Agreement and Plan of Merger
and Reorganization
Dated as of July 21, 1999
By and Between
FirstLink Communications, Inc.
and
USOL Holdings, Inc.
Table of Contents
-----------------
Article/Section Heading Page
ARTICLE I DEFINITIONS 2
1.1 Definitions 2
ARTICLE II THE MERGER 10
2.1 Merger; Effective Time 10
2.2 Closing 10
2.3 Effect of the Merger 10
2.4 Articles of Incorporation; By-laws 11
2.5 Directors and Officers 11
2.6 Effect on Capital Stock 11
2.7 Exchange of Certificates 12
2.8 Stock Transfer Books 14
2.9 Dissenting Shares 14
2.10 No Further Ownership Rights in USOL Stock 14
2.11 Lost, Stolen or Destroyed Certificates 14
2.12 Tax and Accounting Consequences 15
2.13 Adjustments 15
ARTICLE III REPRESENTATIONS AND WARRANTIES OF FLCI 15
3.1 Organization 15
3.2 Capitalization 16
3.3 SEC Filings 16
3.4 Qualification in Foreign Jurisdictions 16
3.5 Authority Relative to this Agreement 17
3.6 No Conflict; Required Filings and Consents 17
3.7 Compliance with Laws; Permits 18
3.8 Financial Statements 18
3.9 Absence of Certain Changes or Events 19
3.10 Material Contracts 19
3.11 Accounts Receivable 20
3.12 No Undisclosed Liabilities 20
3.13 Absence of Litigation 20
3.14 Employee Matters 21
3.15 Labor Matters 21
3.16 Restrictions on Business Activities 22
3.17 Real Property 22
3.18 Equipment and Vehicles 22
3.19 Inventories 23
3.20 Taxes 23
3.21 Environmental Matters 24
3.22 Brokers 25
3.23 Interested Party Transactions 25
3.24 Insurance Policies 25
3.25 Vote Required 25
3.26 Other Negotiations 25
3.27 Full Disclosure 26
3.28 Anti-takeover Law 26
3.29 Intellectual Property 26
3.30 Absence of Certain Business Practices 27
3.31 Territorial Restrictions 28
3.32 Year 2000 Compliance 28
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF USOL 28
4.1 Organization 28
4.2 Capitalization 29
4.3 Qualification in Foreign Jurisdictions 29
4.4 Authority Relative to this Agreement 30
4.5 No Conflict; Required Filings and Consents 30
4.6 Brokers 31
4.7 Other Negotiations 31
4.8 Full Disclosure 31
4.9 Lockup Agreement 31
4.10 Incorporation of Representations and Warranties By Reference 32
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER 33
5.1 Conduct of Business by USOL and FLCI Pending the Merger 33
5.2 No Solicitation by USOL or FLCI 35
ARTICLE VI ADDITIONAL AGREEMENTS 36
6.1 Proxy Statement 36
6.2 FLCI Stockholders' Meeting 37
6.3 Access to Information; Confidentiality 37
6.4 Consents, Approvals 38
6.5 Stock Options 38
6.6 Warrants 39
6.7 Notification of Certain Matters 39
6.8 Public Announcements 39
6.9 Application For Nasdaq Approval 40
6.10 Delivery of Additional Filings 40
6.11 Accountant's Comfort Letters 40
6.12 Indemnification; Directors' and Officers' Insurance 40
6.13 Employee Benefits 41
6.14 Stockholder Litigation 42
6.15 Accredited Investors 42
ARTICLE VII CONDITIONS TO THE MERGER 42
7.1 Conditions to Obligation of Each Party to Effect the Merger 42
7.2 Additional Conditions to Obligations of FLCI 43
7.3 Additional Conditions to Obligation of USOL 44
ARTICLE VIII TERMINATION 45
8.1 Termination 45
8.2 Certain Actions Prior to Termination 47
8.3 Effect of Termination 48
8.4 Fees and Expenses 48
ARTICLE IX ARBITRATION; CONSENT TO JURISDICTION 50
9.1 Submission to Jurisdiction 50
9.2 Waiver of Immunity and Inconvenient Forum 50
9.3 Arbitration Procedures 51
9.4 Final Arbitration Decisions 51
9.5 Claims for Unpaid Balance 51
ARTICLE X GENERAL PROVISIONS 51
10.1 Attorney's Fees 51
10.2 Effectiveness of Representations, Warranties and
Agreements; Knowledge, Etc. 52
10.3 Notices 52
10.4 Amendment 54
10.5 Waiver 54
10.6 Severability 54
10.7 Assignment 54
10.8 Parties in Interest 55
10.9 Failure or Indulgence Not Waiver; Remedies Cumulative 55
10.10 Governing Law 55
10.11 Counterparts 55
10.12 Captions 55
10.13 Time 56
Attachments to Agreement and Plan of Merger and Reorganization
Schedules:
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Schedule 1.1 - USOL Permitted Liens
Schedule 2.5(a) - Directors of Surviving Corporation
Schedule 3.1 - FLCI Investments and Extensions of Credit
Schedule 3.2 - FLCI Stock Options, Warrants, and Registration Rights
Schedule 3.4 - FLCI Qualification in Foreign Jurisdictions
Schedule 3.5 - FLCI Stockholder Consents
Schedule 3.6(a) - FLCI Conflicts, Required Filings and Consents
Schedule 3.6(b) - Requirements of State Government Authorities
Schedule 3.7 - Permits of FLCI
Schedule 3.10(a) - FLCI Material Contracts
Schedule 3.12 - Material Liabilities not on FLCI Financial Statements
Schedule 3.14(a) - FLCI Employee Benefit Plans
Schedule 3.14(b) - Certain Employment Agreements
Schedule 3.14(c) - Outstanding Options and Option Holders
Schedule 3.17(a) - Legal Descriptions of FLCI Leased Real Property
Schedule 3.18-1 - FLCI Equipment
Schedule 3.18-2 - FLCI Personal Property Leases
Schedule 3.20(a) - Certain Tax Matters
Schedule 3.23 - FLCI Interested Party Transactions
Schedule 3.29(a) - All FLCI Intellectual Property Assets
Schedule 3.29(b) - Intellectual Property Infringements by Third Parties
Schedule 3.29(c) - FLCI Intellectual Property Licensing Agreements
Schedule 3.29(d) - Intellectual Property Litigation
Schedule 3.29(e) - Filing Offices Where FLCI Intellectual Property
Assets are Registered
Schedule 4.1(b) - USOL Subsidiaries
Schedule 4.2(a) - USOL Stock Options, Warrants
Schedule 4.2(b) - Terms of Senior Note Commitment
Schedule 4.2(c) - USOL Debt Obligations
Schedule 4.3 - USOL Qualification in Foreign Jurisdictions
Schedule 4.5(b) - USOL Required Consents, Approvals and Permits
Schedule 4.6 - USOL Brokers
Schedule 4.9 - Permitted Transfers
Schedule 5.1(g) - Normal Salary/Wage Increases
Exhibits:
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Exhibit 1.1(a) - Form of TSD Asset Purchase Agreement
Exhibit 1.1(b) - Form of USOC Asset Purchase Agreement
Exhibit 2.6(b)-1 - Form of Certificate of Designations of Preferences,
Limitations and Relative Rights of USOL Series A
Convertible Preferred Stock
Exhibit 2.6(b)-2 - Form of Certificate of Designations of Preferences,
Limitations and Relative Rights of USOL Series B
Convertible Preferred Stock
Exhibit 2.6(c)-1 - Form of USOL Other Warrants
Exhibit 2.6(c)-2 - Form of USOL TSD Warrants
Exhibit 7.2(f) - Opinion of Jenkens & Xxxxxxxxx
Exhibit 7.3(f) - Opinion of Xxxxxx Xxxxxxx & Stone, LLC
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
Agreement and Plan of Merger and Reorganization, dated as of July 21,
1999 (this "Agreement"), is by and between FirstLink Communications, Inc., an
Oregon corporation ("FLCI"), and USOL Holdings, Inc., a Delaware corporation
("USOL").
W I T N E S S E T H:
Whereas, each of the Boards of Directors of FLCI and USOL has determined
that it is advisable and in the best interests of the respective stockholders
for FLCI and USOL to enter into a strategic business combination upon the
terms and subject to the conditions set forth herein; and
Whereas, USOL, Inc., a Delaware corporation and a wholly-owned subsidiary
of USOL ("USOL Sub"), has acquired substantially all of the assets and assumed
substantially all of the remaining liabilities of US Online Communications,
Inc., a Delaware corporation ("USOC"), and XxxXxxxxxxxXxxx.xxx,Inc., a
Delaware corporation and a wholly-owned subsidiary of USOL Sub ("TRC"), has
acquired certain of the assets of the Tenant Services Division ("TSD") of GMAC
Commercial Mortgage Corporation, a California corporation ("GMAC-CM"); and
Whereas, in furtherance of such combination, each of the Boards of
Directors of FLCI and USOL has approved the merger of USOL with and into FLCI
(the "Merger") in accordance with the applicable provisions of the Oregon Law
(as defined herein) and the Delaware Law (as defined herein) and upon the
terms and subject to the conditions set forth herein; and
Whereas, concurrently with the execution and delivery of this Agreement
and as a condition and inducement to each of USOL's and FLCI's willingness to
enter into this Agreement, certain stockholders of FLCI have entered into
agreements with USOL, dated as of the date of this Agreement ("Stockholder
Support Agreements"), pursuant to which such stockholders have agreed, among
other things, to vote all voting securities of FLCI beneficially owned by them
in favor of adoption of the Merger; and
Whereas, FLCI and USOL intend this Agreement to be a plan of
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and the regulations thereunder;
Now, Therefore, in consideration of the foregoing and the mutual
covenants and agreements herein contained, FLCI and USOL hereby agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms have
the following meanings:
"Acquisition Proposal" has the meaning set forth in Section 5.2(a).
"Action" has the meaning set forth in Section 7.2(d).
"Affiliate" means, with respect to a Person, a Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the first mentioned Person; including, without
limitation, any partnership or joint venture in which such Person (either
alone, or through or together with any other subsidiary) has, directly or
indirectly, an interest of ten percent or more.
"Agreement" means this Agreement and includes exhibits and schedules
delivered pursuant to the terms of this Agreement.
"Arbitration Notice" has the meaning set forth in Section 9.3(b).
"Arbitration Panel" has the meaning set forth in Section 9.3(a).
"Articles of Merger" means the articles of merger filed in connection
with the Merger with the Secretary of State of the State of Oregon pursuant to
Section 60.494 of the Oregon Law.
"Balance Sheet Date" means May 31, 1999.
"Beneficial owner" means, with respect to any shares of stock, a Person
who shall be deemed to be the beneficial owner of such shares (i) which such
Person or any of its Affiliates or associates (as such term is defined in Rule
12b-2 of the Exchange Act) beneficially owns, directly or indirectly, (ii)
which such Person or any of its Affiliates or associates has, directly or
indirectly, (A) the right to acquire (whether such right is exercisable
immediately or subject only to the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of consideration
rights, exchange rights, warrants or options, or otherwise, or (B) the right
to vote pursuant to any agreement, arrangement or understanding or (iii) which
are beneficially owned, directly or indirectly, by any other Persons with whom
such Person or any of its Affiliates or associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any shares.
"Business Day" means any day of the year (other than any Saturday or
Sunday) on which the Federal Reserve Bank is open for business in Los Angeles,
California.
"Cancelled Shares" has the meaning set forth in Section 2.6(d).
"Cash" means all cash, certificates of deposits, bank deposits and other
cash equivalents, together with all accrued but unpaid interest thereon.
"Certificate of Merger" means the certificate of merger filed in
connection with the Merger with the Secretary of State of the State of
Delaware in accordance with Section 252 of the Delaware Law.
"Closing" has the meaning set forth in Section 2.2.
"Code" has the meaning set forth in the Recitals.
"Company" means (a) USOL at all times prior to the Effective Time, and
(b) FLCI upon the Effective Time and at all times thereafter.
` "Company Common Stock" means (a) USOL Common Stock at all times prior to
the Effective Time, and (b) FLCI Common Stock upon the Effective Time and at
all times thereafter.
"Company Other Warrants" means (a) USOL Other Warrants at all times prior
to the Effective Time, and (b) FLCI Other Warrants upon the Effective Time and
at all times thereafter.
"Company Preferred Stock" means (a) USOL Preferred Stock at all times
prior to the Effective Time, and (b) FLCI Preferred Stock upon the Effective
Time and at all times thereafter.
"Company Warrants" means (a) USOL Warrants at all times prior to the
Effective Time, and (b) FLCI Warrants upon the Effective Time and at all times
thereafter.
"Contract" means any contract, lease, commitment, sales order, purchase
order, agreement, indenture, mortgage, note, bond, instrument, plan, permit or
license.
"Control" (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly or as trustee or executor,
of the power to direct or cause the direction of the management or policies of
a Person, whether through the ownership of stock, as trustee or executor, by
contract or credit arrangement or otherwise.
"Delaware Law" means the Delaware General Corporation Law, Chapter 1 of
Title 8, Section 101 et seq.
"Dissenting Shares" has the meaning set forth in Section 2.9(a).
"Effective Time" has the meaning set forth in Section 2.1.
"Environmental Law" means any Law which relates to or otherwise imposes
liability or standards of conduct concerning discharges, releases or
threatened releases of noises, odors or any pollutants, contaminants or
hazardous or toxic wastes, substances or materials, whether as matter or
energy, into ambient air, water or land, or otherwise relating to the
manufacture, processing, generation, distribution, use, treatment, storage,
disposal, cleanup, transport or handling of pollutants, contaminants or
hazardous or toxic wastes, substances or materials, including the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Resource Conservation and Recovery Act of 1976, as amended, the
Toxic Substances Control Act of 1976, as amended, the Federal Water Pollution
Control Act Amendments of 1972, the Clean Water Act of 1977, as amended, any
so-called "Superfund" or "Superlien" Law (including those already referenced
in this definition) and any other Law of any Governmental Authority having a
similar subject matter.
"Environmental Permit" means any Permit required by or pursuant to any
applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agent" has the meaning set forth in Section 2.7(a).
"FCC" means the Federal Communications Commission or any successor agency
thereto.
"FLCI Accounts Receivable" has the meaning set forth in Section 3.11.
"FLCI" has the meaning set forth in the Recitals.
"FLCI Balance Sheets" has the meaning set forth in Section 3.8.
"FLCI Certificates" has the meaning set forth in Section 2.7(b).
"FLCI Common Stock" means the common stock, par value $.001 per share, of
FLCI.
"FLCI Employee Plans" has the meaning set forth in Section 3.14(a).
"FLCI Equipment" has the meaning set forth in Section 3.18.
"FLCI FCC Permits" has the meaning set forth in Section 3.7.
"FLCI Financial Statements" has the meaning set forth in Section 3.8.
"FLCI Intellectual Property Assets" has the meaning set forth in Section
3.29(a).
"FLCI Material Contracts" has the meaning set forth in Section 3.10(a).
"FLCI Preferred Stock" means, collectively, the FLCI Series A Preferred
Stock and the FLCI Series B Preferred Stock.
"FLCI Real Property Leases" has the meaning set forth in Section 3.17(a).
"FLCI SEC Reports" has the meaning set forth in Section 3.3.
"FLCI Series A Preferred Stock" means the Series A Convertible Preferred
Stock, par value $.001 per share, of FLCI, with the identical rights,
preferences and privileges as the USOL Series A Preferred Stock.
"FLCI Series B Preferred Stock" means the Series B Convertible Preferred
Stock, par value $.001 per share, of FLCI, with the identical rights,
preferences and privileges as the USOL Series B Preferred Stock.
"FLCI Stock" means the shares of FLCI Common Stock and FLCI Preferred
Stock, collectively.
"FLCI Stock Option Plan" means FLCI's 1998-1999 Combined Incentive Stock
Option and Nonqualified Stock Option Plan.
"FLCI Stockholders Meeting" has the meaning set forth in Section 3.27(b).
"FLCI TSD Warrants" means the separate warrants to be issued in the
Merger in exchange for the USOL TSD Warrants.
"FLCI Unaudited Balance Sheets" has the meaning set forth in Section 3.8.
"FLCI Unaudited Financial Statements" has the meaning set forth in
Section 3.8.
"FLCI Warrants" means, collectively, the FLCI Other Warrants and the FLCI
TSD Warrants.
"GAAP" means U.S. generally accepted accounting principles at the time in
effect.
"GMAC-CM" has the meaning set forth in the Recitals.
"Governmental Approval" means any consent of any Governmental Authority.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including, without limitation, any multilateral authority or
any government authority, agency, department, board, commission or
instrumentality of the United States, any State of the United States or any
political subdivision thereof, and any tribunal or arbitrator(s) of competent
jurisdiction, and any self-regulatory organization.
"Group Health Plan" has the meaning set forth in Section 6.13(c).
"Hazardous Substances" means any natural or artificial substance,
preparation or article which if generated, transported, stored, treated, used
or disposed of (alone or combined with any other substance, preparation or
article) is harmful to water, air or land or any living organism.
"Intellectual Property" means any and all United States and foreign: (a)
patents (including design patents, industrial designs and utility models) and
patent applications (including docketed patent disclosures awaiting filing,
reissues, divisions, continuations-in-part and extensions), patent disclosures
awaiting filing determination, inventions and improvements thereto; (b)
trademarks, service marks, trade names, trade dress, logos, business and
product names, slogans, and registrations and applications for registration
thereof; (c) copyrights (including software) and registrations thereof; (d)
inventions, processes, designs, formulae, trade secrets, know-how, industrial
models, confidential and technical information, manufacturing, engineering and
technical drawings, product specifications and confidential business
information; (e) intellectual property rights similar to any of the foregoing;
and (f) copies and tangible embodiments thereof (in whatever form or medium,
including electronic media).
"IRS" means the Internal Revenue Service.
"ISO" means an incentive stock option within the meaning of Section
422(b) of the Code.
"Law" means any law, statute, regulation, ordinance, rule, order, decree,
judgment, consent decree, settlement agreement or governmental requirement
enacted, promulgated, entered into, agreed or imposed by any Governmental
Authority.
"Lien" shall mean any encumbrance, lien, charge, hypothecation, pledge,
mortgage, title retention agreement, security interest of any nature, adverse
claim, exception, reservation, easement, right of occupation, any matter
capable of registration against title, option, right-of-preemption, privilege
or any agreement, indenture, contract, lease, deed of trust, license, option,
instrument or other commitment to create any of the foregoing.
"Lockup Period" has the meaning set forth in Section 4.9(b).
"Losses" means any and all costs, demands, claims, liabilities, fines,
penalties, assessments, damages and expenses (including the burden and expense
of defending against all of the foregoing even if the assertions therein are
groundless, false or fraudulent), or amounts paid in settlement thereof, and
court costs (including court-awarded interest) and reasonable attorneys' fees
and disbursements of counsel (including legal or other expenses reasonably
incurred in connection with investigating or defending the same); provided,
that the term "Losses" shall not include costs, demands, claims, liabilities,
fines, penalties, assessments, damages and expenses which are indirect or
consequential in nature.
"Lost USOL Certificate" has the meaning set forth in Section 2.11.
"Merger" has the meaning set forth in the Recitals.
"Merger Consideration" has the meaning set forth in Section 2.7(b).
"Nasdaq" means the Nasdaq Stock Market, Inc.
"Notice" has the meaning set forth in Section 10.3.
"Oregon Law" means the Oregon Business Corporation Act, Oregon Revised
Statutes, 60.001 et seq.
"Other Lockup Period" has the meaning set forth in Section 4.9(c).
"Outside Date" means December 31, 1999.
"Permit" means a permit, license, consent, certificate, approval,
franchise, right, waiver, exemption, order or other authorization of a
Governmental Authority.
"Permitted Liens" means
1. liens for Taxes, assessments and governmental charges due and being
contested in good faith and diligently by appropriate proceedings (and for the
payment of which adequate provision has been made);
2. servitudes, easements, restrictions, rights-of-way and other similar
rights in real property or any interest therein; provided the same are not of
such nature as to materially adversely affect the use of the property subject
thereto;
3. liens for Taxes either not due and payable or due but for which
notice of assessment has not been given;
4. undetermined or inchoate liens, charges and privileges incidental to
current construction or current operations and statutory liens, charges,
adverse claims, security interests or encumbrances of any nature whatsoever
claimed or held by any governmental authority that have not at the time been
filed or registered against the title to the asset or served upon the Seller
pursuant to law or that relate to obligations not due or delinquent;
5. liens or rights reserved in any lease for rent or for compliance
with the terms of such lease;
6. security given in the ordinary course of the Business to any public
utility, municipality or government or to any statutory or public authority in
connection with the operations of the Business, other than security for
borrowed money;
7. statutory liens in favor of a seller of personal property,
mechanic's liens or other statutory liens in favor of a provider of a service;
provided, that obligations to a secured party are not overdue or delinquent;
and
8. the liens described in Schedule 1.1 (with respect to USOL).
"Person" means any individual, corporation, trust, estate, partnership,
joint venture, company, association, governmental bureau or other entity of
whatsoever kind or nature (including as defined in Section 13(d)(3) of the
Exchange Act).
"Predecessor Entities" means, collectively, USOC and TSD.
"Proxy Statement" has the meaning set forth in Section 3.27(b).
"Re-incorporation" means the re-incorporation in the State of Delaware of
the Surviving Corporation.
"Rules of Arbitration" has the meaning set forth in Section 9.3(a).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Notes" has the meaning set forth in Section 4.2(b).
"Stockholder Support Agreements" has the meaning set forth in the
Recitals.
"Subsidiary" or "subsidiaries" means, with respect to a Person, any
corporation, partnership, joint venture or other legal entity of such Person
(either alone or through or together with any other subsidiary of such Person)
which owns, directly or indirectly, more than 50% of the stock or other equity
interests the holders of which are generally entitled to vote for the election
of the board of directors or other governing body of such corporation or other
legal entity.
"Superior Offer" has the meaning set forth in Section 8.2(c).
"Surviving Corporation" has the meaning set forth in Section 2.1.
"Tax" or "Taxes" means any federal, state, local, foreign or other tax,
levy, impost, fee, assessment, imposition or other charge of any kind
whatsoever, including without limitation net income, gross income, estimated
income, gross receipts, business, occupation, value added, real property,
payroll, personal property, sales, transfer, stamp, use, employment,
commercial rent, occupancy, franchise, withholding, profits, windfall profits,
deemed profits, license, registration, lease, severance, capital stock,
production, corporation, ad valorem, social security (or similar),
unemployment, disability, alternative, add-on minimum, premium or customs
duties, including without limitation any interest, penalty, or addition
thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
information return, statement or other document required to be filed in
respect of Taxes, including without limitation Tax Returns for estimated
Taxes, any schedule or attachment thereto, and any amendment to any of the
above.
"Transfer" has the meaning set forth in Section 4.9.
"TRC" has the meaning set forth in the Recitals.
"TSD" has the meaning set forth in the Recitals.
"TSD Asset Purchase Agreement" means the Asset Purchase Agreement, dated
as of the date hereof, by and among USOL, TRC and GMAC-CM, in the form
attached hereto as Exhibit 1.1(a).
"USOC" has the meaning set forth in the Recitals.
"USOC Asset Purchase Agreement" means the Asset Purchase Agreement, dated
as of the date hereof, by and among USOL Sub, USOL, USOC and certain selling
shareholders, in the form attached hereto as Exhibit 1.1(b).
"USOL" has the meaning set forth in the Recitals.
"USOL Certificate" or "USOL Certificates" has the meaning set forth in
Section 2.7(b).
"USOL Common Stock" means the Common Stock, $.001 par value per share, of
USOL.
"USOL Material Contracts" means those Contracts of USOL set forth in
Section 5.11 of the Disclosure Memorandum to the USOC Asset Purchase
Agreement.
"USOL Other Warrants" means the separate warrants, dated the date hereof,
issued by USOL, in the form attached hereto as Exhibit 2.6(c)-1.
"USOL Preferred Stock" means, collectively, the USOL Series A Preferred
Stock and the USOL Series B Preferred Stock.
"USOL Series A Preferred Stock" means the Series A Convertible Preferred
Stock, $0.001 par value, of USOL, with the rights, preferences and privileges
set forth in Exhibit 2.6(b)-1 hereto.
"USOL Series B Preferred Stock" means the Series B Convertible Preferred
Stock, $0.001 par value, of USOL, with the rights, preferences and privileges
set forth in Exhibit 2.6(b)-2 hereto.
"USOL Stock" means the USOL Common Stock and USOL Preferred Stock,
collectively.
"USOL Stock Option Plan" means the 1999 USOL Holdings, Inc. Incentive
Plan.
"USOL Stockholders Meeting" has the meaning set forth in Section 3.27(b).
"USOL Sub" has the meaning set forth in the Recitals.
"USOL TSD Warrants" means the separate warrants issued under by USOL to
GMAC-CM, in the form attached hereto as Exhibit 2.6(c)-2.
"USOL Unaudited Balance Sheet" means the unaudited balance sheet of USOC
as of May 31, 1999.
"USOL Warrants" means, collectively, the USOL Other Warrants and the USOL
TSD Warrants.
ARTICLE II
THE MERGER
2.1 Merger; Effective Time. At the Effective Time (as defined below),
and subject to and upon the terms and conditions of this Agreement, the
Delaware Law and the Oregon Law, USOL shall be merged with and into FLCI and
FLCI shall continue as the surviving corporation. FLCI as the surviving
corporation after the Merger is hereinafter sometimes referred to as the
"Surviving Corporation." At the Effective Time, the identity and separate
existence of USOL shall cease. As promptly as practicable after the
satisfaction or waiver, as the case may be, of the conditions set forth in
Article VII, USOL and FLCI shall cause the Merger to be consummated by filing
the Certificate of Merger and the Articles of Merger, together with any
required related instruments, with the Secretaries of State of the States of
Delaware and Oregon, respectively, and USOL and FLCI shall take such other
actions as may be required by Law to make the Merger effective. The time the
Merger becomes effective in accordance with applicable Law is referred to
herein as the "Effective Time".
2.2 Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
8.1, and subject to the satisfaction or waiver of all the conditions set forth
in Article VII, the consummation of the Merger (the "Closing") shall take
place as promptly as practicable (and in any event within two business days)
after satisfaction or waiver of the conditions set forth in Article VII, at
the offices of USOL, 00000 Xxxxxx Xxxxxxxxx, Xxxxxx, Xxxxx 00000, unless
another time or place is agreed to in writing by USOL and FLCI.
2.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger, the
applicable provisions of the Delaware Law, the Articles of Merger and the
applicable provisions of the Oregon Law. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time all the property,
rights, privileges, powers and franchises of USOL shall vest in the Surviving
Corporation, and all debts, liabilities and duties of USOL shall become the
debts, liabilities and duties of the Surviving Corporation.
2.4 Articles of Incorporation; By-laws.
(a) The Articles of Incorporation of FLCI, as in effect
immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended in
accordance with the Oregon Law and said Articles of Incorporation except that
said Articles of Incorporation shall be amended as of the Effective Time to
the form mutually agreed upon by the parties.
(b) The By-laws of FLCI, as in effect immediately prior to the
Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter amended in accordance with the Oregon Law, the Articles of
Incorporation of the Surviving Corporation and said By-laws except that said
By-laws shall be amended as of the Effective Time to the form mutually agreed
upon by the parties.
2.5 Directors and Officers.
(a) The seven individuals listed in Schedule 2.5(a) shall comprise
the full Board of Directors of the Surviving Corporation as of the Effective
Time.
(b) The officers of USOL immediately prior to the Effective Time
shall comprise the officers of the Surviving Corporation as of the Effective
Time.
2.6 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of FLCI or USOL or the holders of
any securities issued by either of them:
(a) Each share of USOL Common Stock issued and outstanding
immediately prior to the Effective Time shall be cancelled and converted,
subject to Sections 2.6(e), 2.7(f) and 2.13, into the right to receive one (1)
share of validly issued, fully paid and nonassessable FLCI Common Stock.
(b) Each share of USOL Series A Preferred Stock and USOL Series B
Preferred Stock issued and outstanding immediately prior to the Effective Time
shall be cancelled and converted, subject to Sections 2.6(e), 2.7(f) and 2.13,
into the right to receive one (1) share of validly issued, fully paid and
nonassessable FLCI Series A Preferred Stock or FLCI Series B Preferred Stock,
respectively. The terms of the FLCI Preferred Stock that will be issued
hereunder will be identical to the terms of the USOL Preferred Stock.
Exhibits 2.6(b)-1 and 2.6(b)-2 set forth the forms of the Certificates of
Designations of Preferences, Limitations and Relative Rights with respect to
the USOL Series A Preferred Stock and the USOL Series B Preferred Stock,
respectively.
(c) Each USOL Other Warrant issued and outstanding immediately
prior to the Effective Time shall be cancelled and converted, subject to
Sections 2.6(e), 2.7(f) and 2.13, into the right to receive one (1) FLCI Other
Warrant to purchase the same number of shares as the USOL Other Warrant; and
each USOL TSD Warrant issued and outstanding immediately prior to the
Effective Time shall be converted into the right to receive one (1) FLCI TSD
Warrant to purchase the same number of shares as the USOL TSD Warrant. The
FLCI Other Warrants which will be issued hereunder shall be identical to the
terms of the USOL Other Warrants. Exhibits 2.6(c)-1 and 2.6(c)-2 set forth
the form of the USOL Other Warrants and the USOL TSD Warrants, respectively.
(d) Each share of USOL Stock held in the treasury of USOL and each
share of USOL Stock owned by any direct or indirect subsidiary of USOL
immediately prior to the Effective Time (the "Cancelled Shares") shall, by
virtue of the Merger and without any action on the part of the holder thereof,
cease to be outstanding and be cancelled and retired without payment of any
consideration therefor.
(e) No fraction of a share of FLCI Stock shall be issued, but in
lieu thereof, each holder of USOL Stock who would otherwise be entitled to a
fraction of a share of FLCI Stock (after aggregating all fractional shares of
FLCI Stock to be received by such holder and providing for any shares to be
withheld pursuant to Section 2.7(f), it being the intention of the parties
that no holder of USOL Stock will receive cash in an amount equal to or
greater than the value of one full share of FLCI Stock), shall receive from
FLCI an amount of cash (rounded to the nearest cent), without interest, equal
to the product of (i) such fraction, multiplied by (ii) $2.00, subject to
Section 2.13.
(f) Each USOL Stock Option issued and outstanding immediately
prior to the Effective Time shall be cancelled and converted, pursuant to the
provisions of Section 6.5, into an option to acquire, on the same terms and
conditions as were applicable under such USOL Stock Option prior to the
Effective Time, the whole number of shares of FLCI Common Stock as the holder
of such USOL Stock Option would have been entitled to receive pursuant to the
Merger had such holder exercised such option in full immediately prior to the
Effective Time (not taking into account whether or not such option was in fact
exercisable).
2.7 Exchange of Certificates.
(a) As of the Effective Time, FLCI shall supply, or cause to be
supplied, to or for the account of a bank or trust company to be designated by
FLCI (the "Exchange Agent"), in trust for the benefit of the holders of USOL
Stock (other than the Cancelled Shares), for exchange in accordance with this
Section 2.7, certificates evidencing the FLCI Stock issuable pursuant to
Sections 2.6(a) and 2.6(b) in exchange for outstanding USOL Stock and all cash
required to be paid pursuant to Sections 2.6(e) and 2.7(c).
(b) As soon as reasonably practicable after the Effective Time,
FLCI shall instruct the Exchange Agent to mail to each holder of record of a
certificate or certificates (the "USOL Certificates") which immediately prior
to the Effective Time evidenced outstanding shares of USOL Stock, other than
Cancelled Shares, (i) a letter of transmittal, which letter shall specify,
among other conditions, that delivery shall be effected, and risk of loss and
title to the USOL Certificates shall pass, only upon proper delivery of the
USOL Certificates to the Exchange Agent, and (ii) instructions to effect the
surrender of the USOL Certificates in exchange for the certificates evidencing
shares of FLCI Stock (the "FLCI Certificates") and, in lieu of any fractional
shares thereof, cash. Upon surrender of a USOL Certificate for cancellation
to the Exchange Agent , together with such letter of transmittal, duly
executed, and such other customary documents as may be reasonably required by
FLCI or the Exchange Agent, the holder of such USOL Certificate shall be
entitled to receive in exchange therefor (A) FLCI Certificates evidencing that
whole number of shares of FLCI Stock which such holder has the right to
receive in respect of the shares of USOL Stock formerly evidenced by such USOL
Certificate in accordance with applicable provisions hereof; (B) any dividends
or other distributions to which such holder is entitled pursuant to Section
2.7(c); and (C) cash in lieu of a fractional share of FLCI Stock to which such
holder is entitled pursuant to Section 2.6(e) (such FLCI Stock, rights,
dividends, distributions and cash in lieu of fractional shares together with
any amounts to be withheld pursuant to Section 2.7(f) being collectively
referred to as the "Merger Consideration"), and the USOL Certificate so
surrendered shall forthwith be cancelled. In the event of a transfer of
ownership of shares of USOL Stock which is not registered in the transfer
records of USOL as of the Effective Time, FLCI Stock and cash may be issued
and paid in accordance with this Article II to a transferee if the applicable
certificate is presented to the Exchange Agent, accompanied by all documents
required by law to evidence and effect such transfer pursuant to this Section
2.7(b) and by evidence that any applicable stock transfer taxes have been
paid. Until so surrendered, each outstanding USOL Certificate which
represented shares of USOL Stock, shall be deemed from and after the Effective
Time, for all corporate purposes other than the payment of dividends, to
evidence the ownership of the number of full shares of FLCI Stock into which
such shares of USOL Stock may be exchanged in accordance herewith and the
right to receive an amount in cash in lieu of the issuance of any fractional
shares in accordance with Section 2.6(e).
(c) No dividends or other distributions with respect to FLCI Stock
with a record date after the Effective Time shall be paid to the holder of any
unsurrendered USOL Certificate with respect to the FLCI Stock such holder is
entitled to receive until such holder shall surrender such USOL Certificate.
Subject to applicable law, following the surrender of any such USOL
Certificate, there shall be paid to the record holder of the FLCI Certificates
issued in exchange therefor, without interest, at the time of such surrender,
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of FLCI
Stock.
(d) If any FLCI Certificate is to be issued in a name other than
that in which the USOL Certificate surrendered in exchange therefor is
registered, it shall be a condition of the issuance thereof that the USOL
Certificate so surrendered shall be properly endorsed and otherwise in proper
form for transfer and that the Person requesting such exchange shall have paid
to FLCI, or any agent designated by FLCI, any transfer or other taxes required
by reason of the issuance of an FLCI Certificate in any name other than that
of the registered holder of the USOL Certificate surrendered.
(e) FLCI and USOL shall have no liability to any holder of USOL
Stock for any Merger Consideration (or dividends or distributions with respect
thereto) which are delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(f) FLCI or the Exchange Agent shall be entitled to deduct and
withhold from the Merger Consideration otherwise payable to any holder of USOL
Stock such amounts as FLCI or the Exchange Agent may be required to deduct and
withhold with respect to any provision of Federal, state, local or foreign Tax
laws. To the extent that amounts are so withheld by FLCI or the Exchange
Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares in respect of which
such deduction and withholding was made by FLCI or the Exchange Agent.
2.8 Stock Transfer Books. At the Effective Time, the stock transfer
books of USOL shall be closed, and there shall be no further registration of
transfers of USOL Stock on the records of USOL.
2.9 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of FLCI Common Stock held by a holder who has exercised
appraisal rights for such shares in accordance with the applicable provisions
of the Oregon Law and who, as of the Effective Time, has not effectively
withdrawn or lost such appraisal rights (the "Dissenting Shares"), shall not
be converted into, or represent a right to receive, the Merger Consideration
pursuant to Section 2.7(b), but the holder thereof shall be entitled only to
such rights as are granted by the Oregon Law with respect to such Dissenting
Shares.
(b) FLCI shall give USOL prompt written notice of any demands
received by FLCI to require FLCI to purchase Dissenting Shares, the withdrawal
of any such demands, and any other notices or instruments served pursuant to
the Oregon Law and received by FLCI. FLCI shall not, except with the prior
written consent of USOL, voluntarily make any payment with respect to any
Dissenting Shares or offer to settle, or settle, any such demands with respect
thereto.
2.10 No Further Ownership Rights in USOL Stock. The Merger Consideration
delivered upon the surrender of USOL Certificates in accordance with the terms
hereof shall be deemed to have been delivered in full satisfaction of all
rights pertaining to such USOL Certificates, and there shall be no further
registration of transfers on the records of the Surviving Corporation of
shares of USOL Stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, USOL Certificates are presented to the
Surviving Corporation for any reason, they shall be cancelled and converted as
provided in this Article II.
2.11 Lost, Stolen or Destroyed Certificates. In the event any USOL
Certificate shall have been lost, stolen or destroyed (a "Lost USOL
Certificate"), the Exchange Agent shall, upon the making of an affidavit of
that fact by the registered owner thereof, deliver to the registered owner
thereof such Merger Consideration as may be required pursuant to Sections 2.6
and 2.7; provided, however, that FLCI may, in its sole discretion and as a
condition precedent to the delivery of such Merger Consideration, require the
registered owner of such Lost USOL Certificate to deliver a bond in such sum
as it may reasonably direct as indemnity against any claim that may be made
against FLCI or the Exchange Agent with respect to the Lost USOL Certificate.
2.12 Tax and Accounting Consequences. It is intended by FLCI and USOL
that the Merger shall constitute a reorganization within the meaning of
Section 368(a) of the Code. FLCI and USOL hereby adopt this Agreement as a
"plan of reorganization" within the meaning of Sections 1.368-2(g) and
1.368-3(a) of the United States Treasury Regulations.
2.13 Adjustments. If, between the date of this Agreement and the
Effective Time, the outstanding shares of FLCI Common Stock shall be changed
into a different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares
or readjustment, or a stock dividend thereon shall be declared with a record
date prior to the Effective Time, the amount of consideration to be received
pursuant to this Article II in exchange for each outstanding share of USOL
Stock or USOL Warrant shall be correspondingly adjusted.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FLCI
FLCI hereby represents and warrants to USOL that each of the following is
true, correct and complete as of the date hereof:
3.1 Organization.
(a) FLCI is a corporation duly organized, validly existing and in
good standing under the laws of Oregon. FLCI has full corporate power and
authority to own, lease and operate its properties and to carry on its
business as such business is now conducted and proposed to be conducted. The
copies of the Articles of Incorporation of FLCI, certified by the Secretary of
State of Oregon, and the By-laws of FLCI, each of which have been delivered
to USOL by FLCI, are true and complete copies thereof, and are in full force
and effect. FLCI is not in violation of its Articles of Incorporation or By-
laws.
(b) FLCI has no subsidiaries and does not, directly or indirectly,
own or have the contractual right or obligation to acquire any equity interest
in any other corporation, partnership, joint venture, trust or other business
organization. Except as disclosed in Schedule 3.1, FLCI has not made any
investment in, loan to, or advance of cash or other extension of credit to any
Person other than in the ordinary course of its business.
3.2 Capitalization. The authorized capital stock of FLCI consists of
20,000,000 shares of common stock, no par value per share, of which 3,615,617
shares are currently issued and outstanding, and 1,000,000 shares of preferred
stock, no par value per share, none of which shares are currently issued or
outstanding, and no designation of any series of preferred stock has been
made. All of the outstanding shares of FLCI's capital stock have been duly
authorized, are validly issued, fully paid and non-assessable, and the holders
thereof are not entitled to cumulative voting rights or preemptive rights.
There are no obligations, contingent or otherwise, of FLCI to repurchase,
redeem or otherwise acquire any shares of FLCI's capital stock or to provide
funds to or make any investment (in the form of a loan, capital contribution
or otherwise) in any entity. Except as set forth in Schedule 3.2 or 3.14(c),
there are no outstanding options to purchase, registration rights, or
warrants, privileges or rights to subscribe to or purchase, any shares of
FLCI's capital stock or securities issued by FLCI convertible into or
exchangeable for shares of FLCI's capital stock or other securities of FLCI or
commitments, understandings or intentions to issue any additional shares or
options, warrants, privileges or rights to subscribe for shares of FLCI's
capital stock. At the Effective Time, the authorized capital stock of FLCI
will consist of 50,000,000 shares of FLCI Common Stock and 5,000,000 shares of
FLCI Preferred Stock, 1,700,000 shares of which shall be designated as the
"FLCI Series A Preferred Stock" and 300,000 shares of which shall be
designated as the "FLCI Series B Preferred Stock."
3.3 SEC Filings. FLCI has filed all forms, reports and documents
required to be filed with the SEC under the Securities Act and the Exchange
Act since the date FLCI first registered the FLCI Common Stock under the
Exchange Act and has delivered to USOL true and complete copies of (i) its
Annual Report on Form 10-K for the fiscal year ended December 31, 1998, (ii)
its Quarterly Reports on Form 10-Q for the periods ended September 30, 1998,
and Xxxxx 00, 0000, (xxx) Amendment No. 3 to its Registration Statement on
Form SB-2 filed with the SEC on May 14, 1998, (iv) all other reports or
registration statements filed by FLCI with the SEC since it first registered
the FLCI Common Stock under the Exchange Act, and (v) all amendments,
supplements and exhibits (including, without duplication, exhibits
incorporated by reference) to all such reports and registration statements
(the reports referred to in subsections (i) - (v), collectively, the "FLCI
SEC Reports"). The FLCI SEC Reports (i) were prepared in accordance with the
requirements of the Securities Act or the Exchange Act, as applicable, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
3.4 Qualification in Foreign Jurisdictions. FLCI is duly qualified or
licensed and in good standing as a foreign corporation duly authorized to do
business in each jurisdiction in which the character of the properties owned
or leased or the nature of the activities conducted by it makes such
qualification or licensing necessary, except for any jurisdiction(s) in which
the failure to so qualify would not have a material adverse effect upon FLCI.
Schedule 3.4 lists the jurisdictions in which FLCI is qualified to do business
as a foreign corporation.
3.5 Authority Relative to this Agreement. FLCI has all necessary
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by FLCI and
the consummation by FLCI of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of the Board of Directors of FLCI are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. FLCI has obtained, and has delivered to USOL, separate
Stockholder Support Agreements executed by, and has obtained the proxy of, the
holders of the outstanding shares of FLCI Stock listed in Schedule 3.5 in
favor of the approval and adoption of the Merger. The Board of Directors of
FLCI has determined that it is advisable and in the best interest of FLCI's
stockholders for FLCI to enter into the Merger with USOL upon the terms and
subject to the conditions of this Agreement. This Agreement has been duly and
validly executed and delivered by FLCI and, assuming the due authorization,
execution and delivery by USOL, constitutes a legal, valid and binding
obligation of FLCI enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization and similar laws from time to time in effect that
affect creditors' rights generally, and by legal and equitable limitations on
the availability of specific remedies.
3.6 No Conflict; Required Filings and Consents.
(a) Except as set forth in Schedule 3.6(a), the execution and
delivery of this Agreement by FLCI does not, and the performance of this
Agreement by FLCI will not, (i) conflict with or violate the Articles of
Incorporation or By-laws of FLCI, (ii) conflict with or violate any Law
applicable to FLCI or by which any of its properties is bound or affected,
(iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would constitute a default), or impair FLCI's
rights or alter the rights or obligations of any third party under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any FLCI Material Contract, (iv) result in the termination of, or accelerate
the payment or performance required by, or result in the creation of a Lien on
any of the properties or assets of FLCI pursuant to any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which FLCI is a party or by which FLCI, or any of
its properties, is bound or affected, or (v) give any Person the right to
require FLCI to purchase assets from or sell assets to such Person or trigger
a "change of control" provision in any Contract to which FLCI is a party;
except in the case of clause (ii) for such violations or conflicts that would
not, individually or in the aggregate, have a material adverse effect on FLCI.
(b) The execution and delivery of this Agreement by FLCI does not,
and the performance of this Agreement and the transactions contemplated hereby
by FLCI will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any Governmental Authority, except (i) for
applicable requirements of any state Governmental Authorities as set forth in
Schedule 3.6(b), the Securities Act, the Exchange Act, state securities laws,
Nasdaq, and the filing and recordation of appropriate merger or other
documents as required by the Oregon Law and the Delaware Law, and (ii) where
the failure to obtain such consents, approvals, authorizations or permits, or
to make such filings or notifications, would not prevent or delay consummation
of the Merger, or otherwise prevent or delay FLCI from performing its
obligations under this Agreement, or would not otherwise have a material
adverse effect upon FLCI.
3.7 Compliance with Laws; Permits. To FLCI's knowledge, the operation
of its business has been and is being conducted in accordance with all Laws
applicable thereto. No investigation by any Governmental Authority or alleged
violation of or noncompliance with such Laws is pending or, to the best
knowledge of FLCI, threatened. FLCI holds all of the Permits listed in
Schedule 3.7, and no other Permits are currently necessary for the lawful
operation of FLCI's business, except where the failure to possess the same
would not have a material adverse effect on the financial condition, results
of operations or business of FLCI. All Permits listed are in full force and
effect. No violation of any Permit has occurred which is continuing, and no
proceeding is pending or threatened to revoke or limit any Permit. FLCI holds
all Permits of the FCC necessary for the lawful conduct of its business (the
"FLCI FCC Permits"), except where failure to possess the same would not have a
material adverse effect on the financial condition, results of operations or
business of FLCI. FLCI is in compliance with the terms of all FLCI FCC
Permits and the applicable rules and regulations of the FCC in all material
respects.
3.8 Financial Statements. FLCI has delivered to USOL FLCI's audited
balance sheets as at December 31, 1997 and December 31, 1998 (the "FLCI
Balance Sheets"), and FLCI's audited statements of income and changes in
financial position for the years then ended (collectively, with the FLCI
Balance Sheets, the "FLCI Financial Statements"). The FLCI Financial
Statements have been audited by the independent public accounting firm of KPMG
Peat Marwick, LLP. FLCI has also delivered to USOL FLCI's unaudited balance
sheets as at March 31, 1998, March 31, 1999 and May 31, 1999 (the "FLCI
Unaudited Balance Sheets"), and FLCI's unaudited statements of income and
changes in financial position for the three month period ended March 31, 1999
(collectively, with the FLCI Unaudited Balance Sheets, the "FLCI Unaudited
Financial Statements"). The FLCI Financial Statements and the FLCI Unaudited
Financial Statements were prepared in accordance with SEC requirements and
such financial statements (including the notes thereto) were prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except for the absence of footnote disclosures in the FLCI Unaudited
Financial Statements, and except as may be indicated in the notes thereto) and
each fairly presented in all material respects the financial position of FLCI
as at the date thereof and the results of its operations and cash flows for
the periods indicated, except that the FLCI Unaudited Financial Statements
were or are subject to normal and recurring year-end adjustments which are not
in the aggregate material in amount.
3.9 Absence of Certain Changes or Events. Except as reflected in the
FLCI Financial Statements, since December 31, 1998, FLCI has conducted its
business in the ordinary course and there has not occurred: (i) any amendments
or changes in the Articles of Incorporation or By-laws of FLCI; (ii) any
damage to, destruction or loss of any assets of FLCI (whether or not covered
by insurance) that could have a material adverse effect upon FLCI; (iii) any
change by FLCI in its accounting methods, principles or practices; (iv) any
revaluation by FLCI of any of its assets, including, without limitation, the
writing down of the value of capitalized software or inventory or the writing
off of promissory notes or accounts receivable other than in the ordinary
course of business in amounts that would not individually or in the aggregate
have a material adverse effect on FLCI; (v) any sale of a material amount of
property or assets of FLCI; or (vi) any other action or event that would have
required the consent of USOL pursuant to Section 5.1 had such action or event
occurred after the date of this Agreement. Since December 31, 1998, there has
been no material adverse change in the financial condition, results of
operations or business of FLCI.
3.10 Material Contracts.
(a) Schedule 3.10(a) sets forth a true and complete list of (i)
(A) each Contract with respect to which FLCI has any liability or obligation,
contingent or otherwise, involving more than $25,000; or which places any
material limitations on the method of conducting, or scope of, FLCI's
business; (B) all Contracts of FLCI pursuant to which benefits accrue to the
other parties to such Contracts as a result of the Merger; (C) all Contracts
of FLCI with its directors, officers, employees, agents or consultants, or its
Affiliates; (D) all Contracts to which FLCI is a party relating to the
borrowing of money, or the guaranty of any obligation for the borrowing of
money; (E) all Contracts relating to any securities of FLCI or rights in
connection therewith, and (ii) all Contracts which, as of the date hereof,
would be required to be filed by FLCI with the SEC as "material contracts"
pursuant to applicable securities laws ((i) and (ii) being collectively
referred to as the "FLCI Material Contracts"). FLCI is not a party to any
oral Contract, agreement or other arrangement which, if reduced to written
form, would be required to be listed in Schedule 3.10(a).
(b) The FLCI Material Contracts set forth the entire arrangement
and understanding between FLCI and the respective third parties with respect
to the subject matter thereof, and there have been no material amendments or
side or supplemental arrangements to or in respect of any FLCI Material
Contract. FLCI has made available for review by USOL and its representatives
true and correct copies of all FLCI Material Contracts as currently in effect,
and will furnish any further information that USOL may reasonably request in
connection therewith. Each FLCI Material Contract is valid and in full force
and effect and FLCI has performed all material obligations required to be
performed thereunder. FLCI is not in default under or in breach or violation
of any material term of any FLCI Material Contract and, to the knowledge of
FLCI, no third party is in default under any material provision of any FLCI
Material Contract, except, in each such case, for such defaults, breaches or
violations which would not, individually or in the aggregate, have a material
adverse effect on FLCI. Each FLCI Material Contract is enforceable against
FLCI in accordance with its terms and, to the knowledge of FLCI, is
enforceable against the other party thereto.
3.11 Accounts Receivable. Each account receivable of FLCI summarized on
the FLCI Financial Statements and the FLCI Unaudited Financial Statements
(collectively, the "FLCI Accounts Receivable") represented, at the date of the
applicable financial statement, (a) a sale made in the ordinary course of
business and which arose pursuant to an enforceable contract for an
undisputed, bona fide sale of goods or for services performed, and FLCI had
performed all of its obligations to produce the goods or perform the services
to which such FLCI Accounts Receivable relates; (b) except as adequately
reserved against in the FLCI Balance Sheets and the FLCI Unaudited Balance
Sheets, and except for any amounts the failure of which to collect would not
have, individually or in the aggregate, a material adverse effect on FLCI,
amounts owed which were not more than 30 days past due as of the applicable
date, and which were not subject to any claim or reduction, counterclaim, set-
off, recoupment or other claim for credit, allowances or adjustments by the
Person owing such amount; and (c) except as reserved against on such balance
sheets, to FLCI's knowledge, the FLCI Accounts Receivable were collectible in
full within 60 days from the date of the applicable financial statement, in at
least the amount at which they are carried on the books of FLCI. FLCI has not
sold, assigned, or otherwise encumbered the FLCI Accounts Receivable.
3.12 No Undisclosed Liabilities. Except as set forth on Schedule 3.12,
FLCI has no liabilities (absolute, accrued, contingent or otherwise) which
are, in the aggregate, material to the business, operations or financial
condition of FLCI, taken as a whole, except (a) liabilities adequately
provided for in the FLCI Financial Statements, (b) contractual liabilities
incurred in the ordinary course of business and not required under GAAP to be
reflected on the FLCI Financial Statements, (c) liabilities incurred in
connection with this Agreement, or (d) other liabilities reflected on the FLCI
Unaudited Balance Sheets or incurred since the Balance Sheet Date in the
ordinary course of business which are not, in the aggregate, material to the
business operations or financial condition of FLCI.
3.13 Absence of Litigation. There are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of FLCI, threatened
against FLCI, or any properties or rights of FLCI before any court, arbitrator
or administrative or Governmental Authority or body, domestic or foreign,
that, individually or in the aggregate, could have a material adverse effect
upon FLCI.
3.14 Employee Matters.
(a) Except as specifically described in Schedule 3.14(a), FLCI has
no employee benefit plans (including, but not limited to, pension plans and
health or welfare plans), arrangements or understandings, whether formal or
informal ("FLCI Employee Plans"). FLCI does not now and has never contributed
to a "multi-employer plan" as defined in Section 400(a)(3) of ERISA. FLCI has
complied with all applicable provisions of ERISA and all rules and regulations
promulgated thereunder, and neither FLCI nor any trustee, administrator,
fiduciary, agent or employee thereof has at any time been involved in a
transaction that would constitute a "prohibited transaction" within the
meaning of Section 406 of ERISA as to any covered plan of FLCI. FLCI is not a
party to any collective bargaining or other labor union agreement. FLCI has
not, within the past five (5) years had, or been threatened with, any labor
union activities, work stoppages or other labor trouble with respect to its
employees.
(b) FLCI has made available for review by USOL and its
representatives and Schedule 3.14(b) sets forth (i) a list of true and
complete copies of all employment agreements with officers and directors of
FLCI; (ii) a list of true and complete copies of all agreements with
consultants where FLCI has obligations to make annual cash payments in an
amount exceeding $25,000; (iii) a schedule listing all officers of FLCI who
have executed a non-competition agreement with FLCI; (iv) a list of true and
complete copies of all severance agreements, programs and policies of FLCI
with or relating to its employees, excluding programs and policies required to
be maintained by law; and (v) a list of true and complete copies of all plans,
programs, agreements and other arrangements of FLCI with or relating to its
employees which contain change-in-control provisions.
(c) Schedule 3.14(c) sets forth a true and complete list of each
outstanding option to purchase FLCI Stock as of the date hereof, together
with the identity of the holder of such option, the number of shares of FLCI
Stock subject to such option, the date of grant of such option, the extent to
which such option is or will become vested, the option price of such option
(to the extent determined as of the date hereof), whether such option is
intended to qualify as an ISO, and the expiration date of such option.
Schedule 3.14(c) also sets forth the total number of such ISOs and any
nonqualified options.
3.15 Labor Matters. FLCI has been and currently is conducting its
business in full compliance with all Laws relating to employment and
employment practices, terms and conditions of employment, wages and hours and
nondiscrimination in employment. FLCI's relationship with its employees is
good, and there is no labor strike, dispute, slow-down or work stoppage
actually pending or threatened against or involving FLCI which might affect in
any material way its business. None of the employees of FLCI is covered by
any collective bargaining agreement, no collective bargaining agreement is
currently being negotiated, and, to the best knowledge or FLCI, no attempt is
currently being made to organize any employees of FLCI to form or enter a
labor union or similar organization. FLCI has not experienced any work
stoppage or other material labor difficulty in the last five years.
3.16 Restrictions on Business Activities. Except for this Agreement,
there is no material agreement, judgment, injunction, order or decree binding
upon FLCI which has or could reasonably be expected to have the effect of
prohibiting or impairing any material business practice of FLCI, the
acquisition of property by FLCI or the conduct of business by FLCI as
currently conducted or as proposed to be conducted by FLCI following the
Merger.
3.17 Real Property.
(a) FLCI does not own any real property. Schedule 3.17(a) lists
all leases pursuant to which FLCI holds any real property ("FLCI Real Property
Leases") and includes complete, accurate and insurable legal descriptions of
such leased real property. No parcel of land subject to an FLCI Real Property
Lease relies on or regularly makes use of access to the nearest public road or
right-of-way over land owned by others, except where such access is by means
of one or more valid recorded easements not subject to divestiture, the terms
of which have been disclosed to USOL prior to the date hereof. FLCI has
delivered to USOL true and complete copies of all FLCI Real Property Leases,
together with copies of all reports of any engineers, environmental
consultants or other consultants in its possession relating to any of the
property subject to an FLCI Real Property Lease. All of the FLCI Real
Property Leases are valid, enforceable and effective in accordance with their
terms; all rentals, royalties and other monetary obligations thereunder
payable have been fully paid; there is not under any FLCI Real Property Lease
any existing or claimed default by FLCI or any other party thereto; there is
not under any FLCI Real Property Lease any event or condition, which with or
without notice or the passage of time, or both, would constitute a default by
FLCI; and FLCI enjoys peaceable and undisturbed possession under all FLCI Real
Property Leases. None of the FLCI Real Property Leases are encumbered by any
Liens, other than Permitted Liens.
(b) Each separate parcel of real estate subject to an FLCI Real
Property Lease has adequate water supply, storm and sanitary sewer facilities,
access to telephone, gas and electrical connections, fire protection, drainage
and other public utilities, and has parking facilities that meet all
requirements imposed by applicable Laws.
(c) There is no pending or, to the best knowledge of FLCI,
threatened or proposed proceeding or governmental action to modify the zoning
classification of, or to condemn or take by the power of eminent domain (or to
purchase in lieu thereof), or to classify as a landmark, or to impose special
assessments on, or otherwise to take or restrict in any way the right to use,
develop or alter, all or any part of the real property subject to the FLCI
Real Property Leases.
3.18 Equipment and Vehicles. Schedule 3.18-1 sets forth a true and
complete list of all equipment owned by FLCI ("FLCI Equipment"), other than
items acquired by FLCI in the ordinary course of business from the date hereof
through the Closing (and FLCI will identify in writing to USOL, prior to the
Closing, each item so acquired which has a book value of $10,000 or more).
Schedule 3.18-2 lists all leases by FLCI of any item of personal property used
in connection with the Business ("FLCI Personal Property Leases"). All of the
FLCI Equipment and all of the other personal property leased by FLCI under the
FLCI Personal Property Leases are presently utilized by FLCI in the ordinary
course of its business. FLCI has delivered to USOL true and complete copies
of all FLCI Personal Property Leases.
3.19 Inventories. FLCI does not maintain inventories.
3.20 Taxes.
(a) Except as set forth in Schedule 3.20(a), FLCI has completed
and timely filed with the appropriate taxing authority all Tax Returns
required to be filed by it through the date hereof and will timely file any
Tax Returns required to be filed on or prior to the Closing. FLCI has paid
and discharged all Taxes due in connection with or with respect to all Tax
Returns and has paid all other Taxes when due, and there are no other Taxes
that would be due if asserted by a taxing authority, except such as are being
contested in good faith by appropriate proceedings (to the extent that any
such proceedings are required) and with respect to which FLCI is maintaining
reserves to the extent currently required in all respects adequate for their
payment. As of the time of filing, all Tax Returns were (and, as to Tax
Returns not filed as of the date hereof, will be) complete and correct in all
material respects. FLCI has complied in all material respects with all
applicable Laws relating to the payment and withholding of Taxes and has
timely withheld from employee wages or other payments to creditors or
independent contractors or stockholders and paid over to the proper taxing
authority all amounts required to be so withheld and paid over. Except as set
forth in Schedule 3.20(a), no claim has ever been made by a taxing authority
in a jurisdiction where FLCI does not file Tax Returns that it is or may be
subject to Taxes in that jurisdiction. FLCI has disclosed to the relevant
taxing authority any position taken where the failure to make such disclosure
would enable the taxing authority to subject a taxpayer to penalties or
additions to tax that would have a material adverse effect upon FLCI. No
taxing authority or agency is now asserting or, to FLCI's knowledge, is
threatening to assert against FLCI any deficiency or claim for additional
Taxes other than additional Taxes with respect to which an adequate reserve
(in conformity with GAAP) has been established, as set forth in the most
recently filed FLCI SEC Report. FLCI is not currently being audited by any
taxing authority. There are no Tax liens on any assets of FLCI. No extension
or waiver of a statute of limitations with respect to Taxes or Tax Returns is
currently in effect for FLCI. The accruals and reserves for Taxes are in all
material respects adequate to cover all Taxes accruable and unpaid through the
Closing Date (including interest and penalties, if any, thereon and Taxes
being contested) in accordance with GAAP, consistently applied with past
practice. No material issue has been raised by a taxing authority on audit
that is of a recurring nature and that would have a material adverse effect
upon the Taxes of FLCI. FLCI has delivered to USOL for inspection all Tax
Returns of, and all examination reports and statements of deficiency assessed
against or agreed to by, FLCI for which the applicable statute of limitations
has not expired. All material elections with respect to Taxes affecting FLCI
as of the date hereof are set forth in Schedule 3.20(a). FLCI has not entered
into any transaction already recharacterized or which could be recharacterized
with respect to Taxes on the grounds of tax avoidance, bad faith, or tax
fraud.
(b) FLCI has not made any payments, is not obligated to make any
payments and is not a party to any agreement, contract or arrangement,
including this Agreement, that may result, separately or in the aggregate, in
the payment of any "excess parachute payment" within the meaning of Section
280G of the Code or any payment that will not be deductible under Section
162(m) of the Code. FLCI does not own stock in a passive foreign investment
company within the meaning of Section 1296 of the Code. FLCI has not filed a
consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of any asset owned by FLCI. No
property used by FLCI is property that FLCI is or will be required to treat
as being owned by another Person pursuant to the provisions of Section
168(f)(8) of the Internal Revenue Code of 1954 as it existed prior to the
enactment of the Tax Reform Act of 1986 or is "tax-exempt use property" within
the meaning of Section 168(h) of the Code. FLCI has not entered into any
inter-company transaction within the meaning of Section 1.1502-13(b)(1) of the
United States Treasury Regulations as to which deferred gains or losses have
not been restored. FLCI does not have and has not had a branch in any foreign
country. FLCI is not a party to any tax allocation or tax sharing agreements
or documentation of similar arrangements. FLCI has not been and is not a
member of an affiliated group (within the meaning of Section 1504(a) of the
Code or a similar group defined under a similar provision of state, local, or
foreign law, filing a consolidated tax return, and FLCI is not liable for the
Taxes of any other Person or entity under United States Treasury Regulation
Section 1.1502-6 (or any similar provision of state, foreign or local law), or
as a transferee or successor, or by contract, or otherwise. FLCI operates at
least one significant historic business line, or owns at least a significant
portion of its historic business assets, in each case within the meaning of
Section 1.368-1(d) of the United States Treasury Regulations. FLCI is not an
"investment company" as defined in Section 368(a)(2)(F) of the Code.
3.21 Environmental Matters. FLCI (i) has obtained all required
Environmental Permits; (ii) is in substantial compliance with all material
terms and conditions of such required Environmental Permits, and also is in
substantial compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in the Environmental Laws or contained in any regulation, code,
plan, order, decree, judgment, notice or demand letter issued, entered,
promulgated or approved thereunder; (iii) as of the date hereof, is not aware
of and has not received notice of any event, condition, circumstance,
activity, practice, incident, action or plan which would interfere with or
prevent continued compliance with or which would give rise to any material
common law or statutory liability, or otherwise form the basis of any claim,
action, suit or proceeding, based on or resulting from FLCI's (or any of its
agent's) manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling, or the emission, discharge or release into
the environment, of any pollutant, contaminant or hazardous or toxic material
or waste, and (iv) has taken all actions necessary under applicable
requirements of Laws, including the Environmental Laws, to register any
products or materials required to be registered by FLCI (or any of its agents)
thereunder.
3.22 Brokers. No investment bank, broker or finder is entitled to any
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of FLCI.
3.23 Interested Party Transactions. Except as set forth in Schedule
3.23, since the effective date of FLCI's Registration Statement and Prospectus
dated July 28, 1998, no event has occurred that would be required to be
reported as a Certain Relationship or Related Transaction, pursuant to Item
404 of Regulation S-K promulgated by the SEC.
3.24 Insurance Policies. There are no disputes with underwriters of
FLCI's insurance policies or bonds, and all premiums due and payable with
respect thereto have been paid. There are no pending or, to the best
knowledge of FLCI, threatened terminations or premium increases with respect
to any of such insurance policies or bonds and, to the best knowledge of FLCI,
there is no condition or circumstance applicable to FLCI's business which is
likely to result in such termination or increase. FLCI's business and the
assets insured by such insurance policies are in compliance with all material
conditions contained in such insurance policies or bonds; and such insurance
policies are valid and in full force.
3.25 Vote Required. The affirmative vote of the holders of a majority of
the outstanding shares of FLCI Common Stock is the only vote of the holders of
any class or series of FLCI's capital stock necessary under its Articles of
Incorporation, By-laws, applicable law and the rules of the National
Association of Securities Dealers, Inc., or Nasdaq to approve the Merger and
the other transactions contemplated hereby.
3.26 Other Negotiations. FLCI is not engaged in discussions or
negotiations with any Person or Persons with respect to, and has not solicited
or furnished any information to any Person or Persons who, to FLCI's
knowledge, is or are currently contemplating negotiations or an offer
regarding, a consolidation or merger or other business combination,
recapitalization, liquidation, or similar transaction, or any other
transaction which could be conditioned upon, or otherwise require, the
termination of this Agreement.
3.27 Full Disclosure.
(a) No statement contained in this Agreement or in any certificate
or schedule furnished or to be furnished by or on behalf of FLCI to USOL
pursuant to this Agreement, when taken together with all other statements
contained herein or in other certificates and schedules furnished pursuant to
this Agreement, contains any untrue statement of a material fact or omits to
state any material fact necessary, in the light of the circumstances under
which it was made, in order to make the statements herein or therein not
misleading.
(b) The information supplied by FLCI for inclusion or
incorporation by reference in the proxy statement to be sent to the
stockholders of FLCI in connection with the meeting of the stockholders of
FLCI to consider the Merger and related matters (the "FLCI Stockholders'
Meeting") and relating to the FLCI Stock to be issued in connection with the
Merger (such proxy statement as amended or supplemented being hereinafter
referred to as the "Proxy Statement") shall not (i) at the time the Proxy
Statement (or any amendment thereof or supplement thereto) is first mailed to
holders of FLCI Stock, (ii) at the time of the FLCI Stockholders' Meeting, and
(iii) at the Effective Time, contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they are made, not misleading. If at any time prior to the Effective Time any
event or circumstance relating to FLCI or any of its Affiliates or its or
their respective officers or directors should be discovered by FLCI which
should be set forth in an amendment or a supplement to the Proxy Statement,
FLCI shall promptly inform USOL of such event or circumstance.
3.28 Anti-takeover Law. Neither the entering into this Agreement nor the
consummation by FLCI of the transactions contemplated hereby will result in
the prohibition of any business combination pursuant to Sections 60.801 -
60.845 of the Oregon Law.
3.29 Intellectual Property.
(a) Title. Schedule 3.29(a) sets forth a true and complete list of all
of the Intellectual Property that is owned by FLCI and primarily related to,
currently used in, held for current use in connection with, or currently
necessary for the conduct of, or otherwise material to its business (the "FLCI
Intellectual Property Assets") other than Intellectual Property that is both
not registered or subject to application or registration and not material to
its business as currently conducted. The FLCI Intellectual Property Assets
comprise all of the Intellectual Property necessary for FLCI to conduct and
operate its business as it is now being conducted by FLCI.
(b) No Infringement. The conduct of FLCI's business does not
infringe or otherwise conflict with any rights of any Person in respect of any
Intellectual Property. Except as set forth in Schedule 3.29(b), to the best
knowledge of FLCI, none of the FLCI Intellectual Property Assets is being
infringed or otherwise used or available for use by any other Person.
(c) Licensing Arrangements. Schedule 3.29(c) sets forth all
agreements or arrangements currently in effect (i) pursuant to which FLCI has
licensed FLCI Intellectual Property Assets to, or the use of FLCI Intellectual
Property Assets has been otherwise permitted (through settlement or similar
agreements) by, any other Person and (ii) pursuant to which FLCI has had
Intellectual Property licensed to it or has otherwise been permitted to use
Intellectual Property (through settlement or similar agreements). All of the
agreements or arrangements set forth in Schedule 3.29(c): (x) are in full
force and effect in accordance with their terms and no default exists
thereunder by FLCI, or to the best knowledge of FLCI, by any other party
thereto, (y) are free and clear of all Liens, other than Permitted Liens and
(z) do not contain any change-in-control or other terms or conditions that
will become applicable or inapplicable as a result of the transactions
contemplated by the Agreement. FLCI has delivered to USOL true and complete
copies of all licenses and arrangements (including amendments) set forth in
the Schedule 3.29(c).
(d) No Intellectual Property Litigation. No claim or demand of
any Person has been made nor is there any proceeding that is pending or, to
the best knowledge of FLCI, threatened, which (i) challenges the rights of
FLCI in respect of any FLCI Intellectual Property Assets, (ii) asserts that
FLCI is infringing or otherwise in conflict with, or is, required to pay any
royalty, license fee, charge or other amount with regard to any Intellectual
Property, or (iii) claims that any default exists under any agreement or
arrangement listed in Schedule 3.29(c). None of the FLCI Intellectual
Property Assets is subject to any outstanding order, ruling, decree, judgment
or stipulation by or with any court, arbitrator, or administrative agency, or
any Governmental Authority, or has been the subject of any litigation, whether
or not resolved in favor of FLCI.
(e) Due Registration, Etc. Schedule 3.29(e) sets forth the filing
offices, domestic or foreign, where the FLCI Intellectual Property Assets have
been registered, issued or filed. FLCI has taken such other actions that FLCI
considers reasonably necessary to ensure full protection under any applicable
laws or regulations, and such registrations, filings, issuances and other
actions remain in full force and effect, in each case to the extent material
to its business.
(f) Use of Name and Xxxx. There are, and immediately after the
Closing will be, no contractual restriction or limitations pursuant to any
orders, decisions, injunctions, judgments, awards or decrees of any
Governmental Authority on FLCI's right to use the name and xxxx "FIRSTLINK" in
the conduct of its business as presently carried on.
3.30 Absence of Certain Business Practices. To the best knowledge of
FLCI, neither FLCI nor any officer, employee or agent of FLCI, nor any other
Person acting on their behalf, has, directly or indirectly, since January 1,
1998 given or agreed to give any gift or similar benefit to any customer,
supplier, governmental employee or other Person who is or may be in a position
to help or hinder FLCI's business (or assist FLCI in connection with any
actual or proposed transaction relating to its business) (i) which subjected
FLCI to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (ii) which if not given in the past, might have a
material adverse effect, (iii) which if not continued in the future, might
have a material adverse effect or subject FLCI to suit or penalty in any
private or governmental proceeding, or (iv) for the purpose of establishing or
maintaining any concealed fund or concealed bank account.
3.31 Territorial Restrictions. FLCI is not a party to any agreement or
understanding, whether written or oral, with any other Person which restricts
it from carrying on its business anywhere in the world.
3.32 Year 2000 Compliance. All of the computer hardware, software and
information systems, including without limitation the financial, operational
and manufacturing systems, owned or used by FLCI (i) are prior to, during and
after calendar year 2000 A.D. capable of operating in all material respects
without errors relating to date data, including errors relating to date data
which represents or references different calendar centuries or more than one
century, and of providing all date related functionalities, interfaces and
data fields, including the indication of century; (ii) are able to accurately
manage and process data and date-related data (including, but not limited to,
calculating, comparing, sequencing and sorting) from, into and between the
20th and 21st centuries, including single and multiple centuries and leap
years; and (iii) shall not abnormally terminate or provide invalid or
incorrect results due to date or date-related data, specifically including
date data which represents or references different centuries or more than one
century.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF USOL
USOL hereby represents and warrants to FLCI that each of the following is
true, correct, and complete as of the date hereof:
4.1 Organization.
(a) USOL is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. USOL has full corporate
power and authority to own, lease and operate its properties and to carry on
its business as such business is now conducted and proposed to be conducted.
The copies of the Certificate of Incorporation of USOL, certified by the
Secretary of State of the State of Delaware, and the By-laws of USOL, each of
which have been delivered to FLCI by USOL, are true and complete copies
thereof, and are in full force and effect. USOL is not in violation of its
Certificate of Incorporation or its By-laws.
(b) Except as set forth in Schedule 4.1(b), USOL has no
subsidiaries and does not, directly or indirectly, own or have the contractual
right or obligation to acquire any equity interest in any other corporation,
partnership, joint venture, trust or other business organization. USOL is the
record and beneficial owner of all of the capital stock of each of the
corporations listed in Schedule 4.1(b). Except as disclosed in Schedule
4.1(b), USOL has not made any investment in, loan to, or advance of cash or
other extension of credit to any Person, other than in the ordinary course of
its business.
4.2 Capitalization.
(a) The authorized capital stock of USOL consists of (i)
30,000,000 shares of common stock, $.001 par value per share, of which
3,175,000 shares are currently issued and outstanding, and (ii) 2,000,000
shares of Preferred Stock, $.001 par value per share, 1,700,000 shares of
which have been designated as the "Series A Convertible Preferred Stock," of
which 1,262,000 shares are currently issued and outstanding and 300,000 shares
of which have been designated as the "Series B Convertible Preferred Stock,"
of which 218,000 shares are currently issued and outstanding. Exhibits
2.6(b)-1 and 2.6(b)-2 set forth the Certificate of Designations of the USOL
Series A Preferred Stock and the USOL Series B Preferred Stock, respectively.
All of the outstanding shares of capital stock of USOL have been duly
authorized, are validly issued, fully paid and non-assessable, and the holders
thereof are not entitled to cumulative voting rights or preemptive rights.
There are no obligations, contingent or otherwise, of USOL or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of USOL
Common Stock or the capital stock of any Subsidiary or to provide funds to or
make any investment (in the form of a loan, capital contribution or otherwise)
in any such subsidiary or any other entity other than guarantees of bank
obligations of Subsidiaries entered into in the ordinary course of business.
Except as set forth in Schedule 4.2(a), there are no outstanding options to
purchase or warrants, privileges or rights to subscribe to or purchase any
shares of USOL's capital stock or securities issued by USOL convertible into
or exchangeable for shares of USOL's capital stock or other securities of USOL
or commitments, understandings or intentions to issue any additional shares or
options, warrants, privileges or rights to subscribe for shares of USOL's
capital stock.
(b) USOL has obtained a commitment for $35 million of senior notes
(the "Senior Notes") on the terms and conditions described in Schedule 4.2(b).
(c) USOL has no short-term or long-term debt obligations, except
as set forth in Schedule 4.2(c), and except for obligations incurred in the
ordinary course of business in individual amounts not greater than $25,000.
4.3 Qualification in Foreign Jurisdictions. USOL is duly qualified or
licensed and in good standing as a foreign corporation duly authorized to do
business in each jurisdiction in which the character of the properties owned
or leased or the nature of the activities conducted by it makes such
qualification or licensing necessary, except for any jurisdiction(s) in which
the failure to so qualify would not have a material adverse effect upon USOL.
Schedule 4.3 sets forth each state in which USOL is qualified to do business
as a foreign corporation.
4.4 Authority Relative to this Agreement. USOL has all necessary
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by USOL and
the consummation by USOL of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of USOL are necessary to authorize this
Agreement or to consummate the transactions so contemplated. The Board of
Directors of USOL has determined that it is advisable and in the best interest
of USOL's stockholders for USOL to enter into the Merger with FLCI upon the
terms and subject to the conditions of this Agreement. This Agreement has
been duly and validly executed and delivered by USOL and, assuming the due
authorization, execution and delivery by FLCI, constitutes a legal, valid and
binding obligation of USOL, enforceable in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization and similar laws from time to time in effect that
affect creditors' rights generally, and by legal and equitable limitations on
the availability of specific remedies.
4.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by USOL does not,
and the performance of this Agreement by USOL will not, (i) conflict with or
violate the Certificate of Incorporation or By-laws of USOL; (ii) conflict
with or violate any Law applicable to USOL or any of its subsidiaries or by
which any of their respective properties is bound or affected; (iii) result in
any breach of or constitute a default (or an event that with notice or lapse
of time or both would become a default), or impair USOL's or any of its
Subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any USOL Material Contract; or (iv) result in the creation of
a Lien on any of the properties or assets of USOL or any of its Subsidiaries
pursuant to, any note, bond mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which USOL or
any of its Subsidiaries is a party or by which USOL or any of its
Subsidiaries, or any of their respective properties, is bound or affected,
except in the case of clauses (ii), (iii) and (iv) for such breaches, defaults
or other occurrences that would not, individually or in the aggregate, have a
material adverse effect upon USOL.
(b) The execution and delivery of this Agreement by USOL does not,
and the performance of this Agreement and the transactions contemplated hereby
by USOL will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any Governmental Authority, except (i) the
consents, approvals or Permits set forth in Schedule 4.5(b), (ii) for
applicable requirements, if any, of the Securities Act, the Exchange Act,
state securities laws, and the filing and recordation of appropriate merger or
other documents as required by the Delaware Law and the Oregon Law, and (iii)
where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or delay
consummation of the Merger, or otherwise prevent or delay USOL from performing
its obligations under this Agreement, or would not otherwise have a material
adverse effect on USOL.
4.6 Brokers. Except as set forth in Schedule 4.6, no investment bank,
broker or finder is entitled to any fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of USOL. USOL has heretofore furnished to FLCI true and complete
copies of all agreements between USOL and any other Person, pursuant to which
such other firm would be entitled to any payment relating to the transactions
contemplated hereunder.
4.7 Other Negotiations. USOL is not engaged in discussions or
negotiations with any Person or Persons with respect to, and has not solicited
or furnished any information to any Person or Persons who, to USOL's
knowledge, is or are currently contemplating negotiations or an offer
regarding, a consolidation or merger or other business combination,
recapitalization, liquidation, or similar transaction, or any other
transaction which could be conditioned upon, or otherwise require, the
termination of this Agreement.
4.8 Full Disclosure.
(a) No statement contained in this Agreement or in any certificate
or schedule furnished or to be furnished by or on behalf of USOL to FLCI
pursuant to this Agreement, when taken together with all other statements
contained herein or in other certificates and schedules furnished pursuant to
this Agreement, contains any untrue statement of a material fact or omits to
state any material fact necessary, in the light of the circumstances under
which it was made, in order to make the statements herein or therein not
misleading.
(b) Any information supplied by USOL for inclusion or
incorporation by reference in the Proxy Statement shall not (i) at the time
the Proxy Statement (or any amendment thereof or supplement thereto) is first
mailed to holders of FLCI Stock, (ii) at the time of the FLCI Stockholders'
Meeting, or (iii) at the Effective Time, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they are made, not misleading. If at any time prior to the
Effective Time any event or circumstance relating to USOL or its officers or
directors should be discovered by USOL which should be set forth in a
supplement to the Proxy Statement, USOL shall promptly inform FLCI of such
event or circumstance.
4.9 Lockup Agreement.
(a) USOL has obtained, and has delivered to FLCI, the agreement of
each holder of any share of USOL Preferred Stock that such holder, except as
provided in Schedule 4.9, for a period of one (1) year after the Effective
Time, but in no event later than eighteen (18) months from the date hereof,
shall not sell, pledge, encumber or otherwise transfer or dispose of, and
shall not permit to be sold, encumbered, attached or otherwise disposed of or
transferred in any manner, either voluntarily or by operation of law
("Transfer"), all or any portion of the shares of Company Preferred Stock that
such holder owns or hereafter acquires.
(b) USOL has obtained, through execution and delivery of the
Common Stockholder and Warrant Holder Registration Rights Agreement dated as
of the date hereof, the agreement of each holder of USOL Common Stock and each
holder of a USOL Warrant that such holder, for a period of six months after
the Effective Time, but in no event later than nine (9) months from the date
hereof (the "Lockup Period"), shall not Transfer, and shall not permit to be
Transferred, all or any portion of the shares of Company Common Stock or of
the Company Warrants that such holder owns or hereafter acquires; provided,
however, that during the Lockup Period, each such holder may make Transfers to
Qualified Institutional Buyers (as such term is defined in Rule 144A under the
Securities Act); and provided further, that each such holder may (i) transfer
all or any part of such holder's USOL Common Stock and/or USOL Warrants to one
or more Affiliates which, for purposes of this Section 4.9(b), shall include
members of any holder which is a limited liability company, employees or
directors of each such holder; (ii) Transfer such holder's USOL Common Stock
and/or USOL Warrants in connection with any exchange, reclassification or
other conversion of shares into any cash, securities or other property
pursuant to a merger or consolidation of the Company or any of its
subsidiaries with, or any sale or transfer by the Company or any of its
subsidiaries of all or substantially all its assets to, any Person; and (iii)
Transfer such holder's USOL Common Stock and/or USOL Warrants in connection
with any statutory share exchange or any recapitalization of the Company or
any of its subsidiaries; and provided further, that if the conditions
precedent for USOL to exercise the call option under Section 8 of the USOL
Other Warrants exist, then the Lockup Period with respect to the Company Other
Warrants shall terminate.
(c) USOL has obtained, through execution and delivery by Xxx
Xxxxxx and Xxxxxx Xxxxxxx (for the purposes of this paragraph only, the
"holders") of the Officers Indemnification Agreement dated as of the date
hereof, and has delivered to FLCI, the agreement of each such holder with
respect to the Company Common Stock that such holder, for a period of one year
after the Effective Time, but in no event later than eighteen (18) months from
the date hereof (the "Other Lockup Period"), shall not Transfer, and shall not
permit to be Transferred, all or any portion of the shares of Company Common
Stock that such holder owns or hereafter acquires.
4.10 Incorporation of Representations and Warranties By Reference. The
representations and warranties and related schedules and disclosure memoranda
of (a) USOC set forth in the USOC Asset Purchase Agreement and (b) GMAC-CM set
forth in the TSD Asset Purchase Agreement are hereby incorporated by reference
as though made by USOL and fully set forth herein.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
5.1 Conduct of Business by USOL and FLCI Pending the Merger. During the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, unless the other party
shall otherwise agree in writing, and except as to USOL, the actions permitted
to be taken by USOL Sub pursuant to the USOC Asset Purchase Agreement and the
transactions contemplated thereby, each of USOL and FLCI shall conduct its
respective business and shall cause the businesses of its subsidiaries to be
conducted only in, and each of USOL and FLCI and its subsidiaries shall not
take any action except in, the ordinary course of business and in a manner
consistent with past practice; and each of USOL and FLCI shall use reasonable
efforts to preserve the business organization of itself and its subsidiaries,
to keep available the services of the present officers, key employees and
consultants of itself and its subsidiaries and to preserve the present
relationships of itself and its subsidiaries with customers, suppliers and
other Persons with which it or any of its subsidiaries has significant
business relations. By way of amplification and not limitation, except as
contemplated by this Agreement, neither USOL nor FLCI, nor any of their
respective subsidiaries shall, during the period from the date of this
Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time do, or propose to do, any of the following
without the prior written consent of the other party:
(a) propose to or amend or otherwise change its Articles or
Certificate of Incorporation or By-laws;
(b) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class (other than the sale or issuance of common stock upon the
exercise of outstanding options listed in Schedule 3.2 or Schedule 3.14(c)
hereto (with respect to FLCI); or in Schedule 4.2(a) hereto (with respect to
USOL), or any options, warrants, convertible securities or other rights of any
kind to acquire any shares of capital stock, or any other ownership interest
(including, without limitation, any phantom interest) of FLCI or USOL, as the
case may be, or any of their respective subsidiaries (provided that consent
for grants of employee stock options to newly hired employees pursuant to
existing stock option plans consistent with past practice shall not be
unreasonably withheld);
(c) sell, pledge, mortgage, dispose of or encumber any of its
assets or any assets of its subsidiaries, except for (i) sales of products (or
licenses thereto) and services in the ordinary course of business consistent
with past practice, (ii) dispositions of obsolete or worthless assets, and
(iii) sales of immaterial assets not in excess of $10,000 in the aggregate;
(d) except as is contemplated by Section 6.5, alter the price or
accelerate, amend or change the period (or permit any acceleration, amendment
or change) of exercisability of options or restricted stock granted under the
Employee Plans (including stock option plans) or authorize cash payments in
exchange for any options granted under any of such plans;
(e) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof)
in respect of any of its capital stock, except for the declaration and payment
of any required dividend by USOL on the USOL Preferred Stock, (ii) split,
combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (iii) amend the terms of,
repurchase, redeem or otherwise acquire, or permit any subsidiary to
repurchase, redeem or otherwise acquire, any of its securities or any
securities of its subsidiaries, or propose to do any of the foregoing;
(f) (i) acquire (by merger, consolidation, or acquisition of stock
or assets) any corporation, partnership or other business organization or
division thereof; (ii) incur any indebtedness for borrowed money (except for
the issuance of the Senior Notes), or issue any debt securities or assume,
guarantee (other than guarantees of bank debt of such party's subsidiaries
entered into in the ordinary course of business) or endorse or otherwise as an
accommodation become responsible for, the obligations of any Person, or make
any loans or advances, except in each case in the ordinary course of business
consistent with past practice; (iii) enter into or amend any USOL Material
Contract or FLCI Material Contract, as the case may be, other than in the
ordinary course of business consistent with past practice; (iv) authorize any
capital expenditures or purchase of fixed assets which are, in the aggregate,
in excess of $25,000 for such party and its subsidiaries taken as a whole; or
(v) enter into or amend any contract, agreement, commitment or arrangement to
effect any of the matters prohibited by this Section 5.1;
(g) except, as to FLCI, for increases consistent with past
practice and disclosed on Schedule 5.1(g) in salary or wages of employees of
FLCI or its subsidiaries who are not officers and except, as to USOL, for
Persons other than Xxxxxx Xxxxxxx and Xxxxxx Xxxxxx, increase the compensation
payable or to become payable to its officers or employees, or grant any
severance or termination pay to, or enter into any employment or severance
agreement with any director, officer or other employee of such party or any of
its subsidiaries, or establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, stock purchase, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any current or former directors,
officers or employees, except, in each case, as may be required by law, and
except for ministerial updating of plans and trusts which does not affect the
benefits thereunder;
(h) take any action to change accounting policies or procedures
(including, without limitation, procedures with respect to revenue
recognition, payments of accounts payable, and collection of accounts
receivable);
(i) make any material tax election inconsistent with past
practices or settle or compromise any material Federal, state, local or
foreign tax liability or agree to an extension of a statute of limitations
except to the extent the amount of any such settlement has been reserved for
on the USOL Unaudited Balance Sheet or the FLCI Unaudited Balance Sheet, each
as on the Balance Sheet Date, as the case may be;
(j) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice of liabilities reflected
or reserved against in the financial statements of such party or incurred in
the ordinary course of business and consistent with past practice;
(k) take any action which would make any of the representations or
warranties of such party contained in this Agreement materially untrue or
incorrect or prevent such party from performing in all material respects or
cause such party not to perform in all material respects its covenants
hereunder;
(l) cancel or waive any claim or right of substantial value or
settle any material pending litigation;
(m) pay, discharge, or satisfy any material claim or liability
before it becomes due or fail to pay accounts payable in accordance with their
terms;
(n) knowingly take or allow to be taken or fail to take any action
which act or omission would jeopardize qualification of any of the Merger as a
"reorganization" within the meaning of Section 368(a) of the Code; or
(o) agree to do any of the foregoing.
5.2 No Solicitation by USOL or FLCI.
(a) During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Effective Time, neither USOL nor FLCI shall, directly or indirectly, through
any officer, director, employee, representative or agent of USOL or FLCI,
including, without limitation, any investment banker, attorney, or accountant
retained by FLCI or USOL, as the case may be, or any of its subsidiaries, (i)
initiate, solicit, or encourage any inquiries or proposals that constitute, or
could reasonably be expected to lead to, a proposal or offer for a merger,
consolidation, business combination, sale of assets representing a substantial
portion of the assets of either USOL or FLCI, as applicable, including a sale
of shares representing 20% or more of the outstanding USOL Stock or FLCI
Stock, including, without limitation, by way of tender offer or exchange offer
other than the Merger and the other transactions relating to this Agreement
(any of the foregoing inquiries or proposals being referred to in this
Agreement as an "Acquisition Proposal"); or, subject to the applicable
fiduciary duties of the respective directors of USOL and FLCI, as determined
by such directors in good faith after consultation with and based upon the
advice of legal counsel, (ii) engage in negotiations or discussions
concerning, or provide to any Person or entity non-public information or data
regarding FLCI or USOL or any of their respective subsidiaries, as applicable,
for the purpose of, or otherwise cooperate with or assist or participate in,
facilitate or encourage, any inquiries regarding the making of an Acquisition
Proposal, (iii) agree to, approve, or recommend any Acquisition Proposal or
(iv) take any other action inconsistent with the obligations of USOL or FLCI,
as applicable; provided, however, that any conversations, solicitations or
negotiations conducted by either party or their respective representatives
regarding an acquisition proposal solely with respect to the Surviving
Corporation shall not be deemed to violate any of the foregoing provisions of
this Section 5.2(a).
(b) Either party shall immediately notify the other party after
receipt of any Acquisition Proposal or any request for nonpublic information
relating to such party or any of its subsidiaries in connection with an
Acquisition Proposal or for access to the properties, books or records of such
party or any subsidiary by any Person that informs the Board of Directors or
officers of such party or such subsidiary that it intends to make, or has
made, an Acquisition Proposal. Such notice to the other party shall be made
orally and in writing and shall indicate in reasonable detail the identity of
the offeror and the terms and conditions of such proposal, inquiry or contact.
(c) Both parties shall use reasonable efforts to ensure that the
officers and directors of USOL and FLCI and their respective subsidiaries and
any investment banker or other advisor or representative retained by such
party are aware of, and comply with, the restrictions described in this
Section 5.2.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Proxy Statement.
(a) As promptly as practicable after the execution of this
Agreement, FLCI shall prepare and file with the SEC the Proxy Statement, which
shall be in form and substance satisfactory to USOL. FLCI shall cause the
Proxy Statement to comply in all material respects with the Securities Act,
the Exchange Act and the regulations thereunder. FLCI shall use reasonable
efforts to have or cause the Proxy Statement to be cleared as promptly as
practicable, and shall take all actions required under any applicable federal
or state securities laws or the rules and regulations of Nasdaq in connection
with the issuance of shares of FLCI Stock pursuant to the Merger. Without
limiting the generality of the foregoing, FLCI agrees to use all reasonable
efforts, after consulting with USOL, to respond promptly to any comments made
by the SEC with respect to the Proxy Statement (including each preliminary
version thereof).
(b) Each of USOL and FLCI shall, and shall cause its respective
representatives to, fully cooperate with the other party and its respective
representatives in the preparation of the Proxy Statement, and shall, upon
request, furnish the other party with all information concerning it and its
Affiliates, directors, officers and stockholders as the other may reasonably
request in connection with the preparation of the Proxy Statement.
(c) As promptly as practicable after the Proxy Statement has been
cleared by the SEC, FLCI shall cause the Proxy Statement to be mailed to its
stockholders. Thereafter, USOL and FLCI shall each notify the other as
promptly as practicable upon becoming aware of any event or circumstance which
should be described in an amendment of, or a supplement to, the Proxy
Statement. FLCI shall notify USOL as promptly as practicable after the
receipt by it of any written or oral comments of the SEC on, or of any written
or oral request by the SEC for amendments or supplements to, the Proxy
Statement, and FLCI shall promptly supply USOL with copies of all
correspondence between it or any of its representatives and the SEC with
respect to any of the foregoing filings.
6.2 FLCI Stockholders' Meeting. FLCI shall, in accordance with its
charter documents, call and hold (i) the FLCI Stockholders' Meeting as
promptly as practicable for the purpose of voting upon the approval of the
Merger and this Agreement, (ii) the approval of the Re-incorporation, and
(iii) the approval of the increase in authorized capital stock required to
consummate the Merger, and FLCI shall use its best efforts to hold the FLCI
Stockholders' Meeting as soon as permitted by the proxy rules under the
Exchange Act. FLCI shall use its best efforts to obtain from the stockholders
owning more than 50% of the FLCI Stock, proxies in favor of the approval of
(i) the Merger and this Agreement, (ii) the Re-incorporation, and (iii) the
increase in authorized capital stock required to consummate the Merger.
Subject to the applicable fiduciary duties of FLCI's directors, as determined
by such directors in good faith after consultation with and based upon the
written advice of legal counsel, FLCI shall take all other action necessary or
advisable to secure the vote or consent of stockholders required by the
applicable Law to obtain such approvals, including, without limitation, the
inclusion in the Proxy Statement of the recommendation of its Board of
Directors that its shareholders vote in favor of the approval and adoption of
this Agreement and the transactions related hereto.
6.3 Access to Information; Confidentiality. Upon reasonable notice and
subject to restrictions contained in confidentiality agreements to which USOL
or FLCI may be subject (from which USOL and FLCI shall each use reasonable
efforts to be released), USOL and FLCI shall each (and USOL shall cause each
of its subsidiaries to) afford to the officers, employees, accountants,
counsel and other representatives of the other, reasonable access, during the
period from the date of this Agreement to the Effective Time, to all its
properties, books, contracts, commitments and records and, during such period,
USOL and FLCI shall each furnish promptly to the other all information
concerning its business, properties and personnel as such other party may
reasonably request, and USOL and FLCI shall each make available to the other
the appropriate individuals (including attorneys, accountants and other
professionals) for discussion of the other's business, properties and
personnel as either FLCI or USOL may reasonably request. Each party shall keep
such information confidential in accordance with the terms of the
Confidentiality and Standstill Agreement, dated May, 1999, entered into
between FLCI and USOL.
6.4 Consents, Approvals. USOL and FLCI shall each use its reasonable
best efforts to obtain all consents, waivers, approvals, authorizations or
orders (including, without limitation, all Governmental Approvals), and USOL
and FLCI shall make all filings (including, without limitation, all filings
with Governmental Authorities or regulatory agencies) required in connection
with the authorization, execution and delivery of this Agreement by USOL and
FLCI and the consummation by them of the transactions contemplated hereby.
USOL and FLCI shall furnish all information required to be included in the
Proxy Statement, or for any application or other filing to be made pursuant to
the rules and regulations of any Governmental Authority in connection with the
transactions contemplated by this Agreement. Upon the terms and subject to the
conditions hereof, each of the parties hereto shall use reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
other things necessary, proper or advisable to consummate and make effective
as promptly as practicable the transactions contemplated by this Agreement, to
obtain in a timely manner all necessary waivers, consents and approvals and to
effect all necessary registrations and filings, and to otherwise satisfy or
cause to be satisfied all conditions precedent to its obligations under this
Agreement. FLCI and USOL shall each use reasonable efforts to cause the Merger
to qualify, and will not (either before or after consummation of the Merger)
take any actions which could prevent the Merger from qualifying, as a
reorganization within the meaning of Section 368(a)(1)(A) of the Code.
6.5 Stock Options.
(a) At the Effective Time, the obligation to issue shares under
each then outstanding option to purchase USOL Common Stock (each a "USOL Stock
Option") granted under USOL's Stock Option Plan, as amended, shall be assumed
by FLCI and each such option shall be converted into an option to acquire, on
the same terms and conditions as were applicable under such USOL Stock Option
prior to the Effective Time, the whole number of shares of FLCI Common Stock
as the holder of such USOL Stock Option would have been entitled to receive
pursuant to the Merger had such holder exercised such option in full
immediately prior to the Effective Time (not taking into account whether or
not such option was in fact exercisable). The exercise price of the options
shall be a price per share equal to the exercise price for shares of USOL
Common Stock otherwise purchasable pursuant to such USOL Stock Option;
provided, however, that the exercisability or the other vesting of the assumed
options and the underlying stock shall continue to be determined by reference
to stock option agreements executed pursuant to USOL's Stock Option Plan; and
provided further, that references in any USOL Stock Option to USOL, the Board
of Directors of USOL or any committee thereof, and any USOL Stock Option Plan,
shall, commencing at the Effective Time, unless inconsistent with the context,
be to FLCI, the board of directors of FLCI or a committee thereof, and FLCI's
1998-1999 Combined Incentive Stock Option and Nonqualified Stock Option Plan,
respectively.
(b) As soon as practicable after the Effective Time, FLCI shall
deliver to each holder of an outstanding USOL Stock Option an appropriate
notice setting forth such holder's rights pursuant thereto and such USOL Stock
Option shall continue in effect on the same terms and conditions. FLCI shall
comply with the terms of all such USOL Stock Options and ensure, to the extent
required by, and subject to the provisions of, any USOL Stock Plan, that USOL
Stock Options which qualified for special tax treatment prior to the
Effective Time continue to so qualify after the Effective Time. FLCI shall
take all corporate action necessary to reserve for issuance a sufficient
number of shares of FLCI Common Stock for delivery pursuant to the terms set
forth in this Section 6.5.
(c) FLCI shall use its reasonable best efforts after the Effective
Time to file and maintain the effectiveness of a registration statement under
the Securities Act with respect to the issuance by FLCI of shares of FLCI
Common Stock which may be issued pursuant to the USOL Stock Options as
provided for above in this Section 6.5.
6.6 Warrants. At the Effective Time, FLCI shall assume in writing all
obligations under the USOL Other Warrants and the USOL TSD Warrants, and the
holders of the USOL Other Warrants and the USOL TSD Warrants thereafter shall
have the right to acquire, on the same pricing and payment terms and
conditions as are currently applicable under the USOL Other Warrants and the
USOL TSD Warrants, as applicable, the same number of shares of FLCI Common
Stock as the holders of such warrants would have been entitled to receive in
the Merger had such holder exercised such warrants in full immediately prior
to the Effective Time.
6.7 Notification of Certain Matters. USOL shall give prompt notice to
FLCI, and FLCI shall give prompt notice to USOL, of (i) the occurrence or non-
occurrence of any event which would cause any representation or warranty made
by the respective parties in this Agreement to be materially untrue or
inaccurate, and (ii) any failure of USOL or FLCI, as the case may be, to
materially comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 6.7 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice, and provided further, that failure to give such notice shall not be
treated as a breach of covenant for the purposes of Sections 7.2(b) or 7.3(b)
unless the failure to give such notice results in material prejudice to the
other party.
6.8 Public Announcements. FLCI and USOL shall consult with each other
before issuing any press release or other public statement with respect to the
Merger or this Agreement, and any such press release shall state that it is
being made by both FLCI and USOL. FLCI and USOL shall not issue any such press
release or make any such public statement without the prior consent of the
other party, which shall not be unreasonably withheld; provided, however, that
a party may, without the prior consent of the other party, issue such press
release or make such public statement as may upon the written advice of
counsel be required by law if it has used reasonable efforts to consult first
with the other party, and has provided the other party with at least 24 hours
notice of such release.
6.9 Application For Nasdaq Approval. FLCI agrees to use its best
efforts to prepare and file with Nasdaq such applications, notices, reports
and other information as may be reasonably required to obtain the approval by
Nasdaq of the continued listing of FLCI's common stock outstanding prior to
the consummation of the Merger and the FLCI Common Stock, and FLCI's warrants
outstanding prior to the Effective Time and the FLCI Warrants that are
currently listed on Nasdaq following consummation of the transactions provided
for herein. USOL agrees to provide FLCI with such documents, information and
other materials as FLCI may reasonably request in connection with effecting
such application and to otherwise cooperate with FLCI in its efforts to obtain
such Nasdaq approval. FLCI and USOL shall cooperate with each other in
applying for a new listing of the FLCI Common Stock and the FLCI Warrants on
the Nasdaq National Market and having the FLCI Common Stock and the FLCI
Warrants designated as national market system securities.
6.10 Delivery of Additional Filings. Following the execution of this
Agreement and until the Closing, FLCI shall provide USOL with copies of any
and all reports, filings, notices or other information which FLCI may prepare
and file with or receive from the SEC, Nasdaq or any other Governmental
Authority (and shall give USOL an opportunity to review and comment on any
such filings).
6.11 Accountant's Comfort Letters. USOL and FLCI shall each use
reasonable efforts to cause their respective independent public accountants to
deliver to the other party a letter covering such matters as may be requested
by such other party, with respect to such matters as are customarily addressed
in certified public accountant's "comfort" letters with respect to the type of
transactions contemplated by this Agreement.
6.12 Indemnification; Directors' and Officers' Insurance. All rights to
indemnification now existing in favor of the present or former directors or
officers of USOL as provided in USOL's Certificate of Incorporation or By-
laws, which rights are in effect as of the date hereof, shall, with respect to
matters occurring prior to the Effective Time, survive the Merger and continue
in full force and effect after the Effective Time. All rights to
indemnification in respect of any such claim or claims shall continue until
disposition of such claim or claims. FLCI and USOL further agree that all
rights to indemnification now existing in favor of the present or former
directors or officers of USOL in any indemnification agreement between such
Person and USOL shall survive the Merger and continue in full force and effect
in accordance with the terms of such agreement. Until the sixth anniversary of
the Effective Time, FLCI shall maintain in effect with respect to matters
occurring prior to the Effective Time, to the extent available, the policy of
directors' and officers' liability insurance currently maintained by USOL on
behalf of its officers and directors; provided, however, that FLCI may
substitute therefor a policy containing coverage, terms and conditions which
are no less advantageous to such present or former directors and officers of
USOL. Notwithstanding anything to the contrary contained in this Agreement,
the provisions of this Section 6.12 shall survive the Effective Time and are
intended to be for the benefit of, and shall be enforceable by, each present
and former director and officer of USOL and shall be binding on all successors
and assigns of the Surviving Corporation. In the event the Surviving
Corporation or any of its successors or assigns (i) consolidates with or
merges into any other Person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger, or (ii) transfers all
or substantially all of its properties and assets to any Person, then, and in
each such case, proper provision shall be made so that the successors and
assigns of the Surviving Corporation assume the obligations set forth in this
Section 6.12.
6.13 Employee Benefits
(a) FLCI will maintain without change for a period of twelve
months after the Effective Time each severance program and policy of USOL
listed in Section 5.14 of the Disclosure Memorandum attached to the USOC Asset
Purchase Agreement (including any such plan, program or policy that is subject
to the approval of the Board of Directors of USOL as of the date of this
Agreement) with respect to each FLCI employee who was employed by USOL
immediately prior to the Effective Time and for purposes of any such severance
program or policy and any severance program and policy which USOL was required
to maintain by law. FLCI will give full credit to each such FLCI employee for
all service performed for USOL by such employee. FLCI will honor all severance
and retention agreements of USOL in effect as of the Effective Time.
(b) With respect to each FLCI Employee Plan, each FLCI employee
employed by USOL immediately prior to the Effective Time shall receive credit
for all service performed for USOL; such service credit shall apply for all
purposes, including but not limited to any vacation, sick time, insurance or
other benefits and any eligibility or vesting requirements under any FLCI
Employee Plan.
(c) As of the Effective Time, each FLCI employee who was employed
by USOL immediately prior to the Effective Time shall be enrolled in the
Person Choice Account group health benefit plan for employees of FLCI, or any
successor plan thereto ("Group Health Plan") and shall be entitled to
participate in the Group Health Plan without limitation or exclusion for any
preexisting conditions applicable to any such employee or his or her enrolled
dependents, except to the extent that any such preexisting condition
limitation or exclusion applied to such individual under the group health plan
provided by USOL prior to the Effective Time. For purposes of participation in
the Group Health Plan, each FLCI employee employed by USOL immediately prior
to the Effective Time shall also receive credit for all payments made toward
deductible, co-payment and out-of-pocket limits under the group health plan of
USOL in which such employee was a participant immediately prior to the
Effective Time for the plan year which includes the Effective Time as if such
payments had been made for similar purposes for such period under the Group
Health Plan by an employee employed by FLCI immediately prior to the Effective
Time.
6.14 Stockholder Litigation. Each of FLCI and USOL shall give the other
the reasonable opportunity to participate in the defense of any stockholder
litigation arising in connection with the transactions contemplated hereby
against FLCI or USOL, as applicable, and their respective directors.
6.15 Accredited Investors. Prior to the Effective Time, USOL shall
deliver to FLCI evidence reasonably satisfactory to FLCI that each holder of
USOL Stock is an "Accredited Investor" as such term is defined in Regulation D
of the Securities Act.
ARTICLE VII
CONDITIONS TO THE MERGER
7.1 Conditions to Obligation of Each Party to Effect the Merger. Unless
waived, in whole or in part, by the applicable party, the respective
obligations of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) No proceeding in respect of the Proxy Statement shall have
been initiated or threatened by the SEC.
(b) This Agreement, the Merger, the increase in the authorized
capital stock of FLCI required to consummate the Merger, and the
Re-incorporation shall have been approved by the requisite vote of the
stockholders of FLCI.
(c) No statute, rule, regulation, order, decree or injunction
shall have been enacted, entered, promulgated or enforced by any court or
Governmental Authority of competent jurisdiction which restrains, enjoins or
otherwise prohibits the consummation of the Merger; provided, however, that
USOL and FLCI shall use their reasonable best efforts to have any such order,
decree or injunction vacated.
(d) FLCI and USOL shall have received the written opinion of
Jenkens & Xxxxxxxxx, in form and substance reasonably satisfactory to each of
them to the effect that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code.
(e) The shares of FLCI Common Stock to be issued in the Merger
shall have been approved for quotation on Nasdaq, subject to official notice
of issuance.
(f) All corporate and other proceedings and actions taken in
connection with this Agreement and all certificates, opinions, agreements,
instruments, and documents mentioned in this Agreement or incident to any such
transactions shall have been delivered to the appropriate party or third
party, and be reasonably satisfactory in form and substance to USOL, FLCI, and
their respective counsel.
(g) There shall not have occurred and be continuing at any time
within 30 days prior to the proposed Effective Time (i) any suspension in
trading on Nasdaq, any fixing of minimum or maximum prices for trading on
Nasdaq by the NASD or SEC or any other Governmental Authority, (ii) the
declaration of a banking moratorium by federal, Oregon, Colorado or Texas
Governmental Authorities; (ii) an outbreak or major escalation of hostilities
between the United States and any foreign power or other insurrection or armed
conflict involving the United States.
7.2 Additional Conditions to Obligations of FLCI. Unless waived, in
whole or in part, in writing by FLCI, the obligations of FLCI to effect the
Merger are also subject to the fulfillment prior to or at the Effective Time,
of each of the following conditions:
(a) The representations and warranties of USOL contained in this
Agreement shall be true and correct in all material respects on and as of the
Effective Time, except for (i) changes contemplated or permitted by this
Agreement, (ii) those representations and warranties which address matters
only as of a specified date (which shall remain true and correct as of such
date), and (iii) where the failure to be true and correct would not have a
material adverse effect upon USOL.
(b) USOL shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be performed
or complied with by USOL on or prior to the Effective Time.
(c) No material adverse change in the business, property,
prospects, results of operations or conditions (financial or otherwise) of
USOL shall have occurred between the date of this Agreement and the Effective
Time.
(d) No action or proceeding by any Governmental Authority or other
Person (an "Action") shall have been instituted or threatened which (i) might
have a material adverse effect on USOL; (ii) would enjoin, restrain, or
prohibit, or might result in substantial damages in respect of, this Agreement
or the complete consummation of the Merger; or (iii) seeks to prohibit or
limit the Surviving Corporation from exercising all material rights and
privileges pertaining to its ownership of all or a material portion of the
business or assets of USOL and the Predecessor Entities, and which would, in
the reasonable judgment of FLCI make it inadvisable to consummate such
transactions; provided, however, that if an Action has been instituted, or an
order issued pursuant to an Action, that FLCI and USOL shall use their
reasonable best efforts to have any such order or Action dismissed or vacated.
(e) USOL shall have delivered to FLCI a certificate signed by
USOL's President and Chief Financial Officer, dated the date of the Closing,
certifying that the conditions specified in Sections 7.2(a), 7.2(b), 7.2(c)
and 7.2(d) of this Agreement have been satisfied.
(f) FLCI shall have received the opinion of Jenkens & Xxxxxxxxx,
counsel to USOL, dated the date of the Closing, containing the opinion set
forth in Exhibit 7.2(f) attached hereto.
(g) All corporate and other proceedings and actions taken in
connection with this Agreement and all certificates, opinions, agreements,
instruments, and documents mentioned in this Agreement or incident to any such
transactions shall be reasonably satisfactory in form and substance to FLCI
and its counsel.
7.3 Additional Conditions to Obligation of USOL. Unless waived, in
whole or in part, in writing by USOL, the obligations of USOL to effect the
Merger are also subject to the fulfillment prior to or at the Effective Time
of each of the following conditions:
(a) The representations and warranties of FLCI contained in this
Agreement shall be true and correct in all material respects on and as of the
Effective Time, except for (i) changes contemplated or permitted by this
Agreement, (ii) those representations and warranties which address matters
only as of a specified date (which shall remain true and correct as of such
date), and (iii) where the failure to be true and correct would not have a
material adverse effect upon FLCI.
(b) FLCI shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be performed
or complied with by FLCI on or prior to the Effective Time.
(c) No material adverse change in the business, property,
prospects, results of operations or conditions (financial or otherwise) of
FLCI shall have occurred between the date of this Agreement and the Effective
Time.
(d) No Action shall have been instituted or threatened which (i)
might have a material adverse effect on FLCI; (ii) would enjoin, restrain, or
prohibit, or might result in substantial damages in respect of, this Agreement
or the complete consummation of the Merger; or (iii) seeks to prohibit or
limit the Surviving Corporation from exercising all material rights and
privileges pertaining to its ownership of all or a material portion of the
business or assets of FLCI, and which would, in the reasonable judgment of
USOL make it inadvisable to consummate such transactions; provided, however,
that if an Action has been instituted, or an order issued pursuant to an
Action, that FLCI and USOL shall use their reasonable best efforts to have any
such order or Action dismissed or vacated.
(e) FLCI shall have delivered to USOL a certificate signed by
FLCI's President and Chief Financial Officer, dated the date of the Closing,
certifying that the conditions specified in Sections 7.3(a), 7.3(b), 7.3(c),
and 7.3(d) of this Agreement have been satisfied.
(f) USOL shall have received the opinion of Xxxxxx Xxxxxxx &
Stone, LLC, counsel to FLCI, dated the date of the Closing, containing the
opinion set forth in Exhibit 7.3(f) attached hereto.
ARTICLE VIII
TERMINATION
8.1 Termination.
(a) This Agreement may be terminated at any time prior to the
Effective Time, notwithstanding approval thereof by the stockholders of either
USOL or FLCI:
(i) by mutual written consent of the parties hereto duly
authorized by the Boards of Directors of FLCI and USOL; or
(ii) by either FLCI or USOL if the Merger shall not have been
consummated by the Outside Date, provided that the right to terminate this
Agreement under this Section 8.1(a)(ii) shall not be available to any party
whose willful failure to fulfill any obligation under this Agreement has been
the cause of or resulted in the failure of the Merger to occur on or before
such date; or
(iii) by either FLCI or USOL if a court of competent
jurisdiction or Governmental Authority shall have issued a non-appealable
final order, decree or ruling or taken any other action, in each case having
the effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, except if the party relying on such order, decree or ruling or other
action has not complied with its obligations under Section 6.4; or
(iv) by either FLCI or USOL, if, at the FLCI Stockholders'
Meeting (including any adjournment or postponement thereof), the requisite
vote of the stockholders of FLCI shall not have been obtained; or
(v) by FLCI, upon a breach of any representation, warranty,
covenant or agreement on the part of USOL set forth in this Agreement such
that the conditions set forth in Section 7.3(a) or 7.3(b) would not be
satisfied, or by USOL, upon a breach of any representation, warranty, covenant
or agreement on the part of FLCI set forth in this Agreement such that the
conditions set forth in Section 7.2(a) or 7.2(b), would not be satisfied (any
of such breaches by either party, a "Terminating Breach"); provided, however,
that if such Terminating Breach is curable prior to the Outside Date, by FLCI
or USOL, as the case may be, through the exercise of its reasonable efforts
and for so long as FLCI or USOL, as the case may be, continues to exercise
such reasonable efforts, neither USOL nor the FLCI, respectively, may
terminate this Agreement under this Section 8.1(a)(v); or
(vi) by FLCI, if (A) the Board of Directors of USOL shall
fail to recommend the Merger or shall withdraw, modify or change its
recommendation of the Merger in a manner adverse to FLCI or shall have
resolved to do any of the foregoing; (B) after the receipt by USOL of an
Acquisition Proposal, FLCI requests in writing that the Board of Directors of
USOL reconfirm its recommendation of this Agreement and the Merger to the
stockholders of USOL and the Board of Directors of USOL fails to do so within
10 business days after its receipt of FLCI's request; (C) the Board of
Directors of USOL shall have recommended to the stockholders of USOL an
Alternative Transaction (as defined in Section 8.4(e)); or (D) a tender offer
or exchange offer for 20% or more of the outstanding shares of USOL Stock is
commenced (other than by FLCI or an Affiliate of FLCI) and the Board of
Directors of USOL recommends that the stockholders of USOL tender their shares
in such tender or exchange offer; or
(vii) by USOL, if (A) the Board of Directors of FLCI shall
fail to recommend the Merger or shall withdraw, modify or change its
recommendation of the Merger in a manner adverse to USOL or shall have
resolved to do any of the foregoing; (B) after the receipt by FLCI of an
Acquisition Proposal, USOL requests in writing that the Board of Directors of
FLCI reconfirm its recommendation of this Agreement and the Merger to the
stockholders of USOL and the Board of Directors of FLCI fails to do so within
10 business days after its receipt of USOL's request; (C) the Board of
Directors of FLCI shall have recommended to the stockholders of FLCI an
Alternative Transaction; (D) a tender offer or exchange offer for 20% or more
of the outstanding shares of FLCI Common Stock is commenced (other than by
USOL or an Affiliate of USOL) and the Board of Directors of FLCI recommends
that the stockholders of FLCI tender their shares in such tender or exchange
offer; or (E) for any reason FLCI fails to call and hold the FLCI
Stockholders' Meeting by the Outside Date (provided that USOL's right to
terminate this Agreement under this clause (E) shall not be available if at
such time FLCI would be entitled to terminate this Agreement under Section
8.1(a)(v) without giving effect to the cure period); or
(viii) by USOL, subject to Section 8.2(a), if the Board of
Directors of USOL shall concurrently approve, and USOL shall concurrently
enter into, a definitive agreement providing for the implementation of a
Superior Offer (as hereinafter defined); provided, however, that (A) USOL is
not then in breach of Section 5.2, (B) the Board of Directors of USOL shall
have complied with Section 8.2(a) in connection with such Superior Offer, and
(C) USOL shall simultaneously make the payment required by Section 8.4(b); and
provided further, that USOL agrees to use its commercially reasonable efforts
to have such Superior Offer include the Surviving Corporation and to
consummate the Merger.
(b) This Agreement may be terminated by FLCI at any time prior to
the approval thereof by the stockholders of FLCI, subject to Section 8.2(b),
if the Board of Directors of FLCI shall concurrently approve, and FLCI shall
concurrently enter into, a definitive agreement providing for the
implementation of a Superior Offer; provided, however, that (i) FLCI is not
then in breach of Section 5.2, (ii) the Board of Directors of FLCI shall have
complied with Section 8.2(b) in connection with such Superior Offer, and (iii)
FLCI shall simultaneously make the payment required by Section 8.4(c); and
provided further, that FLCI agrees to use its commercially reasonable efforts
to have such Superior Offer include the Surviving Corporation and to
consummate the Merger.
8.2 Certain Actions Prior to Termination.
(a) USOL shall provide to FLCI written notice of its intention to
terminate this Agreement pursuant to Section 8.1(a)(viii) advising FLCI (i)
that the Board of Directors of USOL has determined, by action of a majority of
the members of the Board of Directors of USOL who are not affiliated with
either FLCI or the Person making such Acquisition Proposal or their respective
affiliates, that such Acquisition Proposal is a Superior Offer and that, in
the exercise of its good faith judgment as to fiduciary duties to stockholders
under applicable law, after consultation with USOL's outside legal counsel,
failure by the Board of Directors to terminate this Agreement could reasonably
be expected to result in a breach of such duties and (ii) as to the material
terms of any such Acquisition Proposal. At any time after the fifth business
day following receipt of such notice by FLCI, USOL may terminate this
Agreement as provided in Section 8.1(a)(viii) only if the Board of Directors
of USOL who are not affiliated with either FLCI or the Person making such
Acquisition Proposal or their respective affiliates, determines that failure
by the Board of Directors to terminate this Agreement continues to be
reasonably expected to result in a breach of its fiduciary duties to
stockholders under applicable law (which determination shall be made in light
of any revised proposal made by FLCI prior to the expiration of such five
business day period) and concurrently enters into a definitive agreement
providing for the implementation of such Acquisition Proposal.
(b) FLCI shall provide to USOL written notice of its intention to
terminate this Agreement pursuant to Section 8.1(b) advising USOL (i) that the
Board of Directors of FLCI has determined, by action of a majority of the
members of the Board of Directors of FLCI who are not affiliated with either
USOL or the Person making such Acquisition Proposal or their respective
affiliates, that such Acquisition Proposal is a Superior Offer and that, in
the exercise of its good faith judgment as to fiduciary duties to stockholders
under applicable law, after consultation with FLCI's outside legal counsel,
failure by the Board of Directors to terminate this Agreement could reasonably
be expected to result in a breach of such duties and (ii) as to the material
terms of any such Acquisition Proposal. At any time after the fifth business
day following receipt of such notice by USOL, FLCI may terminate this
Agreement as provided in Section 8.1(b) only if the Board of Directors of FLCI
who are not affiliated with either USOL or the Person making such Acquisition
Proposal or their respective affiliates, determines that failure by the Board
of Directors to terminate this Agreement continues to be reasonably expected
to result in a breach of its fiduciary duties to stockholders under applicable
law (which determination shall be made in light of any revised proposal made
by USOL prior to the expiration of such five business day period) and
concurrently enters into a definitive agreement providing for the
implementation of such Acquisition Proposal.
(c) For purposes of this Agreement, "Superior Offer" means an
Acquisition Proposal which is superior from a financial point of view to (i)
FLCI's stockholders (other than any stockholders affiliated with USOL) or (ii)
USOL's stockholders (other than any stockholders affiliated with FLCI), as
applicable, to the Merger and for which financing, to the extent required, is
then committed or which, in the good faith judgment of FCLI's or USOL's board
of directors, as applicable, after consultation with FLCI's or USOL's
financial advisors is reasonably capable of being obtained.
8.3 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 8.1, this Agreement shall immediately become
void and there shall be no liability on the part of any party hereto or any of
its Affiliates, directors, officers or stockholders, except as provided in
Section 8.4; provided, however, that termination of this Agreement shall not
in any way terminate, limit or restrict the rights and remedies of any party
hereto against any other party resulting from any breach of this Agreement.
8.4 Fees and Expenses.
(a) Except as set forth in this Section 8.4, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses if the Merger is not
consummated and by the Surviving Corporation if the Merger is consummated, to
the extent such expenses are solely and directly related to such Merger in
accordance with the guidelines established in Revenue Ruling 73-54, 1973-1
C.B. 187; provided, however, that, if the Merger is not consummated, FLCI and
USOL shall share equally all fees and expenses, other than attorneys' fees,
incurred in relation to the printing of the Proxy Statement (including any
preliminary materials related thereto) and any amendments or supplements
thereto.
(b) USOL shall pay FLCI a termination fee of $1,000,000 upon the
earlier to occur of the following events:
(i) the termination of this Agreement by FLCI pursuant to
Section 8.1(a)(vi); or
(ii) the termination of this Agreement by USOL pursuant to
Section 8.1(a)(viii).
USOL's payment of a termination fee pursuant to this
subsection shall be the sole and exclusive remedy of FLCI against USOL and its
directors, officers, employees, agents, advisors, and other representatives
with respect to the occurrences giving rise to such payment; provided that
this limitation shall not apply in the event of a willful breach of this
Agreement by USOL.
(c) FLCI shall pay USOL a termination fee of $1,000,000 upon the
earliest to occur of the following events:
(i) the termination of this Agreement by either FLCI or USOL
pursuant to Section 8.1(a)(iv) if (A) the requisite votes of the stockholders
of FLCI to approve the Merger shall not have been obtained, (B) a proposal
for an Alternative Transaction (as defined below) involving FLCI shall have
been publicly announced prior to the FLCI Stockholders' Meeting, and (C)
either a definitive agreement for an Alternative Transaction involving FLCI is
entered into, or an Alternative Transaction involving FLCI is consummated,
within eighteen months of such termination;
(ii) the termination of this Agreement by either FLCI or USOL
pursuant to Section 8.1(a)(iv) if (A) the requisite vote of the stockholders
of FLCI to approve the Merger shall not have been obtained because one or more
of the stockholders party to the Stockholder Support Agreements failed to
approve the Merger in breach of such agreement, and (B) if such stockholder
had voted for the Merger or not otherwise breached, the Merger would have been
approved by the FLCI stockholders;
(iii) the termination of this Agreement by USOL pursuant to
Section 8.1(a)(vii); or
(iv) the termination of this Agreement by FLCI pursuant to
Section 8.1(b).
FLCI's payment of a termination fee pursuant to this
subsection shall be the sole and exclusive remedy of USOL against FLCI and any
of its subsidiaries and their respective directors, officers, employees,
agents, advisors or other representatives with respect to the occurrences
giving rise to such payment; provided that this limitation shall not apply in
the event of a willful breach of this Agreement by FLCI.
(d) The fees payable pursuant to Section 8.4(b) or 8.4(c) shall be
paid concurrently with the first to occur of the events described in Section
8.4(b)(i) or (ii) or 8.4(c)(i), (ii), (iii) or (iv), respectively.
(e) As used in this Agreement, "Alternative Transaction" means
either (i) a transaction pursuant to which any third party acquires more than
20% of the outstanding shares of USOL Stock or FLCI Stock, as the case may be,
pursuant to a stock purchase, tender offer or exchange offer or otherwise,
(ii) a merger or other business combination involving USOL or FLCI pursuant to
which any third party (or the stockholders of a third party) acquires more
than 20% of the outstanding shares of USOL Stock or FLCI Stock, as the case
may be, or the entity surviving such merger or business combination, (iii) any
other transaction pursuant to which any third party acquires control of assets
(including for this purpose the outstanding equity securities of subsidiaries
of USOL, and the entity surviving any merger or business combination including
any of them) of USOL or FLCI having a fair market value (as determined by the
Board of Directors of USOL or FLCI, as the case may be, in good faith) equal
to more than 20% of the fair market value of all the assets of USOL or FLCI,
as the case may be, and their respective subsidiaries, taken as a whole,
immediately prior to such transaction.
ARTICLE IX
ARBITRATION; CONSENT TO JURISDICTION
9.1 Submission to Jurisdiction. FLCI and USOL each hereby agree that
any and all disputes, legal actions, suits, or proceedings arising out of or
relating to this Agreement or the transactions contemplated hereby may be
brought in any state or federal court located in Portland, Oregon. By their
signature to this Agreement, FLCI and USOL each irrevocably submit to the
jurisdiction of the courts located in Portland, Oregon, in any dispute, legal
action, suit, or proceeding arising out of or relating to this Agreement or
the transactions contemplated hereby.
9.2 Waiver of Immunity and Inconvenient Forum. FLCI and USOL each
hereby irrevocably waives all immunity from jurisdiction, attachment and
execution, whether on the basis of sovereignty or otherwise, to which it might
otherwise be entitled in any legal action or proceeding brought in any state
or federal court located in Portland, Oregon, and further irrevocably waives,
to the fullest extent permitted by law, any objection which it may now or
hereafter have to any dispute, legal action, suit, or proceeding arising out
of or relating to this Agreement or the transactions contemplated hereby being
brought in any federal or state court located in Portland, Oregon, and hereby
further irrevocably waives any claim that any such dispute, legal action,
suit, or proceeding brought in any such court has been brought in an
inconvenient forum.
9.3 Arbitration Procedures.
(a) All disputes arising in connection with this Agreement or any
contract of sale hereunder shall be finally settled by arbitration in
Portland, Oregon, in accordance with the International Arbitration Rules of
the American Arbitration Association (the "Rules of Arbitration"). Judgment
on the award rendered by the arbitration panel (the "Arbitration Panel") may
be entered in any court of competent jurisdiction.
(b) Any party which desires to initiate arbitration proceedings
may do so by delivering written notice to the other party (the "Arbitration
Notice") specifying (x) the nature of the dispute or controversy to be
arbitrated; (y) the name and address of the arbitrator appointed by the party
initiating such arbitration; and (z) such other matters as may be required by
the Rules of Arbitration. The party who receives an Arbitration Notice shall
appoint an arbitrator and notify the initiating party of such arbitrator's
name and address within 30 days after delivery of the Arbitration Notice;
otherwise, a second arbitrator shall be appointed by the American Arbitration
Association at the request of the party who delivered the Arbitration Notice.
The two arbitrators so appointed shall appoint a third arbitrator who shall be
chairman of the Arbitration Panel and the "neutral arbitrator" for purposes of
the Rules of Arbitration.
9.4 Final Arbitration Decisions. All decisions of the Arbitration Panel
shall be final, conclusive and binding on all parties and shall not be subject
to judicial review. The parties expressly waive the provisions of any state
statute or regulation that permits a party to an arbitration in which an award
has been made to petition a court of competent jurisdiction to vacate an
arbitration award.
9.5 Claims for Unpaid Balance. Notwithstanding anything to the contrary
contained in this Article IX, any claim by either party for a "provisional
remedy" as defined in Section 1281.8 of the Rules of Arbitration, may be
brought in any court of competent jurisdiction, and any judgment, order or
decree relating thereto shall have precedence over any arbitral award or
proceeding.
ARTICLE X
GENERAL PROVISIONS
10.1 Attorney's Fees. In any action at law or in equity or in any
arbitration proceeding, for declaratory relief or to enforce any of the
provisions or rights or obligations under this Agreement, the unsuccessful
party to such proceeding, shall pay the successful party or parties all
statutorily recoverable costs, expenses and reasonable attorneys' fees
incurred by the successful party or parties including without limitation
costs, expenses, and fees on any appeals and the enforcement of any award,
judgment or settlement obtained, such costs, expenses and attorneys' fees
shall be included as part of the judgment. The successful party shall be that
party who obtained substantially the relief or remedy sought, whether by
judgment, compromise, settlement or otherwise.
10.2 Effectiveness of Representations, Warranties and Agreements;
Knowledge, Etc. Except as otherwise provided in this Section 10.2, the
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of the other party hereto, any Person controlling any such party
or any of their respective officers or directors, whether prior to or after
the execution of this Agreement. The representations, warranties and
agreements in this Agreement shall terminate at the Effective Time, except
that the agreements set forth in Sections 6.4, 6.5, 6.6, 6.8, 6.12, 6.13, 6.14
and 8.4 shall survive the Effective Time. The Confidentiality/Standstill
Agreement shall survive termination of this Agreement as therein provided.
10.3 Notices.
(a) Any notice, communication, offer, acceptance, request, consent,
reply, or advice (herein severally and collectively, for convenience, called
"Notice"), in this Agreement provided or permitted to be given, served, made,
or accepted by any party or Person to any other party or parties, Person or
Persons, hereunder must be in writing, addressed to the party to be notified
at the address set forth below, or such other address as to which one party
notifies the other in writing pursuant to the terms of this Section, and must
be served by (1) telefax or other similar electronic method, or (2) depositing
the same in the United States mail, certified, return receipt requested and
postage paid to the party or parties, Person or Persons to be notified or
entitled to receive same, or (3) delivering the same in Person to such party.
Any party receiving a facsimile transmission shall be entitled to rely upon a
facsimile transmission to the same extent as if it were the original.
(b) All notices and other communications given or made pursuant hereto
shall be deemed to have been given immediately when sent by telefax and
confirmed received or other electronic method or when personally delivered in
the manner hereinabove described, and seventy-two hours after being deposited
in the United States mail. Notice provided in any manner not specified above
shall be effective only if and when received by the party or parties, person
or persons to be, or provided to be notified.
(c) All notices, requests, demands, and other communications required or
permitted under this Agreement shall be addressed as set forth below:
(i) If to FLCI:
FirstLink Communications, Inc.
000 XX Xxxxxxxx
Xxxxxxxx, Xxxxxx 00000
Telecopier No. (000) 000-0000
Attn: A. Xxxxx Xxxxx, President
With a copy to:
Xxxxxx Xxxxxxx & Xxxxx, LLC
0000 XXX Xxxxxxxxx, XX-0
Xxxxxxxxx, XX 00000
Telecopier No. (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
(ii) If to USOL:
USOL Holdings, Inc.
00000 Xxxxxx Xxxxxxxxx
Xxxxxx, Xxxxx 00000
Telecopier No. (000) 000-0000
Attn: Xxx Xxxxxxx, Chief Executive Officer
With a copy to:
Jenkens & Xxxxxxxxx
000 Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telecopier No. (000) 000-0000
Attention: X. Xxxxxxx Xxxx, Esq.
(iii) Copies to:
GMAC Commercial Mortgage Corporation
000 Xxxxxxxx Xxxx
Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx
Xxxxx & Lardner
One IBM Plaza
000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxx
Troop Xxxxxxx Pasich Reddick & Xxxxx, LLP
0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxx Xxxxxxxxxx
10.4 Amendment. This Agreement may be amended by the parties hereto by
action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; provided, however, that after approval of
the Merger by the stockholders of USOL and FLCI, no amendment may be made
which by law requires further approval by such stockholders without such
further approval. This Agreement may not be amended except by an instrument in
writing signed by USOL and FLCI.
10.5 Waiver At any time prior to the Effective Time, any party hereto
may, with respect to any other party hereto, (a) extend the time for the
performance of any of the obligations or other acts, (b) waive any
inaccuracies in the representations and warranties of the other party
contained herein or in any document delivered pursuant hereto, and (c) waive
compliance by the other party with any of the agreements or conditions
contained herein. Any such extension or waiver shall be valid only if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
10.6 Severability. If any term or other provision of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal or incapable
of being enforced by any rule of law, or public policy, all other conditions
and provisions of this Agreement shall nevertheless remain in full force and
effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the extent possible.
10.7 Assignment. Neither party may directly or indirectly assign or
delegate, by operation of law or otherwise, all or any portion of its rights,
obligations or liabilities under this Agreement without the prior written
consent of the other party, which consent may be withheld at the other party's
sole and absolute discretion. Any purported assignment or delegation without
such consent shall be null and void.
For purposes of this Section, the term "Agreement" shall include this
Agreement and the exhibits, schedules, and other documents attached hereto or
described in this Section 10.7. This Agreement, and other documents delivered
pursuant to this Agreement, contain all of the terms and conditions agreed
upon by the parties relating to the subject matter of this Agreement and
supersede all prior and contemporaneous agreements, letters of intent,
representations, warranties, disclosures, negotiations, correspondence,
undertakings and communications of the parties, oral or written, respecting
that subject matter, including, without limitation, the letter of intent dated
May 3, 1999, among USOC, FLCI, and others, as amended prior to the date
hereof.
10.8 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement
(other than Sections 6.5, 6.6 and 6.13), express or implied, is intended to or
shall confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
10.9 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure
or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach by the other party of any representation, warranty
or agreement herein, nor shall any single or partial exercise of any such
right preclude other or further exercise thereof or of any other right. All
rights and remedies existing under this Agreement are cumulative and in
addition to, and not exclusive of, any rights or remedies otherwise available.
10.10 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF DELAWARE,
WITHOUT REGARD TO THE CHOICE OF LAW PROVISIONS THEREOF.
10.11 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement. This Agreement
shall become binding when all counterparts taken together shall have been
executed and delivered by the parties. A telecopied facsimile of an executed
counterpart of this Agreement shall be sufficient to evidence the binding
agreement of each party to the terms hereof. However, each party agrees to
return to the other parties an originally executed counterpart of this
Agreement promptly after delivery of a telecopied facsimile thereof.
10.12 Captions. The caption and heading of various sections and
paragraphs of this Agreement are for convenience only and are not to be
construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
10.13 Time. Time is of the essence with respect to this Agreement
and each of its provisions.
IN WITNESS WHEREOF, FLCI and USOL have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
FIRSTLINK COMMUNICATIONS, INC.
By: /s/ A. Xxxxx Xxxxx
------------------------------
A. Xxxxx Xxxxx, President and Chief
Executive Officer
USOL HOLDINGS, INC.
By: /s/ Xxx Xxxxxxx
---------------------------------
Xxx Xxxxxxx, President
