Owner at least ten (10) days notice prior to the commencement of
installation. FirstLink may subcontract activities related to the
installation of the System, but shall be responsible for any and all acts
and/or omissions by any subcontractor.
6. OWNERSHIP AND CHARACTER OF THE SYSTEM. Except as otherwise stated
herein which includes pre-existing coaxial and twisted pair cabling, the
System, including any alterations and attachments, shall at all times remain
the sole property of FirstLink. It is the intention of the parties that the
System, and every component of the System, shall retain its character as
personal property following the installation of the System on the Properties,
and shall not be deemed to be a fixture constituting a part of the
Properties. No part of the System shall be or become subject to any mortgage,
deed of trust or lien upon the Properties.
7. SERVICE TO TENANTS. FirstLink shall provide Telephone Service
and other Telecommunication Services offered through the System to each
resident requesting them. FirstLink's obligation to provide or continue
Telecommunication Services shall be contingent on the resident paying service
charges and meeting other reasonable requirements as are established by
FirstLink from time to time. Residents electing to receive Telecommunication
Services offered by FirstLink shall do so through the execution and delivery
to Owner or FirstLink of a Tenant Services Agreement in the form provided,
from time to time, from FirstLink to Owner. Owner shall promptly provide
such executed documents to FirstLink. Residents requesting Telecommunication
Services shall be charged and billed individually for connection to the
System and for service at standard rates established solely by FirstLink from
time to time unless prohibited by applicable law or regulation. FirstLink
shall be solely responsible for invoicing, collections and bad debts related
to provision of Telecommunication Service to residents.
FirstLink shall at all times keep the rates charged Owner's tenants
competitive with like-kind companies offering similar services. Owner's
properties shall at no time be significantly disadvantaged to other buildings
offering similar services. FirstLink further guarantees to continuously
offer first class service, with prompt response to service calls, change in
service requests, and to maintain their equipment and installations in a
first class condition. FirstLink further guarantees to at all times compete
with like-kind companies with the latest technology and service packages. If
FirstLink fails to perform according to the foregoing, Owner may cancel this
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Agreement after thirty (30) day notice to cure. If FirstLink disagrees with
Owner's interpretation of the quality of FirstLink's service, both parties
hereby agree to arbitrate the dispute.
Both parties agree that neither the Owner nor the Owner's agent shall have any
liability regarding the number of residents electing to use Telecommunications
Services.
8. COMMISSIONS. Owner shall be entitled to Commissions according to
the following schedule:
PENETRATION RATE COMMISSION PERCENT
- ------------------------------------------------------------------------------
* *
Commissions are paid on all gross revenues actually collected for
telecommunications services, including internet access services, calling cards,
paging services, and cellular services provided to each living unit served by
FirstLink hereunder. Penetration rate is the number of living units subscribing
to any of FirstLink's services divided by the total number of living units in
the Property at the start of the quarter for which commissions are payable. All
commission payments hereunder will be paid quarterly in arrears within thirty
days of each quarter end.
9. ADDITIONAL OBLIGATIONS OF FIRSTLINK. FirstLink shall:
(a) Make a customer service representative available to receive
service requests or inquiries from Owner or residents and insure that it
responds to service requests within four (~) hours of receipt. Routine
maintenance services shall be performed by FirstLink during its normal
working hours. A technician shall arrive at the Properties to commence
maintenance services promptly after request by a customer of such services,
provided however, where such requests are made on, or on a day preceding a
Saturday, Sunday or holiday, FirstLink's system technician shall arrive at
the Properties to commence maintenance services on the next normal working
day. A technician shall be dispatched within four (4) hours of receipt of an
emergency service request or notification of a service problem affecting more
than one resident.
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(b) Provide Owner with marketing materials, sales support
and sales training to enable Owner and Owner's employees to market
Telecommunications Services in accordance with Section 10(b);
(c) Provide training to Owner's staff to enable staff to perform the
duties specified in Section 10(b);
(d) Repair or replace any damage to the Properties resulting from
Installation, operation, or removal of the System or any other acts by
FirstLink to the satisfaction of the Owner and restore Properties to their
original condition;
(e) Comply with all applicable regulatory requirements relating to
the provision of the Telecommunication Services provided by FirstLink as may
be in effect from time to time;
(f) Maintain the System in good order, condition and repair; and
(g) Provide Owner with business Telephone Services at the Properties.
Owner will pay the installation costs for providing such business Telephone
Services and will provide, at its own cost, all necessary ancillary hardware
such as keysets and operator consoles for the dedicated use of the Owner;
such costs will be reasonable and reflect customary installation charges for
business telephone systems.
(h) Pay all taxes resulting from the ownership or operation of System
and service.
10. OBLIGATIONS OF OWNER. Owner shall:
(a) Make the System Site available on a rent-free basis to FirstLink
during the term of this Agreement. The construction and location of the
System Site shall be as Owner and FirstLink reasonably agree, subject to
technical and regulatory requirements as determined by FirstLink. FirstLink
shall have twenty-four hour, seven day a week access to the System Site, and
Owner's employees and agents shall not disturb the System. It is understood
that Owner currently has no emergency power generator at the Properties.
FirstLink's system at each System Site will include backup battery capacity
of 3.3 - 10.0 hours depending on resident load. If power is interrupted to
the System, a FirstLink technician will be automatically paged, allowing
sufficient time for a
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portable generator to be delivered to the System Site to provide
temporary power until normal power is restored.
(b) Use reasonable efforts to encourage its staff, agents and
representatives to encourage and promote the use of the Telecommunications
Services to residents and prospective residents as part of the amenities
provided by Owner at the Properties. Owner consents to FirstLink's use of
incentives and incentive programs with management personnel, leasing staff
and other personnel at the Properties for the purpose of promoting the System
and Telecommunication Services provided through the System. Such incentives
will be paid directly by FirstLink to the recipients. Owner's staff will
present the telecommunications service agreement and related information to
prospective tenants with the objective of securing sales. It is envisioned
that this selling process will require a minimal amount of time on behalf of
Owner's staff. If Owner determines that FirstLink incentives or incentive
programs are causing Owner's personnel to spend excessive time promoting
FirstLink services, Owner may request FirstLink to modify or cease such
incentives or incentive programs, such request to be not unreasonably made.
Upon such reasonable request by Owner FirstLink will modify or cease such
incentives or incentive programs. If tenants have additional questions or
require additional information, their sales lead will be referred to
FirstLink staff who will be responsible for responding to customer inquiries
and securing any resulting sales. FirstLink will also be fully responsible
for the initial sales conversion process;
(c) Promptly provide to FirstLink requested specifications on the
Properties, such as wiring schematics and/or building diagrams, a current
list of residents, addresses and their telephone numbers and other specific
information regarding resident transactions, such as rentals, move-ins,
move-outs, transfers, intents to vacate, and the entering into or termination
of leases and other information necessary to market and operate the
System and provide the Telecommunications Services according to this
Agreement or to comply with governmental or Utility Commission rules as may
be determined by FirstLink . Telephone numbers of residents are to be kept
confidential by FirstLink and used for operational - not marketing - purposes
(such as determining whether a resident can retain a previous telephone
number).
(d) Cooperate with FirstLink in obtaining permits, consents, licenses
and any other requirements which may be necessary for FirstLink to install
and operate the System and furnish the Telecommunications Services; provided
that FirstLink shall pay all reasonable costs of the
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<PAGE>
Owner associated therewith except that Owner will pay installation costs as
described in Section 9(g);
(e) Provide reasonable access to the Properties to FirstLink and its
employees and agents to enable FirstLink to perform the activities
contemplated by or necessary under this Agreement including access for the
purpose of soliciting customers.
11. INSURANCE. FirstLink shall carry and maintain liability insurance
of $1,000,000 naming Owner and Owner's agent as additional insured covering
personal injury and property damage that may be caused to person(s), the
Properties or their contents, by the System or FirstLink's employees or
agents, including but not limited to the duties described in paragraph 17.
Owner and FirstLink each waive any right of recovery against each other for
any claims that may be brought for any loss that is covered by insurance upon
or relating to the Properties or the System to the extent of the actual
proceeds received by waiving party. Owner shall carry and maintain general
liability insurance related to the Properties.
12. TERMINATION OF THE AGREEMENT.
(a) This Agreement may be terminated by either party if there has been
a material breach of the terms of this Agreement by the other party and if
within forty-five (45) days after receiving notice of such breach from the
party seeking to terminate, such breach has not been cured.
(b) FirstLink may terminate this Agreement, or discontinue the provision
of any Telecommunications Services provided hereunder, if in the sole
discretion of FirstLink, it ceases to be feasible for legal, economic or
regulatory reasons to provide Telecommunications Services to the Properties;
provided that FirstLink provides forty-five (45) days written notice to Owner.
(c) Any termination of this Agreement shall be effective as of the date
of termination but FirstLink shall continue to provide Telecommunications
Services until the earlier of (i) all FirstLink customers at the Properties
are provided Telephone Service from another source or (ii) thirty (30) days
from the date of such termination. The provisions of this agreement necessary
for such continued services shall remain effective.
(d) Upon termination of this Agreement for any reason, FirstLink, or any
designee of FirstLink, including without limitation, any party providing
financing to FirstLink, shall have the
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right, after providing Owner with written notice of at least forty-five (45)
days, without further demand, to enter upon the Properties and to dismantle
and remove or render inoperative any and all equipment or other property
comprising the System so long as such right shall conform to Sections 9 (d)
and 12 (c) herein.
13. ASSIGNMENT OF THE AGREEMENT. This Agreement and the rights hereunder
may be assigned by FirstLink to any majority-owned subsidiary of FirstLink or
to an affiliate or party acquiring all or substantially all of the assets of
FirstLink upon prior written consent of Owner. Such consent shall not be
unreasonably withheld. Alternatively, the Agreement may be assigned by
FirstLink to any FirstLink subsidiary so long as FirstLink agrees in writing
that it shall remain liable for all obligations arising under this Agreement.
FirstLink may also assign this Agreement to any party providing financing to
FirstLink; provided that such assignment shall not relieve FirstLink from its
obligations hereunder. In connection with a sale or disposition of the
Properties, Owner shall request FirstLink's written consent to assign this
Agreement and shall require any subsequent owner of the Properties to assume
this Agreement and the rights and obligations hereunder. Subject to the
foregoing, this Agreement shall be binding upon and shall inure to the
benefit of the successors and assigns of the respective parties to this
Agreement.
14. OWNER WARRANTIES; INFORMATION. Owner warrants that (i) it has full
power and authority to grant to FirstLink the exclusive rights set forth in
this Agreement, (ii) that no party holds any rights or interests with respect
to the Properties that conflict with any rights or interests that Owner
grants to FirstLink under this Agreement; (iii) that the Properties is not
presently part of bankruptcy proceeding, foreclosure action, or deed in lieu
of foreclosure transaction; (iv) Owner is not in default of any mortgages or
other encumbrances on the Properties; and (v) no purchase contracts presently
exist as to the Properties.
15. FIRSTLINK WARRANTY. FirstLink warrants that it will comply with all
laws and licensing requirements concerning the installation and operation of
the System. Except as expressly stated in this Agreement, FirstLink makes no
representations or warranties regarding the System, express or implied,
including, but not limited to, any implied warranty of merchantability or
fitness for a particular purpose.
16. INDEPENDENT CONTRACTOR. FirstLink shall be and is an independent
contractor and Owner shall not control or direct the details and means by
which FirstLink performs its duties
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under this Agreement. This Agreement shall not create the relationship of
employer and employee, a partnership or a joint venture.
17. EMERGENCY CALLS. FirstLink will use its commercially reasonable
best efforts to pass all "911" emergency calls through the System to
authorities and to assure identity of each dwelling unit placing such call
but makes no warranty or guaranty of any nature as to the promptness or
adequacy of any response to any such emergency call. FirstLink assumes no
responsibility whatsoever for any actions with respect to emergency calls
other than to use its reasonable best efforts to pass such traffic to
authorities through the System. In the event that the System has been
adversely affected by any situation described in Section 21, FirstLink shall
have no liability whatsoever for failure to pass on emergency telephone
traffic.
18. INDEMNIFICATION. Subject to the provisions set forth in Section 19
below, (i) FirstLink and Owner hereby agree to indemnify, defend and hold
each other (and each other's officers, directors, owners, employees, and
agents) harmless from and against all claims, losses and liabilities in any
way relating to, growing out of, or resulting from a material breach of each
of their respective obligations to the other under this Agreement ; and (ii)
Owner will indemnify FirstLink for damages to the System as provided in
Section 3 herein.
In addition, FirstLink agrees to indemnify, defend and hold harmless Owner
and Owner's partners, employees, agents and successors from and against all
damages, losses, liabilities, costs, and expenses (including reasonable
attorneys' fees) resulting from claims made or causes of action asserted by
third parties (including, without limitation, residents of the Properties)
arising out of or relating to (i) the performance by FirstLink (or its
employees or agents) of its obligations under this Agreement, (ii) the
provision of Telecommunications Services or (iii) compliance of FirstLink
and/or the System with applicable laws and regulations, except to the extent
such matters are attributable to the gross negligence or willful misconduct
of Owner.
19. LIMITATION OF REMEDIES. Notwithstanding any other provision of this
agreement but without limiting the mutual indemnification in Section 18,
neither FirstLink nor Owner shall be liable to any third party for any
incidental or consequential damages, including but not limited to lost
profits, of any nature whatsoever or for the condition or repair of any
telephone instrument or any property to which the System is attached.
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20. ARBITRATION OF DISPUTES. Any controversy, dispute, or claim of
whatever nature arising out of, in connection with or in relation to the
interpretation, performance or breach of this Agreement, including any claim
based on contract, tort or statute, shall be resolved at the request of any
party to this Agreement, by final and binding arbitration before a single
arbitrator conducted at a location determined by the arbitrator in Portland,
Oregon, ( or jurisdiction where property is located, at Owner's election)
administered by and in accordance with the then existing rules of practice
and procedure established by the Arbitration Chapter of the Uniform Trial
Court Rules as then in effect in the State of Oregon, (or jurisdiction where
property is located, at Owner's election) and judgment upon any award
rendered by the arbitrator may be entered by any state or federal court
having jurisdiction thereof. If the parties cannot mutually agree on an
arbitrator, either party may petition the Presiding Judge of the Multnomah
County Circuit Court (or jurisdiction where property is located, at Owner's
election) to appoint an arbitrator. The arbitrator shall award attorney's
fees and costs of the arbitration procedure to the prevailing party. Both
parties acknowledge that they are giving up their right to have any such
claim decided in a court of law before a judge or jury, and hereby waive all
rights to appeal.
21. FORCE MAJEURE. If the performance of any of the obligations under
this Agreement is interfered with by any reason or any circumstances beyond
the reasonable control of the parties, including, but not limited to, fire,
earthquake, storm, volcanic eruption, explosion, power failure or power
surge, acts of God, war, revolution, civil commotion, or requirement of any
government or legal body or any representative of any such government or
legal body, labor unrest, including but not limited to, strikes, slowdowns,
picketing or boycotts, then the parties shall be excused from performance on
a day-by-day basis to the extent of such interference.
22. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement contains the entire Agreement
between the parties and may not be modified, amended or changed except by
written instrument signed by duly authorized executives of both parties.
(b) WAIVER. The failure by either party at any time to require
performance by the other party or to claim a breach of any provision of this
Agreement shall not be construed as affecting any subsequent breach or the
right to require performance or to claim a breach with respect thereto.
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(c) GOVERNING LAW. The rights and obligations of the parties and all
interpretations and performances of this Agreement shall be governed in all
respects by the laws of the State of Oregon.
(d) NOTICES. Any notice to be given by either party to the other shall
be in writing and either personally delivered or sent by certified mail,
return receipt requested, to the addresses of the Owner and FirstLink
provided below. Notices shall be deemed given when received or refused. Each
party may change its address for notice to it by notice in accordance with
the foregoing provisions.
<TABLE>
<CAPTION>
FIRSTLINK: OWNER:
<S> <C>
FirstLink Communications, Inc. Harsch Investment Corp.
255 SW Harrison, Suite lA 1121 SW Salmon Street
Portland, Oregon 97201 Portland, Oregon 97205
Facsimile: 503~06-4333 Facsimile: 503-274-2093
Telephone: 503-306-4444 Telephone: 503-242-2900
Attn: A. Roger Pease, CEO Attn: Susan S. Bowlsby
</TABLE>
(e) VALIDITY. If any provision of this Agreement shall be held to be
invalid or unenforceable, such provisions shall not affect in any respect the
validity or enforceability of the remainder of this Agreement unless the
invalidity materially affects the ability of either party to perform as
contemplated hereunder.
(f) ATTORNEYS' FEES AND COSTS. If arbitration or other proceedings are
brought to enforce or interpret this Agreement, the substantially prevailing
party shall be entitled to recover reasonable attorneys' fees and other costs
incurred in such action, arbitration or proceeding from the other party, in
addition to any other relief to which such party may be entitled.
(g) AUTHORITY. Each individual signing this Agreement on behalf of a
corporation or partnership represents that he or she has the necessary
authority to execute this Agreement on behalf of such entity and that, in the
case of a corporation, all necessary corporate action has been taken
approving the execution of this Agreement.
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Any person or entity executing this Agreement as "Owner" hereby represents
and warrants to FirstLink that it is fully authorized by Owner to execute
this Agreement and to bind Owner to the terms and obligations set forth in
this Agreement and the Owner is fully aware of the existence and contents of
this Agreement. Owner and any person or entity executing this Agreement on
Owner's behalf acknowledges that Owner shall be estopped from claiming that
this Agreement was executed by a person or entity lacking actual authority to
bind Owner.
(h) FURTHER ASSURANCES Upon the reasonable request of either party,
the other party shall promptly and, at its own expense, execute and deliver
any additional documents or take such actions, as may be reasonably necessary
(subject to any other agreement binding on either party) For the purpose of
evidencing or perfecting any rights or interest of either party arising under
this Agreement or arising under documents executed in accordance with this
Agreement.
This Agreement has been signed and delivered as of the above date.
<TABLE>
<CAPTION>
FIRSTLINK: OWNER:
<S> <C>
By: By:
----------------------------------- ----------------------------------
Title: Title:
--------------------------------- --------------------------------
</TABLE>
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<PAGE>
Exhibit No. 10.18 Telecommunications Services Agreement between Registrant and
Harsch Development Corp. (The Nettleton).
* = Confidential Information
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
AND
HARSCH INVESTMENT CORP.
THE NETTLETON TELECOMMUNICATIONS SERVICES AGREEMENT
This agreement ("Agreement") is entered into as of September 25, 1997, by and
between FirstLink Communications, Inc., an Oregon corporation ("FirstLink"),
and Harsch Investment Corp., an Oregon corporation ("Owner").
1. PROPERTIES. Owner owns the multi-family residential complex
commonly known as The Nettleton located at 1000 8th avenue, Seattle,
Washington 98140 which consists of 351 units ( "the Property").
2. GRANT OF RIGHTS.
(a) Owner grants FirstLink the sole and exclusive right, except as
provided in the last sentence of clause (6) below, to install, own, operate,
replace and maintain the System on, off and through the Properties and the
sole and exclusive right to provide Telecommunication Services to residents
of the Properties. "System" shall mean all electronic devices, cable, wire,
hardware, software and other material used to transmit and receive two-way
voice and data communications, telephone service ("Telephone Service"),
multi-channel TV, video on demand, audio on demand, voice mail, data services
and other means of two-way communication distribution, whether now existing
or hereafter developed (collectively "Telecommunication Services") as
between the Properties and the local and/or long distance telephone networks
or other outside distributor of these and other services.
It is anticipated that Telephone Services will include local and long
distance calling, multi-channel television, voice mail and calling features
such as conference calling, call waiting and call forwarding. Additional
services will be added from time to time, as available and as warranted by
tenant demand. Such additional Telecommunication Services may include:
video conferencing, on-line computer services, electronic mail, wireless
services (such as cellular telephone) and other types of services. There can
be no assurance that any or all of the above additional services will be made
available. Their availability is dependent upon many variables
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and factors beyond FirstLink's control. Such factors include, but are not
limited to, technical feasibility, economic, regulatory and market
considerations.
(b) In consideration of the substantial investment made by FirstLink in
the System, Owner agrees that it will not grant access to the Properties to
any person or entity, other than FirstLink, for the purpose of operating or
maintaining the System, or permit the installation, maintenance or operation
at the Properties of any other equipment, wire, cable, or material by any
person or entity that similarly provides Telecommunication Services. So long
as it is a requirement of law that a local telephone company also serve the
Properties, this exclusivity provision shall not deny such local telephone
company the right to serve residents of the Properties.
3. SYSTEM EXPENSES. Other than as set forth herein, FirstLink shall
bear all expenses to install, operate, maintain and repair the System
including wiring within each apartment. Owner shall, at Owner's expense and
cost, provide electrical power to the System (except emergency power
generator costs) and shall pay for any damage to the System caused by the
negligence or misconduct of Owner or Owner's agent(s) or employees. For the
purposes of this Agreement, "System Site" shall mean an adequate and secure
space at each of the Properties to house FirstLink's System equipment, which
shall consist of a rent-free, locked room meeting FirstLink's specifications.
FirstLink will pay for constructing such a room if one does not exist. Owner
hereby grants FirstLink and its authorized personnel access to the Properties
for any reasonable purposes related to this Agreement including the
installation of cabling or microwave equipment to interconnect buildings and
to connect to other telecommunication systems and grants specific rights to
FirstLink to use both existing coaxial and twisted pair cabling in the
Properties. FirstLink agrees to notify the Facility Manager when either
FirstLink or its authorized personnel are on-site.
4. TERM. The term of this Agreement shall be * years from the date
hereof. The original term may be renewed for up to * additional periods of *
years each at the same terms and conditions upon written notice of at least
180 days prior to the end of the original term or any renewal term. Owner has
the right to cancel this Agreement within 90 days of receipt of FirstLink's
renewal notice to be effective on the anniversary date.
5. INSTALLATION. FirstLink shall commence installation of the System
as soon as practicable and in a manner that minimizes interruption of
existing communication services. In no event shall FirstLink interrupt
service provided by US West for those tenants choosing to remain
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connected to US West. Telecommunication Services to the Properties shall
commence no later than 180 days from commencement of installation. FirstLink
shall give Owner at least ten (10) days notice prior to the commencement of
installation. FirstLink may subcontract activities related to the
installation of the System, but shall be responsible for any and all acts
and/or omissions by any subcontractor.
6. OWNERSHIP AND CHARACTER OF THE SYSTEM. Except as otherwise stated
herein which includes pre-existing coaxial and twisted pair cabling, the
System, including any alterations and attachments, shall at all times remain
the sole property of FirstLink. It is the intention of the parties that the
System, and every component of the System, shall retain its character as
personal property following the installation of the System on the Properties,
and shall not be deemed to be a fixture constituting a part of the
Properties. No part of the System shall be or become subject to any mortgage,
deed of trust or lien upon the Properties.
7. SERVICE TO TENANTS. FirstLink shall provide Telephone Service and
other Telecommunication Services offered through the System to each resident
requesting them. FirstLink's obligation to provide or continue
Telecommunication Services shall be contingent on the resident paying service
charges and meeting other reasonable requirements as are established by
FirstLink from time to time. Residents electing to receive Telecommunication
Services offered by FirstLink shall do so through the execution and delivery
to Owner or FirstLink of a Tenant Services Agreement in the form provided,
from time to time, from FirstLink to Owner. Owner shall promptly provide
such executed documents to FirstLink. Residents requesting Telecommunication
Services shall be charged and billed individually for connection to the
System and for service at standard rates established solely by FirstLink from
time to time unless prohibited by applicable law or regulation. FirstLink
shall be solely responsible for invoicing, collections and bad debts related
to provision of Telecommunication Service to residents.
FirstLink shall at all times keep the rates charged Owner's tenants
competitive with like-kind companies offering similar services. Owner's
properties shall at no time be significantly disadvantaged to other buildings
offering similar services. FirstLink further guarantees to continuously
offer first class service, with prompt response to service calls, change in
service requests, and to maintain their equipment and installations in a
first class condition. FirstLink further guarantees to at all times compete
with like-kind companies with the latest technology and service packages. If
FirstLink fails to perform according to the foregoing, Owner may cancel this
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Agreement after thirty (30) day notice to cure. If FirstLink disagrees with
Owner's interpretation of the quality of FirstLink's service, both parties
hereby agree to arbitrate the dispute.
Both parties agree that neither the Owner nor the Owner1s agent shall have
any liability regarding the number of residents electing to use
Telecommunications Services.
8. COMMISSIONS. Owner shall be entitled to Commissions according to
the following schedule:
<TABLE>
<CAPTION>
Penetration Rate Commission Percent
- ----------------------------------------------------------------------
<S> <C>
* *
* *
* *
</TABLE>
Commissions are paid on all gross revenues actually collected for
telecommunications services, including internet access services, calling
cards, paging services, and cellular services provided to each living unit
served by FirstLink hereunder. * penetration rate is the number of living
units subscribing to any of FirstLink's services divided by the total number
of living units in the Property at the start of the quarter for which
commissions are payable. All commission payments hereunder will be paid
quarterly in arrears within thirty days of each quarter end.
9. ADDITIONAL OBLIGATIONS OF FIRSTLINK. FirstLink shall:
(a) Make a customer service representative available to receive service
requests or inquiries from Owner or residents and insure that it responds to
service requests within four (4) hours of receipt. Routine maintenance
services shall be performed by FirstLink during its normal working hours. A
technician shall arrive at the Properties to commence maintenance services
promptly after request by a customer of such services, provided however,
where such requests are made on, or on a day preceding a Saturday, Sunday or
holiday, FirstLink's system technician shall arrive at the Properties to
commence maintenance services on the next normal working day. A technician
shall be dispatched within four (4) hours of receipt of an emergency service
request or notification of a service problem affecting more than one resident.
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(b) Provide Owner with marketing materials, sales support and sales
training to enable Owner and Owner's employees to market Telecommunications
Services in accordance with Section 10(b);
(c) Provide training to Owner's staff to enable staff to perform the
duties specified in Section 10(b);
(d) Repair or replace any damage to the Properties resulting from
Installation, operation, or removal of the System or any other acts by
FirstLink to the satisfaction of the Owner and restore Properties to their
original condition;
(e) Comply with all applicable regulatory requirements relating to the
provision of the Telecommunication Services provided by FirstLink as may be
in effect from time to time;
(f) Maintain the System in good order, condition and repair; and
(g) Provide Owner with business Telephone Services at the Properties.
Owner will pay the installation costs for providing such business Telephone
Services and will provide, at its own cost, all necessary ancillary hardware
such as keysets and operator consoles for the dedicated use of the Owner;
such costs will be reasonable and reflect customary installation charges for
business telephone systems.
(h) Pay all taxes resulting from the ownership or operation of System
and service.
10. OBLIGATIONS OF OWNER. Owner shall:
(a) Make the System Site available on a rent-free basis to FirstLink
during the term of this Agreement. The construction and location of the
System Site shall be as Owner and FirstLink reasonably agree, subject to
technical and regulatory requirements as determined by FirstLink. FirstLink
shall have twenty-four hour, seven day a week access to the System Site, and
Owner's employees and agents shall not disturb the System. It is understood
that Owner currently has no emergency power generator at the Properties.
FirstLink's system at each System Site will include backup battery capacity
of 3.3 - 10.0 hours depending on resident load. If power is interrupted to the
System, a FirstLink technician will be automatically paged, allowing
sufficient time for a
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portable generator to be delivered to the System Site to provide temporary
power until normal power is restored.
(b) Use reasonable efforts to encourage its staff, agents and
representatives to encourage and promote the use of the Telecommunications
Services to residents and prospective residents as part of the amenities
provided by Owner at the Properties. Owner consents to FirstLink's use of
incentives and incentive programs with management personnel, leasing staff
and other personnel at the Properties for the purpose of promoting the System
and Telecommunication Services provided through the System. Such incentives
will be paid directly by FirstLink to the recipients. Owner's staff will
present the telecommunications service agreement and related information to
prospective tenants with the objective of securing sales. It is envisioned
that this selling process will require a minimal amount of time on behalf of
Owner's staff. If Owner determines that FirstLink incentives or incentive
programs are causing Owner's personnel to spend excessive time promoting
FirstLink services, Owner may request FirstLink to modify or cease such
incentives or incentive programs, such request to be not unreasonably made.
Upon such reasonable request by Owner FirstLink will modify or cease such
incentives or incentive programs. If tenants have additional questions or
require additional information, their sales lead will be referred to
FirstLink staff who will be responsible for responding to customer inquiries
and securing any resulting sales. FirstLink will also be fully responsible
for the initial sales conversion process;
(c) Promptly provide to FirstLink requested specifications on the
Properties, such as wiring schematics and/or building diagrams, a current
list of residents, addresses and their telephone numbers and other specific
information regarding resident transactions, such as rentals, move-ins,
move-outs, transfers, intents to vacate, and the entering into or termination
of leases and other information necessary to market and operate the
System and provide the Telecommunications Services according to this
Agreement or to comply with governmental or Utility Commission rules as may
be determined by FirstLink . Telephone numbers of residents are to be kept
confidential by FirstLink and used for operational - not marketing - purposes
(such as determining whether a resident can retain a previous telephone
number).
(d) Cooperate with FirstLink in obtaining permits, consents, licenses
and any other requirements which may be necessary for FirstLink to install
and operate the System and furnish the Telecommunications Services; provided
that FirstLink shall pay all reasonable costs of the
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Owner associated therewith except that Owner will pay installation costs as
described in Section 9(g);
(e) Provide reasonable access to the Properties to FirstLink and its
employees and agents to enable FirstLink to perform the activities
contemplated by or necessary under this Agreement including access for the
purpose of soliciting customers.
11. INSURANCE. FirstLink shall carry and maintain liability insurance
of $1,000,000 naming Owner and Owner's agent as additional insured covering
personal injury and property damage that may be caused to person(s), the
Properties or their contents, by the System or FirstLink's employees or
agents, including but not limited to the duties described in paragraph 17.
Owner and FirstLink each waive any right of recovery against each other for
any claims that may be brought for any loss that is covered by insurance upon
or relating to the Properties or the System to the extent of the actual
proceeds received by waiving party. Owner shall carry and maintain general
liability insurance related to the Properties.
12. TERMINATION OF THE AGREEMENT.
(a) This Agreement may be terminated by either party if there has been a
material breach of the terms of this Agreement by the other party and if
within forty-five (45) days after receiving notice of such breach from the
party seeking to terminate, such breach has not been cured.
(b) FirstLink may terminate this Agreement, or discontinue the provision
of any Telecommunications Services provided hereunder, if in the sole
discretion of FirstLink, it ceases to be feasible for legal, economic or
regulatory reasons to provide Telecommunications Services to the Properties;
provided that FirstLink provides forty-five (45) days written notice to Owner.
(c) Any termination of this Agreement shall be effective as of the date
of termination, but FirstLink shall continue to provide Telecommunications
Services until the earlier of (i) all FirstLink customers at the Properties
are provided Telephone Service from another source or (ii) thirty (30) days
from the date of such termination. The provisions of this agreement necessary
for such continued services shall remain effective.
(d) Upon termination of this Agreement for any reason, FirstLink, or any
designee of FirstLink, including without limitation, any party providing
financing to FirstLink, shall have the
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right, after providing Owner with written notice of at least forty-five (45)
days, without further demand, to enter upon the Properties and to dismantle
and remove or render inoperative any and all equipment or other property
comprising the System so long as such right shall conform to Sections 9 (d)
and 12 (c) herein.
13. ASSIGNMENT OF THE AGREEMENT. This Agreement and the rights hereunder
may be assigned by FirstLink to any majority-owned subsidiary of FirstLink or
to an affiliate or party acquiring all or substantially all of the assets of
FirstLink upon prior written consent of Owner. Such consent shall not be
unreasonably withheld. Alternatively, the Agreement may be assigned by
FirstLink to any FirstLink subsidiary so long as FirstLink agrees in writing
that it shall remain liable for all obligations arising under this Agreement.
FirstLink may also assign this Agreement to any party providing financing to
FirstLink; provided that such assignment shall not relieve FirstLink from its
obligations hereunder. In connection with a sale or disposition of the
Properties, Owner shall request FirstLink's written consent to assign this
Agreement and shall require any subsequent owner of the Properties to assume
this Agreement and the rights and obligations hereunder. Subject to the
foregoing, this Agreement shall be binding upon and shall inure to the
benefit of the successors and assigns of the respective parties to this
Agreement.
14. OWNER WARRANTIES; INFORMATION. Owner warrants that (i) it has full
power and authority to grant to FirstLink the exclusive rights set forth in
this Agreement, (ii) that no party holds any rights or interests with respect
to the Properties that conflict with any rights or interests that Owner
grants to FirstLink under this Agreement; (iii) that the Properties is not
presently part of bankruptcy proceeding, foreclosure action, or deed in lieu
of foreclosure transaction; (iv) Owner is not in default of any mortgages or
other encumbrances on the Properties; and (v) no purchase contracts presently
exist as to the Properties.
15. FIRSTLINK WARRANTY. FirstLink warrants that it will comply with all
laws and licensing requirements concerning the installation and operation of
the System. Except as expressly stated in this Agreement, FirstLink makes no
representations or warranties regarding the System, express or implied,
including, but not limited to, any implied warranty of merchantability or
fitness for a particular purpose.
16. INDEPENDENT CONTRACTOR. FirstLink shall be and is an independent
contractor and Owner shall not control or direct the details and means by
which FirstLink performs its duties
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under this Agreement. This Agreement shall not create the relationship of
employer and employee, a partnership or a joint venture.
17. EMERGENCY CALLS. FirstLink will use its commercially reasonable
best efforts to pass all "911" emergency calls through the System to
authorities and to assure identity of each dwelling unit placing such call
but makes no warranty or guaranty of any nature as to the promptness or
adequacy of any response to any such emergency call. FirstLink assumes no
responsibility whatsoever for any actions with respect to emergency calls
other than to use its reasonable best efforts to pass such traffic to
authorities through the System. In the event that the System has been
adversely affected by any situation described in Section 21, FirstLink shall
have no liability whatsoever for failure to pass on emergency telephone
traffic.
18. INDEMNIFICATION. Subject to the provisions set forth in Section 19
below, (i) FirstLink and Owner hereby agree to indemnify, defend and hold
each other (and each other's officers, directors, owners, employees, and
agents) harmless from and against all claims, losses and liabilities in any
way relating to, growing out of, or resulting from a material breach of each
of their respective obligations to the other under this Agreement ; and (ii)
Owner will indemnify FirstLink for damages to the System as provided in
Section 3 herein.
In addition, FirstLink agrees to indemnify, defend and hold harmless Owner
and Owner's partners, employees, agents and successors from and against all
damages, losses, liabilities, costs, and expenses (including reasonable
attorneys' fees) resulting from claims made or causes of action asserted by
third parties (including, without limitation, residents of the Properties)
arising out of or relating to (i) the performance by FirstLink (or its
employees or agents) of its obligations under this Agreement, (ii) the
provision of Telecommunications Services or (iii) compliance of FirstLink
and/or the System with applicable laws and regulations, except to the extent
such matters are attributable to the gross negligence or willful misconduct
of Owner.
19. LIMITATION OF REMEDIES. Notwithstanding any other provision of this
agreement but without limiting the mutual indemnification in Section 18,
neither FirstLink nor Owner shall be liable to any third party for any
incidental or consequential damages, including but not limited to lost profits,
of any nature whatsoever or for the condition or repair of any telephone
instrument or any property to which the System is attached.
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<PAGE>
20. ARBITRATION OF DISPUTES. Any controversy, dispute, or claim of
whatever nature arising out of, in connection with or in relation to the
interpretation, performance or breach of this Agreement, including any claim
based on contract, tort or statute, shall be resolved at the request of any
party to this Agreement, by final and binding arbitration before a single
arbitrator conducted at a location determined by the arbitrator in Portland,
Oregon, ( or jurisdiction where property is located, at Owner's election)
administered by and in accordance with the then existing rules of practice
and procedure established by the Arbitration Chapter of the Uniform Trial
Court Rules as then in effect in the State of Oregon, (or jurisdiction where
property is located, at Owner's election) and judgment upon any award
rendered by the arbitrator may be entered by any state or federal court
having jurisdiction thereof. If the parties cannot mutually agree on an
arbitrator, either party may petition the Presiding Judge of the Multnomah
County Circuit Court (or jurisdiction where property is located, at Owner's
election) to appoint an arbitrator. The arbitrator shall award attorney's
fees and costs of the arbitration procedure to the prevailing party. Both
parties acknowledge that they are giving up their right to have any such
claim decided in a court of law before a judge or jury, and hereby waive all
rights to appeal.
21. FORCE MAJEURE. If the performance of any of the obligations under
this Agreement is interfered with by any reason or any circumstances beyond
the reasonable control of the parties, including, but not limited to, fire,
earthquake, storm, volcanic eruption, explosion, power failure or power
surge, acts of God, war, revolution, civil commotion, or requirement of any
government or legal body or any representative of any such government or
legal body, labor unrest, including but not limited to, strikes, slowdowns,
picketing or boycotts, then the parties shall be excused from performance on
a day-by-day basis to the extent of such interference.
22. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement contains the entire Agreement
between the parties and may not be modified, amended or changed except by
written instrument signed by duly authorized executives of both parties.
(b) WAIVER. The failure by either party at any time to require
performance by the other party or to claim a breach of any provision of this
Agreement shall not be construed as affecting any subsequent breach or the
right to require performance or to claim a breach with respect thereto.
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(c) GOVERNING LAW. The rights and obligations of the parties and all
interpretations and performances of this Agreement shall be governed in all
respects by the laws of the State of Oregon.
(d) NOTICES. Any notice to be given by either party to the other shall
be in writing and either personally delivered or sent by certified mail,
return receipt requested, to the addresses of the Owner and FirstLink
provided below. Notices shall be deemed given when received or refused. Each
party may change its address for notice to it by notice in accordance with
the foregoing provisions.
FIRSTLINK: OWNER:
FirstLink Communications, Inc. Harsch Investment Corp.
255 SW Harrison, Suite 1A 1121 SW Salmon Street
Portland, Oregon 97201 Portland, Oregon 97205
Facsimile: 503-306-4333 Facsimile: 503-274-2093
Telephone: 503-306-4444 Telephone: 503-242-2900
Attn: A. Roger Pease, CEO Attn: Susan S. Bowlsby
(e) VALIDITY. If any provision of this Agreement shall be held to be
invalid or unenforceable, such provisions shall not affect in any respect the
validity or enforceability of the remainder of this Agreement unless the
invalidity materially affects the ability of either party to perform as
contemplated hereunder.
(f) ATTORNEYS' FEES AND COSTS. If arbitration or other proceedings are
brought to enforce or interpret this Agreement, the substantially prevailing
party shall be entitled to recover reasonable attorneys' fees and other costs
incurred in such action, arbitration or proceeding from the other party, in
addition to any other relief to which such party may be entitled.
(g) AUTHORITY. Each individual signing this Agreement on behalf of a
corporation or partnership represents that he or she has the necessary authority
to execute this Agreement on behalf of such entity and that, in the case of a
corporation, all necessary corporate action has been taken approving the
execution of this Agreement.
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Any person or entity executing this Agreement as "Owner" hereby represents
and warrants to FirstLink that it is fully authorized by Owner to execute
this Agreement and to bind Owner to the terms and obligations set forth in
this Agreement and the Owner is fully aware of the existence and contents of
this Agreement. Owner and any person or entity executing this Agreement on
Owner's behalf acknowledges that Owner shall be estopped from claiming that
this Agreement was executed by a person or entity lacking actual authority to
bind Owner.
(h) FURTHER ASSURANCES. Upon the reasonable request of either party,
the other party shall promptly and, at its own expense, execute and deliver
any additional documents or take such actions, as may be reasonably necessary
(subject to any other agreement binding on either party) for the purpose of
evidencing or perfecting any rights or interest of either party arising under
this Agreement or arising under documents executed in accordance with this
Agreement.
This Agreement has been signed and delivered as of the above date.
FIRSTLINK: OWNER:
By: /S/ A. ROGER PEASE By: [ILLEGIBLE]
----------------------- ----------------------------
Title: CEO Title: VP
----------------------- ----------------------------
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Exhibit No. 10.19 Telecommunications Services Agreement between Registrant and
Harsch Development Corp. (Regency Tower Apartments).
* = Confidential Information
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
AND
HARSCH INVESTMENT CORP.
REGENCY TOWER APARTMENTS TELECOMMUNICATIONS SERVICES AGREEMENT
This agreement ("Agreement") is entered into as of September 25, 1997, by and
between FirstLink Communications, Inc., an Oregon corporation ("FirstLink"),
and Harsch Investment Corp., an Oregon corporation ("Owner").
1. PROPERTIES. Owner owns the multi-family residential complex
commonly known as Regency Tower Apartments located at 333 NW 5th Street,
Oklahoma City, Oklahoma 73102 which consists of 273 units ("the Property").
2. GRANT OF RIGHTS.
(a) Owner grants FirstLink the sole and exclusive right, except as
provided in the last sentence of clause (b) below, to install, own, operate,
replace and maintain the System on, off and through the Properties and the
sole and exclusive right to provide Telecommunication Services to residents
of the Properties. "System shall mean all electronic devices, cable, wire,
hardware, software and other material used to transmit and receive two-way
voice and data communications, telephone service ("Telephone Service"),
multi-channel TV, video on demand, audio on demand, voice mail, data services
and other means of two-way communication distribution, whether now existing
or hereafter developed (collectively "Telecommunication Services") as
between the Properties and the local and/or long distance telephone networks
or other outside distributor of these and other services.
It is anticipated that Telephone Services will include local and long
distance calling, multi-channel television, voice mail and calling features
such as conference calling, call waiting and call forwarding. Additional
services will be added from time to time, as available and as warranted by
tenant demand. Such additional Telecommunication Services may include:
video conferencing, on-line computer services, electronic mail, wireless
services (such as cellular telephone) and other types of services. There can
be no assurance that any or all of the above additional services will be made
available. Their availability is dependent upon many variables
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and factors beyond FirstLink's control. Such factors include, but are not
limited to, technical feasibility, economic, regulatory and market
considerations.
(b) In consideration of the substantial investment made by FirstLink in
the System, Owner agrees that it will not grant access to the Properties to
any person or entity, other than FirstLink, for the purpose of operating or
maintaining the System, or permit the installation, maintenance or operation
at the Properties of any other equipment, wire, cable, or material 6y any
person or entity that similarly provides Telecommunication Services. So long
as it is a requirement of law that a local telephone company also serve the
Properties, this exclusivity provision shall not deny such local telephone
company the right to serve residents of the Properties.
3. SYSTEM EXPENSES. Other than as set forth herein, FirstLink shall
bear all expenses to install, operate, maintain and repair the System
including wiring within each apartment. Owner shall, at Owner's expense and
cost, provide electrical power to the System (except emergency power
generator costs) and shall pay for any damage to the System caused by the
negligence or misconduct of Owner or Owner's agent(s) or employees. For the
purposes of this Agreement, "System Site" shall mean an adequate and secure
space at each of the Properties to house FirstLink's System equipment, which
shall consist of a rent-free, locked room meeting FirstLink's specifications.
FirstLink will pay for constructing such a room if one does not exist. Owner
hereby grants FirstLink and its authorized personnel access to the Properties
for any reasonable purposes related to this Agreement including the
installation of cabling or microwave equipment to interconnect buildings and
to connect to other telecommunication systems and grants specific rights to
FirstLink to use both existing coaxial and twisted pair cabling in the
Properties. FirstLink agrees to notify the Facility Manager when either
FirstLink or its authorized personnel are on-site.
4. TERM. The term of this Agreement shall be * years from the date
hereof. The original term may be renewed for up to * additional periods *
years each at the same terms and conditions upon written notice at least 180
days prior to the end of the original term or any renewal term. Owner has the
right to cancel this Agreement within 90 days of receipt of FirstLink's
renewal notice to be effective on the anniversary date.
5. INSTALLATION. FirstLink shall commence installation of the System
as soon as practicable and in a manner that minimizes interruption of
existing communication services. In no event shall FirstLink interrupt
service provided by US West for those tenants choosing to remain
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connected to US West. Telecommunication Services to the Properties shall
commence no later than 180 days from commencement of installation. FirstLink
shall give Owner at least ten (10) days notice prior to the commencement of
installation. FirstLink may subcontract activities related to the
installation of the System, but shall be responsible for any and all acts
and/or omissions by any subcontractor.
6. OWNERSHIP AND CHARACTER OF THE SYSTEM. Except as otherwise stated
herein which includes pre-existing coaxial and twisted pair cabling, the
System, including any alterations and attachments, shall at all times remain
the sole property of FirstLink. It is the intention of the parties that the
System, and every component of the System, shall retain its character as
personal property following the installation of the System on the Properties,
and shall not be deemed to be a fixture constituting a part of the
Properties. No part of the System shall be or become subject to any mortgage,
deed of trust or lien upon the Properties.
7. SERVICE TO TENANTS. FirstLink shall provide Telephone Service and
other Telecommunication Services offered through the System to each resident
requesting them. FirstLink's obligation to provide or continue
Telecommunication Services shall be contingent on the resident paying service
charges and meeting other reasonable requirements as are established by
FirstLink from time to time. Residents electing to receive Telecommunication
Services offered by FirstLink shall do so through the execution and delivery
to Owner or FirstLink of a Tenant Services Agreement in the form provided,
from time to time, from FirstLink to Owner. Owner shall promptly provide such
executed documents to FirstLink. Residents requesting Telecommunication
Services shall be charged and billed individually for connection to the
System and for service at standard rates established solely by FirstLink from
time to time unless prohibited by applicable law or regulation. FirstLink
shall be solely responsible for invoicing, collections and bad debts related
to provision of Telecommunication Service to residents.
FirstLink shall at all times keep the rates charged Owner's tenants
competitive with like-kind companies offering similar services. Owner's
properties shall at no time be significantly disadvantaged to other buildings
offering similar services. FirstLink further guarantees to continuously
offer first class service, with prompt response to service calls, change in
service requests, and to maintain their equipment and installations in a
first class condition. FirstLink further guarantees to at all times compete
with like-kind companies with the latest technology and service packages. If
FirstLink fails to perform according to the foregoing, Owner may cancel this
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Agreement after thirty (30) day notice to cure. If FirstLink disagrees with
Owner's interpretation of the quality of FirstLink's service, both parties
hereby agree to arbitrate the dispute.
Both parties agree that neither the Owner nor the Owner's agent shall have
any liability regarding the number of residents electing to use
Telecommunications Services.
8. COMMISSIONS. Owner shall be entitled to Commissions according to
the following schedule:
<TABLE>
<CAPTION>
Penetration Rate Commission Percent
- -------------------------------------------------------------------------------
<S> <C>
* *
</TABLE>
Commissions are paid on all gross revenues actually collected for
telecommunications services, including internet access services, calling
cards, paging services, and cellular services provided to each living unit
served by FirstLink hereunder. * penetration rate is the number of living
units subscribing to any of FirstLink's services divided by the total number
of living units in the Property at the start of the quarter for which
commissions are payable. All commission payments hereunder will be paid
quarterly in arrears within thirty days of each quarter end.
9. ADDITIONAL OBLIGATIONS OF FIRSTLINK. FirstLink shall:
(a) Make a customer service representative available to receive service
requests or inquiries from Owner or residents and insure that it responds to
service requests within four (4) hours of receipt. Routine maintenance
services shall be performed by FirstLink during its normal working hours. A
technician shall arrive at the Properties to commence maintenance services
promptly after request by a customer of such services, provided however,
where such requests are made on, or on a day preceding a Saturday, Sunday or
holiday, FirstLink's system technician shall arrive at the Properties to
commence maintenance services on the next normal working day. A technician
shall be dispatched within four (4) hours of receipt of an emergency service
request or notification of a service problem affecting more than one
resident.
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(b) Provide Owner with marketing materials, sales support and sales
training to enable Owner and Owner's employees to market Telecommunications
Services in accordance with Section 10(b);
(c) Provide training to Owner's staff to enable staff to perform the
duties specified in Section 10(b);
(d) Repair or replace any damage to the Properties resulting from
Installation, operation, or removal of the System or any other acts by
FirstLink to the satisfaction of the Owner and restore Properties to their
original condition;
(e) Comply with all applicable regulatory requirements relating to the
provision of the Telecommunication Services provided by FirstLink as may be
in effect from time to time;
(f) Maintain the System in good order, condition and repair; and
(g) Provide Owner with business Telephone Services at the Properties.
Owner will pay the installation costs for providing such business Telephone
Services and will provide, at its own cost, all necessary ancillary hardware
such as keysets and operator consoles for the dedicated use of the Owner;
such costs will be reasonable and reflect customary installation charges for
business telephone systems.
(h) Pay all taxes resulting from the ownership or operation of System
and service.
10. OBLIGATIONS OF OWNER. Owner shall:
(a) Make the System Site available on a rent-free basis to FirstLink
during the term of this Agreement. The construction and location of the
System Site shall be as Owner and FirstLink reasonably agree, subject to
technical and regulatory requirements as determined by FirstLink. FirstLink
shall have twenty-four hour, seven day a week access to the System Site, and
Owner 5 employees and agents shall not disturb the System. It is understood
that Owner currently has no emergency power generator at the Properties.
FirstLink's system at each System Site will include backup battery capacity
of 3.3 - 10.0 hours depending on resident load. If power is interrupted to
the System, a FirstLink technician will be automatically paged, allowing
sufficient time for a
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<PAGE>
portable generator to be delivered to the System Site to provide temporary
power until normal power is restored.
(b) Use reasonable efforts to encourage its staff, agents and
representatives to encourage and promote the use of the Telecommunications
Services to residents and prospective residents as part of the amenities
provided by Owner at the Properties. Owner consents to FirstLink's use of
incentives and incentive programs with management personnel, leasing staff
and other personnel at the Properties for the purpose of promoting the System
and Telecommunication Services provided through the System. Such incentives
will be paid directly by FirstLink to the recipients. Owner's staff will
present the telecommunications service agreement and related information to
prospective tenants with the objective of securing sales. It is envisioned
that this selling process will require a minimal amount of time on behalf of
Owner's staff. If Owner determines that FirstLink incentives or incentive
programs are causing Owner's personnel to spend excessive time promoting
FirstLink services, Owner may request FirstLink to modify or cease such
incentives or incentive programs, such request to be not unreasonably made.
Upon such reasonable request by Owner FirstLink will modify or cease such
incentives or incentive programs. if tenants have additional questions or
require additional information, their sales lead will be referred to
FirstLink staff who will be responsible for responding to customer inquiries
and securing any resulting sales. FirstLink will also be fully responsible
for the initial sales conversion process;
(c) Promptly provide to FirstLink requested specifications on the
Properties, such as wiring schematics and/or building diagrams, a current
list of residents, addresses and their telephone numbers and other specific
information regarding resident transactions, such as rentals, move-ins,
move-outs, transfers, intents to vacate, and the entering into or termination
of leases and other information necessary to market and operate the
System and provide the Telecommunications Services according to this
Agreement or to comply with governmental or Utility Commission rules as may
be determined by FirstLink . Telephone numbers of residents are to be kept
confidential by FirstLink and used for operational - not marketing - purposes
(such as determining whether a resident can retain a previous telephone
number).
(d) Cooperate with FirstLink in obtaining permits, consents, licenses
and any other requirements which may be necessary for FirstLink to install
and operate the System and furnish the Telecommunications Services; provided
that FirstLink shall pay all reasonable costs of the
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Owner associated therewith except that Owner will pay installation costs as
described in Section 9(g);
(e) Provide reasonable access to the Properties to FirstLink and its
employees and agents to enable FirstLink to perform the activities
contemplated by or necessary under this Agreement including access for the
purpose of soliciting customers.
11. INSURANCE. FirstLink shall carry and maintain liability
insurance of $1,000,000 naming Owner and Owner's agent as additional
insured covering personal injury and property damage that may be caused to
person(s), the Properties or their contents, by the System or FirstLink's
employees or agents, including but not limited to the duties described in
paragraph 17. Owner and FirstLink each waive any right of recovery against
each other for any claims that may be brought for any loss that is covered
by insurance upon or relating to the Properties or the System to the extent
of the actual proceeds received by waiving party. Owner shall carry and
maintain general liability insurance related to the Properties.
12. TERMINATION OF THE AGREEMENT.
(a) This Agreement may be terminated by either party if there has been a
material breach of the terms of this Agreement by the other party and if within
forty-five (45) days after receiving notice of such breach from the party
seeking to terminate, such breach has not been cured.
(b) FirstLink may terminate this Agreement, or discontinue the
provision of any Telecommunications Services provided hereunder, if in the
sole discretion of FirstLink, it ceases to be feasible for legal, economic or
regulatory reasons to provide Telecommunications Services to the Properties;
provided that FirstLink provides forty-five (45) days written notice to Owner.
(c) Any termination of this Agreement shall be effective as of the
date of termination, but FirstLink shall continue to provide
Telecommunications Services until the earlier of (i) all FirstLink customers
at the Properties are provided Telephone Service from another source or (ii)
thirty (30) days from the date of such termination. The provisions of this
agreement necessary for such continued services shall remain effective.
(d) Upon termination of this Agreement for any reason, FirstLink, or
any designee of FirstLink, including without limitation, any party providing
financing to FirstLink, shall have the
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right, after providing Owner with written notice of at least forty-five (45)
days, without further demand, to enter upon the Properties and to dismantle and
remove or render inoperative any and all equipment or other property comprising
the System so long as such right shall conform to Sections 9 (d) and 12 (c)
herein.
13. ASSIGNMENT OF THE AGREEMENT. This Agreement and the rights
hereunder may be assigned by FirstLink to any majority-owned subsidiary of
FirstLink or to an affiliate or party acquiring all or substantially all of
the assets of FirstLink upon prior written consent of Owner. Such consent
shall not be unreasonably withheld. Alternatively, the Agreement may be
assigned by FirstLink to any FirstLink subsidiary so long as FirstLink agrees
in writing that it shall remain liable for all obligations arising under this
Agreement. FirstLink may also assign this Agreement to any party providing
financing to FirstLink; provided that such assignment shall not relieve
FirstLink from its obligations hereunder. In connection with a sale or
disposition of the Properties, Owner shall request FirstLink's written
consent to assign this Agreement and shall require any subsequent owner of
the Properties to assume this Agreement and the rights and obligations
hereunder. Subject to the foregoing, this Agreement shall be binding upon and
shall inure to the benefit of the successors and assigns of the respective
parties to this Agreement.
14. OWNER WARRANTIES: INFORMATION. Owner warrants that (i) it has full
power and authority to grant to FirstLink the exclusive rights set forth in
this Agreement, (ii) that no party holds any rights or interests with respect
to the Properties that conflict with any rights or interests that Owner
grants to FirstLink under this Agreement; (iii) that the Properties is not
presently part of bankruptcy proceeding, foreclosure action, or deed in lieu
of foreclosure transaction; (iv) Owner is not in default of any mortgages or
other encumbrances on the Properties; and (v) no purchase contracts presently
exist as to the Properties.
15. FIRSTLINK WARRANTY. FirstLink warrants that it will comply with
all laws and licensing requirements concerning the installation and operation
of the System. Except as expressly stated in this Agreement, FirstLink makes
no representations or warranties regarding the System, express or implied,
including, but not limited to, any implied warranty of merchantability or
fitness for a particular purpose.
16. INDEPENDENT CONTRACTOR. FirstLink shall be and is an independent
contractor and Owner shall not control or direct the details and means by
which FirstLink performs its duties
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under this Agreement. This Agreement shall not create the relationship of
employer and employee, a partnership or a joint venture.
17. EMERGENCY CALLS. FirstLink will use its commercially reasonable best
efforts to pass all "911" emergency calls through the System to authorities and
to assure identity of each dwelling unit placing such call but makes no warranty
or guaranty of any nature as to the promptness or adequacy of any response to
any such emergency call. FirstLink assumes no responsibility whatsoever for any
actions with respect to emergency calls other than to use its reasonable best
efforts to pass such traffic to authorities through the System. In the event
that the System has been adversely affected by any situation described in
Section 21, FirstLink shall have no liability whatsoever for failure to pass on
emergency telephone traffic.
18. INDEMNIFICATION. Subject to the provisions set forth in Section 19
below, (i) FirstLink and Owner hereby agree to indemnify, defend and hold
each other (and each other's officers, directors, owners, employees, and
agents) harmless from and against all claims, losses and liabilities in any
way relating to, growing out of, or resulting from a material breach of each
of their respective obligations to the other under this Agreement ; and (ii)
Owner will indemnify FirstLink for damages to the System as provided in
Section 3 herein.
In addition, FirstLink agrees to indemnify, defend and hold harmless Owner
and Owners partners, employees, agents and successors from and against all
damages, losses, liabilities, costs, and expenses (including reasonable
attorneys' fees) resulting from claims made or causes of action asserted by
third parties (including, without limitation, residents of the Properties)
arising out of or relating to (i) the performance by FirstLink (or its employees
or agents) of its obligations under this Agreement, (ii) the provision of
Telecommunications Services or (iii) compliance of FirstLink and/or the System
with applicable laws and regulations, except to the extent such matters are
attributable to the gross negligence or willful misconduct of Owner.
19. LIMITATION OF REMEDIES. Notwithstanding any other provision of this
agreement but without limiting the mutual indemnification in Section 18,
neither FirstLink nor Owner shall be liable to any third party for any
incidental or consequential damages, including but not limited to lost
profits, of any nature whatsoever or for the condition or repair of any
telephone instrument or any property to which the System is attached.
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20. ARBITRATION OF DISPUTES. Any controversy, dispute, or claim of
whatever nature arising out of, in connection with or in relation to the
interpretation, performance or breach of this Agreement, including any claim
based on contract, tort or statute, shall be resolved at the request of any
party to this Agreement, by final and binding arbitration before a single
arbitrator conducted at a location determined by the arbitrator in Portland,
Oregon, ( or jurisdiction where property is located, at Owner's election)
administered by and in accordance with the then existing rules of practice
and procedure established by the Arbitration Chapter of the Uniform Trial
Court Rules as then in effect in the State of Oregon, (or jurisdiction where
property is located, at Owner's election) and judgment upon any award
rendered by the arbitrator may be entered by any state or federal court
having jurisdiction thereof. If the parties cannot mutually agree on an
arbitrator, either party may petition the Presiding Judge of the Multnomah
County Circuit Court (or jurisdiction where property is located, at Owner's
election) to appoint an arbitrator. The arbitrator shall award attorney's
fees and costs of the arbitration procedure to the prevailing party. Both
parties acknowledge that they are giving up their right to have any such
claim decided in a court of law before a judge or jury, and hereby waive all
rights to appeal.
21. FORCE MAJEURE. If the performance of any of the obligations under
this Agreement is interfered with by any reason or any circumstances beyond
the reasonable control of the parties, including, but not limited to, fire,
earthquake, storm, volcanic eruption, explosion, power failure or power
surge, acts of God, war, revolution, civil commotion, or requirement of any
government or legal body or any representative of any such government or
legal body, labor unrest, including but not limited to, strikes, slowdowns,
picketing or boycotts, then the parties shall be excused from performance on
a day-by-day basis to the extent of such interference.
22. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement contains the entire Agreement
between the parties and may not be modified, amended or changed except by
written instrument signed by duly authorized executives of both parties.
(b) WAIVER. The failure by either party at any time to require
performance by the other party or to claim a breach of any provision of this
Agreement shall not be construed as affecting any subsequent breach or the
right to require performance or to claim a breach with respect thereto.
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(c) GOVERNING LAW. The rights and obligations of the parties and all
interpretations and performances of this Agreement shall be governed in all
respects by the laws of the State of Oregon.
(d) NOTICES. Any notice to be given by either party to the other shall
be in writing and either personally delivered or sent by certified mail,
return receipt requested, to the addresses of the Owner and FirstLink
provided below. Notices shall be deemed given when received or refused. Each
party may change its address for notice to it by notice in accordance with
the Foregoing provisions.
FIRSTLINK: OWNER:
FirstLink Communications, Inc. Harsch Investment Corp.
255 SW Harrison, Suite 1A 1121 SW Salmon Street
Portland, Oregon 97201 Portland, Oregon 97205
Facsimile: 503-306-4333 Facsimile: 503-274-2093
Telephone: 503-306-4444 Telephone: 503-242-2900
Attn: A. Roger Pease, CEO Attn: Susan S. Bowlsby
(e) VALIDITY. If any provision of this Agreement shall be held to be
invalid or unenforceable, such provisions shall not affect in any respect the
validity or enforceability of the remainder of this Agreement unless the
invalidity materially affects the ability of either party to perform as
contemplated hereunder.
(f) ATTORNEYS' FEES AND COSTS. If arbitration or other proceedings
are brought to enforce or interpret this Agreement, the substantially
prevailing party shall be entitled to recover reasonable attorneys' fees and
other costs incurred in such action, arbitration or proceeding from the other
party, in addition to any other relief to which such party may be entitled.
(g) AUTHORITY. Each individual signing this Agreement on behalf of a
corporation or partnership represents that he or she has the necessary authority
to execute this Agreement on behalf of such entity and that, in the case of a
corporation, all necessary corporate action has been taken approving the
execution of this Agreement.
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Any person or entity executing this Agreement as "Owner" hereby represents
and warrants to FirstLink that it is fully authorized by Owner to execute this
Agreement and to bind Owner to the terms and obligations set forth in this
Agreement and the Owner is fully aware of the existence and contents of this
Agreement. Owner and any person or entity executing this Agreement on Owner's
behalf acknowledges that Owner shall be estopped from claiming that this
Agreement was executed by a person or entity lacking actual authority to bind
Owner.
(h) FURTHER ASSURANCES. Upon the reasonable request of either party,
the other party shall promptly and, at its own expense, execute and deliver
any additional documents or take such actions, as may be reasonably necessary
(subject to any other agreement binding on either party) for the purpose of
evidencing or perfecting any rights or interest of either party arising under
this Agreement or arising under documents executed in accordance with this
Agreement.
This Agreement has been signed and delivered as of the above date.
FIRSTLINK: OWNER:
By: /s/ A. Roger Pease By: /s/ [ILLEGIBLE]
-------------------------- --------------------------
Title: CEO Title: VP
-------------------------- --------------------------
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Exhibit No. 10.20 Telecommunications Services Agreement between Registrant and
Harsch Development Corp. (Syl-Mar Estates).
* = Confidential Information
<PAGE>
FIRSTLINK COMMUNICATIONS, INC.
AND
HARSCH INVESTMENT CORP.
SYL-MAR ESTATES TELECOMMUNICATIONS SERVICES AGREEMENT
This agreement ("Agreement") is entered into as of September 25, 1997,
by and between FirstLink Communications, Inc., an Oregon corporation
("FirstLink"), and Harsch Investment Corp., an Oregon corporation ("Owner").
1. PROPERTIES. Owner owns the multi-family residential complex
commonly known as Syl-Mar Estates located at 3838 West Camelback Road,
Phoenix, Arizona which consists of 267 units ( "the Property").
2. GRANT OF RIGHTS.
(a) Owner grants FirstLink the sole and exclusive right, except as
provided in the last sentence of clause (b) below, to install, own, operate,
replace and maintain the System on, off and through the Properties and the
sole and exclusive ri9ht to provide Telecommunication Services to residents
of the Properties. "System" shall mean all electronic devices, cable, wire,
hardware, software and other material used to transmit and receive two-way
voice and data communications, telephone service ("Telephone Service"),
multi-channel TV, video on demand, audio on demand, voice mail, data services
and other means of two-way communication distribution, whether now existing
or hereafter developed (collectively "Telecommunication Services") as between
the Properties and the local and/or long distance telephone networks or other
outside distributor of these and other services.
It is anticipated that Telephone Services will include local and long
distance calling, multi-channel television, voice mail and calling features
such as conference calling, call waiting and call forwarding. Additional
services will be added from time to time, as available and as warranted by
tenant demand. Such additional Telecommunication Services may include:
video conferencing, on-line computer services, electronic mail, wireless
services (such as cellular telephone) and other types of services. There can
be no assurance that any or all of the above additional services will be made
available. Their availability is dependent upon many variables
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and factors beyond FirstLink's control. Such factors include, but are not
limited to, technical feasibility, economic, regulatory and market
considerations.
(b) In consideration of the substantial investment made by FirstLink in
the System, Owner agrees that it will not grant access to the Properties to
any person or entity, other than FirstLink, for the purpose of operating or
maintaining the System, or permit the installation, maintenance or operation
at the Properties of any other equipment, wire, cable or material by any
person or entity that similarly provides Telecommunication Services. So long
as it is a requirement of law that a local telephone company also serve the
Properties, this exclusivity provision shall not deny such local telephone
company the right to serve residents of the Properties.
3. SYSTEM EXPENSES. Other than as set forth herein, FirstLink shall
bear all expenses to install, operate, maintain and repair the System
including wiring within each apartment. Owner shall, at Owner's expense and
cost, provide electrical power to the System (except emergency power
generator costs) and shall pay for any damage to the System caused by the
negligence or misconduct of Owner or Owner1s agent(s) or employees. For the
purposes of this Agreement, "System Site" shall mean an adequate and secure
space at each of the Properties to house FirstLink's System equipment, which
shall consist of a rent-free, locked room meeting FirstLink's specifications.
FirstLink will pay for constructing such a room if one does not exist. Owner
hereby grants FirstLink and its authorized personnel access to the Properties
for any reasonable purposes related to this Agreement including the
installation of cabling or microwave equipment to interconnect buildings and
to connect to other telecommunication systems and grants specific rights to
FirstLink to use both existing coaxial and twisted pair cabling in the
Properties. FirstLink agrees to notify the Facility Manager when either
FirstLink or its authorized personnel are on-site.
4. TERM. The term of this Agreement shall be * years from the date
hereof. The original term may be renewed for up to * additional periods of *
years each at the same terms and conditions upon written notice of at least
180 days prior to the end of the original term or any renewal term. Owner has
the right to cancel this Agreement within 90 days of receipt of FirstLink's
renewal notice to be effective on the anniversary date.
5. INSTALLATION. FirstLink shall commence installation of the System
as soon as practicable and in a manner that minimizes interruption of
existing communication services. In no event shall FirstLink interrupt
service provided by US West for those tenants choosing to remain
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connected to US West. Telecommunication Services to the Properties shall
commence no later than 180 days from commencement of installation. FirstLink
shall give Owner at least ten (10) days notice prior to the commencement of
installation. FirstLink may subcontract activities related to the
installation of the System, but shall be responsible for any and all acts
and/or omissions by any subcontractor.
6. OWNERSHIP AND CHARACTER OF THE SYSTEM. Except as otherwise stated
herein which includes pre-existing coaxial and twisted pair cabling, the
System, including any alterations and attachments, shall at all times remain
the sole property of FirstLink. It is the intention of the parties that the
System, and every component of the System, shall retain its character as
personal property following the installation of the System on the Properties,
and shall not be deemed to be a fixture constituting a part of the
Properties. No part of the System shall be or become subject to any mortgage,
deed of trust or lien upon the Properties.
7. SERVICE TO TENANTS. FirstLink shall provide Telephone Service and
other Telecommunication Services offered through the System to each resident
requesting them. FirstLink's obligation to provide or continue
Telecommunication Services shall be contingent on the resident paying service
charges and meeting other reasonable requirements as are established by
FirstLink from time to time. Residents electing to receive Telecommunication
Services offered by FirstLink shall do so through the execution and delivery
to Owner or FirstLink of a Tenant Services Agreement in the form provided,
from time to time, from FirstLink to Owner. Owner shall promptly provide
such executed documents to FirstLink. Residents requesting Telecommunication
Services shall be charged and billed individually for connection to the
System and for service at standard rates established solely by FirstLink from
time to time unless prohibited by applicable law or regulation. FirstLink
shall be solely responsible for invoicing, collections and bad debts related
to provision of Telecommunication Service to residents.
FirstLink shall at all times keep the rates charged Owner's tenants
competitive with like-kind companies offering similar services. Owner's
properties shall at no time be significantly disadvantaged to other buildings
offering similar services. FirstLink further guarantees to continuously
offer first class service, with prompt response to service calls, change in
service requests, and to maintain their equipment and installations in a
first class condition. FirstLink further guarantees to at all times compete
with like-kind companies with the latest technology and service packages. If
FirstLink fails to perform according to the foregoing, Owner may cancel this
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Agreement after thirty (30) day notice to cure. If FirstLink disagrees with
Owner's interpretation of the quality of FirstLink's service, both parties
hereby agree to arbitrate the dispute.
Both parties agree that neither the Owner nor the Owner's agent shall
have any liability regarding the number of residents electing to use
Telecommunications Services.
8. COMMISSIONS. Owner shall be entitled to Commissions according to
the following schedule:
<TABLE>
<CAPTION>
Penetration Rate Commission Percent
- --------------------------------------------------------------------------------
<S> <C>
* *
</TABLE>
Commissions are paid on all gross revenues actually collected for
telecommunications services, including internet access services, calling
cards, paging services, and cellular services provided to each living unit
served by FirstLink hereunder. * penetration rate is the number of living
units subscribing to any of FirstLink's services divided by the total number
of living units in the Property at the start of the quarter for which
commissions are payable. All commission payments hereunder will be paid
quarterly in arrears within thirty days of each quarter end.
9. ADDITIONAL OBLIGATIONS OF FIRSTLINK. FirstLink shall:
(a) Make a customer service representative available to receive service
requests or inquiries from Owner or residents and insure that it responds to
service requests within four (4) hours of receipt. Routine maintenance
services shall be performed by FirstLink during its normal working hours. A
technician shall arrive at the Properties to commence maintenance services
promptly after request by a customer of such services, provided however,
where such requests are made on, or on a day preceding a Saturday, Sunday or
holiday, FirstLink's system technician shall arrive at the Properties to
commence maintenance services on the next normal working day. A technician
shall be dispatched within four (4) hours of receipt of an emergency service
request or notification of a service problem affecting more than one resident.
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(b) Provide Owner with marketing materials, sales support and sales
training to enable Owner and Owner's employees to market Telecommunications
Services in accordance with Section 10(b);
(c) Provide training to Owner's staff to enable staff to perform the
duties specified in Section 10(b);
(d) Repair or replace any damage to the Properties resulting from
Installation, operation, or removal of the System or any other acts by
FirstLink to the satisfaction of the Owner and restore Properties to their
original condition;
(e) Comply with all applicable regulatory requirements relating to the
provision of the Telecommunication Services provided by FirstLink as may be
in effect from time to time;
(f) Maintain the System in good order, condition and repair; and
(g) Provide Owner with business Telephone Services at the Properties.
Owner will pay the installation costs for providing such business Telephone
Services and will provide, at its own cost, all necessary ancillary hardware
such as keysets and operator consoles for the dedicated use of the Owner;
such costs will be reasonable and reflect customary installation charges for
business telephone systems.
(h) Pay all taxes resulting from the ownership or operation of System
and service.
10. OBLIGATIONS OF OWNER. Owner shall:
(a) Make the System Site available on a rent-free basis to FirstLink
during the term of this Agreement. The construction and location of the
System Site shall be as Owner and FirstLink reasonably agree, subject to
technical and regulatory requirements as determined by FirstLink. FirstLink
shall have twenty-four hour, seven day a week access to the System Site, and
Owner's employees and agents shall not disturb the System. It is understood
that Owner currently has no emergency power generator at the Properties.
FirstLink's system at each System Site will include backup battery capacity
of 3.3 - 10.0 hours depending on resident load. If power is interrupted to
the System, a FirstLink technician will be automatically paged, allowing
sufficient time for a
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portable generator to be delivered to the System Site to provide temporary
power until normal power is restored.
(b) Use reasonable efforts to encourage its staff, agents and
representatives to encourage and promote the use of the Telecommunications
Services to residents and prospective residents as part of the amenities
provided by Owner at the Properties. Owner consents to FirstLink's use of
incentives and incentive programs with management personnel, leasing staff
and other personnel at the Properties for the purpose of promoting the System
and Telecommunication Services provided through the System. Such incentives
will be paid directly by FirstLink to the recipients. Owner's staff will
present the telecommunications service agreement and related information to
prospective tenants with the objective of securing sales. It is envisioned
that this selling process will require a minimal amount of time on behalf of
Owner's staff. If Owner determines that FirstLink incentives or incentive
programs are causing Owner's personnel to spend excessive time promoting
FirstLink services, Owner may request FirstLink to modify or cease such
incentives or incentive programs, such request to be not unreasonably made.
Upon such reasonable request by Owner FirstLink will modify or cease such
incentives or incentive programs. If tenants have additional questions or
require additional information, their sales lead will be referred to
FirstLink staff who will be responsible for responding to customer inquiries
and securing any resulting sales. FirstLink will also be fully responsible
for the initial sales conversion process;
(c) Promptly provide to FirstLink requested specifications on the
Properties, such as wiring schematics and/or building diagrams, a current
list of residents, addresses and their telephone numbers and other specific
information regarding resident transactions, such as rentals, move-ins,
move-outs, transfers, intents to vacate, and the entering into or termination
of leases and other information necessary to market and operate the
System and provide the Telecommunications Services according to this
Agreement or to comply with governmental or Utility Commission rules as may
be determined by FirstLink . Telephone numbers of residents are to be kept
confidential by FirstLink and used for operational -- not marketing -- purposes
(such as determining whether a resident can retain a previous telephone
number).
(d) Cooperate with FirstLink in obtaining permits, consents, licenses
and any other requirements which may be necessary for FirstLink to install
and operate the System and furnish the Telecommunications Services; provided
that FirstLink shall pay all reasonable costs of the
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Owner associated therewith except that Owner will pay installation costs
as described in Section 9(g);
(e) Provide reasonable access to the Properties to FirstLink and its
employees and agents to enable FirstLink to perform the activities
contemplated by or necessary under this Agreement including access for the
purpose of soliciting customers.
11. INSURANCE. FirstLink shall carry and maintain liability insurance
of $1,000,000 naming Owner and Owner's agent as additional insured covering
personal injury and property damage that may be caused to person(s), the
Properties or their contents, by the System or FirstLink's employees or
agents, including but not limited to the duties described in paragraph 17.
Owner and FirstLink each waive any right of recovery against each other for
any claims that may be brought for any loss that is covered by insurance upon
or relating to the Properties or the System to the extent of the actual
proceeds received by waiving party. Owner shall carry and maintain general
liability insurance related to the Properties.
12. TERMINATION OF THE AGREEMENT.
(a) This Agreement may be terminated by either party if there has been
a material breach of the terms of this Agreement by the other party and if
within forty-five (45) days after receiving notice of such breach from the
party seeking to terminate, such breach has not been cured.
(b) FirstLink may terminate this Agreement, or discontinue the
provision of any Telecommunications Services provided hereunder, if in the
sole discretion of FirstLink, it ceases to be feasible for legal, economic or
regulatory reasons to provide Telecommunications Services to the Properties;
provided that FirstLink provides forty-five (45) days written notice to Owner.
(c) Any termination of this Agreement shall be effective as of the date
of termination, but FirstLink shall continue to provide Telecommunications
Services until the earlier of (i) all FirstLink customers at the Properties
are provided Telephone Service from another source or (ii) thirty (30) days
from the date of such termination. The provisions of this agreement
necessary for such continued services shall remain effective.
(d) Upon termination of this Agreement for any reason, FirstLink, or
any designee of FirstLink, including without limitation, any party providing
financing to FirstLink, shall have the
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right, after providing Owner with written notice of at least forty-five (45)
days, without further demand, to enter upon the Properties and to dismantle
and remove or render inoperative any and all equipment or other property
comprising the System so long as such right shall conform to Sections 9 (d)
and 12 (c) herein.
13. ASSIGNMENT OF THE AGREEMENT. This Agreement and the rights
hereunder may be assigned by FirstLink to any majority-owned subsidiary of
FirstLink or to an affiliate or party acquiring all or substantially all of
the assets of FirstLink upon prior written consent of Owner. Such consent
shall not be unreasonably withheld. Alternatively, the Agreement may be
assigned by FirstLink to any FirstLink subsidiary so long as FirstLink agrees
in writing that it shall remain liable for all obligations arising under this
Agreement. FirstLink may also assign this Agreement to any party providing
financing to FirstLink; provided that such assignment shall not relieve
FirstLink from its obligations hereunder. In connection with a sale or
disposition of the Properties, Owner shall request FirstLink's written
consent to assign this Agreement and shall require any subsequent owner of
the Properties to assume this Agreement and the rights and obligations
hereunder. Subject to the foregoing, this Agreement shall be binding upon and
shall inure to the benefit of the successors and assigns of the respective
parties to this Agreement.
14. OWNER WARRANTIES: INFORMATION. Owner warrants that (i) it has full
power and authority to grant to FirstLink the exclusive rights set forth in
this Agreement, (ii) that no party holds any rights or interests with respect
to the Properties that conflict with any rights or interests that Owner
grants to FirstLink under this Agreement; (iii) that the Properties is not
presently part of bankruptcy proceeding, foreclosure action, or deed in lieu
of foreclosure transaction; (iv) Owner is not in default of any mortgages or
other encumbrances on the Properties; and (v) no purchase contracts presently
exist as to the Properties.
15. FIRSTLINK WARRANTY. FirstLink warrants that it will comply with all
laws and licensing requirements concerning the installation and operation of
the System. Except as expressly stated in this Agreement, FirstLink makes no
representations or warranties regarding the System, express or implied,
including, but not limited to, any implied warranty of merchantability or
fitness for a particular purpose.
16. INDEPENDENT CONTRACTOR. FirstLink shall be and is an independent
contractor and Owner shall not control or direct the details and means by
which FirstLink performs its duties
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(c) GOVERNING LAW. The rights and obligations of the parties and all
interpretations and performances of this Agreement shall be governed in all
respects by the laws of the State of Oregon.
(d) NOTICES. Any notice to be given by either party to the other shall
be in writing and either personally delivered or sent by certified mail,
return receipt requested, to the addresses of the Owner and FirstLink
provided below. Notices shall be deemed given when received or refused. Each
party may change its address for notice to it by notice in accordance with
the foregoing provisions.
<TABLE>
<CAPTION>
FIRSTLINK: OWNER:
<S> <C>
FirstLink Communications, Inc. Harsch Investment Corp.
255 SW Harrison, Suite lA 1121 SW Salmon Street
Portland, Oregon 97201 Portland, Oregon 97205
Facsimile: 503-306-4333 Facsimile: 503-274-2093
Telephone: 503-306-4444 Telephone: 503-242-2900
Attn: A. Roger Pease, CEO Attn: Susan S. Bowlsby
</TABLE>
(e) VALIDITY. If any provision of this Agreement shall be held to be
invalid or unenforceable, such provisions shall not affect in any respect the
validity or enforceability of the remainder of this Agreement unless the
invalidity materially affects the ability of either party to perform as
contemplated hereunder.
(f) ATTORNEYS' FEES AND COSTS. If arbitration or other proceedings are
brought to enforce or interpret this Agreement, the substantially prevailing
party shall be entitled to recover reasonable attorneys' fees and other costs
incurred in such action, arbitration or proceeding from the other party, in
addition to any other relief to which such party may be entitled.
(g) AUTHORITY. Each individual signing this Agreement on behalf of a
corporation or partnership represents that he or she has the necessary
authority to execute this Agreement on behalf of such entity and that, in the
case of a corporation, all necessary corporate action has been taken
approving the execution of this Agreement.
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Any person or entity executing this Agreement as "Owner" hereby
represents and warrants to FirstLink that it is fully authorized by Owner to
execute this A9reement and to bind Owner to the terms and obligations set
forth in this Agreement and the Owner is fully aware of the existence and
contents of this Agreement. Owner and any person or entity executing this
Agreement on Owner's behalf acknowledges that Owner shall be estopped from
claiming that this Agreement was executed by a person or entity lacking
actual authority to bind Owner.
(h) FURTHER ASSURANCES. Upon the reasonable request of either party,
the other party shall promptly and, at its own expense, execute and deliver
any additional documents or take such actions, as may be reasonably necessary
(subject to any other agreement binding on either party) for the purpose of
evidencing or perfecting any rights or interest of either party arising under
this Agreement or arising under documents executed in accordance with this
Agreement.
This Agreement has been signed and delivered as of the above date.
FIRSTLINK: OWNER:
By: /s/ A. ROGER PEASE By: /s/ [Illegible]
---------------------------------- ------------------------------
Title: CEO Title:
-------------------------------- ----------------------------
<PAGE>
FIRSTLINK
December 11, 1997
Hugh D. Clark
Harsch Investment Corp.
1121 SW Salmon
Portland, Oregon 97205
Dear Hugh:
Enclosed are the executed Telecommunications Services Agreements for
Park Plaza, Clay Tower, The Nettleton, Sherman Tower, Regency Tower and
Syl-Mar Estates.
To clarify our final agreement regarding Section a, Commissions, the
third sentence in Section 8 (originally "For telephone and cable. for which
commissions are payable") is hereby modified to read 'Commissions on
telephone revenues and cable television revenues are calculated separately,
with the penetration rate for telephone calculated as the number of living
units subscribing to telephone services divided by the total number of living
units in the Property at the start of the quarter for which commissions are
payable The penetration rate for cable is calculated as the number of living
units subscribing to cable services divided by the total number of living
units in the Property at the start of the quarter for which commissions are
payable."
Hugh, if this conforms to your understanding please sign the enclosed
copy of this letter and return to me for our files.
Sincerely,
/s/ A. ROGER PEASE
- --------------------------------------
A. Roger Pease
Chief Executive Officer
Acceptance by Owner
By: /s/ HUGH D. CLARK
-----------------------------------
Title: Vice President
--------------------------------
FIRSTLINK COMMUNICATIONS, INC.
190 S.W. HARRISON ST.
PORTLAND, OR 97201-5312
FAX 503-306-4333
503-306-4444
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FIRSTLINK COMMUNICATIONS, INC.
Consent of Independent Accountants
Dated March 31, 1998
<PAGE>
When the transaction referred to in note 2(e) of the notes to the financial
statements has been consummated, we will be in a position to render the
following consent.
KPMG PEAT MARWICK LLP
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
FirstLink Communications, Inc.
We consent to the use of our report included herein and to the reference
to our firm under the heading "Experts" in the Prospectus.
Our report dated January 21, 1998, except as to note 9 which is as of
March 18, 1998 and note 2(e) which is as of ________, 1998, contains an
explanatory paragraph that states that the Company has suffered
recurring losses from operations, which raise substantial doubt about
its ability to continue as going concern. The financial statements do
not include any adjustments that might result from the outcome of that
uncertainty.
Portland, Oregon
March 31, 1998
