Exhibit No. 10.3.1 Telecommunications Services Agreement between Registrant and
Oregon Portland Associates (Portland Center Apartments)
Certain information in this exhibit has been omitted pursuant to Rule 406
of the Securities Act. Omitted information is designated by "*".
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, ▇▇▇ ▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, 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
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.
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
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 ▇▇▇▇▇▇▇▇) 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.
(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.
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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(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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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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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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(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
▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ c/o Pacific Union Property Services, Inc.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇ Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Attn: A ▇▇▇▇▇ ▇▇▇▇▇, President Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇, 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
Page 10 - Telecommunications Services Agreement
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 ▇▇▇▇▇) 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
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