SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (or Date of Earliest Event Reported): December 22, 1999
USOL HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
OREGON 01-14271 93-1197477
(State or other (Commission File Number) (IRS Employer
jurisdiction of incorporation) Identification No.)
10300 Metric Boulevard
Austin, Texas 78758
(Address of principal executive offices) (Zip Code)
(512) 651-3780
(Registrant's telephone number, including area code)
FIRSTLINK COMMUNICATIONS, INC.
190 SW Harrison
Portland, Oregon 97201
(Former name or former address, if changed since last report)
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INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 1. CHANGE IN CONTROL OF REGISTRANT.
See Item 2.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
The consummation of the merger of USOL Holdings, Inc., a Delaware
corporation ("Old USOL") with and into FirstLink Communications, Inc., an Oregon
corporation (the "Registrant") was effective as of December 22, 1999. In
connection with the merger, the Registrant's Articles of Incorporation were
amended to change the Registrant's name to USOL Holdings, Inc. The merger was
completed pursuant to the Agreement and Plan of Merger and Reorganization dated
as of July 21, 1999 by and among Old USOL and the Registrant. As a result of the
merger, each outstanding share of Old USOL's common stock, Series A Convertible
Preferred Stock and Series B Convertible Preferred Stock are exchangeable for
one share of the Registrant's common stock, Series A Convertible Preferred Stock
and Series B Convertible Preferred Stock, respectively. In the aggregate, the
Registrant will issue approximately 3,175,000 shares of common stock and
1,480,000 shares of preferred stock in connection with the merger. Additionally,
each outstanding option to purchase approximately an aggregate of 1,910,000
shares of common stock of old USOL and warrants to purchase an aggregate of
2,084,000 shares of common stock of old USOL were converted into options and
warrants to purchase the same number of shares of the Registrant's common stock.
Each share of Series A Convertible Preferred Stock and Series B Convertible
Preferred Stock is convertible into that number of shares of common stock
obtained by dividing the liquidation preference by the then applicable
conversion price. The liquidation preference equals $25.00 and the conversion
price equals $2.00 per share, as adjusted. Each share of Series B Convertible
Preferred Stock is also convertible into one share of Series A Convertible
Preferred Stock. As of December 28, 1999, there were 6,883,779 shares of common
stock of the Registrant outstanding (including the shares to be issued to the
common stockholders of Old USOL). Following the merger, existing stockholders of
OLD USOL owned approximately 46.1% of the Registrant's outstanding common stock
as of December 28, 1999. Also as of such date, all of the holders of all of the
Series A and Series B Preferred Convertible Common Stock (the "Preferred
Stockholders"), some of which also own shares of the Registrant's common stock
and warrants to purchase shares of the Registrant's common stock, hold
approximately 70.8% of the Registrant's common stock on a fully diluted basis.
This transaction, which will be accounted for as a reverse acquisition, has
resulted in a change of control of the Registrant.
All of the Preferred Stockholders entered into an Agreement Among Investors
dated July 21, 1999 (the "Investor Agreement"). Under the terms of the Investor
Agreement, the Preferred Stockholders made certain agreements relating to the
voting and transfer of their respective shares of Series A Convertible Preferred
Stock and Series B Convertible Preferred Stock of Old USOL, which the parties
further agreed would apply to their shares of Series A Convertible Preferred
Stock and Series B Convertible Preferred Stock of the Registrant upon
consummation of the merger. Under the Investor Agreement, the Preferred
Stockholders agreed that in any matter requiring the vote of the Company's
stockholders, the Preferred Stockholders would hold a meeting where the holders
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of the Series A Convertible Preferred Stock (the "Voting Investors") would vote
among themselves to determine the collective course of action of the Preferred
Stockholders. The Preferred Stockholders holding more than 50% of all Voting
Percentage Interests (as such number is calculated in accordance with the
Investor Agreement) shall constitute a quorum at any meeting of the Preferred
Stockholders. A vote of more than 50% of the percentage interests held by the
Voting Investors shall be the act of the Preferred Stockholders at any meeting
(the "Desired Outcome"). Each of the Preferred Stockholders further agreed to
vote its shares of the Registrant consistent with the Desired Outcome. If there
is no Desired Outcome determined by the Preferred Stockholders, then the
Preferred Stockholders are entitled to vote their shares as they deem
appropriate at any meeting of the stockholders of the Registrant.
In addition, each of GMAC Commercial Mortgage Corporation, Aspen
Foxtrot Investments, LLC, Peregrine Equities 1, L.L.C. - Peregrine Equities 10,
L.L.C. (acting together), and AGL Investments No. 8 Limited Partnership is
entitled, subject to certain limitations, to designate an individual to serve as
director of the Registrant and each of the Preferred Stockholders has agreed to
vote its shares in favor of such director nominee.
Except for certain permitted transfers, the Investor Agreement further
provides that for a period of one year from the date of the merger, such
Preferred Stockholder will not transfer any of the shares of Series A
Convertible Preferred Stock or Series B Convertible Preferred Stock of the
Company owned by such Preferred Stockholder. The "permitted transfers" include
the following: a Preferred Stockholder may (a) subject to and in accordance with
the terms of the preferred stock, convert within the one year period following
the date of the merger, up to 25% of its shares of preferred stock into common
stock, and, to the extent permitted under applicable securities laws, such
common stock may be sold publicly, (b) transfer all or any part of such
Preferred Stockholder's preferred stock to one or more affiliates, employees or
directors of such Preferred Stockholder, (c) transfer the preferred stock in
connection with any exchange, reclassification or other conversion of shares
into cash, securities or other property pursuant to a merger or consolidation of
the Registrant or any of its subsidiaries with, or any sale or transfer by the
Registrant or any of its subsidiaries of all or substantially all of its assets
to any person, (d) transfer such Preferred Stockholder's preferred stock in
connection with any statutory share exchange or recapitalization of the
Registrant, and (e) transfer such Preferred Stockholder's preferred stock in
connection with the terms of the tag-along rights provision and drag-along
rights provision of the Investor Agreement. Other than in connection with a
"permitted transfer" described above or a transfer pursuant to an effective
registration statement or pursuant to Rule 144 under the Securities Act of 1933,
if at any time a Preferred Stockholder desires to transfer any shares of the
Registrant, the selling investor is required to give notice to the remaining
Preferred Stockholders of an offer to sell. Each of the remaining investors has
15 days to accept the offer on the terms set forth in the notice. There is no
obligation to sell any shares unless one or more of the other investors
purchases all, but not less than all, of the shares offered. If investors
deliver notices electing to purchase shares in excess of the number of shares
offered, then the accepting investors have the right to purchase the shares on a
pro rata basis. If the shares are not purchased by the remaining investors, then
the selling investor may sell to a third party on the same terms. However, prior
to such sale, the selling investor is required to offer to each remaining
investor the opportunity to sell such investor's shares on the same terms. Other
than in connection with a "permitted transfer" described above or a transfer
pursuant to an effective
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registration statement or pursuant to Rule 144 under the Securities Act of 1933,
if at any time Preferred Stockholders holding a majority of the securities
subject to the Investor Agreement, calculated on a fully converted basis, desire
to transfer all or any part of their securities, which would result in the sale
of at least 20% of the voting stock of the Registrant and the person or group
acquiring the stock will become the beneficial owner of a greater percentage of
voting capital stock, determined on a fully converted basis, than any other
person or group, each of the other Preferred Stockholders shall be required to
sell all, but not less than all, of their respective shares to the same party on
the same terms as the transferring investors. Unless otherwise provided by the
Investor Agreement in certain circumstances, the Investor Agreement applies only
to the Series A Convertible Preferred Stock and the Series B Convertible
Preferred Stock of the Registrant.
Additionally, the Preferred Stockholders have certain registration
rights with respect to the common stock issuable upon conversion of the Series A
Convertible Preferred Stock and the Series B Convertible Preferred Stock and
upon exercise of any warrant held by any Preferred Stockholder, pursuant to a
preferred stockholder registration rights agreement and a common stockholder and
warrant holder registration rights agreement, respectively, each dated as July
21, 1999 among Old USOL and each stock and warrant holder party thereto. Those
Preferred Stockholders currently holding common stock also have the benefit of
the common and warrant registration rights Agreement.
The Registrant provides integrated telecommunications and entertainment
services to residents of primarily apartment and condominium complexes through
agreements with the owners or managers of the complexes. The services include
local and long distance telephone, cable television or CATV, and internet
access, in a single package on a single invoice for the residents. These bundled
services are referred to as Residential Multi-Tenant Services, or RMTS. The
Registrant's primary objective is to become a leading provider of RMTS in the
United States. Currently, the Registrant has approximately 15,400 subscribers,
consisting of approximately 11,300 CATV and 4,100 telephone customers.
This Form 8-K includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The opinions, forecasts,
projections or other statements, other than statements of historical fact, are
forward-looking statements. Although the Registrant believes that the
expectations reflected in such forward-looking statements are reasonable; it can
give no assurance that such expectations will prove to have been correct.
Certain risks and uncertainties inherent in the Registrant's business are set
forth in the filings of the Registrant with the Securities and Exchange
Commission.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANTS.
As stated in the Registrant's Proxy Statement dated November 8, 1999,
on December 22, 1999, the effective date of the Registrant's merger with USOL
Holdings, Inc., the Registrant changed its certifying accountants from KPMG LLP
to Arthur Andersen LLP.
(1) With respect to that change in certifying accountants:
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(a) KPMG LLP did not resign but was replaced by the
Registrant with Arthur Andersen LLP.
(b) KPMG LLP's reports on the financial statements
of FirstLink Communication, Inc. for the years ended
December 31, 1998 and 1997 did not contain an adverse
opinion or a disclaimer of opinion, nor were the
reports qualified as to audit scope, or accounting
principles. KPMG LLP's report for the year ended
December 31, 1997 contains a separate paragraph
stating that FirstLink Communications, Inc. had
recurring losses from operations that raised
substantial doubt about FirstLink Communication,
Inc.'s ability to continue as a going concern.
(c) The decision to change accountants was recommended by
the audit committee of the board of directors, and
approved by the board of directors.
(d) In connection with the audits of the two fiscal years
ended December 31, 1998, and the subsequent interim
period through December 22, 1999, there were no
disagreements with KPMG LLP on any matter of
accounting principles or practices, financial
statement disclosure, or auditing scope or
procedures, which disagreements if not resolved to
their satisfaction would have caused them to make
reference in connection with their opinion to the
subject matter of the disagreement.
Registrant has provided KPMG LLP with a copy of the disclosure it is making
in this Form 8-K/A. KPMG LLP provided Registrant with a letter stating that it
agrees with the statements made by the Registrant in this report. A copy of such
letter is filed as an exhibit to this report.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of business acquired:
See Registrant's Proxy Statement dated November 8, 1999. Any
additional financial information required by this item will be filed by
amendment to this report as soon as practicable, but not later than 60 days
after this report must be filed.
(b) Pro forma financial information:
See Registrant's Proxy Statement dated November 8, 1999. Any
additional pro forma financial information will be filed by the Registrant by an
amendment to this report as soon as practical, but not later than 60 days after
this report must be filed.
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(c) Exhibits:
Exhibit No. Exhibit Description
2 Agreement and Plan of Merger and Reorganization dated as of
July 21, 1999, by and between FirstLink Communications, Inc.
and USOL Holdings, Inc. (incorporated by reference to Appendix
A to the Proxy Statement dated November 8, 1999 of FirstLink
Communications, Inc.).
4.1* Amendment to Articles of Incorporation.
4.2* Certificate of Designations, Preferences, Limitations, and
Relative Rights of Series A Convertible Preferred Stock.
4.3* Certificate of Designations, Preferences, Limitations, and
Relative Rights of Series B Convertible Preferred Stock.
16 Letter regarding Change in Registrant's Certifying Accountants.
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* Previously filed.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
USOL HOLDINGS, INC.
Date: January 12, 2000 By: /s/ Jeffrey S. Sperber
--------------------------
Jeffrey S. Sperber
Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Exhibit Description
2 Agreement and Plan of Merger and Reorganization dated as of
July 21, 1999, by and between FirstLink Communications, Inc.
and USOL Holdings, Inc. (incorporated by reference to Appendix
A to the Proxy Statement dated November 8, 1999 of FirstLink
Communications, Inc.).
4.1* Amendment to Articles of Incorporation.
4.2* Certificate of Designations, Preferences, Limitations, and
Relative Rights of Series A Convertible Preferred Stock.
4.3* Certificate of Designations, Preferences, Limitations, and
Relative Rights of Series B Convertible Preferred Stock.
16 Letter regarding Change in Registrant's Certifying Accountants.
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* Previously filed.
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Exhibit 16
[KPMG Letterhead]
January 12, 2000
Securities and Exchange Commission
Washington, D.C. 20549
Ladies and Gentlemen:
We were previously principal accountants for FirstLink Communications, Inc.
and, under the date of January 29, 1999, we reported on the financial statements
of FirstLink Communications, Inc. as of and for the years ended December 31,
1998 and 1997. On December 22, 1999, our appointment as principal accountants
was terminated. We have read the statements of USOL Holdings, Inc. f/k/a
FirstLink Communications, Inc. included under Item 4 of its Form 8-K dated
January 12, 2000, and we agree with such statements, except that we are not in a
position to agree or disagree with the statement that the change was recommended
by the audit committee of the board of directors, and approved by the board of
directors.
Very truly yours,
/s/ KPMG LLP
KPMG LLP
