As filed with the Securities and Exchange Commission on May 24, 2000.
Registration Statement No. 333-__________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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USOL Holdings, Inc.
(Exact name of Registrant)
Oregon 93-119477
(State of incorporation) (I.R.S. Employer
Identification No.)
Robert G. Solomon
Chairman of the Board and Chief Executive Officer
USOL Holdings, Inc.
10300 Metric Boulevard
Austin, Texas 78758
(512) 651-3767
(Address and telephone number of registrant's executive
offices and name, address and telephone number of
agent for service)
Copy to:
J. Rowland Cook
And
Albert E. Percival
Jenkens & Gilchrist
A Professional Corporation
600 Congress Avenue, Suite 2200
Austin, Texas 78701
(512) 499-3800
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement.
[ ] If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.
[ ] If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.
[X] 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 of 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.
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CALCULATION OF REGISTRATION FEE
======================================================================================================================
Title of Each Class of Proposed Maximum
Securities to be Proposed Maximum Aggregate Offering Amount of
Registered Amount to be Offering Price per Price Registration Fee
Registered Share
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December 1999 warrants 1,500,000 $7.625 $11,437,500 $3,179.63 (1)
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Common Stock, no par stock 1,500,000 $0 $ 0 $0 (1)
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<FN>
(1) Computation of fee based on Rule 457(d) and (i).
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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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1,500,000 Shares Common Stock
1,500,000 December 1999 Warrants
USOL Holdings, Inc.
The holders of the December 1999 warrants issued by USOL Holdings, Inc.
are offering and selling up to 1,500,000 warrants to purchase common stock of
the Company under this prospectus. The Company is offering to sell up to
1,500,000 shares of its common stock issuable upon the exercise of the December
1999 warrants. USOL Holdings, Inc. will not receive any money from the sale of
the December 1999 warrants. However, if all holders of the December 1999
warrants exercised in full for cash, we would receive gross proceeds of
$8,250,000.
The selling warrant holders may offer their December 1999 warrants
through the Nasdaq National Market at market prices or at prices they negotiate
privately with purchasers, or they may exercise the warrant, in which event we
would issue to them shares of our common stock that would be freely marketable.
The Nasdaq National Market currently provides quotes on our shares offered
through this prospectus under the symbols "USOL." We have made application to
have the warrants included for quotation on the Nasdaq National Market under the
symbol "USOLZ."
This investment involves a high degree of risk. You should purchase
warrants and or shares only if you can afford a complete loss of your
investment. See "Risk Factors" Beginning on Page 3.
The information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is May ______, 2000.
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TABLE OF CONTENTS
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Page
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RISK FACTORS......................................................................................................1
USE OF THE PROCEEDS..............................................................................................10
SELLING WARRANT HOLDERS..........................................................................................10
PLAN OF DISTRIBUTION.............................................................................................13
DESCRIPTION OF SECURITIES TO BE REGISTERED.......................................................................13
LEGAL MATTERS....................................................................................................14
EXPERTS..........................................................................................................14
WHERE YOU CAN FIND MORE INFORMATION..............................................................................14
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES..............................15
PART II..........................................................................................................17
INFORMATION NOT REQUIRED IN PROSPECTUS...........................................................................17
POWER OF ATTORNEY TO SIGN AMENDMENTS.............................................................................21
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ABOUT USOL HOLDINGS, INC.
USOL Holdings, Inc. (formerly FirstLink Communications, Inc.) (the
"Company") provides integrated telecommunications and entertainment services to
residents of multi-family apartment and condominium complexes ("MDUs") in Texas,
Oregon, Colorado and Virginia. Services provided include cable television
("CATV") and enhanced local and long-distance telephone services. In certain
properties, we also provide high-speed internet access.
We currently have right of entry contracts with 86 residential
developments in seven cities in the United States. As of December 31, 1999, 63
of those properties were operational, all in Austin, Dallas/Ft. Worth, Denver,
Portland, San Antonio and Washington, D.C., representing 30,748 operational
passings. As of December 31, 1999, the Company had 11,919 CATV, 4,171 telephone
and Internet customers, respectively.
The Company was organized in 1995 under the laws of the State of Oregon
and our headquarters are located at 10300 Metric Boulevard, Austin, Texas 78758.
Our telephone number is (512) 651-3767.
RISK FACTORS
Risk Factors Related to the Company's Business
Before you invest in our securities you should know that the purchase
of our securities carries certain risks, including the risks we describe below.
You should carefully consider these risks, together with all of the other
information in this prospectus, before you decide whether to purchase.
Some of the information in this prospectus contains forward-looking
statements that involve substantial risks and uncertainties. You can identify
these statements by forward-looking words such as "may", "will", "expect",
"anticipate", "believe", "estimate", and "continue" or similar words. You should
read statements that contain these words carefully because they (1) discuss our
future expectations; (2) contain projections of our future results of operation
or of our future financial condition; (3) state other "forward-looking"
information. We believe it is important to communicate our expectations to our
investors. However, unexpected events may arise in the future that we are not
able to predict or control. The risk factors that we describe in this section,
as well as any other cautionary language in this prospectus, give examples of
the types of uncertainties that may cause our actual performance to differ
materially from the expectations we describe in our forward-looking statements.
Before you invest in our common stock, you should know that if the events
described in this section and elsewhere in this prospectus occur, they could
have a material adverse effect on our business, operating results and financial
condition.
Our Past Business Plan Was Not Successful and Our Future Business Plan May Not
Succeed.
Our previous business plan was unsuccessful. Our new plan depends on
our ability to operate our new business successfully. Our previous business plan
required us to enter contracts with TCI or other cable providers to provide
cable TV service to MDUs. In November 1998, TCI informed us that, as a result of
its purchase by AT&T, it may no longer enter into such agreements with us. In
December 1999, we merged USOL Holdings Inc., a Delaware corporation
("USOL-Delaware") into the Company, and changed our name to USOL Holdings, Inc.
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While the merger allows us now to provide cable services to MDUs via fixed SMATV
systems, thereby bypassing local cable systems, there is no assurance that we
can implement this new business model successfully.
We May Not Be Able to Integrate Our Recently Acquired Businesses in a Manner
That is Beneficial to Us, or That Results in Profitable Operations .
We believe that our ultimate success and profitability depends on our
ability to achieve sufficient scale in order to provide necessary operating and
financial efficiencies. To achieve such scale, we will have to significantly
expand our passing base. As a result, we will actively seek acquisition
opportunities that complement our existing business. We cannot assure you that
the integration of our operations with those acquired will provide the
anticipated benefits or result in additional operating cash flow. If we identify
additional appropriate acquisition candidates, we cannot assure you that we will
be able to successfully negotiate, finance or integrate the acquired businesses.
Integrating acquired businesses will require the timely, efficient and effective
combination of management, sales and marketing development teams that prior to
the acquisitions operated in different geographic locations, under varying
management philosophies. Integration of the companies also will require the
combination of differing operating approaches. Additionally, the time-consuming
task of integrating acquired businesses may distract our attention from our
day-to-day business operations.
We Are in an Extremely Competitive Industry That is Dominated by Several
Companies Which Have Significantly Greater Financial, Technical, and Marketing
Resources Than We Have.
The telecommunications industry is highly competitive and characterized
by constant innovation and domination by large, often monopolistic entities.
Many of these companies have names that are more recognizable by consumers than
ours, which may provide such competitors with significant competitive
advantages. Entities with financial resources greater than ours may be able to
offer greater incentives to property owners, and the amount of the payments
demanded by property owners may increase, impairing our ability to operate on a
profitable basis. Some of our competitors include private cable and phone
companies, local exchange carriers, competitive local exchange carriers,
franchised cable companies, franchise-cable company joint ventures and of local
exchange carrier affiliates. The regulatory environment in which we operate
continues to undergo fundamental changes that may also lead to increased
competition. The trend in the telecommunications industry has been the
convergence of traditional telephone and data services with broadcast video
services. As part of this trend, service providers are attempting to converge
network components: cable television distribution networks is being used for
telephone and data services and vice versa, and the wireless distribution
network is being used for broadcast video, telephone services, and data service.
In broader terms, the telephone, cable, wireless and data industries are
evolving to provide fully integrated multimedia services to end-users. The
opportunities offered by such convergence will present risks for us due to
enhanced competition from competitors in various industries with much greater
financial, technical, marketing and other resources. Should rates decrease, we
may be forced to lower our prices or offer additional services or features to
remain competitive. Wireless cable and telephone services may also allow
competitors to bypass property owners altogether and market their services
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directly to residents of MDUs. To remain competitive with other providers, we
may be required to adopt new technologies, which are likely to entail
significant capital expenditures.
Our Failure to Manage Growth Properly Could Have a Material Adverse Effect Upon
Our Business, Financial Condition and Results of Operations.
The expansion of our operations will depend to some extent on matters
outside of our control including, but not limited to, our ability to enter into
right of entry agreements with property owners on favorable terms and make
attractive acquisitions in a timely manner, at reasonable costs and on
satisfactory terms and conditions. We may incur substantial additional
indebtedness to continue to upgrade our existing systems and to acquire right of
entry agreements from other entities that will enable us to grow and offer our
customers enhanced products and services. Construction of new systems requires
us to obtain qualified subcontractors and may subject us to the risk of cost
overruns and delays. Delays also can be caused by weather, design changes, or
material or equipment shortages, as well as the need to obtain governmental
approvals. Failure to complete construction of new systems on a timely basis
could impair our ability to compete effectively in a particular area. In
addition, we rely on our reputation for providing superior customer service to
attract customers. The failure to continue to provide this level of service may
impair our growth strategy and may result in the loss of customers.
Our Management Information Systems May Not Be Able to Track Information About
Our Customers.
Since the merger with USOL-Delaware, we have used a management
information system ("MIS") and billing system that can accurately and quickly
process large amounts of data. Each month, the Company processes over 500,000
individual phone calls and thousands of other individual account transactions.
Each of these account transactions must be properly billed to the appropriate
customer. On occasion, the Company's MIS and billing system has not properly
tracked some types of billable calls, in part due to technology limitations and
in part due to the fact that the current MIS and billing system is limited in
the number of calls that it can accurately process at one time. Errors and
delays in processing customer calls may undermine customer confidence and may
result in customers switching their telephone service to another company. While
to date these difficulties and limitations have not been material, management
estimates that the current system will have to operate until the end of the
third quarter of 2000. At that time, we expect to convert to a billing platform
provided and operated by CSG Systems, Inc., one of the world's largest providers
of such services. Nonetheless, there can be no assurance that we will not
encounter material unforeseen difficulties and delays in upgrading our customer
care and billing system. Any such difficulties or delays could have a material
adverse effect on our business, financial condition and results of operations.
The cost of implementing year 2000 compliant software has had no material effect
on our financial condition and results of operations; however, the Company may
yet be impacted by year 2000 issues.
We Depend Upon Contracts With MDU Owners; But We May Not Be Able to Retain Our
Existing Contracts or to Acquire or Finance Additional Contracts.
Our strategy relies in large part on our continuing ability to enter
into long-term right of entry contracts on satisfactory terms with owners of
demographically favorable MDUs. In addition, we will depend upon third-party
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lenders to finance the build-out of properties covered by right of entry
contracts. We may not be able to implement our growth plan as currently
contemplated if the demographics or occupancy rates of the MDUs served by us
change, if in the future we are unable to procure suitable right of entry
contracts or finance the build-out of properties covered by right of entry
contracts, or if the cost of acquiring right of entry contracts increases
substantially as a result of increased competition or otherwise. Our ability to
implement our growth plan could also be materially adversely affected if lenders
are unwilling to accept right of entry contracts as collateral for debt
financing.
Our Business is Subject to Extensive and Changing Laws and Regulations; Changing
Regulations May Invalidate the Exclusivity of Our Contracts.
The Company is subject to extensive and changing laws and rules
regulating the telecommunications business, including those of the Federal
Communications Commission ("FCC") and state and local regulatory bodies such as
public utility commissions. Many of our operations are subject to licensing
requirements of federal, state and local law. The United States Congress, the
FCC, and state and local regulatory bodies in the past have adopted, and may in
the future adopt, new laws, regulations and policies regarding a wide variety of
matters, including rule-making by the FCC with respect to exclusive contractual
rights to provide CATV service to a property that could affect our operations.
Some states have adopted "mandatory access laws," which could prevent
alternative video providers, such as private cable operators, and property
owners from enforcing exclusivity provisions such as those included in many of
our right of entry contracts. None of the states in which we currently operate
or plan to operate in the foreseeable future have mandatory access laws. We
cannot assure that mandatory access laws will not be adopted in states where we
do business, or that we will not expand our operations into states that have
mandatory access laws. In addition, the FCC is reviewing the rights of various
video programming service providers to access private property, including MDUs,
and is considering various restrictions on the duration of contracts that grant
exclusive access rights. Changes in any of the above current laws or regulations
could have a material adverse effect on the Company.
Rapid and Significant Technological Changes May Cause Our Systems to Become
Obsolete.
The cable and telecommunications industries are subject to rapid and
significant technological changes and service innovations. The effect of these
changes and innovations, including those relating to emerging hardwire and
wireless transmission and switching technologies, cannot be predicted. If new
methods for delivering the services we provide are devised, we may have
difficulty competing profitably with companies that utilize such methods, unless
we are able to adopt such methods and modify our current systems.
Our Success Will Depend on Our Ability to Attract And Retain Key Personnel; If
We are Unable to Attract and Retain Key Personnel, We will be Unable to Succeed
in Our Business Plan.
Our success will continue to be highly dependent upon the continued
services of certain key individuals. The loss of the services of such
individuals could adversely affect our business, financial condition and results
of operations. We cannot assure that we will be successful in attracting and
retaining the personnel the Company requires to develop and operate its
facilities or to expand its operations.
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Oregon Law and Our Bylaws Protect Our Directors from Certain Types of Lawsuits.
Oregon law provides that our directors will not be liable to us or our
stockholders for monetary damages for all but certain types of conduct as
directors. Our Bylaws require us to indemnify our directors and officers against
all damages incurred in connection with our business to the fullest extent
provided or allowed by law. The exculpation provisions may have the effect of
preventing stockholders from recovering damages against our directors caused by
their negligence, poor judgment or other circumstances. The indemnification
provisions may require us to use our assets to defend our directors and officers
against claims, including claims arising out of their negligence, poor judgment,
or other circumstances. We have also entered into indemnity agreements with each
of our directors and officers.
There is Potential for Continued Net Losses in Our Business.
Our ability to cover the operating and administrative costs of the
business, will depend on our obtaining a sufficient number of properties and
subscribers (our current markets are Austin, Dallas, Denver, Houston, Portland,
San Antonio and Washington D.C.). A sustained economic downturn or significant
increases in competition in those regions could adversely effect revenues and
profitability.
Failure to Raise Necessary Capital Could Restrict the Development of Our
Networks and the Introduction of New Services.
The acquisition of new properties and the installation of SMATV and
telephone systems requires significant capital. Technological change may make
even more upgrades necessary if we are to compete in our market. Our financial
resources may not be adequate for our capital needs. We may not be able to
obtain sufficient additional debt or equity financing or at rates and terms that
are acceptable to us. Not being able to acquire and update additional properties
could harm our operations and competitive position.
We Will have Broad Discretion to Allocate Any Proceeds We Receive from the
Exercise of Warrants; We Cannot Guarantee that the Cash Proceeds Received will
Improve Our Operations.
Any cash proceeds that we may receive from the exercise of the warrants
will be allocated generally to provide working capital and for general corporate
purposes, at our discretion. As such, we will use funds as they are received for
such purposes and in such proportions as we deem advisable. While we will apply
the proceeds in a manner consistent with our fiduciary duty and in a manner
consistent with our best interests, we cannot assure you that the funds received
will result in any present or future improvement in our results of operations.
Moreover, since the warrants contain a cash-less exercise feature permitting
their exercise for a reduced number of shares without any cash payment, it is
possible that we might receive only negligible proceeds.
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We May Authorize the Issuance of Our Preferred Stock Without Shareholder
Approval.
Our articles of incorporation, as amended, authorize the issuance of up
to 5,000,000 shares of preferred stock. We can fix and determine the relative
rights and preferences of preferred shares and may issue these shares, without
further shareholder approval. As a result, we could authorize the issuance of a
series of preferred stock which would: grant to holders preferred rights to our
assets upon liquidation; grant to holders the right to receive dividend coupons
before dividends would be declared to common shareholders; and grant to holders
the right to the redemption of those shares, together with a premium, prior to
the redemption of common stock.
In addition, we could issue large blocks of voting stocks to fend
against unwanted tender offers or hostile takeovers without further shareholder
approval.
The Exercise of Outstanding Options and Warrants And/or Our Ability to Issue
Additional Securities Without Shareholder Approval Could Have Substantial
Dilutive and Other Adverse Effects on Existing Shareholders and Investors in
this Offering.
We have the authority to issue additional shares of common stock and to
issue options and warrants to purchase shares of our common stock without
shareholder approval. We could issue large blocks of voting stock to fend off
unwanted tender offers or hostile takeovers without further shareholder
approval. At March 31, 2000 we had outstanding options exercisable to purchase
up to 2,254,500 shares of common stock at a weighted average exercise price of
$2.37 per share, and outstanding warrants exercisable to purchase up to
3,144,975 shares of common stock at a weighted average exercise price of $4.99
per share. Exercise of these warrants and options could have a further dilutive
effect on existing stockholders and on you, as an investor in this offering. Our
common stock and warrants have been traded on the Nasdaq National Market under
the symbols USOL and USOLW, respectively. While there currently exists a limited
and sporadic public trading market for our securities, the prices are subject to
high degrees of volatility and we cannot assure you that the market will improve
in the future. Factors discussed in this prospectus may have a significant
impact on the market prices of our common stock and warrants. The
over-the-counter markets for securities such as those 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 our industry and investment markets
generally, as well as economic conditions and quarterly variations in our
results of operations, may adversely affect the market price of our common
stock. Although our common stock is currently included in the Nasdaq National
Market, there can be no assurance that such common stock will remain eligible to
be included in that trading market. In the event that our common stock or
warrants were no longer eligible to be included in Nasdaq, trading in our
securities could be subject to rules adopted by the SEC regulating broker-dealer
practices in connection with transactions in "penny stocks" which could
materially, adversely affect the liquidity of our securities. The regulations
define a penny stock as any equity security not listed on a regional or national
exchange or Nasdaq that has a market price of less than $5.00 per share, subject
to certain exceptions. The material, adverse effects of such designation could
include, among other things, impaired liquidity with respect to our securities
and burdensome transactional requirements associated with transactions in our
securities, including, but not limited to, waiting periods, account and activity
reviews, disclosure of additional personal financial information and substantial
written documentation. These requirements could lead to a refusal of certain
broker-dealers to trade or make a market in our securities.
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The December 1999 Warrants are Redeemable.
The December 1999 warrants are redeemable (unless exercised prior to a
specified date after notice of the Company's desire to redeem such warrants, as
set forth in the December 1999 warrant) commencing on the date on which the
common stock of the Company has been publicly trading on a national securities
exchange or on the Nasdaq National Market for not fewer than thirty (30)
consecutive trading days at a closing price of $9.00 per share or higher, and at
all times thereafter. Any such redemption by the Company may be detrimental to
the benefits derived by any purchase of the December 1999 warrants.
Risk Factors Related to the Resident Club
An Investment in the Company May Be Impacted by Our Indirect Ownership of the
Resident Club.
Investors should also consider the risk related to TheResidentClub.com,
Inc. ("TRC"), a wholly owned subsidiary of USOL, Inc. TRC provides customized
web portals and a range of move-in and lifestyle enhancement services for the
residential real estate industry and affinity groups. An investor in the Company
must also consider the risks, expenses and difficulties encountered in this
industry. To the extent of the Company's investment in TRC, the Company may be
negatively impacted by risks related to TRC's industry. In addition to those
risk factors listed above which generally apply to all business, our investment
in TRC may also be exposed to the following risks.
The Market for Products and Services in the Relocation or Lifestyle Market is
Extremely Competitive
The market for products and services relating to relocation or
lifestyle services is intensely competitive. TRC's competitors may be able to
undertake more extensive marketing campaigns, adopt more aggressive pricing
policies, make more attractive offers to distribution partners and content
providers and respond more quickly to new or emerging technologies and changes
in Internet user requirements. TRC's competitors may develop content equal to or
superior to or that achieves greater market acceptance than that of TRC. The
barriers to entry in the relocation and lifestyle services industry are low,
making it possible for new competitors to emerge and rapidly acquire a
significant market share. TRC may not be able to compete successfully for
consumers, clients and advertisers and increased competition could result in
price reductions, reduced margins or loss of market share, any of which could
materially adversely affect TRC's business, results of operations and financial
conditions.
Changes in Discretionary Consumer Spending and General Economic Conditions in
the TRC Markets May Negatively Impact the Company.
TRC's success depends to a large extent upon factors related to
discretionary consumer and business spending, and the overall condition of the
United States economy. Because a consumer's purchase of move-in and lifestyle
services is relatively discretionary, any reduction in disposable income in
general may affect TRC more significantly than companies in other industries.
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TRC may experience seasonality in its business.
The residential real estate industry experiences a decrease in activity
during the winter. However, because of TRC's limited operating history under its
current business model, we do not know if or when any seasonal pattern will
develop or the size or nature of any seasonal pattern in TRC's business. TRC's
limited operating history and rapid growth make it difficult for us to assess
the impact of seasonal factors on its business. Nevertheless, we expect TRC's
revenue to be subject to seasonal fluctuations, reflecting a combination of
seasonality trends for the products and services offered by TRC.
Development and Performance of the TRC System is Critical to the Services of
TRC.
To execute its business plan, TRC must develop and maintain a robust
and reliable database and Web site. The development of such systems are still in
process. If not successfully developed, TRC's business will be materially and
adversely affected. If and when such systems are developed, the performance and
reliability of such systems will be critical to the ongoing operations and
ultimate success of TRC's business. Failure to maintain such systems, or the
inability of such systems to adequately handle customer and transaction volumes
could have a material adverse impact on the business of TRC.
TRC Has Yet to Locate an ISP Partner.
A critical element of TRC's business plan is to provide discounted
Internet service as part of its membership package. Failure to negotiate
Internet service from an ISP on suitable terms could reduce TRC's ability to
attract customers.
There are Many Factors Involved in TRC's Providing Service which are Beyond the
Control of TRC.
TRC's systems and operations that are offered over the Internet are
vulnerable to interruption or malfunction due to certain events beyond its
control, including natural disasters, power loss, telecommunication failures,
break-ins, sabotage, computer viruses, intentional acts of vandalism and similar
events. TRC also relies on Web browsers and online service providers to provide
Internet access to its sites. We cannot assure you that TRC will be able to
expand its network infrastructure, either itself or through use of a third party
hosting systems or service providers, on a timely basis sufficient to meet
demand. Any interruption to TRC's systems or operations could have a material
adverse effect on TRC's business and its ability to retain users, advertisers
and strategic partners.
TRC is Vulnerable to Security Risks Associated with the Internet.
TRC's networks may be vulnerable to unauthorized access, computer
viruses, coordinated attacks by computer hackers and other security problems.
Persons who circumvent security measures could wrongfully use information of TRC
or cause interruptions or malfunctions in TRC's operations. Concern about the
transmission of confidential information over the Internet has been a
significant barrier to electronic commerce and communications over the Web. Any
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well-publicized compromise of security could deter more people from using the
Web or from using it to conduct transactions that involve the transmission of
confidential information, such as purchasing goods or services. Because many of
our advertisers seek to advertise on the TRC network to encourage people to use
the Web to purchase goods or services, TRC's business, results of operations and
financial condition could be materially adversely affected if Internet users
significantly reduce their use of the Web because of security concerns. TRC may
be required to expend significant resources to protect against the threat of
security breaches or to alleviate problems caused by any breaches. Although TRC
intends to continue to implement industry-standard security measures, these
measures may be inadequate.
TRC Relies On Technology Licenses Which May Not Be Available To Them In The
Future Or Work As Intended.
TRC relies on certain technology licensed from third parties. Many such
licenses are critical to TRC's ability to satisfy its expectations for the
quality of its products and services. TRC's ability to generate revenue from
Internet commerce may also depend on data encryption and authentication
technologies that it may be required to license from third parties. We cannot
assure you that such technology licenses will be available at all, that they
will be available on reasonable commercial terms or that they will operate as
intended.
Traffic from Other Internet Sites is Important to the TRC Network.
Traffic originating from links existing on other Internet sites,
particularly search engines, directories and other navigational tools managed by
Internet service providers and Web browser companies, is an important segment of
the overall traffic on TRC's network. TRC intends to pursue additional
distribution relationships in the future and it may not succeed in these
efforts. There is intense competition for these types of linking arrangements.
We cannot assure you that these arrangements will be maintained or that
advertising or links will continue to be available on reasonable commercial
terms or at all. If any of these agreements is not renewed, TRC would experience
a decline in the number of its users and its competitive position could be
significantly weakened.
TRC has Taken Certain Steps to Protect Its Intellectual Property; but these
Steps may not be Adequate to Protect TRC's Business Operations.
To establish and protect TRC's trademarks, service marks and other
proprietary rights in its products and services, TRC relies on a combination of
trademark, copyright, unfair competition, service mark and trade secret laws,
confidentiality agreements and other contractual arrangements with its
employees, affiliates, clients, strategic partners and others. The protective
steps we have taken may be inadequate to deter misappropriation of TRC's
proprietary information, and certain tradenames, trademarks and servicemarks
used by TRC, including the TRC name, may not be protectable. We may be unable to
detect the unauthorized use of, or take appropriate steps to enforce, our
intellectual property rights. Failure to adequately protect TRC's intellectual
property could harm the TRC brand, devalue TRC's proprietary content and affect
is ability to compete effectively. TRC may be subject to claims of alleged
infringement of the trademarks and other intellectual property rights of third
parties. If such claims are successful, TRC may be required to change their
trademarks, alter their content or pay financial damages. Further, defending
TRC's intellectual property rights could result in the expenditure of
significant financial and managerial resources, which could materially adversely
affect TRC's business, results of operations and financial condition. There can
be no assurance that any such claims or the defense of such claims will not
adversely affect TRC's business.
9
<PAGE>
TRC May Not Be Able to Obtain the Necessary Valid Licenses Required to do
Business.
TRC may be required to obtain licenses from others to refine, develop,
market and deliver new services. There can be no assurance that TRC will be able
to obtain such licenses on commercially reasonable terms or at all or that
rights granted pursuant to any licenses will be valid and enforceable.
USE OF THE PROCEEDS
We will not receive any of the proceeds from the offer and sale of the
December 1999 warrants. However, if all of these warrants were exercised for
cash, we would receive gross proceeds of $8,250,000. Holders of the December
1999 Warrant who choose to exercise (the "Selling Warrant Holders") will not pay
any of the expenses that are expected to be incurred in connection with the
registration of the common stock or the December 1999 warrants, but will pay all
commissions, discounts and other compensation to any securities broker-dealer
through whom they sell any of these securities.
We will utilize the net proceeds, if any, realized from the exercise of
the warrants for working capital and for general corporate purposes, at our
discretion. Actual expenditures for these purposes may vary substantially
depending upon economic conditions and opportunities we are unable to identify
at this time.
SELLING WARRANT HOLDERS
As of May 22, 2000, the selling warrant holders owned 1,500,000
warrants to buy 1,500,000 shares of common stock of the Company. All of these
warrants are being offered pursuant to this prospectus.
The following table sets forth :
1) the name of each of the selling warrant holders who may sell warrants;
2) the nature of any position, office or other material relationship which the
selling warrant holder has had within the past three years with the Company
or any affiliate;
3) the number of warrants owned by each of them as of May 22, 2000; and
4) The number of warrants offered by this prospectus that may be sold from
time to time by each of them.
After the completion of this offering the warrant holders listed below
will own none of the December 1999 warrants.
10
<PAGE>
<TABLE>
<CAPTION>
December 1999 Warrants
Number of Warrants
Relationship Beneficially Owned Number of Warrants
Name With Company Prior to Offering Hereby Offered
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
US OnLine Communications, LLC 250,000 250,000
Aspen OnLine Investments, LLC This investor owns 11.5% 234,375 234,375
of the Company common stock ------- -------
on a fully diluted basis and
is entitled to nominate one
member of the Company Board
of Directors.
Barington Investors:
- -------------------
Adams, Leonard J. 3,906 3,906
Alec, Ronald B. 3,906 3,906
Alter, Paul R. 7,813 7,813
Aspen OnLine Investments 390,625 390,625
Babiarz, David 11,718 11,718
Barish, Marvin G. 7,813 7,813
Baron Associates 5,468 5,468
Baruffi, Jerome 3,906 3,906
Bernat Blanch, Sonia 11,718 11,718
Bower, Paul M. & Kathleen 11,718 11,718
Bulos, Howard I. & Tedjaksuma, Linda 3,906 3,906
Burdo, Eldon P. 7,813 7,813
Castle Ventures Ltd. 3,906 3,906
Central Investments Limited 7,813 7,813
CLFS Equities LLP 11,718 11,718
Cotter, Robert J. 3,906 3,906
D. Stake Mill, Inc. 7,813 7,813
Dimes, Edwin K. 3,906 3,906
Douglas McDougal, Alastair 7,188 7,188
Downey, Larry P. & Connie K. 7,813 7,813
Drebsky, Dennis 7,813 7,813
Duffield, Albert W. 15,625 15,625
Emig, Glen E. 7,813 7,813
Erickson, Roger L. 3,906 3,906
Fastovsky, James 3,906 3,906
Fauver, Phillip 7,813 7,813
Fried, David & Magda, Trustees 3,906 3,906
UA Michael Lantos Trust dtd
12/14/90
Friedman, Harry IRA R/O 3,906
Gill, Douglas F. 7,813
Gold, Stuart W. 7,813
Hudson, T.L. 23,438 23,438
11
<PAGE>
Hunt Inc., Dr. John A. Pension Plan Trust 3,906
Intervest Group L.P. 3,906 3,906
Jablon, Alan 78,124 78,124
Johnson, Joyce & James P. 3,906 3,906
Juranich, Frank T. 3,906 3,906
Katz, Robert 7,813 7,813
Kilgannon, Owen L. 15,625 15,625
Koreyva IRA, Richard S. 7,813 7,813
Levites, Barry H. 5,468 5,468
Magill, John James 7,813 7,813
Maltry, David 3,906 3,906
Matusow, Paul 6,875 6,875
McMaster, John 3,906 3,906
Moses, Robert 7,813 7,813
Mourning, Alonzo 7,813 7,813
Muskinow, Samuel 7,813 7,813
Mykytyn, Dennis J. 3,906 3,906
Nano-Cap Hyper Growth Partnership, L.P. 7,813 7,813
Nano-Cap Hyper Growth Partnership, L.P. 3,906 3,906
Ostner, Steven M. 15,625 15,625
Pappas, Peter J. 23,438 23,438
Partch, Eric & Susan 7,813 7,813
Phanse, Mohan S. 3,906 3,906
Piven, Frances Fox 7,813 7,813
Pizitz, Michael 3,906 3,906
Reinhart, Myron H. 15,625 15,625
Roth, Ronald 8,593 8,593
Rothberg, Lawrence 3,906 3,906
Rupp, Alois 15,625 15,625
Russonielo, Joseph G. 3,906 3,906
Saker, Wayne 7,813 7,813
Saker, Wayne 7,813 7,813
Salsgiver, Paul H. & Linda B. Revocable 15,625 15,625
Trust Dated November 13, 1996
Schwartzbard, Michael 7,813 7,813
Shiman, Stewart A. 3,906 3,906
Siegel, Somers & Schwartz LLP 7,813 7,813
Profit Sharing Plan dtd 11/1/84
Silpe, Paul & Beverly 7,813 7,813
Singh, Dr. Satbir 3,906 3,906
12
<PAGE>
Solomon, C.M. 7,813 7,813
Spiegel, Dr. George 3,906 3,906
Spitzer Living Trust 5,468 5,468
Tedder, Dewey R. & Dora F. 3,906 3,906
Temple, Paul N. Revocable Trust 3,906 3,906
U/A/D 2/11/80
Threadgill, Jack M. 3,906 3,906
Zimmer, Stella & Cynthia 3,906 3,906
----- -----
TOTAL DECEMBER 1999 WARRANTS 1,500,000 1,500,000
</TABLE>
PLAN OF DISTRIBUTION
The selling warrant holders may offer their December 1999 warrants at
various times in one or more of the following transactions:
o on the Nasdaq National Market at prevailing market prices,
o otherwise than on such market at prevailing market prices or negotiated
prices, or
o in a combination of the above transactions.
The selling warrant holders may use broker-dealers to sell their
shares. If they do, the broker-dealers will either receive discounts or
commissions from the selling warrant holders or they will receive commissions
from purchasers of warrants for whom they acted as agents.
We have signed agreements with the selling warrant holders that provide
that, although we will not receive any portion of the proceeds of any sales of
the warrants by the selling warrant holders, we will pay all the costs of
registering the offering of the warrants. The selling warrant holders will pay
all the costs of selling the warrants. In addition, we have agreed to indemnify
the selling warrant holders against certain liabilities, including liabilities
arising under the Securities Act of 1933.
DESCRIPTION OF SECURITIES TO BE REGISTERED
Common Stock
See Section below titled "WHERE CAN YOU FIND MORE INFORMATION."
Warrants
The December 1999 warrants are held by those individuals or entities
listed earlier in this prospectus in the total amounts set forth opposite such
individual's or entity's name. The December 1999 warrants specify that, at any
13
<PAGE>
time and from time to time on any business day on or prior to 5:00 p.m. Pacific
Standard Time on July 21, 2003, the holder is entitled to purchase a specific
number of shares of Company common stock for an exercise price of $5.50 per
share. With certain exceptions, in case, at any time or from time to time after
the December 1999 warrant issue date, the Company shall issue or sell grant
rights for shares of common stock for consideration less than the fair value of
such common stock (or grant options, warrants, rights to subscriber, issue
convertible securities, or other common stock for less than fair value) (or
issue any dividend payable in common stock)) the exercise price and number of
warrant shares issuable upon exercise of the December 1999 warrant shall be
adjusted. In addition if the common stock of the Company shall be
split,(including a reverse split) then the exercise price and number of warrant
shares issuable upon exercise of the December 1999 warrant shall be adjusted.
Furthermore, all or any part of the December 1999 warrant may be exercised on a
"cashless" basis, by stating in the exercise notice such intention and the
maximum number of shares of common stock the holder desires to purchase in
consideration of cancellation of all or a portion of this warrant in payment for
such exercise.
LEGAL MATTERS
For the purposes of this offering, Jenkens & Gilchrist, A Professional
Corporation, Austin, Texas, is giving its opinion on the validity of the
warrants.
EXPERTS
The financial statements incorporated by reference in this prospectus
and elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said report.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
through the SEC's web site at http://www.sec.gov. Our principal offices are
located at 10300 Metric Boulevard, Austin, Texas, 78758 and our telephone number
is (512) 651-3767.
This prospectus is part of a registration statement we filed with the
SEC on May 24, 2000 (Registration No. 333-__________). The SEC allows us to
"incorporate by reference" the information we file with them, which means that
we can disclose important information to you by referring you to those
documents. The information incorporated by reference is considered to be a part
of this prospectus, and later information that we file with the SEC will
automatically update and supersede this information. We incorporate by reference
the following documents and any future filings made with the SEC under Sections
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until the
selling warrant holders sell all the warrants, or until all of the warrants have
been exercised or redeemed:
14
<PAGE>
o The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1999, filed with the Commission on March 30, 2000, and all
amendments thereto, if any;
o The Company's Report on Form 10-QSB for the quarter ended March 31, 2000,
filed with the Commission on May 15, 2000, and all amendments thereto, if
any;
o All other reports filed pursuant to Sections 13(a) or 15(d) of the Exchange
Act since December 31, 1999; and
o The description of the common stock set forth in the Registration Statement
on Form SB-2 (Registration No. 333-49291) filed with the Commission on
April 2, 1999, including any amendments or reports filed for purposes of
updating such description.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Jeffrey S. Sperber
Chief Financial Officer
USOL Holdings, Inc.
10300 Metric Boulevard
Austin, Texas 78758
(512) 651-3767
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. The selling warrant holders
identified in this prospectus will not make an offer of these shares in any
state where the offer is not permitted. You should not assume that the
information in this prospectus or any supplement is accurate as of any date
other than the date on the front of those documents.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
15
<PAGE>
- --------------------------------------------------------------------------------
No dealer, salesman, or other person has been authorized to give any information
or to make any representations other than those contained in this prospectus
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Company or the Selling warrant holders.
This prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the warrants or the underlying shares of
Common Stock nor does it constitute an offer or solicitation by anyone in any
jurisdiction in which such offer or solicitation would be unlawful or to any
person to whom it is unlawful to make such offer or solicitation. Neither the
delivery of this prospectus nor any offer or sale made hereunder at any time
shall imply that information herein is correct as of any time subsequent to the
date hereof.
---------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1,500,000 December 1999 Warrants
1,500,000 Shares of Common Stock
USOL HOLDINGS, INC.
----------------
PROSPECTUS
----------------
May _____, 2000
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The estimated expenses in connection with the issuance and distribution
of the securities being registered, all of which will be borne by the Company,
are set forth in the following itemized table:
<TABLE>
<CAPTION>
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------
SEC Registration Fee............................................................................. $ 2,293.50
- ---------------------------------------------------------------------------------------------------------------------
Transfer Agent's Fees............................................................................ 1,000.00
- ---------------------------------------------------------------------------------------------------------------------
Blue Sky Fees and Expenses....................................................................... -0-
- ---------------------------------------------------------------------------------------------------------------------
Accounting Fees.................................................................................. -0-
- ---------------------------------------------------------------------------------------------------------------------
Legal Fees....................................................................................... 18,000.00
- ---------------------------------------------------------------------------------------------------------------------
Miscellaneous.................................................................................... -0-
----------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Total $21,293.50
==========
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Item 15. Indemnification of Directors and Officers
The Company's articles of incorporation limit the liability of a
directors for monetary damages for his conduct as a director, except for:
1) Any breach of his duty of loyalty to the Company or its
shareholders;
2) Acts or omissions not in good faith or that involved intentional
misconduct or a knowing violation of law;
3) Dividends or other distributions of corporate assets from which
the director derives an improper personal benefit; and
4) Liability under federal securities law.
The effect of this provisions is to eliminate our right and the right
of our shareholders (through shareholder's derivative suits on our behalf) to
recover monetary damages against a director for breach of his fiduciary duty of
care as a director, except for the acts described above. This provisions does
not limit or eliminate our right or the right of a shareholder to seek non-
monetary relief, such as an injunction or rescission, in the event of a breach
of a director's duty of care. Our by-laws 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 us to provide broader indemnification rights than the
law permitted prior to such amendment.
Our articles of incorporation and by-laws also provide that we shall
indemnify, to the full extent permitted by Oregon law, any of our directors,
officers, employees or agents who are made, or threatened to be made, a party to
a proceeding by reason of the fact that he or she is or was one of our
directors, officers, employees or agents. The indemnification is against
judgments, penalties, fines, settlements and reasonable expenses incurred by the
17
<PAGE>
person in connection with the proceeding if certain standards are met. Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to our directors, officers and controlling persons in accordance
with these provisions, or otherwise, we have been advised that, in the opinion
of the SEC, indemnification for liabilities arising under the Securities Act of
1933 is against public policy as expressed in the Securities Act and is,
therefore, unenforceable.
The only statute, charter provision, by-law, 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:
Our articles of incorporation permit and its By-laws require us to
indemnify officers and directors to the fullest extent permitted by the Oregon
Business Corporation Law (OBCA). We have also entered into agreements to
indemnify our 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 our right.
Article VI of the our by-laws permits us to indemnify our 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 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 or conduct.
18
<PAGE>
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 by-law, 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 which holding such office.
Item 16. Exhibits
4.1 Form of December 1999 Warrant
4.2 Articles of Incorporation (1)
4.3 Articles of Amendment to the Articles of Incorporation (2)
5 Opinion of Jenkens & Gilchrist, A Professional Corporation
23.1 Consent of Jenkens & Gilchrist, A Professional Corporation (contained
in its opinion filed as Exhibit 5)
23.2 Consent of Independent Auditors
24 Power of Attorney (included on the signature pages hereof)
(1) Incorporated by reference to Exhibit 3.1 to the Company's registration
statement on Form SB-2 effective July 1998 (File No. 333-49291).
(2) Incorporated by reference to Exhibit 4.1 to the Company's Form 8-K dated
December 22, 1999 (File No. 01-14271).
Item 17. Undertakings.
A. 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 to include any prospectus
required by section 10(a)(3) of the Securities Act;
to include any material information with respect to
the plan of distribution not previously disclosed in
the Registration Statement; or to include any facts
or events representing, individually or together, a
fundamental change in the information in the
Registration Statement;
19
<PAGE>
(2) that, for the purpose of determining any liability
under the Securities Act, 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; and
(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.
B. The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act, each
filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement 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.
C. 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 provisions
described under Item 15 above, 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) is asserted by such director, officer or controlling
person 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.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Austin, State of Texas, on May 23, 2000.
USOL HOLDINGS, INC.
By: /s/ Robert G. Solomon
--------------------------------------------------
Robert G. Solomon, Chairman of the Board and Chief
Executive Officer
POWER OF ATTORNEY TO SIGN AMENDMENTS
KNOW ALL BY THESE PRESENTS, that each person whose signature appears
below does hereby constitute and appoint Robert G. Solomon and Donald E. Barlow,
either of whom may act alone, as his true and lawful attorneys-in-fact and
agents for him and his name, place and stead, in any and all capacities, to sign
any or all amendments to the USOL Holdings, Inc. Registration Statement on Form
S-3, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney's-in-fact and agents 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 in order to effectuate the same as fully, to all intents and purposes,
as they or he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, may lawfully do or cause
to be done by virtue hereof. This Power of Attorney has been signed below by the
following persons in the capacities and on the dates indicated.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Robert G. Solomon Chairman of the Board and Chief Executive May 23, 2000
- ----------------------------------- Officer
Robert G. Solomon
/s/ Donald E. Barlow President, Chief Operating May 23, 2000
- ----------------------------------- Officer and Secretary
Donald E. Barlow
/s/ Jeffrey S. Sperber Vice President, Chief Financial Officer May 23, 2000
- ----------------------------------- and Assistant Secretary
Jeffrey S. Sperber
/s/ David B. Agnew Director May 23, 2000
- -----------------------------------
David B. Agnew
/s/ Mark Sampson Director May 23, 2000
- -----------------------------------
Mark Sampson
/s/ Thomas E. McChesney Director May 23, 2000
- -----------------------------------
Thomas E. McChesney
/s/ Ronald L. Piasecki Director May 23, 2000
- -----------------------------------
Ronald L. Piasecki
Director
- -----------------------------------
Roy Rose
</TABLE>
EXHIBIT 4.1
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OR STATE SECURITIES LAWS AND NO TRANSFER OF
THESE SECURITIES MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, OR (B) PURSUANT TO AN EXEMPTION THEREFROM
WITH RESPECT TO WHICH THE COMPANY MAY, UPON REQUEST, REQUIRE A SATISFACTORY
OPINION OF COUNSEL FOR THE HOLDER THAT SUCH TRANSFER IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
USOL HOLDINGS, INC.
WARRANT CERTIFICATE
Warrant to Purchase _________________ Shares of Common Stock
Issued: July 21, 1999
Expiring July 21, 2003
This warrant certificate ("Warrant") certifies that for value received
[___________________] (together with any other person or entity to whom it may
transfer the rights and interests granted hereunder, or a portion thereof, the
"Holder" at any time and from time to time on any Business Day on or prior to
5:00 p.m. Pacific Standard Time on July 21, 2003 (the "Expiration Date"), is
entitled to subscribe for and purchase from USOL Holdings, Inc., a Delaware
corporation (the "Company") the Warrant Shares at the Exercise Price.
This Warrant is issued pursuant to that certain Asset Purchase Agreement dated
July 21, 1999 by and among the Company, USOL, Inc., U.S. OnLine Communications,
Inc. and certain selling shareholders (the "Asset Purchase Agreement"). A copy
of the Asset Purchase Agreement may be obtained by the Holder at no charge from
the Company at the Company's address set forth in Section 10 below.
1. Definitions. The following terms, as used herein, have the following
meanings:
"Board of Directors" means the board of directors of the Company.
"Business Day" means and day except a Saturday, Sunday or other day on
which commercial banks in New York City are authorized by law to close.
"Closing Price" means, for any trading day with respect to each share
of Common Stock, the last reported sale price or, in case no such reported sale
takes place on such day, the average of the reported closing bid and asked
prices, in either case on the principal national securities exchange on which
the Common Stock is listed or admitted to trading or, if not listed or admitted
to trading on any national securities exchange, the average of the closing bid
and asked prices as reported by the National Association of Securities Dealers
Automated Quotation System. If the Company and the Holder are unable to agree
Exhibit 4-1
<PAGE>
upon the Closing Price for the Common Stock, then such dispute shall be resolved
pursuant to the procedures for the determination of Fair Value set forth in
Section 4.6 below.
"Commission" means the Securities and Exchange Commission or any other
Federal agency administering the Securities Act at the time.
"Common Stock" means the Company's currently authorized common stock,
par value $0.001 per share, and stock of any other class or other consideration
into which such currently authorized Common Stock may hereafter have been
exchanged.
"Convertible Securities" means any stock or other securities
convertible into or exchangeable for Common Stock.
"Exercise Price" means $5.50 per Warrant Share, as adjusted from time
to time pursuant to Section 4.
"Merger" means the closing of the merger of the Company into FirstLink
Communications, Inc. ("FLCI") pursuant to an Agreement and Plan of Merger dated
as of July 21, 1999 by and between the Company, and FLCI.
"Person" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality hereof.
"Qualified IPO" means a firm commitment underwritten public offering of
Common Stock pursuant to a registration statement under the Securities Act where
both (i) the proceeds to the Company (prior to deducting any underwriters'
discounts and commissions) equal or exceed Twenty-Five Million Dollars
($25,000,000) and (ii) upon consummation of such offering, the Common Stock is
listed on the New York Stock Exchange or authorized to be quoted and/or listed
on the Nasdaq National Market.
"Securities Act" means the Securities Act of 1933, or any successor
Federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time. Reference to a particular section of
the Securities Act shall include a reference to the comparable section, if any,
of any such successor Federal statute.
"Warrant Shares" means the shares of Common Stock issued or issuable
upon exercise of this Warrant the number of which is set forth on the first
page, (as adjusted from time to time pursuant to Section 4) or any portion
thereof.
2. Term of Warrant. This Warrant shall terminated and expire at 5:00 p.m.
(Pacific Standard Time) on the Expiration Date, and no Warrant Shares shall be
purchasable by Holder after that date.
3. Exercise of Warrant.
(a) Terms and Conditions of Exercise. There is no obliga-
tion to exercise all or any portion of this Warrant. This Warrant is immediately
exercisable. This Warrant may be exercised only be delivery to the Company of:
(i) Written notice in form and substance identical to Exhibit "A"
attached hereto (the "Exercise Notice"); and
Exhibit 4-2
<PAGE>
(ii) Payment of the Exercise Price of the Warrant Shares being
exercised (the "Purchased Shares"), either (A) in cash, by wire transfer of
funds or by certified or cashier's check or (B) on a "cashless" basis in
accordance with Section 3(e) herein.
Upon receipt thereof, the Company shall, as promptly as practicable, and in any
event within ten (10) Business Days thereafter, execute or cause to be executed
and deliver or cause to be delivered to Holder a certificate or certificates
(containing, if applicable, the legend contained on the first page of this
Warrant) representing the aggregate number of full shares of Common Stock
issuable upon such exercise, together with cash in lieu of any fraction of a
share, as hereinafter provided. The stock certificate or certificates so
delivered shall be, to the extent possible, in such denomination or
denominations as such Holder shall request in the notice and shall be registered
in the name of Holder or, subject to Section 7, such other name as shall be
designated in the notice. This Warrant shall be deemed to have been exercised
and such certificate or certificates shall be deemed to have been issued, and
Holder or any other Person so designated to be named therein shall be deemed to
have become a holder of record of such shares for all purposes, as of the date
the notice, together with the cash or check or checks, if any, and this Warrant,
is received by the Company as described above and all taxes required to be paid
by Holder, if any, prior to the issuance of such Warrant Shares have been paid.
If this Warrant shall have been exercised in part, the Company shall, at the
time of delivery of the certificate or certificates representing Warrant Shares,
deliver to Holder a new Warrant evidencing the rights of Holder to purchase the
unpurchased shares of Common Stock called for by this Warrant, which new Warrant
shall in all other respects be identical with this Warrant, or, at the request
of Holder, appropriate notation may be made on this Warrant and the same
returned to Holder. In the case of a dispute as to the determination of the
Exercise Price, the Closing Price or the arithmetic calculation of the Warrant
Shares, the Company shall promptly issue to the Holder the number of Warrant
Shares that is not disputed and shall follow the procedures for the
determination of Fair Value set forth in Section 4.6 below.
(b) Payment of Taxes. All shares of Common Stock issuable upon
the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and nonassessable and without any preemptive rights. The
Company shall pay all expenses in connection with, and all taxes and other
governmental charges that may be imposed with respect to, the issue or delivery
thereof, excluding income taxes and related charges imposed by law upon Holder,
in which case such taxes or charges shall be paid by Holder. The Company shall
not be required, however, to pay any tax or other charge imposed in connection
with any transfer involved in the issue of any certificate for shares of Common
Stock issuable upon exercise of this Warrant in any name other than that of
Holder, and in such case the Company shall not be required to issue or deliver
any stock certificate until such tax or other charge has been paid or it has
been established to the reasonable satisfaction of the Company that no such tax
or other charge is due.
(c) Fractional Shares. The Company shall not be required to
issue fractions of shares of Common Stock upon an exercise of this Warrant. If
any fraction of a share would, but for this restriction, be issuable upon an
exercise of this Warrant, in lieu of delivering such fractional share, the
Company shall pay to Holder, in cash, an amount equal to the same fraction times
the Closing Price on the trading day immediately prior to the date of such
exercise.
(d) Holder of Record. Upon each exercise of the Holder's
rights to purchase Warrant Shares, 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 shall then be closed or certificates
representing such Warrant Shares shall not then have been actually delivered to
the Holder.
Exhibit 4-3
<PAGE>
(e) Cashless Exercise. All or any part of this Warrant may be
exercised on a "cashless" basis, by stating in the Exercise Notice such
intention and the maximum number (the "Maximum Number") of shares of Common
Stock the Holder desires to purchase in consideration of cancellation of all or
a portion of this Warrant in payment for such exercise. The number of shares of
Common Stock the Holder shall receive (the "Cashless Exercise Number") upon such
exercise pursuant to this Section 3(e) shall equal the difference between the
Maximum Number and the quotient that is obtained when the product of the Maximum
Number and the then current Exercise Price is divided by the then Fair Value (as
defined in Section 4.6 below).
4. Adjustments to Exercise Price and Number of Warrant Shares. The
Exercise Price and number of Warrant Shares shall be subject to adjustment from
time to time as follows:
4.1 Except as provided in Section 4.5, in case, at any time or from
time to time after the date hereof (the "Issuance Date"), the Company shall
issue or sell any shares of any class of common stock for a consideration per
share less than the Fair Value (as defined in Section 4.6 below), then forthwith
upon such issuance or sale: (a) the number of Warrant Shares shall be increased
in proportion to such increase in the aggregate number of shares of Common Stock
outstanding (and those issuable with respect to Convertible Securities), if any,
and (b) the Exercise Price in effect immediately prior to such issuance or sale
shall be reduced to a price (calculated to the nearest cent) determined by
multiplying the Exercise Price in effect prior to the adjustment by a fraction
determined by dividing (i) an amount equal to the sum of (A) the number of
shares of Common Stock outstanding immediately prior to such issuance or sale
multiplied by the Fair Value per share of Common Stock immediately prior to such
issuance or sale, and (B) the consideration, if any, received by the Company
upon such issuance or sale, by (ii) the total number of shares of Common Stock
outstanding immediately after such issuance or sale multiplied by the Fair Value
per share of Common Stock immediately prior to such issuance or sale. No
adjustment of the Exercise Price, however, shall be made in am amount less than
one cent per share, but any lesser adjustment shall be carried forward and shall
be made at the time of and together with the next subsequent adjustment which,
together with any adjustments so carried forward, shall amount to two cents per
share or more.
4.2 For the purposes of Section 4.1 above, the following paragraphs
(a) to (f) inclusive, shall also be applicable:
(a) In case at any time the Company shall grant any rights to
subscribe for, or any rights or options or warrants to purchase,
Common Stock or any Convertible Securities, whether or nut such rights
or options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for
which Common Stock is issuable upon the exercise for such rights or
options or upon conversion or exchange of such Convertible Securities
(determined by dividing (1) the total amount, if any, received or
receivable by the Company as consideration for the granting of such
rights or options or warrants, plus the maximum aggregate amount of
additional consideration payable to the Company upon the exercise of
such rights or options, plus, in the case of any such rights or
options or warrants which relate to such Convertible Securities, the
maximum aggregate amount of additional consideration, if any payable
upon the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (2) the total maximum number of
shares of Common Stock issuable upon the exercise of such rights or
options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such rights or options shall
Exhibit 4-4
<PAGE>
be less than the Fair Value in effect immediately prior to the time of
the granting of such rights or options or warrants, then the total
maximum number of shares of Common Stock issuable upon the exercise of
such rights or options or upon conversion or exchange of the total
maximum amount of such Convertible Securities issuable upon the
exercise of such rights or options shall (as of the date of granting
of such rights or options) be deemed to be outstanding and to have
been issued for such price per share and the current Exercise Price
and the number of Warrant Shares shall be adjusted as provided in
Section 4.1 above. Except as provided in Section 4.4, no further
adjustments of the Exercise Price or to the number of Warrant Shares
shall be made upon the actual issue of such Common Stock or if such
Convertible Securities upon exercise of such rights or options or upon
the actual issue of such Common Stock upon conversion or exchange of
such Convertible Securities.
(b)In case at any time the Company shall issue or sell any
Convertible Securities, whether or not the rights to exchange or
convert thereunder are immediately exercisable, and the price per
share for which Common Stock is issuable upon such conversion or
exchange (determined by dividing (1) the total amount received or
receivable by the Company as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the
conversion or exchange thereof, by (2) the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the Fair Value
immediately prior to the time of such issue or sale, then the total
maximum number of shares of Common Stock issuable upon conversion or
exchange of all such Convertible Securities shall (as of the date of
the issue or sale of such Convertible Securities) be deemed to be
outstanding and to have been issued for such price per share and the
Exercise Price and the number of Warrant Shares shall be adjusted as
provided in Section 4.1 above, provided that (x) except as provided in
Section 4.4, no further adjustments of the Exercise Price or to the
number of Warrant Shares shall be made upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible
Securities, and (y) if any such issue or sale of such Convertible
Securities is made upon exercise of any rights to subscribe for or to
purchase or any option to purchase any such Convertible Securities for
which adjustments of the Exercise Price or to the number of Warrant
Shares have been or are to be made pursuant to other provisions of
Section 4.2, no further adjustment of the Exercise Price or to the
number of Warrant Shares shall be made by reason of such issue or
sale.
(c) With respect to any dividend or other distribution upon any
stock of the Company payable in Common Stock or Convertible
Securities, any Common Stock or Convertible Securities, as the case
may be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration and the
Exercise Price and number of Warrant Shares shall be adjusted as
provided in Section 4.1 above.
(d) In case any time any shares of Common Stock or Convertible
Securities or any rights or options to purchase any such Common Stock
or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount
received by the Company therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions or concessions or
discounts paid or allowed by the Company in connection therewith. In
case any shares of Common Stock or Convertible Securities or any
rights or options to purchase any such Common Stock or Convertible
Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the
Company shall be deemed to be the fair value of such consideration as
determined by the Board of Directors of the Company in good faith,
Exhibit 4-5
<PAGE>
without deduction therefrom of any expenses incurred or any
underwriting commissions or concessions or discounts paid or allowed
by the Company in connection therewith. In case any shares of Common
Stock or Convertible Securities or any rights or options to purchase
any such Common Stock or Convertible Securities shall be issued in
connection with any merger of another company into the Company, the
amount of consideration therefor shall be deemed to be the fair value
of the assets of such merged company as determined by the Board of
Directors of the Company in good faith after deducting therefrom all
cash and other consideration (if any) paid by the Company in
connection with such merger.
(e) In case any time the Company shall take a record of the
holders of Common Stock for the purpose of entitling them (a) to
receive a dividend or other distribution payable in Common Stock or in
Convertible Securities, or (B) to subscribe for or purchase Common
Stock or Convertible Securities, then such record date shall be deemed
to be the date of the issue or sale of the shares of Common Stock
deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may
be.
(f) The number of shares of Common Stock outstanding at any given
time shall not include shares owned or held by or for the account of
the Company or any of its subsidiaries, but the disposition of any
such shares shall be considered an issue or sale of Common Stock for
the purposes of Section 4.
4.3 In case at any time the Company shall subdivide its outstanding
shares of Common Stock into a greater number of shares or upon any issuance by
the Company of a greater number of shares of Common Stock in a pro rata exchange
for all of its outstanding shares of Common Stock, the number of Warrant Shares
shall be proportionately increased, and the Exercise Price in effect immediately
prior to such subdivision shall be proportionately reduced; conversely, in case
the outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares or upon any issuance by the Company of a lesser number
of shares of Common Stock in a pro rata exchange for all of its outstanding
shares of Common Stock, the number of Warrant Shares shall be proportionately
reduced, and the Exercise price in effect immediately prior to such combination
shall be proportionately increased.
4.4 If the purchase price provided for in any right or option referred
to in paragraph (a) of Section 4.2, or the rate at which any Convertible
Securities referred to in paragraphs (a) or (b) of said Section 4.2 are
convertible into or exchangeable for Common Stock, shall change or a different
purchase price or rate shall become effective at any time or from time to time
(other than under or by reason or provisions designed to protect against
dilution), then, upon such change becoming effective, the Exercise Price then in
effect hereunder shall forthwith be increased or decreased to such Exercise
Price as would have obtained had the adjustments made upon the granting or
issuance of such rights or options or Convertible Securities been made upon the
basis of (a) the issuance of the number of shares of Common Stock theretofore
actually delivered upon the exercise of such options or rights or upon the
conversion or exchange of such Convertible Securities, and the total
consideration received therefor, and (b) the granting or issuance at the time of
such change of any such options, rights or Convertible Securities then still
outstanding for the consideration, if any, received by the Company therefor and
to be received on the basis of such changed price. On the expiration of any
right or option referred to in paragraph (a) of Section 4.2, or on the
termination of any right to convert or exchange any Convertible Securities
referred to in paragraphs (a) or (b) of said Section 4.2, the Exercise Price
shall forthwith be readjusted to such amount as would have obtained had the
adjustment made upon the granting or issuance of such rights or options or
Convertible Securities been made upon the basis of the issuance or sale of only
the number of shares of Common Stock actually issued upon the exercise of such
options or rights or upon the conversion or exchange of such Convertible
Securities. If the purchase price provided for in any such right or option, or
the rate at which any such Convertible Securities are convertible into or
exchangeable for Common Stock, shall change at any time under or by reason of
provisions with respect thereto designed to protect against dilution, then in
case of the delivery of Common Stock upon the exercise of any such right or
Exhibit 4-6
<PAGE>
option or upon conversion or exchange of any such Convertible Security, the
Exercise Price then in effect hereunder shall forthwith be decreased and the
number of Warrant Shares shall forthwith be increased to such Exercise Price and
number of Warrant Shares, as the case may be, as would have obtained had the
adjustments made upon the issuance of such right or option or Convertible
Security been made upon the basis of the issuance of (and the total
consideration received for) the shares of Common Stock delivered as aforesaid.
4.5 The following events shall not effect an adjustment to the Exercise
Price pursuant to this Section 4:
(a) The issuance of Common Stock by the Company upon the
conversion of the Company's Series A Convertible Preferred Stock and
the Series B Convertible Preferred Stock;
(b) The issuance of options to acquire shares of Common Stock not
to exceed 10% of the outstanding shares of Common Stock, on a fully
diluted basis, as of the effective date of this Certificate, from time
to time issuable or issued to employees, consultants or directors of
the Company granted or to be granted with the approval of the Board of
Directors of the Company and the Common Stock issuable or issued upon
exercise thereof;
(c) The issuance of warrants to acquire 1,500,000 shares of
Common Stock issued to former creditors of U.S. Online Communications,
Inc. in connection with the sale of assets to the Company (the "Asset
Sale") and the issuance of Common Stock issuable or issued upon
exercise thereof;
(d) The issuance of 750,000 shares of Common Stock in connection
with the Asset Sale;
(e) The issuance of warrants to acquire 325,000 shares of Common
Stock issued to GMAC Commercial Mortgage Corporation in connection
with the sale of certain of its assets to TheResidentClub.com Inc., an
indirect wholly-owned subsidiary of the Company, and the issuance of
Common Stock issuable upon exercise thereof; and
(f) The issuance of warrants to acquire 259,000 shares of Common
Stock to Amstar Capital Group or its Affiliates in connection with any
financial advisory arrangements, and the issuance of Common Stock
issuable or issued upon exercise thereof.
4.6 "Fair Value" of the Common Stock as of a particular date shall mean
the average of the daily Closing Prices for the preceding twenty trading days
before the day in question. If no price can be determined by the foregoing
method, "Fair Value" shall mean the fair value thereof as determined by mutual
agreement reached by the Company and the Holder or, on the event the parties are
unable to agree, an opinion of an independent investment banking firm or firms
in accordance with the following procedure. In the case of any event which gives
rise to a requirement to determine "Fair Value" hereunder, the Company shall be
responsible for initiating the process by which Fair Value shall be determined
as promptly as practicable, but in any event within twenty (2) days following
such event and if the procedures contemplated herein in connection with
determining Fair Value have not been complied with fully, then any such
determination of Fair Value for any purpose hereunder shall be deemed to be
preliminary and subject to adjustment pending full compliance with such
procedures. Upon the occurrence of an event requiring the determination of Fair
Value, the Company shall give the Holder notice of such event, and the Company
and the Holder shall engage in direct good faith discussions to arrive at a
mutually agreeable determination of Fair Value. In the event the Company and the
Holder are unable to arrive at a mutually agreeable determination within thirty
Exhibit 4-7
<PAGE>
(3) days of the notice, an independent investment banking firm of national
standing selected by the Company shall make such determination and render such
opinion. The determination so made shall be conclusive and binding on the
Company and the Holder. The fees and expenses of the investment banking firm
retained for such purpose shall be shared equally by the Company and the Holder.
4.7 If it is expected that there will occur any event described in
Section 4, the Company shall give the Holder notice thereof, which notice shall
be given not more than 30 days prior thereto and not less than 10 days prior
thereto.
4.8 The provisions of this Section 4 are intended to be exclusive, and
the Holder shall have no other rights upon the occurrence of any of the events
described in this Section 4.
4.9 The grant of this Warrant shall not affect in any way the right or
power of the Company to make adjustments, reclassifications, reorganizations or
changes in its capital or business structure, or to merge, consolidate, dissolve
or liquidate, or to sell or transfer all or any part of its business or assets.
4.10 Whenever there shall be an adjustment as provided in this Section
4, the Company shall as soon as practicable cause written notice thereof to be
sent to the Holder, which notice shall be accompanied by an officer's
certificate setting forth the number of Warrant Shares purchasable upon the
exercise of this Warrant and the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment and the
computation thereof.
5. Representations, Warranties and Covenants of Holder. By accepting this
Warrant, Holder makes the following representations, warranties and
covenants:
5.1 Holder is acquiring this Warrant for its own account with the
present intention of holding this Warrant for investment purposes only and not
with a view to, or for sale in connection with, any distribution of this Warrant
(other than a distribution in compliance with all applicable United States
federal and state securities laws); provided; that nothing contained herein will
prevent Holder and its permitted assigned from transferring this Warrant in
compliance with the provisions of Section 7 of this Warrant.
5.2 Holder agrees that it will not transfer any Warrant Shares without
complying with each of the restrictions set forth herein. As a further condition
to any transfer of the Warrant Shares, except if the transfer is made pursuant
to an effective registration statement under the Securities Act, if in the
reasonable opinion of counsel to the Company any transfer of the Warrant Shares
by the Holder would not be exempt from the registration and prospectus delivery
requirements of the Securities Act, the Company may require the contemplated
transferee to furnish the Company with an investment letter setting forth such
information and agreements as may be reasonably requested by the Company to
ensure compliance by the transferee with the Securities Act. Holder is familiar
with the provisions of the Securities Act and Rule 144 promulgated thereunder
and understands that these restrictions on transfer may result in Holder being
required to hold the Warrant Shares for a certain period of time before any sale
of the Warrant Shares may be made.
6. Reservation of Common Stock. The Company covenants that it will at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of issuance upon exercise of the Warrants, such
number of shares of Common Stock as shall then be issuable upon the exercise of
all of the Warrants.
Exhibit 4-8
<PAGE>
7. Restrictions On Transfer Or Exercise Of The Warrants.
7.1 If in the reasonable opinion of counsel for the Company, or the
opinion of counsel for the Holder, which opinion is reasonably satisfactory to
counsel for the Company, all future dispositions of any of this Warrant or the
related Warrant Shares by the contemplated transferee would be exempt from the
registration and prospectus delivery requirements of the Securities Act and any
applicable state securities laws, then the restrictions on transfer of such
securities contained in this Section 7 shall not apply to any subsequent
transfer hereof or thereof and the legend set forth on the first page of this
Warrant may be removed.
7.2 This Warrant may be exchanged, at the option of the Holder, for
another Warrant, or other Warrants of different denominations, or like tenor and
representing, in the aggregate, the right to purchase a like number of Warrant
Shares (or portions thereof), upon surrender hereof to the Company or its duly
authorized agent. Notwithstanding the foregoing, the Holder may not transfer,
sell, pledge, assign or hypothecate this Warrant or the related Warrant Shares
to any Person, and no Person other than Holder may exercise this Warrant unless
the transfer of this Warrant or the related Warrant Shares to such Person was
permitted by this Section 7. Prior to any exercise of this Warrant or any
transfer or attempted transfer of this Warrant or the related Warrant Shares,
Holder shall give the Company written notice of its intention so to do,
describing briefly the manner of any such proposed exercise, sale or transfer.
The Company agrees to permit such exercise or transfer, provided that such
exercise, sale or transfer is not prohibited by this Section 7 and that the
Company is reasonably satisfied that such exercise, sale or transfer complies
with all applicable federal and state securities laws and regulations, and
provided, further, in the case of a sale or transfer, Holder delivers to the
Company a Notice of Assignment in the form attached to this Warrant as Exhibit
"B."
7.3 If in the reasonable opinion of counsel for the Company,
notwithstanding the opinion of counsel to Holder to the contrary, if any, the
proposed transfer of such Warrant Shares or Warrants may not be effected without
registration thereof under the Securities Act, the Company shall, as promptly as
practicable, so notify Holder and Holder shall not consummate the proposed
transfer.
8. Call Provisions. The provisions of this Section 8 shall be appli-
cable upon the registration of the Warrants pursuant to Section 9:
8.1 Commencing on the date on which the Common Stock of the Company has
been publicly trading on a national securities exchange or on the Nasdaq
National Market for not fewer than thirty (30) consecutive trading days at a
Closing Price of $9.00 per share or higher, and at all times thereafter, the
Company may, at its option, redeem all (but not less than all) outstanding
Warrants on a date specified by the Company (the "Call Date") by paying $0.25
per Warrant Share (the "Call Price") in cash out of funds legally available for
such purpose.
(a) Notice and Redemption Procedures. Notice of the redemption
of the Warrants pursuant to this Section 8 (a "Notice of Redemption") shall be
sent to the Holders of record of the Warrants to be redeemed by first class
mail, postage prepaid, at each such Holder's address as it appears on the stock
record books of the Company not more than 120 nor fewer than 90 days prior to
the Call Date, which date shall be set forth in such notice (the "Call Date").
In order to facilitate the redemption of the Warrants, the Board of Directors
may fix a record date for the determination of the Holders of the Warrants to be
called not more than 30 days prior to the date the Notice of Redemption is
mailed. At any time before the Call Date, each Holder of the Warrants called for
redemption may exercise all or any portion of such Holder's Warrants in
accordance with Section 3 of this Warrant. Any Warrants so exercised shall not
be subject to the call provisions of this Section 8. On or after the Call Date,
Exhibit 4-9
<PAGE>
each Holder of the Warrants called for redemption that have not been exercised
before the Call Date shall surrender such Warrants to the Company at the place
designated in such notice and shall thereupon be entitled to receive payment of
the Call Price for such Warrants.
(b) Deposit of Funds. The Company shall, on or prior to the
Call Date, deposit with its transfer agent or other redemption agent in the
State of Texas having a capital and surplus of at least $500,000,000 selected by
the board of Directors, as a trust fund for the benefit of the Holders of the
Warrants to be redeemed, cash that is sufficient in amount to redeem the
Warrants to be redeemed in accordance with the Notice of Redemption, with
irrevocable instructions and authority to such transfer agent or other
redemption agent to pay to the respective Holders of such Warrants, as evidenced
by a list of such Holders certified by an officer of the Company, the Call Price
upon surrender of their respective Warrants. Such deposit shall be deemed to
constitute full payment of the Call Price for such Warrants to the holders, and
from and after the date of such deposit, all rights of the Holders of the
Warrants, shall cease and terminate. In case Holders of any Warrants called for
redemption shall not, within two years after such deposit, claim the cash
deposited for redemption thereof, such transfer agent or other redemption agent
shall, upon demand, pay over to the Company the balance so deposited. Thereupon,
such transfer agent or other redemption agent shall be relieved of all
responsibility to the Holders thereof and the sole right of such Holders, with
respect to Warrants to be redeemed, shall be to receive the Call Price as
general creditors of the Company. Any interest accrued on any funds so deposited
shall belong to the Company, and shall be paid to it from time to time on
demand.
9. Registration. The Company covenants that as soon as practicable after the
consummation of (i) the Merger or (ii) a Qualified IPO, the Company shall file a
registration statement with the Commission to register the Warrants for public
trading. In addition, in connection with the issuance of this Warrant, the
Company agrees that the Holder shall have the registration rights set forth in
the Registration Rights Agreement in substantially the form attached hereto as
Exhibit "C."
10. Miscellaneous.
10.1 In no event shall Holder have any right or authority to execute
any contract, document or obligation for or on behalf of the Company; it being
recognized that the relationship between Holder, on the one hand, and the
Company, on the other hand, is that of independent contractor and in no event
shall this document be construed to create a joint venture or partnership.
10.2 Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction, or mutilation of this Warrant (and upon surrender of this
Warrant if mutilated), including an affidavit of the Holder that this Warrant
has been lost, stolen, destroyed or mutilated, together with an indemnity
against any claim that may be made against the Company on account of such lost,
stolen, destroyed or mutilated Warrant, the Company shall execute and deliver to
the Holder a new Warrant of like date, tenor, and denomination.
10.3 All notices or demands required or permitted hereunder shall be in
writing and shall be delivered personally, electronically, telegraphically, or
by express or certified mail or registered mail or by private overnight express
mail service. Delivery shall be deemed conclusively made (i) at the time of
delivery if personally delivered, (ii) immediately in the event notice is
delivered by transmittal over electronic or telephonic transmitting devices,
such as telex or telecopy, provided, the party to whom the notice is delivered
has a compatible device and electronically or by other written document confirms
receipt thereof, or the party otherwise confirms actual receipt thereof, (iii)
at the time that the telegraphic agency confirms to the sender delivery thereof
to the addressee if served telegraphically, (iv) twenty-four (24) hours after
delivery to the carrier if served by any private, overnight express mail
Exhibit 4-10
<PAGE>
service, (v) twenty-four (24) hours after deposit thereof in the United States
mail, properly addressed and postage prepaid, return receipt requested, if
served by express mail, or (vi) five (5) days after deposit thereof in the
United States mail, properly addressed and postage prepaid, return receipt
requested, if served by certified mail.
Any notice or demand to the Company shall be given to:
USOL Holdings, Inc.
10300 Metric Boulevard
Austin, TX 78758
Attention: Secretary
with a copy to:
Jenkens & Gilchrist
600 Congress Avenue, Suite 2200
Austin, TX 78701
Attention: J. Rowland Cook
Any notice or demand to the Holder shall be given to the address of the Holder
currently maintained on the books and records of the Company.
Any party may, by virtue of written notice in compliance with this paragraph,
alter or change the address or the identity of the person to whom any notice, or
copy thereof, is to be delivered.
10.4 Any controversy arising out of or relating to this Warrant, or the
making, performance or interpretation thereof, including the interpretation and
scope of this arbitration provision, claims arising thereunder or relating
thereto, and any claims involving statements, agreements or representations made
during the negotiation of this Warrant, or in those situations in which
arbitration is specifically called for in this Warrant, shall be settled by
final and binding arbitration in accordance with the Commercial Arbitration
rules of the American Arbitration Association, before three arbitrators of whom
at least one shall be a certified public accountant and one shall be an
attorney, each with at least ten years of practice in their respective fields.
10.5 Each party shall execute and deliver all such further instruments,
documents and papers, and shall perform any and all acts necessary, to give full
force and effect to all of the terms and provisions of this Warrant.
10.6 All the 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.
10.7 This Warrant shall be governed by and construed in accordance with
the laws of the State of Delaware applicable to contracts entered into and fully
to be performed therein. In all matters of interpretation, whenever necessary to
give effect to any provision of this Warrant, each gender shall include the
others, the singular shall include the plural, and the plural shall include the
singular. The titles of the paragraphs of this Warrant are for convenience only
and shall not in any way affect the interpretation of any provision or condition
of this Warrant. All remedies, rights, undertakings, obligations and agreements
contained in this Warrant shall be cumulative and none of them shall be in
limitation of any other remedy, right, undertaking, obligation or agreement of
any party. Each party and its counsel have reviewed and revised this Warrant. As
a result, the normal rule of construction to the effect that any ambiguities are
Exhibit 4-11
<PAGE>
to be resolved against the drafting party shall not be employed in the
interpretation of this Warrant or any amendments or exhibits thereto.
10.8 In the event of any litigation or arbitration between the parties
hereto respecting or arising out of this Warrant, the prevailing party shall be
entitled to recover reasonable legal fees, whether or not such litigation or
arbitration proceeds to final judgment or determination.
10.9 Any litigation or arbitration between the parties shall occur
exclusively in the County of Travis, State of Texas.
10.10 The terms and conditions of this Warrant shall be subject to all
applicable laws and regulations of any governing jurisdictions. If any clause or
provision of this Warrant is illegal, invalid or unenforceable under present or
future laws effective during the term of this Warrant, then and, in that event,
the remainder of this Warrant shall not be affected thereby, and in lieu of each
clause or provision of this Warrant that is illegal, invalid or unenforceable,
there shall be added a clause or provision as similar in terms and in amount to
such illegal, invalid or unenforceable clause or provision as may be possible
and be legal, valid and enforceable, as long as it does not otherwise frustrate
the principal purposes of this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by
its authorized officer and its corporate seal to be hereunto affixed, and
attested by its Secretary, all as of the day and year first written above.
USOL HOLDINGS, INC
By:
------------------
Name: Robert Solomon
Title: President
[Seal]
Attest:
- --------------------------------
Name: Don Barlow
Title: Assistant Secretary
Exhibit 4-12
<PAGE>
EXHIBIT "A"
NOTICE OF EXERCISE
(To be signed only upon exercise of the Warrant)
TO: USOL HOLDINGS, INC.
The undersigned hereby irrevocably elects to exercise the purchase rights
represented by the Warrant granted to the undersigned as of July 21, 1999 and to
purchase thereunder ___________* shares of Common Stock of USOL HOLDINGS, INC.
(the "Company") and herewith tenders payment of $__________ in full payment of
the purchase price of such shares being purchased, such payment being made by
(i) $_________ by wire transfer of funds or by certified or cashier's check
and/or (ii) cancellation of such Warrant based upon a Maximum Number (as defined
in the Warrant) of _________ shares of Common Stock.
Dated: _______________, __________
------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant)
------------------------------
(Please Print Name)
------------------------------
(Address)
*Insert here the number of shares being exercised, without making any adjustment
for additional Common Stock of the Company, other securities or property which,
pursuant to the adjustment provisions of the Warrant, may be deliverable upon
exercise.
Exhibit 4-13
<PAGE>
EXHIBIT "B"
NOTICE OF ASSIGNMENT
(To be signed only upon a proposed transfer of the Warrant)
TO: USOL HOLDINGS, INC.
The undersigned desires to transfer the purchase rights represented by the
Warrant granted to the undersigned as of July 21, 1999 by USOL HOLDINGS, INC.
(the "Company"), A description of the proposed transfer, including the identity
of the transferee and the number of Warrants transferred, is attached to this
Notice.
The undersigned represents and warrants to the Company that the proposed
transfer is not prohibited by Section 7 of the Warrant, and that the proposed
transfer is not in violation of any applicable federal or state securities laws
or regulations.
Dated: _______________, __________
------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant)
------------------------------
(Please Print Name)
------------------------------
(Address)
The proposed transfer is hereby approved by the Company pursuant to the terms of
Section 7.2 of the Warrant.
Dated: _______________, __________
USOL HOLDINGS, INC
By: _______________________
Its:_______________________
Exhibit 4-14
EXHIBIT 5
[Jenkens & Gilchrist
A PROFESSIONAL CORPORATION
2200 ONE AMERICAN CENTER
600 CONGRESS AVENUE
AUSTIN, TEXAS 78701 DALLAS, TEXAS
(214) 855-4500
(512) 499-3800 CHICAGO, ILLINOIS
TELECOPIER (512) 404-3520 (312) 425-3900
HOUSTON, TEXAS
www.jenkens.com (713) 951-3300
LOS ANGELES, CALIFORNIA
(310) 820-8800
SAN ANTONIO, TEXAS
J. Rowland Cook (210) 246-5000
(512) 499-3821
[email protected] WASHINGTON, D.C.
(202) 326-1500
May 24, 2000
USOL Holdings, Inc.
10300 Metric Boulevard
Austin, Texas 78758
Re: USOL Holdings, Inc.
Registration Statement on Form S-3
Ladies and Gentlemen:
On May 24, 2000, USOL Holdings, Inc., an Oregon corporation (the
"Company"), filed with the Securities and Exchange Commission (the "Commission")
a Registration Statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1993, as amended (the "Act"), relating to the offer and sale
by certain Company securityholders of an aggregate of 1,500,000 warrants (the
"Warrants") and the issuance by the Company of 1,500,000 shares of common stock,
no par value per share (the "Common Stock") upon the exercise of the Warrants.
We have acted as counsel to the Company in connection with the preparation and
filing of the Registration Statement.
In connection therewith, we have examined and relied upon the original
or copies, certified to our satisfaction, of (i) the Articles of Incorporation
and the Bylaws of the Company, in each case as amended to date, (ii) copies of
resolutions of the Board of Directors of the Company authorizing the filing of
the Registration Statement and the Merger Agreement between the Company and USOL
Holdings, Inc., a Delaware corporation, (iii) the Registration Statement and all
exhibits thereto, and (iv) such other documents and instruments as we have
deemed necessary for the expression of the opinions herein contained. In making
the foregoing examinations, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, and the
conformity to original documents of all documents submitted to us as certified
or photostatic copies. As to various questions of fact material to this opinion,
we have relied, to the extent we deem reasonably appropriate, upon
representations or certificates of officers or directors of the Company and upon
documents, records and instruments furnished to us by the Company, without
independent check or verification of their accuracy.
Exhibit 5-1
<PAGE>
Based upon the foregoing examination, we are of the opinion that: 1)
the Warrants have been duly and validly authorized and are legally issued, fully
paid and non-assessable; and 2) upon issuance and delivery against payment
therefor in accordance with the terms of the Warrant, the Common Stock will be
validly authorized, legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement. In
giving such consent, we do not admit that we come within the category of persons
whose consent is required by Section 7 of the Act or the rules and regulations
of the Commission thereunder.
Respectfully submitted,
JENKENS & GILCHRIST,
A Professional Corporation
By: /s/J. Rowland Cook
-------------------------------------
J. Rowland Cook, Authorized Signatory
JRC:cjm
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of Form S-3 of our
respective reports each dated February 11, 2000 relating to USOL Holdings,
Inc.'s and U.S. OnLine Communications, Inc.'s Form 10-KSB for the year ended
December 31, 1999 and to all references to our Firm included in this
registration statement.
/s/ Arthur Andersen LLP
- -----------------------
Austin, Texas
May 22, 2000
Exhibit 23.2-1
