This Warrant and the underlying shares of Common Stock represented by this
Warrant have not been registered under the Securities Act of 1933 (the "Act"),
and are "restricted securities" as that term is defined in Rule l44 under the
Act. The securities may not be offered for sale, sold or otherwise
transferred except pursuant to an effective registration statement under the
Act, a "no-action" letter from the Securities and Exchange Commission and any
applicable State securities administrator as to such sale or offer, or an
opinion of counsel to the corporation that neither State nor Federal
registration is required as to such sale or offer.
Warrant No. ______
***FirstLink Communications, Inc.***
EARNOUT WARRANT TO PURCHASE SHARES OF COMMON STOCK
Warrant to Purchase 2,000,000 Shares
(subject to adjustment and vesting as set forth herein)
Exercise Price $5.40 Per Share
(subject to adjustment as set forth herein)
VOID AFTER 5:00 P.M., PACIFIC STANDARD TIME, ON May 22, 2012
THIS CERTIFIES THAT WEB Service Company, Inc., a California corporation
is entitled to purchase from FirstLink Communications, Inc., an Oregon
corporation (hereinafter called the "Company") with its principal office
located in Portland, Oregon, at any time before 5:00 p.m., Pacific Standard
Time (PST), on May 22, 2012 (the "Termination Date"), at the purchase price of
$5.40 per share (the "Exercise Price"), the number of shares (the "Shares") of
the Company's Common Stock (the "Common Stock") then available for exercise as
set forth herein. The number of Shares purchasable upon exercise of this
Warrant and the Exercise Price per Share shall be subject to vesting as set
forth in Section 2.5 and to adjustment from time to time as set forth in
Section 5 below.
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 "EARNOUT WARRANT." This Warrant.
1.4 "HOLDER" OR "WARRANTHOLDER." The person to whom this Warrant is
issued.
1.5 "NASD." NASD Regulation, Inc.
1.6 "NASDAQ." The automated quotation system operated by Nasdaq, Inc.
1.7 "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.
1.8 "WARRANTS." The warrants issued in accordance with the terms of
this Agreement and any Warrants issued in substitution for or replacement of
such warrants, including those evidenced by a Warrant or Warrants issued upon
division exchange, substitution or transfer pursuant to this Warrant.
1.9 "WARRANT SECURITIES." The Common Stock purchasable upon exercise of
a Warrant, including the Common Stock underlying unexercised portions of a
Warrant.
2.0 "EXCLUSIVE MARKETING AGREEMENT." The exclusive marketing agreement
between FirstLink Communications, Inc. and WEB Service Company, Inc. date
August 26, 1998.
Section 2. Term of Warrants; Exercise of Warrant; Vesting.
----------------------------------------------
2.1 EXERCISE OF WARRANT. Subject to the terms of this Agreement, the
Holder shall have the right, at any time prior to 5:00 p.m., PST, on the
Termination Date, to purchase from the Company up to the number of fully paid
and nonassessable Shares to which the Holder may at the time be entitled to
purchase pursuant to this Agreement, upon surrender to the Company, at its
principal office, of the Warrant 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 Holder; such number being subject to adjustment
as provided herein). Notwithstanding the foregoing, except as provided in
Section 2.5 (b), the Warrant must be exercised as to a Share that has become
vested within not more than five (5) years of the date on which it has vested
as to that Share.
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 SHARES. Upon such surrender of the Warrants 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
Holder and in such name or names as the Holder may designate, a certificate or
certificates for the number of full Shares so purchased upon the exercise of
the Warrant, together with cash, as provided in Section (9) hereof, in respect
of any fractional Shares otherwise issuable upon such surrender.
2.4 STATUS OF HOLDER UPON EXERCISE. Upon receipt of the Warrant by the
Company as described in Sections 2.1 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.
2.5 VESTING PROVISIONS. Notwithstanding anything else to the contrary
herein, this Earnout Warrant is subject to the following vesting provisions:
a. This Earnout Warrant shall vest at the rate of twenty five (25)
Shares per Customer Subscription (as defined in the Exclusive
Marketing Agreement) obtained from a Property in an Exclusive
Territory marketed by Holder and provided to the Company.
b. This Earnout Warrant is subject to the following minimum vesting
schedule:
Minimum Required
Vesting Date Vesting Shares for Period
---------------- ---------------------------
December 31,1999 100,000
December 31, 2000 150,000 additional
December 31, 2001 200,000 additional
December 31, 2002 300,000 additional
December 31, 2003 500,000 additional
May 22, 2004 750,000 additional
Any portion of the minimum required vested Shares for each year that
is not vested by the Vesting Date for that year is lost and may
never be exercised. Except as provided in the following paragraph,
Shares must be exercised within five (5) years of vesting or they
will expire.
Notwithstanding the foregoing, the maximum number of shares that can
be exercised is the lesser of twenty percent (20%) of the Company's
outstanding Shares as of the Vesting Date or 2,000,000 Shares
(subject to adjustment as provided herein) less any previously
vested shares. Any shares which may not be exercised by reason of
the foregoing limitation shall remain exercisable until such time
as, by reason of additional issuances, the shares may be exercised.
c. In the event that, at any time during the term of the Exclusive
Marketing Agreement, there is (i) a merger of the Company or its
parent or (ii) an event resulting in a change of the ownership of at
least fifty percent (50%) of the outstanding voting securities of
the Company or its parent or (iii) the individuals who constitute
the board of directors as of the date hereof cease, for any reason,
to constitute a majority of the board and, following any of the
foregoing, the Exclusive Marketing Agreement is terminated, then WEB
shall be entitled to elect, at its sole discretion, to cause the
vesting of certain Shares as set forth in Section 1.6 of the
Exclusive Marketing Agreement.
d. TERMS. All terms used in this Section 2.5 are as defined herein in
the Exclusive Marketing Agreement between the Company and Holder.
Section 3. Non-Transferability and Form of Warrant.
---------------------------------------
3.1 LIMITATION ON TRANSFER. This Warrant is non-transferable.
3.2 MUTILATED, LOST, STOLEN OR DESTROYED WARRANT. In case the Warrant
shall be mutilated, lost, stolen or destroyed, the Company shall, at the
request of the Warrantholder, issue and deliver in exchange and substitution
for and upon cancellation of the mutilated Warrant or Warrants, or in lieu of
and substitution for the Warrant or Warrants lost, stolen or destroyed, a new
Warrant 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 shall also comply with such other reasonable regulations
and pay such other reasonable charges as the Company may prescribe.
3.3 FORM OF ELECTION. The form of election to purchase Shares shall be
substantially as set forth in Exhibit A attached hereto. The Warrants 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. A Warrant 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 Warrant or did
not hold such office on the date of this Agreement.
The Warrants 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.
------------------------------
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:
4.1 ADJUSTMENTS. The number of 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 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 Warrants immediately'
prior thereto shall be adjusted so that the
Warrantholder 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 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 (4.1. (a)) shall become
effective immediately after the effective date of such
event retroactive to the record date, if any, for such
event.
(b) Whenever the number of 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 prior to
such adjustment, and of which the denominator shall be
purchasable immediately thereafter.
(c) Whenever the number of Shares purchasable upon exercise of the
Warrants is adjusted as herein provided, the Company shall
cause to be promptly mailed to the Warrantholder 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 Warrants after such adjustment, a brief
statement of the facts requiring such adjustment and the
computation by which such adjustment was made.
(d) For the purpose of this Section (4.1), 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.
4.2 NO ADJUSTMENT FOR CERTAIN CASES. No adjustments shall be made
pursuant to Section (4) hereof in connection with the issuance of the Common
Stock upon exercise of the Warrants. No adjustments shall be made pursuant to
Section (4) hereof in connection with 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 plan.
4.3 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 (4), and a certificate signed by such firm shall
be conclusive evidence of the correctness of any computation made under this
Section (4).
4.4 STATEMENT ON WARRANTS. Irrespective of any adjustments in the
number of securities issuable upon exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same number of
securities as are stated in the similar Warrants 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
that it may deem appropriate and that does not affect the substance thereof;
and any Warrant thereafter issued, whether upon registration of transfer of,
or in exchange or substitution for, an outstanding Warrant, may be in the form
so changed.
Section 5. Notice to 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:
(a) the Company shall declare a dividend of Common Stock or authorize
any other distribution on its Common Stock; or
(c) any reclassification, reorganization or similar change of the Common
Stock, or any consolidation or merger to which the Company is a
party; or
(d) the voluntary or involuntary dissolution, liquidation or winding up
of the Company; or
(e) 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:
(i) 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;
(ii) 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
(iii) if any matters referred to in the foregoing clauses (i) and
(ii) 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. Reservation of Warrant Securities.
---------------------------------
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. 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 Section 9 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 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 Warrants or the securities
comprising the Shares.
Section 8. Transfer to Comply With the Securities Act of 1933.
--------------------------------------------------
This Warrant, the Warrant Securities, and all other securities issued or
issuable upon exercise of this Warrant, 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 Company
may cause substantially the following legends, or their equivalents, to be set
forth on each certificate representing the Warrant Securities, or any other
security issued or issuable upon exercise of this Warrant:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SECURITIES HAVE
BEEN ACQUIRED WITHOUT A VIEW TO DISTRIBUTION AND MAY NOT BE OFFERED,
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
EFFECTIVE REGISTRATION STATEMENTS FOR THE SECURITIES UNDER
APPLICABLE FEDERAL AND STATE LAWS, A "NO-ACTION" LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION AND ANY APPLICABLE STATE
SECURITIES ADMINISTRATOR AS TO SUCH SALE OR OFFER, OR AN OPINION OF
COUNSEL TO THE CORPORATION THAT NEITHER STATE NOR FEDERAL
REGISTRATION IS REQUIRED AS TO SUCH SALE OR OFFER. THE
CORPORATION'S TRANSFER AGENT HAS BEEN ORDERED TO EFFECTUATE TRANSFER
OF THIS CERTIFICATE ONLY IN ACCORDANCE WITH THE ABOVE INSTRUCTIONS."
(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 9. Fractional Shares.
-----------------
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of all or any part of this Warrant. With respect to
any fraction of a share of any security called for upon any exercise of this
Warrant, 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 10. No Rights as Stockholder.
------------------------
Nothing contained in this Agreement or in the Warrants shall be construed
as conferring upon the Warrantholder 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.
Section 11. Warrant Securities to be Fully Paid.
-----------------------------------
The Company covenants that all Warrant Securities 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 12. Notices.
-------
Any notice pursuant to this Agreement by the Company or by a
Warrantholder 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:
(i) If to a Warrantholder or a holder of Shares, addressed to the
address set forth above.
(ii) If to the Company addressed to it at FirstLink
Communications, Inc., ▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇.
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 13. Applicable Law.
--------------
This Warrant shall be governed by and construed in accordance with the
laws of the State of Oregon.
Section 14. Arbitration.
-----------
The terms of Section 3.5 of the Exclusive Marketing Agreement are hereby
incorporated by reference.
Section 15. Acceptance of Terms; Successors.
-------------------------------
By its acceptance of this Warrant, the Holder accepts and agrees to
comply with all of the terms and provisions hereof. All the covenants and
provisions of this Warrant by or for the benefit of the Company or the Holder
shall bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 16. Miscellaneous Provisions.
------------------------
(a) Subject to the terms and conditions contained herein, this Warrant
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 Warrant Securities and the exercise of this
Warrant in full shall not terminate the provisions of this Warrant
as it relates to holders of Warrant Securities.
(b) This Warrant 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
only upon the written consent of the Company and all of the holders
of Warrants.
(c) If any provision of this Warrant 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 Warrant.
(d) 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.
Dated: August 26, 1998 FIRSTLINK COMMUNICATIONS, INC.
By:
---------------------------------------
A. ▇▇▇▇▇ ▇▇▇▇▇, Chief Executive Officer
PURCHASE FORM
--------------
Dated
-------------
The undersigned hereby irrevocably elects to exercise this Warrant to the
extent of purchasing _________________ Shares of ____________________ and
hereby tenders payment of the exercise price thereof.
Name
-------------------------------------------
(please type or print in block letters)
Address
-------------------------------------------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
