<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (earliest event reported): October 6, 1997 (October 1, 1997)
Rocky Mountain Internet, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 001-12063 84-1322326
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1099 Eighteenth Street, 30th Floor, Denver, Colorado 80202
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 672-0700
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(Former name or former address, if changed since last report.)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
(a) As of October 1, 1997, Mr. Douglas H. Hanson has obtained effective
control of Rocky Mountain Internet, Inc. a Delaware corporation (the
"Company"), by entering into a series of agreements, described in detail
below, pursuant to which, among other things: (1) the Company issued and sold
to Mr. Hanson 1,225,000 shares of the Company's common stock, par value
$0.001 per share (the "Common Stock") for a purchase price of $2,450,000, or
$2.00 per share; (2) Mr. Hanson purchased 275,000 shares of Common Stock from
four of the Company's shareholders, one of which is a director, and one of
which was a director and officer of the Company, for an aggregate purchase
price of $550,000, or $2.00 per share; (3) the Company agreed to issue to Mr.
Hanson warrants (the "Warrants") to purchase 4,000,000 shares of Common Stock
for an exercise price of $1.90 per share, subject to adjustment as described
below; (4) the Company granted Mr. Hanson incentive stock options to purchase
222,220 shares of Common Stock for an exercise price of $2.25 per share and
non-qualified stock options to purchase 377,780 shares of Common Stock for an
exercise price of $1.00 per share (collectively, the "Options"); (5) Mr.
Hanson obtained proxies from 10 shareholders to vote an additional 2,030,844
shares of Common Stock, of which an aggregate of 1,211,574 can be voted for
up to three years and the remainder can be voted only until the conclusion of
the next meeting of shareholders at which directors are elected; and (6) Mr.
Hanson was elected as a director and was elected the President, Chief
Executive Officer, and Chairman of the Board of Directors of the Company. As
the result of Mr. Hanson's investment in the Company, Mr. Hanson owns
approximately 23% (on a primary basis) of the number of shares of Common
Stock outstanding on the date hereof. If Mr. Hanson exercises all of the
Warrants and Options, he would own approximately 54% (on primary basis) of
the number of shares of Common Stock that would be outstanding upon such
exercise of the Warrants and Options. These percentage figures do not give
effect to the potential issuance of approximately 2,840,420 shares of Common
Stock that may be issued upon the exercise of outstanding warrants and
options and the conversion of outstanding convertible preferred stock. On a
fully diluted basis, after giving effect to the exercise of all outstanding
warrants and options and the conversion of all outstanding convertible
preferred stock, Mr. Hanson purchased approximately 16% of the shares of
Common Stock of the Company and, assuming Mr. Hanson exercised all of the
Warrants and Options, he would own approximately 42% of the number of shares
of Common Stock that would be outstanding upon such exercise.
STOCK PURCHASE AGREEMENT BETWEEN DOUGLAS H. HANSON AND THE COMPANY
Pursuant to a Stock Purchase Agreement between Mr. Hanson and the Company,
the Company issued and sold to Mr. Hanson 1,225,000 shares of Common Stock for a
purchase price of $2,450,000, or $2.00 per share.
In connection with the execution of this Stock Purchase Agreement, the
Board of Directors of the Company, in accordance with the Company's By-laws,
increased the number of directors from three to five and elected Mr. Hanson,
Mr. Reynaldo Ortiz, and Mr. D. D. Hock to be directors of the Company. Mr.
Hanson was elected as the Company's President, Chief Executive Officer, and
Chairman of the Board of Directors. Messrs. Ortiz and Hock were selected by
Mr. Hanson, in accordance with the terms of this agreement, to be nominated
and elected as directors of the Company. Contemporaneously with the election
of Messrs. Hanson, Ortiz, and Hock, Roy J. Dimoff resigned as the President,
Chief Executive Officer, and a director of the Company, and Gerald Van
Eeckhout resigned as the Chairman of the Board of Directors but will remain
as a director of the Company.
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Mr. Hanson served until November 1996 as the President and Chief
Executive Officer of Qwest Communications, Inc., a telecommunications company
with its principal executive offices in the Denver area. Mr. Ortiz has
served as Vice President of U S West Communications, Inc. and of Jones
Intercable, Inc. Mr. Hock recently retired as the Chairman and Chief
Executive Officer of Public Service Company of Colorado.
STOCK PURCHASE AGREEMENT BETWEEN DOUGLAS H. HANSON AND ROY J. DIMOFF
Pursuant to a Stock Purchase Agreement between Mr. Hanson and Roy J.
Dimoff, Mr. Dimoff sold to Mr. Hanson 150,000 shares of Common Stock for a
purchase price of $300,000, or $2.00 per share. Contemporaneously with this
purchase and sale, Mr. Dimoff resigned as a director and as President and Chief
Executive Officer of the Company. Mr. Dimoff has not furnished the Company with
any letter describing any disagreement with the Company on any matter relating
to the Company's operations, policies, or practices. In addition, as discussed
below, Mr. Hanson entered into an agreement with Mr. Dimoff pursuant to which
Mr. Hanson obtained the right to vote all shares of Common Stock owned by Mr.
Dimoff.
STOCK PURCHASE AGREEMENT AMONG DOUGLAS H. HANSON, CHRISTOPHER K. PHILLIPS,
JIM D. WELCH, AND KEVIN R. LOUD
Pursuant to a Stock Purchase Agreement among Douglas H. Hanson,
Christopher K. Phillips, Jim D. Welch, and Kevin R. Loud, Mr. Hanson
purchased 50,000 shares, 50,000 shares, and 25,000 shares of Common Stock
from Messrs. Phillips, Welch, and Loud, respectively, for an aggregate
purchase price of $250,000, in each case for $2.00 per share. In addition,
as discussed below, Mr. Hanson entered into an agreement with Messrs.
Phillips, Welch, and Loud pursuant to which Mr. Hanson obtained the right to
vote all shares of Common Stock owned by them.
REGISTRATION AGREEMENT
Contemporaneously with the execution of the agreements described above,
the Company entered into an agreement with Mr. Hanson to register all of the
shares of Common Stock purchased in the above-described transactions, i.e.,
those shares purchased from the Company and those purchased from Messrs.
Dimoff, Phillips, Welch, and Loud, and the Warrants and shares of Common
Stock that may be issued pursuant to the exercise of the Warrants. The
Company has agreed, not later than thirty days after the closing of the
transactions described above, to use its commercially reasonable best efforts
to file a registration statement with the Securities and Exchange Commission
for the registration of the shares of Common Stock, the Warrants, and the
shares of Common Stock issuable upon exercise of the Warrants and to maintain
the effectiveness of such registration statement for a period of one year.
The Company believes that, during the period of effectiveness of such
registration statement, Mr. Hanson may sell all or any of the shares of
Common Stock or Warrants subject thereto without restriction.
(b) In addition to, and contemporaneously with, the agreements described
above, pursuant to which Mr. Hanson purchased newly-issued or outstanding shares
of Common Stock, Mr. Hanson entered into the following agreements, which may at
a subsequent date result in a change in control of the Company.
WARRANT AGREEMENT
The Company entered into a Warrant Agreement with Mr. Hanson pursuant to
which it agreed, subject to obtaining shareholder approval for an increase in
the authorized capital of the Company, to issue to Mr. Hanson the Warrants,
which entitle the holder thereof to purchase up to 4,000,000 shares of Common
Stock for an exercise price of $1.90 per share, for a period of 18 months
from the date of issuance of the Warrants. As of the date hereof, the
Company does not have a sufficient number of shares of its Common Stock
authorized or reserved for issuance upon exercise of all of the Warrants.
Accordingly, the Warrants have not been issued to Mr. Hanson, and the Company
agreed that it would call a meeting of shareholders as soon as reasonably
practicable following the date of the Warrant Agreement for the purpose,
among other things, of amending the Company's Certificate of Incorporation to
increase the authorized capital of the Company. As a result of the purchase
by Mr. Hanson of the shares of Common Stock described herein and the proxies,
described below, obtained by Mr. Hanson, the approval of such amendment by
the Company's shareholders is assured.
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The Warrants are subject to standard anti-dilution provisions and
adjustments in the number of shares of Common Stock that can be issued (and
the exercise price for which they can be issued) in the event of the payment
by the Company of cash or non-cash dividends, reorganizations, and other
extraordinary events.
The company has been advised that the source of all of the consideration
for the purchase of the shares of Common Stock and Warrants purchased from
the Company and the shares of Common Stock purchased from Messrs. Dimoff,
Phillips, Welch, and Loud was a loan made in the ordinary course of business
by a bank as defined in Section 3(a)(6) of the Securities Exchange Act of
1934, as amended (the "Securities Exchange Act"). The identity of the bank
has been omitted from this Report, pursuant to the rules and regulations of
the Securities Exchange Act, at the request of Mr. Hanson, and the identity
of the bank has been filed separately with the Securities and Exchange
Commission. The loan bears interest at the rate of 192 basis points (i.e.,
1.92%) above the London Interbank Offered Rate and has a term of two years.
One-half of the outstanding principal, and accrued interest thereon, is
payable in January 1998, and the remainder of the outstanding principal
amount, and accrued interest thereon, is payable in January 1999. The loan
is secured by a pledge of all of the shares of Common Stock that Mr. Hanson
purchased from the Company and from Messrs. Dimoff, Phillips, Welch, and Loud
and of income anticipated to be received by Mr. Hanson.
SHAREHOLDERS' VOTING AGREEMENT AND IRREVOCABLE PROXY
Contemporaneously with the agreements described above, Mr. Hanson entered
into a Shareholders' Voting Agreement and Irrevocable Proxy with Messrs.
Phillips, Welch, and Loud pursuant to which Messrs. Phillips, Welch, and Loud
granted to Mr. Hanson their proxies to vote all shares of Common Stock held as
of the date of the agreement or acquired subsequent thereto. The proxies
terminate on the earlier of: (i) three years from the date of execution, i.e.,
October 1, 2000; or (ii) the date upon which any shares of Common Stock owned by
the grantor of a proxy are sold, transferred, assigned, or otherwise disposed of
(except by a pledge thereof) by such shareholder to a person other than: (A) a
member of such shareholder's "immediate family," as such term is defined in Rule
16a-1(e) promulgated pursuant to the Securities Exchange Act,
17 C.F.R. Section 240.16a-1(e), or (B) a trust for the benefit of any
member of such shareholder's immediate family; provided, however, that the
termination applies only to such shares of Common Stock as are sold,
transferred, assigned, or otherwise disposed of to persons other than members of
the shareholder's "immediate family." As of October 1, 1997 the number of
shares of Common Stock subject to these proxies was 1,211,574.
Mr. Hanson also entered into a Shareholders' Voting Agreement and
Irrevocable Proxy with seven other shareholders, including Mr. Dimoff. The
terms of such agreement are similar to those of the agreement with Messrs.
Phillips, Welch, and Loud, except that the proxies granted pursuant to the
agreement with the seven shareholders expire immediately after the first
meeting of shareholders held after October 1, 1997 at which directors are
elected and the proxies will not terminate upon transfer of the shares of
Common Stock that are subject to the proxies. As of October 1, the number of
shares of Common Stock subject to these proxies was 819,270.
Except as disclosed herein, the Company is not aware of any arrangements
the operation of which may at a subsequent date result in another change in
control of the Company.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
The following financial statements are filed as a part of this Report:
(a) Financial statements of business acquired.
(Not applicable)
(b) Pro forma financial information
1. Consolidated Balance Sheet (Unaudited) as of August 31, 1997 and
pro forma Balance Sheet as of such date after giving effect to subsequent
investments in the Company;
2. Consolidated Statement of Operations (Unaudited) for the 8 months
ending August 31, 1997.
(c) Exhibits:
The following documents are being filed as Exhibits hereto:
4.8 Registration Agreement between Rocky Mountain Internet, Inc. and Douglas
H. Hanson, dated as of October 1, 1997;
4.9 Warrant Agreement between Rocky Mountain Internet, Inc. and Douglas H.
Hanson, dated as of October 1, 1997;
4.10 Shareholders' Voting Agreement and Irrevocable Proxy among Douglas H.
Hanson, Christopher K. Phillips, Jim D. Welch, and Kevin R. Loud, dated as of
October 1, 1997;
4.11 Shareholders' Voting Agreement and Irrevocable Proxy among Douglas H.
Hanson, Brian Dimoff, Paul B. Davis, Mike Mara, Monty Reagan, Roy J. Dimoff,
Tim Seanlon, and Owen Seanlon, dated as of October 1, 1997;
10.1 Stock Purchase Agreement between Douglas H. Hanson and Rocky Mountain
Internet, Inc., dated as of October 1, 1997;
10.2 Stock Purchase Agreement between Douglas H. Hanson and Roy J. Dimoff,
dated as of October 1, 1997;
10.3 Stock Purchase Agreement among Douglas H. Hanson, Christopher K.
Phillips, Jim D. Welch, and Kevin R. Loud, dated as of October 1, 1997; and
99.1 Press Release dated October 2, 1997 regarding investment in Rocky
Mountain Internet, Inc. by Douglas H. Hanson
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ROCKY MOUNTAIN INTERNET, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
UNAUDITED PROFORMA
BALANCE INVESTMENT BALANCE SHEET
SHEET SINCE 8/31/97 (1)
AS OF
8/31/97
ASSETS
<S> <C> <C> <C>
Current Assets
Cash $ 150,832 $ 2,560,000 $ 2,710,832
Short Term Investments $ 576,918 $ 576,918
Accounts Receivable $ 684,700 $ 684,700
Inventory $ 56,091 $ 56,091
Prepaid Expenses $ 18,755 $ 18,755
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Total Current Assets $ 1,487,295 $ 2,560,000 $ 4,047,296
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Property, Plant & Equipment
Property, Plant and Equipment $ 3,629,709 $ 3,629,709
Accumulated Depreciation $ (898,688) $ (898,688)
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Total Property and Equipment $ 2,731,022 $ 2,731,022
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Other Assets
Intangible Assets $ 510,008 $ 510,008
Deposits $ 100,654 $ 100,654
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Total Other Assets $ 610,662 $ 610,662
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Total Assets $ 4,828,979 $ 2,560,000 $ 7,388,980
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</TABLE>
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LIABILITIES AND EQUITY
Current Liabilities
Accounts Payable $ 991,023 $ 991,023
Notes Payable $ 499,250 $ 499,250
Current Maturities of LT Debt $ 547,505 $ 547,505
Deferred Revenue $ 399,150 $ 399,150
Accrued P/R and Related Taxes $ 137,331 $ 137,331
Other Current Liabilities $ 525,095 $ 525,095
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Total Current Liabilities $ 3,099,354 $ 3,099,354
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Long Term Debt $ 974,910 $ 974,910
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Stockholders Equity
Common Stock $ 5,381 $ 1,335 $ 6,716
Preferred Stock $ 93 $ 93
additional Paid-in Capital $ 6,161,151 $ 2,558,665 $ 8,719,816
Treasury Stock $ (54,000) $ (54,000)
Retained Earnings $(5,357,910) $(5,357,910)
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Total Equity $ 754,715 $ 2,560,000 $ 3,314,715
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Total Liabilities and Equity $ 4,828,979 $ 2,560,000 $ 7,388,980
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(1) All amounts shown are gross proceeds as follows:
Funds from Private Placement $ 110,000
Proceeds from Hanson investment 2,450,000
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Total Cash Reciepts 2,560,000
Additional Paid-in Capital will subsequently be reduced by the costs of
these offerings. These costs cannot be reasonably determined at this time.
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ROCKY MOUNTAIN INTERNET, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
EIGHT MONTHS ENDED AUGUST 31, 1997
(Unaudited)
REVENUE
Internet access and services $ 3,634,004
Equipment sales $ 260,729
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$ 3,894,733
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COST OF REVENUE EARNED
Internet access and services $ 1,113,791
Equipment sales $ 205,798
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$ 1,319,589
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GROSS PROFIT $ 2,575,144
GENERAL, SELLING AND ADMINISTRATIVE EXPENSES $ 5,139,084
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OPERATING LOSS $ (2,563,940)
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OTHER INCOME (EXPENSE)
Interest expense $ (259,570)
Other expense $ (5,364)
Interest income $ 31,617
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$ (233,317)
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LOSS BEFORE INCOME TAXES $ (2,797,257)
INCOME TAX EXPENSE $ -
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NET LOSS $ (2,797,257)
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Rocky Mountain Internet, Inc.
(Registrant)
Date: October 6, 1997 /s/David L. Evans
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David L Evans, Executive Vice
President
EXHIBIT INDEX
Exhibit
Number Description
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4.8 Registration Agreement between Rocky Mountain Internet, Inc. and
Douglas H. Hanson, dated as of October 1, 1997
4.9 Warrant Agreement between Rocky Mountain Internet, Inc. and
Douglas H. Hanson, dated as of October 1, 1997
4.10 Shareholders' Voting Agreement and Irrevocable Proxy among
Douglas H. Hanson, Christopher K. Phillips, Jim D. Welch, and
Kevin R. Loud, dated as of October 1, 1997
4.11 Shareholders' Voting Agreement and Irrevocable Proxy among
Douglas H. Hanson, Brian Dimoff, Paul B. Davis, Mike Mara,
Monty Reagan, Roy J. Dimoff, Tim Scanlon, and Owen Scanlon,
dated as of October 1, 1997
10.1 Stock Purchase Agreement between Douglas H. Hanson and Rocky
Mountain Internet, Inc., dated as of October 1, 1997
10.2 Stock Purchase Agreement between Douglas H. Hanson and Roy J.
Dimoff, dated as of October 1, 1997
10.3 Stock Purchase Agreement among Douglas H. Hanson, Christopher K.
Phillips, Jim D. Welch, and Kevin R. Loud, dated as of
October 1, 1997
99.1 Press Release dated October 2, 1997 regarding investment in Rocky
Mountain Internet, Inc. by Douglas H. Hanson
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<PAGE>
REGISTRATION AGREEMENT
THIS REGISTRATION AGREEMENT (this "Agreement") is entered into as of
October 1, 1997 by Rocky Mountain Internet, Inc., a Delaware corporation
("RMII"), and Douglas H. Hanson (the "Shareholder").
Recitals
RMII and the Shareholder have entered into a Stock Purchase Agreement, of
even date herewith, pursuant to which, among other things, RMII agreed to issue
to the Shareholder 1,225,000 shares (the "Shares") of its common stock, $0.001
par value per share ("Common Stock") and to enter into a Warrant Agreement
pursuant to which RMII will agree to issue to the Shareholder warrants to
purchase 4,000,000 additional shares of Common Stock, subject to adjustment (the
"Warrants"). The Shareholder also has entered into separate stock purchase
agreements (the "Insider Stock Purchase Agreements") with four current
shareholders of RMII pursuant to which the Shareholder has agreed to purchase an
aggregate of 275,000 shares of Common Stock from said shareholders (the "Insider
Shares").
The Shares, the Warrants, the shares of Common Stock underlying the
Warrants, and the Insider Shares have not been registered under the Securities
Act of 1933, as amended (the "Securities Act"), or the securities laws of any
state.
In consideration of the purchase of the Shares and the Warrants and to
induce the Shareholder to enter into the Stock Purchase Agreement, RMII has
agreed to undertake to register the Registrable Securities, as hereinafter
defined, under the Securities Act and applicable state securities laws.
Agreement
1. REGISTRATION OF REGISTRABLE SECURITIES BY RMII.
(a) Not later than 30 days after the closing of the transactions
contemplated by the Stock Purchase Agreement, RMII will use its commercially
reasonable best efforts ("Best Efforts") to prepare and file a registration
statement on Form S-1, or on any other form for the general registration of
securities to be resold for cash (together with all exhibits and financial
statements and schedules filed therewith and documents incorporated by reference
therein, a "Registration Statement") with the Securities and Exchange Commission
(the "Commission") to cover the Shares, the Warrants, the shares of Common Stock
underlying the Warrants, and the Insider Shares, together with any other shares
of capital stock of RMII issued or issuable in respect of such securities as a
result of stock splits, stock dividends, reclassification, recapitalizations,
mergers, consolidations, or similar events (collectively, the "Registrable
Securities").
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(b) RMII will use its Best Efforts to cause the Registration
Statement to become effective and to effect the registration of the Registrable
Securities under the Securities Act such that the Registrable Securities may be
offered and sold by the Shareholder on a delayed or continuous basis in
accordance with Rule 415 under the Securities Act. In connection with the
preparation and filing of the Registration Statement and any amendments or
supplements thereto, RMII will furnish to the Shareholder copies of all
documents proposed to be filed, which documents will be subject to the
Shareholder's review and reasonable approval with respect to any information
contained therein concerning the Shareholder.
(c) RMII will pay all expenses of the registration incurred by RMII,
including without limitation legal and accounting fees and disbursements, blue
sky fees and expenses, printing costs and related expenses arising out of the
preparation, filing, amending and supplementing of the Registration Statement
and any prospectus a part thereof, and not including fees and disbursements of
counsel, accountants and other advisors for the Shareholder and underwriting
commissions and discounts, brokerage commissions, agents fees and transfer taxes
relating to the offer and sale of the Registrable Securities.
2. REGISTRATION OF REGISTRABLE SECURITIES IN UNDERWRITTEN OFFERING. RMII
agrees that, at the option of the Shareholder and upon receipt of written notice
from the Shareholder as hereinafter required, it will include the Registrable
Securities in any underwritten public offering of RMII equity securities for
which a registration statement is filed within one year after the close of the
transactions contemplated by the Stock Purchase Agreement and the Warrant
Agreement. RMII will provide the Shareholder with at least 30 business days'
written notice prior to the filing of a Registration Statement relating to any
such underwritten offering. The Shareholder shall have 20 business days from
the receipt of such notice from RMII within which to notify RMII in writing of
an election to participate in the underwritten offering. If the Shareholder
does not notify RMII of such election within such period, RMII shall have no
further obligation to the Shareholder under this Section 2. Such inclusion
shall be prior to the inclusion of any shares of RMII Common Stock held by any
person other than the Shareholder and other than shareholders who received
rights to register their shares of Common Stock prior to the date of this
Agreement; provided, if, in the written opinion of the managing underwriter or
underwriters, if any, for such offering, the inclusion of the Registrable
Securities, when added to the securities being registered by RMII or the selling
stockholder(s), will exceed the maximum amount of RMII's securities that can be
marketed (i) at a price reasonably related to their then current market value,
or (ii) without materially and adversely affecting the entire offering, RMII
shall nevertheless register all or any portion of the Registrable Securities
required to be so registered but such securities shall not be sold by the
Shareholder until such time after the offering has become effective as shall be
agreed by and between the Shareholder and the managing underwriter or
underwriters; provided further that, if any securities are registered for sale
on behalf of other stockholders in such offering and such stockholders have not
agreed to defer such sale until the expiration of such delay period, the number
of securities to be sold by all stockholders in such public offering during such
delay period shall be apportioned PRO RATA among all such selling shareholders,
including the Shareholder, according to the total number of securities of RMII
owned by said selling stockholders, including the Shareholder. Nothing in this
Agreement shall diminish or otherwise adversely affect the rights of any
shareholder or any
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other person who holds rights with respect to RMII's Common Stock under any
existing contract or other arrangement.
3. POSTPONEMENT OF REGISTRATION UNDER CERTAIN CIRCUMSTANCES. RMII shall
be entitled to postpone for a reasonable period of time, not to exceed 90 days
after providing notice to the Shareholder thereof, the filing of any
Registration Statement under Section 1, if (i) at any time prior to the filing
of such Registration Statement RMII determines, in its reasonable business
judgment, that such registration and offering could interfere with or otherwise
adversely affect any financing, acquisition, corporate reorganization, or other
material transaction or development involving RMII or any of its subsidiaries or
require RMII to disclose matters that otherwise would not be required to be
disclosed at such time and (ii) RMII gives the Shareholder written notice of
such postponement.
4. REGISTRATION PROCEDURES.
(a) Subject to the provisions of Section 3, in connection with the
registration of the Registrable Securities, RMII will, as expeditiously as
possible:
(i) subject to Section 4(b), prepare and file with the
Commission such amendments and supplements to the Registration Statement and the
prospectus a part thereof (a "Prospectus," which term shall for all purposes of
this Agreement include any amendments or supplements to such Prospectus) as are
necessary to maintain the effectiveness of such Registration Statement and to
comply with the provisions of the Securities Act and the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), with respect to the disposition of the
Registrable Securities until all of the Registrable Securities have been
disposed of in accordance with the intended methods of disposition of the
Shareholder, as set forth in the Registration Statement, or until counsel for
RMII has in writing advised RMII and the Shareholder that such counsel is of the
opinion that the Shareholder has no further obligation to comply with the
registration requirements of the Securities Act or to deliver a Prospectus
meeting the requirements of Section 10(a) of the Securities Act in connection
with further sales of Registrable Securities by the Shareholder, but in no event
shall RMII be required to maintain the effectiveness of any Registration
Statement for a period of more than one year after the effective date thereof;
(ii) furnish to the Shareholder two conformed copies of each
Registration Statement and of each related amendment and supplement and in each
case including all exhibits, a number of copies of the related Prospectus
(including any related preliminary prospectus and summary prospectus), in
conformity with the requirements of the Securities Act, and such other documents
as the Shareholder reasonably requests to facilitate the disposition of the
Registrable Securities;
(iii) use its best reasonable efforts to register or qualify
the Registrable Securities under the securities or blue sky laws of those
jurisdictions within the United States which the Shareholder reasonably
requests, provided that RMII reserves the right, in its sole discretion, not to
register or qualify the Registrable Securities in any jurisdiction where the
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<PAGE>
Registrable Securities do not meet such jurisdiction's requirements for
registration or qualification or where RMII would be required to consent to
service of process;
(iv) notify the Shareholder promptly (A) when a Registration
Statement becomes effective; and (B) at any time when a Prospectus is required
to be delivered under the Securities Act, of (I) the happening of any event as a
result of which such Prospectus, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements made, in the light of the
circumstances then existing, not misleading; (in which event RMII, at the
request of the Shareholder, shall prepare, file with the Commission and furnish
to the Shareholder a reasonable number of copies of a supplement to or an
amendment of such Prospectus, so that, as thereafter delivered to the purchasers
of such Registrable Securities, such Prospectus does not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made, in the light of the
circumstances then existing, not misleading), (II) any request by the Commission
for any amendment of or supplement to a Registration Statement or any Prospectus
relating thereto or for additional information, (III) the issuance by the
Commission of a stop order suspending the effectiveness of a Registration
Statement or the initiation of proceedings for such purpose, and (IV) the
receipt by RMII of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation of proceedings for
such purpose; and
(v) use its best reasonable efforts to list the Registrable
Securities on the automated quotation system and/or securities exchanges upon
which RMII's Common Stock is listed generally.
(b) Notwithstanding any provision contained herein to the contrary,
if at any time after the filing of a Registration Statement or after it is
declared effective by the Commission, RMII determines, in its reasonable
business judgment, that such registration and offering could interfere with or
otherwise adversely affect any financing, acquisition, corporate reorganization,
or other material transaction or development involving RMII or any of its
subsidiaries or require RMII to disclose matters that otherwise would not be
required to be disclosed at such time, then RMII may require the suspension by
the Shareholder of the distribution of the Registrable Securities by giving
written notice to the Shareholder of such circumstance. In the event such
notice is given, then until RMII has determined, in its reasonable business
judgment, that such registration and offering would no longer interfere with the
matters described in the preceding sentence and has given written notice thereof
to the Shareholder, RMII's obligations under Section 1, if the Registration
Statement has not been declared effective, or under Section 4(a)(i), if the
Registration Statement has become effective, will be suspended. In the event of
a suspension pursuant to this Section 4(b) after a Registration Statement has
been declared effective, the applicable period of effectiveness of such
Registration Statement referred to in Section 4(a)(i) will be extended by a
number of days equal to the total number of days for which the distribution of
Registrable Securities included in such Registration Statement has been
suspended pursuant to this Section 4(b).
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5. CONDITIONS TO REGISTRATION. The Shareholder's right to have
Registrable Securities included in a Registration Statement shall be subject to
the following conditions or limitations:
(a) The Shareholder shall furnish RMII in a timely manner with all
information required by the applicable rules and regulations of the Commission,
including without limitation the proposed method of sale or other disposition of
the Registrable Shares, the identity of and compensation to be paid to any
person to be employed in connection therewith, and all other information as RMII
may reasonably require;
(b) In the event that the Shareholder desires to sell and distribute
Registrable Securities over a period of time, or from time to time, at then
prevailing market prices, the Shareholder shall execute and deliver to RMII
those written undertakings which RMII and its counsel may reasonably require in
order to assure full compliance with relevant provisions of the Securities Act
and the Exchange Act;
(c) Upon the written request of RMII and the managing underwriter or
underwriters, if any, of an underwritten offering of equity securities or debt
securities convertible into equity securities of RMII, the Shareholder shall not
sell publicly or otherwise transfer or dispose of any Registrable Securities or
other equity securities of RMII held by the Shareholder during the period
starting up to 45 days prior to RMII s good faith estimate of the date of filing
with the Commission of, and ending on a date up to 60 days (or up to 90 days if
so requested by the managing underwriter or underwriters) after the effective
date of, a registration statement relating thereto, provided that RMII is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective;
(d) To the extent that any Registrable Securities are included in an
underwritten offering, the Shareholder shall execute an underwriting agreement
containing customary terms including, without limitation, indemnification
provisions, and such other agreements as may be reasonably requested by RMII and
the managing underwriter or the underwriters; and
(e) Upon written notice from RMII of the occurrence of any of the
events specified in clause (B) of Section 4(a)(iv) or that, as set forth in
Section 4(b), the suspension by the Shareholder of the distribution of any of
the Registrable Securities is required, then the Shareholder shall cease
offering or distributing the Registrable Securities until such time as RMII
shall notify the Shareholder in writing that offering and distribution of the
Registrable Securities may recommence.
6. INDEMNIFICATION.
(a) INDEMNIFICATION BY RMII. RMII will, to the extent permitted by
law, indemnify and hold harmless the Shareholder, each other person, if any, who
participates as an underwriter, broker or dealer in the offering or sale of the
Registrable Securities by the Shareholder, and each other person, if any, who
controls any such participating person within the meaning of the Securities Act,
against any losses, claims, demands, damages or liabilities, joint
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or several, to which such indemnified person may become subject under the
Securities Act or otherwise, insofar as the losses, claims, demands, damages or
liabilities (or actions or proceedings in respect thereof) arise out of or are
based upon (a) any untrue statement or alleged untrue statement of any material
fact contained or incorporated by reference in a Registration Statement, a
Prospectus or a preliminary or summary prospectus contained therein, any
amendment or supplement thereto, or any document (or part thereof) incorporated
by reference therein, or (b) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and RMII will reimburse each indemnified person for all
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, demand, damage, liability,
action or proceeding, except that RMII will not be liable in any such case to
the extent that the loss, claim, demand, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made or incorporated by reference in such Registration
Statement, Prospectus or preliminary or summary prospectus, amendment or
supplement in reliance upon and in conformity with information furnished to RMII
by or on behalf of the Shareholder or the indemnified person. This indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of an indemnified person and shall survive the transfer of Registrable
Securities by the Shareholder.
(b) INDEMNIFICATION BY SHAREHOLDER. The Shareholder will, to the
extent permitted by law, indemnify and hold harmless RMII, each director of
RMII, each officer of RMII who signs a Registration Statement, and each other
person, if any, who controls RMII, against any losses, claims, demands, damages
or liabilities, joint or several, to which RMII or such director, officer or
controlling person may become subject under the Securities Act or otherwise,
insofar as the losses, claims, demands, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (a) any untrue
statement or alleged untrue statement of any material fact contained or
incorporated by reference in a Registration Statement, Prospectus or preliminary
or summary prospectus contained therein, any amendment or supplement thereto, or
any document (or part thereof) incorporated by reference therein, or (b) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, which
untrue statement or alleged untrue statement or omission or alleged omission has
been made or incorporated therein in reliance upon and in conformity with
information furnished to RMII by or on behalf of the Shareholder. The
Shareholder will reimburse RMII and each director, officer and controlling
person for all legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, demand, damage, liability,
action or proceeding. This indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of RMII or such director,
officer or controlling person and shall survive the transfer of Registrable
Securities by the Shareholder.
(c) NOTICES OF CLAIMS. Promptly after receipt by an indemnified
party of a demand or notice of the commencement of any action or proceeding
involving losses, claims, demands, damages or liabilities referred to in Section
6(a) or 6(b) (each, an "Indemnified Claim"), the indemnified party will, if a
claim for indemnification is to be made against an indemnifying party, give
written notice to the indemnifying party of the Indemnified Claim;
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<PAGE>
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under Section
6(a) or 6(b), except to the extent that the indemnifying party is materially
prejudiced by the failure to give notice. Unless in the reasonable judgment of
counsel for an indemnifying party a conflict of interest exists between such
indemnifying party and the indemnified party or parties with respect to the
Indemnified Claim, each indemnified party agrees to permit the indemnifying
party to assume the defense of the Indemnified Claim with counsel reasonably
satisfactory to the indemnified party or parties. If the indemnifying party is
not entitled to, or elects not to, assume the defense of an Indemnified Claim,
it will not be obligated to pay the fees and expenses of more than one counsel
for such indemnified party or parties with respect to the Indemnified Claim. No
indemnifying party will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term the giving by the
claimant or plaintiff to the indemnified party of a release from all liability
in respect of the Indemnified Claim.
(d) CONTRIBUTION. If the indemnification provided for in Section
6(a) or 6(b) from the indemnifying party is unavailable to an indemnified party
in respect of any losses, claims, demands, damages or liabilities referred to
therein, then each indemnifying party, in lieu of indemnifying the indemnified
party, shall contribute to the amount paid or payable by each indemnified party
as a result of such losses, claims, demands, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of such indemnifying
party on the one hand and of the indemnified party or parties on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission.
The parties agree that it would not be just and equitable if contribution
pursuant to this Section 6 were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. No person
liable for fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not liable for such fraudulent misrepresentation.
(e) JURISDICTION; SERVICE OF PROCESS. Any action or proceeding by
either party seeking to enforce any provision of, or based on any right arising
out of, this Agreement may be brought against the other party in the courts of
the State of Colorado, City and County of Denver, or, if it has or can acquire
jurisdiction, in the United States District Court for the District of Colorado,
and each of the parties consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any action or proceeding referred
to in the preceding sentence may be served on any party anywhere in the world.
Each party agrees that a final judgment in any action
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or proceeding so brought shall be conclusive and may be enforced by suit on the
judgment or in any other manner provided by law or at equity.
7. EXPENSES. Except as otherwise specifically provided in this Agreement,
each party shall pay his or its own expenses incident to the performance or
enforcement of this Agreement, including all fees and expenses of his or its
counsel for all activities of counsel undertaken pursuant to this Agreement.
8. NOTICES. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by registered or certified
mail, postage prepaid, sent by telecopier, or otherwise delivered by hand or by
a nationally-recognized overnight courier, addressed (a) if to the Purchaser, at
the Purchaser's address or telecopier number set forth below, or at such other
address or telecopier number as the Purchaser shall have furnished to the
Company in writing, or (b) if to the Company, one copy should be sent to its
address or telecopier number set forth below and addressed to the attention of
the Corporate Secretary, or at such other address or telecopier number as the
Company shall have furnished to the Purchaser. Such notices and communications
shall be sent or delivered as follows:
If to RMII, to: Rocky Mountain Internet, Inc.
1099 Eighteenth Street
30th Floor
Denver, Colorado 80202
telephone: 303/672-0700
telecopy 303/672-0711
With a Copy to:
Robert Mintz, Esq.
Sherman & Howard, L.L.C.
633 Seventeenth Street
Suite 3000
Denver, Colorado 80202
telephone: 303/299-8001
telecopy: 303/298-0940
If to the Shareholder, to: Douglas H. Hanson
2925 East Exposition Avenue
Denver, Colorado 80209
telephone: 303/777-4311
telecopy: 303/777-4314
With a Copy to:
Ned A. Minor, Esq.
Minor & Brown, P.C.
650 South Cherry Street
Suite 1100
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Denver, Colorado 80222
telephone: 303/320-1053
telecopy: 303/320-6330
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given (x) in the case of
personal delivery or delivery by telecopier, on the date of such delivery and
verified, in the case of telecopier transmission, by confirmation of such
transmission, (y) in the case of a nationally-recognized overnight courier, on
the day such delivery is confirmed by such courier or by the recipient, and (z)
in the case of mailing, on the third business day following that on which the
piece of mail containing such communication has been deposited in a regularly
maintained receptacle for the deposit of the United States mail, addressed and
mailed as aforesaid.
Any notice shall be deemed to be given when so mailed. Any notice so sent
by rapid transmission shall be deemed to be given when transmitted, if such
transmission is confirmed by mailing (by first class or express mail, postage
prepaid) written confirmation at substantially the same time as the rapid
transmissions and any communication so delivered in person shall be deemed to be
given when receipted for by, or actually received by, the party (or its agent)
to whom it is given.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties with respect to its subject matter and supersedes all prior
agreements and understandings between them as to its subject matter.
10. WAIVERS AND FURTHER AGREEMENTS. A waiver of any of the terms or
conditions of this Agreement shall be in writing and shall not operate as a
waiver of any other breach of such terms or conditions or any other term or
condition, nor shall any failure to enforce any provision hereof operate as a
waiver of such provision or of any other provision. No such written waiver
shall be construed to effect a continuing waiver of the provision being waived,
unless it specifically provides to the contrary, and no such waiver in any
instance shall constitute a waiver in any other instance or for any other
purpose or impair the right of the party against whom such waiver is claimed in
all other instances or for all other purposes to require full compliance with
such provision. Each of the parties agrees to execute all further instruments
and documents and to take all further action as the other parties may reasonably
require in order to effectuate the purposes and intent of this Agreement.
11. AMENDMENTS. This Agreement may not be amended nor shall any waiver,
change, modification, consent or discharge be effected except by an instrument
in writing executed by or on behalf of the party or parties against whom
enforcement of any amendment, waiver, change, modification, consent or discharge
is sought.
12. ASSIGNMENT; SUCCESSORS AND ASSIGNS. This Agreement and the rights
provided hereunder shall be binding upon and shall inure to the benefit of the
parties and their respective assigns, successors, heirs, executors and legal
representatives.
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13. RESTRICTIONS ON TRANSFER OF REGISTRABLE SECURITIES. The Shareholder
acknowledges that the Registrable Securities have not been registered under the
Securities Act or the securities laws of any jurisdiction and may not be sold or
transferred unless they are registered or RMII receives an opinion of counsel
reasonably satisfactory to RMII that an exemption from applicable registration
requirements is available. The certificates representing the Registrable
Securities will bear a restrictive legend to the foregoing effect until such
time as such Registrable Shares are the subject of an effective Registration
Statement or until they are resold pursuant to a valid exemption from the
registration requirements of the Securities Act and other applicable laws. The
Shareholder agrees not to sell or otherwise transfer any Registrable Securities
except in compliance with the Securities Act and other applicable laws and the
provisions hereof. The Shareholder may pledge his Registrable Securities,
provided the pledgee agrees in writing not to sell or otherwise transfer pledged
Registrable Securities except in compliance with the Securities Act and other
applicable laws.
14. SEVERABILITY. Except as provided in Section 6(d), which shall not be
severable from this Agreement, if any provision of this Agreement is held or
deemed to be, or in fact is, invalid, inoperative or unenforceable for any
reason, this Agreement shall be construed as though such invalid, inoperative or
unenforceable provision had never been contained in this Agreement.
15. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Colorado, regardless of the
laws which might otherwise be applicable under principles of conflicts of law.
16. COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be executed in
two or more counterparts, each of which need not be executed by each of the
parties and each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The parties hereby
acknowledge and agree that execution of a facsimile copy of this Agreement by
either party and delivery of a copy this Agreement bearing the facsimile
signature of either party shall constitute the valid and binding execution and
delivery of this Agreement, and facsimile copies of this Agreement bearing the
facsimile signature of either party shall constitute an original document
enforceable against such party.
17. SECTION HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
SHAREHOLDER
/s/ Douglas H. Hanson
- ------------------------------------
Douglas H. Hanson
COMPANY
Rocky Mountain Internet, Inc., a Delaware corporation
By: /s/ David L. Evans
--------------------------------
David L. Evans
Title: Executive Vice President
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WARRANT AGREEMENT
This Warrant Agreement (this "Agreement") is made as of October 1, 1997
between Douglas H. Hanson (the "Purchaser") and Rocky Mountain Internet, Inc., a
Delaware corporation (the "Company").
WHEREAS, the Company and the Purchaser have entered into a Stock Purchase
Agreement, of even date herewith, pursuant to which, among other things, RMII
agreed to issue to the Shareholder 1,225,000 shares (the "Shares") of its common
stock, $0.001 par value per share ("Common Stock") and to enter into this
Agreement for the issuance by the Company of warrants to purchase 4,000,000
additional shares of Common Stock, subject to adjustment (the "Warrants"); and
WHEREAS, the Purchaser has delivered to the Company the consideration for
the issuance of the Shares and for the execution of this Agreement;
NOW, THEREFORE, in consideration of the of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the parties agree as follows.
Section 1
Authorization and Delivery of Warrants
Subject to the conditions set forth in section 3 hereof, the Company has
authorized the issuance and delivery to the Purchaser of warrants (the
"Warrants") to purchase 4,000,000 shares (the "Shares") of the Company's common
stock, par value $0.001 per share (the "Common Stock") at an exercise price of
$1.90 per share of Common Stock, pursuant to the terms of the warrant
certificate attached hereto, to the Purchaser.
Section 2
Terms of Warrants; Exercise of Warrants
The terms and conditions of the Warrants shall be governed by a warrant
certificate in substantially the form attached hereto.
Section 3
Conditions to Obligation of Company to Issue and Deliver Warrants
The parties acknowledge and understand that, as of the date hereof, the
Company does not have a sufficient number of shares of its Common Stock
authorized or reserved for issuance upon exercise of the Warrants. Accordingly,
the Company's obligation hereunder to issue and deliver the Warrants to the
Purchaser is subject to the condition that the Company shall have taken all
corporate action necessary to authorize the issuance of the Warrants and the
shares of Common Stock issuable upon the exercise thereof, including, but not
limited to, the approval by the Company's shareholders of an amendment to the
Company's Certificate of Incorporation to
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authorize an increase in the number of shares Common Stock that may be issued by
the Company.
Section 4
Covenants of the Company
The Company hereby covenants and agrees to call a meeting of shareholders
as soon as reasonably practicable following the date hereof for the purpose,
among other things, of amending the Company's Certificate of Incorporation and
authorizing the issuance of the Warrants to the Purchaser as described in
Section 3. Following the completion of all corporate action necessary or
appropriate to authorize the issuance of the Warrants and the shares of Common
Stock issuable upon the exercise thereof, the Company will at all times keep
reserved out of its authorized Common Stock, so long as any of the Warrants
remain outstanding, solely for the purpose of issue upon exercise of the
Warrants, such number of shares as shall then be issuable upon the exercise of
the Warrants.
Section 5
Representations and Warranties of the Purchaser
5.1 ACCREDITED INVESTOR. The Purchaser is an Accredited Investor.
5.2 INVESTMENT. The Purchaser is acquiring the Warrants for investment
for his own account, not as a nominee or agent, and not with the view to, or
for resale in connection with, any unregistered distribution thereof or of
the Shares.
5.3 RESTRICTED SECURITIES. The Purchaser understands and acknowledges
that the Warrants and the Shares have not been registered under the
Securities Act or relevant state securities laws, but are being offered and
sold pursuant to exemptions from such registrations, and that the Purchaser
may not sell, transfer, assign, convey, pledge, hypothecate, or otherwise
dispose of the Warrants or any of the Shares in any manner without first
obtaining (i) an opinion of counsel satisfactory to the Company that such
proposed disposition or transfer lawfully may be made without the
registration of the Warrants or the Shares, as the case may be, for such
purpose pursuant to the Securities Act, as then amended, and applicable state
securities laws; or (ii) such registration. In furtherance thereof, the
Purchaser represents and warrants to and agrees with the Company that the
Purchaser:
(a) has the financial ability to bear the economic risk for the
investment in the Shares, has adequate means for providing for his
current needs and contingencies, and has no need for liquidity with
respect to the investment in the Warrants or the Shares;
(b) has been furnished with a copy of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996, Forms 10-Q
for the quarters ended March 31, 1997 and June 30, 1997, and Current
Report on Form 8-K dated August 15, 1997 (collectively, the
"Documents") and has evaluated the risks of a purchase of the Shares
based on the information contained therein and in this Agreement;
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(c) has been given the opportunity to ask questions of, and receive
answers from, the management of the Company concerning the terms,
conditions, and other matters pertaining to the investment in the
Warrants and has been given the opportunity to obtain such
additional information necessary to verify the accuracy of the
information contained in the Documents;
(d) except as described in Section 5 (c), the Purchaser has not been
furnished with any oral or written representation or oral or written
information in connection with the offering of the Shares; and
(e) has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an
acquisition of the Warrant and the Shares and of making an informed
investment decision with respect thereto.
Section 6
Successors
This Agreement and the rights provided hereunder shall be binding upon and
shall inure to the benefit of the parties and their respective assigns,
successors, heirs, executors, and legal representatives.
Section 7
Remedies
7.1 JURISDICTION; SERVICE OF PROCESS. Any action or proceeding by either
party seeking to enforce any provision of, or based on any right arising out of,
this Agreement may be brought against the other party in the courts of the State
of Colorado, City and County of Denver, or, if it has or can acquire
jurisdiction, in the United States District Court for the District of Colorado,
and each of the parties consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any action or proceeding referred
to in the preceding sentence may be served on any party anywhere in the world.
Each party agrees that a final judgment in any action or proceeding so brought
shall be conclusive and may be enforced by suit on the judgment or in any other
manner provided by law or at equity.
7.2 SPECIFIC ENFORCEMENT. The Company agrees that the remedies at law of
the holder of the Warrants, in the event of any default or threatened default by
the Company in the performance or compliance with any of the terms of this
Warrant Agreement, may not be adequate and such terms may, in addition to and
not in lieu of any other remedy, be specifically enforced by a decree of
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
PURCHASER
/s/ Douglas H. Hanson
- -----------------------------------
Douglas H. Hanson
COMPANY
Rocky Mountain Internet, Inc., a Delaware corporation
By: /s/ David L. Evans
------------------------------
David L. Evans
Title: Executive Vice President
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SHAREHOLDERS' VOTING AGREEMENT
AND IRREVOCABLE PROXY
This SHAREHOLDERS' VOTING AGREEMENT AND IRREVOCABLE PROXY (this
"Agreement") made as of the 1st day of October, 1997 by and among Douglas H.
Hanson ("Hanson") and each of the individuals listed on Schedule A attached
hereto (hereinafter referred to individually as a "Shareholder" and collectively
as the "Shareholders").
WHEREAS, each Shareholder is the owner of (a) the number of shares of
common stock, par value $0.001 per share (the "Common Stock"), of Rocky Mountain
Internet, Inc. (the "Company") set forth opposite his name on Schedule A
attached hereto; (b) the number of shares of Series A Convertible Preferred
Stock, par value $0.001 per share, of the Company (the "Series A Stock" and
collectively with the Common Stock, the "Capital Stock"), which are convertible
into the number of shares of Common Stock set forth opposite his name on
Schedule A attached hereto; and/or (c) the number of options, warrants,
debentures, notes, and other securities (collectively, the "Derivative
Securities") set forth opposite his name on Schedule A attached hereto, which
Derivative Securities are exercisable or exchangeable for or convertible into,
the number of shares of Common Stock set forth opposite his name on Schedule A
attached hereto (the shares of Capital Stock, together with any other shares of
Capital Stock of the Company acquired by such Shareholders after the date hereof
and during the term of this Agreement (including, without limitation, through
the conversion, exchange, or exercise of Derivative Securities) being
collectively referred to herein as the "Subject Shares"); and
WHEREAS, Hanson has proposed to enter into a stock purchase
agreement with the Company (the "Company Stock Purchase Agreement") providing
for the issuance to Hanson of 1,225,000 shares of Common Stock in
consideration for the payment of $2,450,000 in cash; and
WHEREAS, Hanson has proposed to enter into stock purchase
agreements with the Shareholders pursuant to which Hanson would purchase an
aggregate of 125,000 shares of Common Stock currently owned beneficially and
of record by them in consideration for the payment of $2.00 per share of
Common Stock purchased from such persons (the "Purchased Shares"); and
WHEREAS, it being in the best interests of the Company and the
Shareholders, the Shareholders desire to enter into an agreement to be
specifically enforceable against each Shareholder pursuant to which each
Shareholder agrees to vote his Subject Shares in the manner and for the
purposes specified herein.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and for other valuable consideration, the receipt and sufficiency of
which are confessed and acknowledged by the parties hereto, Hanson and the
Shareholders hereby agree as follows:
1. VOTING AGREEMENT. Each Shareholder, individually and on
behalf of all of his respective heirs, executors, administrators, and other
legal representatives, and with respect to any Subject Shares beneficially
owned, directly or indirectly by such Shareholder, agrees to grant
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<PAGE>
to Hanson the absolute right to vote all Subject Shares of the Company held
by such Shareholder on any and all matters that are presented to the
Company's shareholders for a vote.
2. IRREVOCABLE PROXY. In order to insure the voting of the
Shareholders in accordance with this Agreement, each Shareholder hereby
irrevocably grants to, and appoints, Hanson such Shareholder's proxy and
attorney-in-fact (with full power of substitution), for and in the name,
place and stead of such Shareholder, to vote such Shareholder's Subject
Shares on any and all matters that are presented to the Company's
shareholders for a vote or to execute and deliver written consents in respect
of all Subject Shares currently owned or hereinafter acquired.
Each Shareholder hereby affirms that each such irrevocable proxy is
coupled with an interest and may under no circumstances be revoked. Each
Shareholder hereby ratifies and confirms all that the holder of each
irrevocable proxy may lawfully do or cause to be done by virtue hereof. Each
such irrevocable proxy is executed and intended to be irrevocable in
accordance with the provisions of Section 212(e) of the Delaware General
Corporation Law (the "DGCL"); provided, that each such irrevocable proxy
shall terminate pursuant to Section 8 hereof.
3. LEGENDED CERTIFICATES. Each Shareholder agrees to the
placement of a legend on each of his certificates representing shares of
Capital Stock covered by this Agreement stating that such Shareholder's
Subject Shares are restricted by this Agreement. Each Shareholder further
agrees that such legend may not be removed unless: (i) the Subject Shares are
sold, transferred, assigned, or otherwise disposed of to a person other than
a member of such Shareholder's "immediate family," as such term is defined in
Rule 16a-1(e), 17 C.F.R. Section 240.16a-1(e), promulgated pursuant to the
Securities Exchange Act of 1934, as amended, or a trust for the benefit of
any member of such Shareholder's immediate family; or (ii) this Agreement is
terminated; provided, however, that in the event of the pledge or
hypothecation of the Subject Shares to any person, the legend shall not be
removed.
In furtherance of the Shareholders' obligations set forth in this
Section 3, each Shareholder shall deliver to Hanson, upon the execution of
this Agreement by such Shareholder, or as soon as practicable thereafter,
certificates representing all of such Shareholder's Capital Stock and
Derivative Securities solely for the purpose of the placement of such legend
thereon.
4. CHANGES IN COMMON STOCK. In the event of any stock split,
stock dividend, merger, reorganization, recapitalization, or other change in
the capital structure of the Company affecting the Company's Common Stock, or
the acquisition of additional shares of Common Stock or other voting
securities of the Company by any Shareholder, the number of Subject Shares
listed in Schedule A beside the name of such Shareholder shall be adjusted
appropriately and this Agreement and the obligations hereunder shall attach
to any additional shares of the Company's Common Stock or other voting
securities of the Company issued to or acquired by such Shareholder.
5. REPRESENTATIONS OF SHAREHOLDERS. Each Shareholder hereby
represents and warrants to each of the other Shareholders and to Hanson that
(i) Schedule A attached hereto
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<PAGE>
includes all Capital Stock and Derivative Securities owned beneficially,
directly or indirectly by him and that he has the right to vote all of the
shares of Capital Stock set forth therein; (ii) he has full power to enter
into this Agreement and has not, prior to the date of this Agreement,
executed or delivered any proxy or entered into any other voting agreement or
similar arrangement other than one that has expired or terminated prior to
the date hereof; and (iii) he will not take any action inconsistent with the
purposes and provisions of this Agreement.
6. FURTHER ASSURANCES. Each Shareholder will, from time to time,
execute and deliver, or cause to be executed and delivered, such additional
or further consents, documents and other instruments as Hanson may reasonably
request for the purpose of effectively carrying out the purposes and
provisions of this Agreement.
7. CONDITIONS TO EFFECTIVENESS OF AGREEMENT. The obligations of
the Shareholders to consummate the transactions to be performed by them and
to perform their obligations hereunder are subject to satisfaction of the
following conditions:
(a) The Stock Purchase Agreement shall have been executed; and
(b) Hanson shall have purchased the Purchased Shares from the
Shareholders.
8. TERM; TERMINATION. This Agreement shall become effective upon
execution and delivery by all of the parties hereto, and this Agreement and
all rights and obligations of the parties hereunder, shall terminate on the
earlier of: (i) three years from the later of the date of execution of the
Stock Purchase Agreement or the date that Hanson purchases the Purchased
Shares from the Shareholders; or (ii) the date upon which any Subject Shares
are sold, transferred, assigned, or otherwise disposed of (except a pledge
thereof) by a Shareholder to a person other than: (A) a member of such
Shareholder's "immediate family," as such term is defined in Rule 16a-1(e)
promulgated pursuant to the Securities Exchange Act of 1934, as amended, 17
C.F.R. Section 240.16a-1(e), or (B) a trust for the benefit of any member of
such Shareholder's immediate family; provided, however, that the termination
provided in this section 8(ii) shall apply only to such Subject Shares as are
sold, transferred, assigned, or otherwise disposed of as provided herein.
9. GENERAL PROVISIONS.
(a) All of the covenants, agreements, and obligations
contained in this Agreement shall be binding upon, and inure to the benefit
of, the respective parties and their heirs, executors, administrators, and
other legal representatives, as the case may be. Each Shareholder agrees
that this Agreement and the obligations hereunder shall attach to such
Shareholder's Subject Shares and shall, unless terminated pursuant to Section
8 hereof, be binding upon any person to which legal or beneficial ownership
of such Subject Shares shall pass, whether by operation of law or otherwise,
including without limitation such Shareholder's heirs, guardians,
administrators or successors.
-3-
<PAGE>
(b) This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument. Execution of a facsimile copy of this Agreement by any party and
delivery of a copy of this Agreement bearing the facsimile signature of any
party shall constitute the valid and binding execution and delivery of this
Agreement, and facsimile copies of this Agreement bearing the facsimile
signature of any party shall constitute an original document enforceable
against such party.
(c) All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given upon the
earlier of actual delivery to the intended recipient or the first attempted
delivery by personal delivery, expedited courier, messenger service, or
registered or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth in Schedule A attached
hereto. Any attempted delivery by any of the methods set forth above may be
verified by the person attempting personal delivery, the courier, the
messenger service, or the United States Postal Service, as the case may be,
through whom or which such delivery was attempted. Any party may send any
notice, request, demand, claim, or other communication hereunder to the
intended recipient at the address set forth above using any other means
(including telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until, in the case of ordinary mail, it
actually is received by the intended recipient, and, in the case of delivery
by telecopier, telex, or electronic mail, on the date of such delivery and
verified by confirmation of such transmission.
(d) If any provision of this Agreement shall be declared null,
void or unenforceable by any court or administrative board, such provision
shall be deemed to have been severed from the remainder of this Agreement and
this Agreement shall continue in all other respects to be valid and
enforceable.
(e) The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) No waivers of any breach of this Agreement extended by any
party hereto to any other party shall be construed as a waiver of any rights
or remedies of any other party hereto or with respect to any subsequent
breach.
(g) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware regardless of the laws
that might otherwise govern under applicable principles of conflicts of law
thereof.
10. ENFORCEMENT. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction
or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in the United States
District Court for the District of
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<PAGE>
Colorado or in any Colorado state court having jurisdiction over the subject
matter, this being in addition to any other remedy to which they are entitled
at law or in equity. In addition, each of the parties hereto (i) consents to
submit such party to the personal jurisdiction of United States District
Court for the District of Colorado and every Colorado state court having
jurisdiction over the subject matter in the event any dispute arises out of
this Agreement or any of the transactions contemplated hereby, (ii) agrees
that such party will not attempt to deny or defeat such personal jurisdiction
by motion or other request for leave from any such court, (iii) agrees that
such party will not bring any action relating to this Agreement or the
transactions contemplated hereby in any court other than in the United States
District Court for the District of Colorado or in a Colorado state court
having jurisdiction over the subject matter and (iv) waives any right to
trial by jury with respect to any claim or proceeding related to or arising
out of this Agreement or any of the transactions contemplated hereby.
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
on the date first above written.
HANSON:
/s/ Douglas H. Hanson
------------------------------
Douglas H. Hanson
SHAREHOLDERS:
/s/ Christopher K. Phillips
------------------------------
Christopher K. Phillips
/s/ Jim. D. Welch
------------------------------
Jim. D. Welch
/s/ Kevin R. Loud
------------------------------
Kevin R. Loud
-6-
[Exhibit omitted]
<PAGE>
SHAREHOLDERS' VOTING AGREEMENT
AND IRREVOCABLE PROXY
This SHAREHOLDERS' VOTING AGREEMENT AND IRREVOCABLE PROXY (this
"Agreement") made as of the 1st day of October, 1997 by and among Douglas H.
Hanson ("Hanson") and each of the individuals listed on Schedule A attached
hereto (hereinafter referred to individually as a "Shareholder" and collectively
as the "Shareholders").
WHEREAS, each Shareholder is the owner of (a) the number of shares of
common stock, par value $0.001 per share (the "Common Stock"), of Rocky Mountain
Internet, Inc. (the "Company") set forth opposite his name on Schedule A
attached hereto; (b) the number of shares of Series A Convertible Preferred
Stock, par value $0.001 per share, of the Company (the "Series A Stock" and
collectively with the Common Stock, the "Capital Stock"), which are convertible
into the number of shares of Common Stock set forth opposite his name on
Schedule A attached hereto; and/or (c) the number of options, warrants,
debentures, notes, and other securities (collectively, the "Derivative
Securities") set forth opposite his name on Schedule A attached hereto, which
Derivative Securities are exercisable or exchangeable for or convertible into,
the number of shares of Common Stock set forth opposite his name on Schedule A
attached hereto (the shares of Capital Stock, together with any other shares of
Capital Stock of the Company acquired by such Shareholders after the date hereof
and during the term of this Agreement (including, without limitation, through
the conversion, exchange, or exercise of Derivative Securities) being
collectively referred to herein as the "Subject Shares"); and
WHEREAS, Hanson has proposed to enter into a stock purchase agreement with
the Company (the "Company Stock Purchase Agreement") providing for the issuance
to Hanson of 1,225,000 shares of Common Stock in consideration for the payment
of $2,450,000 in cash; and
WHEREAS, it being in the best interests of the Company and the
Shareholders, the Shareholders desire to enter into an agreement to be
specifically enforceable against each Shareholder pursuant to which each
Shareholder agrees to vote his Subject Shares in the manner and for the purposes
specified herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and for other valuable consideration, the receipt and sufficiency of which are
confessed and acknowledged by the parties hereto, Hanson and the Shareholders
hereby agree as follows:
1. VOTING AGREEMENT. Each Shareholder, individually and on behalf of all
of his respective heirs, executors, administrators, and other legal
representatives, and with respect to any Subject Shares beneficially owned,
directly or indirectly but such Shareholder, agrees to grant to Hanson the
absolute right to vote all Subject Shares of the Company held by such
Shareholder on any and all matters that are presented to the Company's
shareholders for a vote.
2. IRREVOCABLE PROXY. In order to insure the voting of the Shareholders
in accordance with this Agreement, each Shareholder hereby irrevocably grants
to, and appoints, Hanson such Shareholder's proxy and attorney-in-fact (with
full power of substitution), for and in the name,
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<PAGE>
place and stead of such Shareholder, to vote such Shareholder's Subject Shares
on any and all matters that are presented to the Company's shareholders for a
vote or to execute and deliver written consents in respect of all Subject Shares
currently owned or hereinafter acquired.
Each Shareholder hereby affirms that each such irrevocable proxy is coupled
with an interest and may under no circumstances be revoked. Each Shareholder
hereby ratifies and confirms all that the holder of each irrevocable proxy may
lawfully do or cause to be done by virtue hereof. Each such irrevocable proxy
is executed and intended to be irrevocable in accordance with the provisions of
Section 212(e) of the Delaware General Corporation Law (the "DGCL"); provided,
that each such irrevocable proxy shall terminate pursuant to Section 8 hereof.
3. LEGENDED CERTIFICATES. Each Shareholder agrees to the placement of a
legend on each of his certificates representing shares of Capital Stock covered
by this Agreement stating that such Shareholder's Subject Shares are restricted
by this Agreement, provided that, as to Roy J. Dimoff, such requirement shall
apply to all of such Shareholder's certificates except 25,000 shares of Common
Stock. Each Shareholder further agrees that such legend may not be removed
until this Agreement is terminated.
In furtherance of the Shareholders' obligations set forth in this Section
3, each Shareholder shall deliver to Hanson, upon the execution of this
Agreement by such Shareholder, or as soon as practicable thereafter,
certificates representing all of such Shareholder's Capital Stock and Derivative
Securities solely for the purpose of the placement of such legend thereon.
4. CHANGES IN COMMON STOCK. In the event of any stock split, stock
dividend, merger, reorganization, recapitalization, or other change in the
capital structure of the Company affecting the Company's Common Stock, or the
acquisition of additional shares of Common Stock or other voting securities of
the Company by any Shareholder, the number of Subject Shares listed in Schedule
A beside the name of such Shareholder shall be adjusted appropriately and this
Agreement and the obligations hereunder shall attach to any additional shares of
the Company's Common Stock or other voting securities of the Company issued to
or acquired by such Shareholder.
5. REPRESENTATIONS OF SHAREHOLDERS. Each Shareholder hereby represents
and warrants to each of the other Shareholders and to Hanson that (i) Schedule A
attached hereto includes all Capital Stock and Derivative Securities owned
beneficially, directly or indirectly by him and that he has the right to vote
all of the shares of Capital Stock set forth therein; (ii) he has full power to
enter into this Agreement and has not, prior to the date of this Agreement,
executed or delivered any proxy or entered into any other voting agreement or
similar arrangement other than one that has expired or terminated prior to the
date hereof; and (iii) he will not take any action inconsistent with the
purposes and provisions of this Agreement.
6. FURTHER ASSURANCES. Each Shareholder will, from time to time, execute
and deliver, or cause to be executed and delivered, such additional or further
consents, documents
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<PAGE>
and other instruments as Hanson may reasonably request for the purpose of
effectively carrying out the purposes and provisions of this Agreement.
7. CONDITIONS TO EFFECTIVENESS OF AGREEMENT. The obligations of the
Shareholders to consummate the transactions to be performed by them and to
perform their obligations hereunder are subject to satisfaction of the condition
that the Stock Purchase Agreement shall have been executed.
8. TERM; TERMINATION. This Agreement shall become effective upon
execution and delivery by all of the parties hereto, and this Agreement and all
rights and obligations of the parties hereunder, shall terminate upon the final
adjournment of the first meeting of shareholders of the Company at which
directors have been elected to occur after the date hereof.
9. GENERAL PROVISIONS.
(a) All of the covenants, agreements, and obligations contained in
this Agreement shall be binding upon, and inure to the benefit of, the
respective parties and their heirs, executors, administrators, and other legal
representatives, as the case may be. Each Shareholder agrees that this
Agreement and the obligations hereunder shall attach to such Shareholder's
Subject Shares and shall, unless terminated pursuant to Section 8 hereof, be
binding upon any person to which legal or beneficial ownership of such Subject
Shares shall pass, whether by operation of law or otherwise, including without
limitation such Shareholder's heirs, guardians, administrators or successors.
(b) This Agreement may be executed in any number of counterparts, each
of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
Execution of a facsimile copy of this Agreement by any party and delivery of a
copy of this Agreement bearing the facsimile signature of any party shall
constitute the valid and binding execution and delivery of this Agreement, and
facsimile copies of this Agreement bearing the facsimile signature of any party
shall constitute an original document enforceable against such party.
(c) All notices, requests, demands, claims, and other communications
hereunder will be in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly given upon the earlier of actual
delivery to the intended recipient or the first attempted delivery by personal
delivery, expedited courier, messenger service, or registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth in Schedule A attached hereto. Any attempted delivery by
any of the methods set forth above may be verified by the person attempting
personal delivery, the courier, the messenger service, or the United States
Postal Service, as the case may be, through whom or which such delivery was
attempted. Any party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including telecopy, telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim, or other communication shall
be deemed to have been duly given unless and until, in the case of ordinary
mail, it actually is received by the intended recipient, and, in the
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<PAGE>
case of delivery by telecopier, telex, or electronic mail, on the date of such
delivery and verified by confirmation of such transmission.
(d) If any provision of this Agreement shall be declared null, void or
unenforceable by any court or administrative board, such provision shall be
deemed to have been severed from the remainder of this Agreement and this
Agreement shall continue in all other respects to be valid and enforceable.
(e) The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
(f) No waivers of any breach of this Agreement extended by any party
hereto to any other party shall be construed as a waiver of any rights or
remedies of any other party hereto or with respect to any subsequent breach.
(g) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware regardless of the laws that might
otherwise govern under applicable principles of conflicts of law thereof.
10. ENFORCEMENT. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in the United States District Court
for the District of Colorado or in any Colorado state court having jurisdiction
over the subject matter, this being in addition to any other remedy to which
they are entitled at law or in equity. In addition, each of the parties hereto
(i) consents to submit such party to the personal jurisdiction of United States
District Court for the District of Colorado and every Colorado state court
having jurisdiction over the subject matter in the event any dispute arises out
of this Agreement or any of the transactions contemplated hereby, (ii) agrees
that such party will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court, (iii) agrees that such
party will not bring any action relating to this Agreement or the transactions
contemplated hereby in any court other than in the United States District Court
for the District of Colorado or in a Colorado state court having jurisdiction
over the subject matter and (iv) waives any right to trial by jury with respect
to any claim or proceeding related to or arising out of this Agreement or any of
the transactions contemplated hereby.
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the
date first above written.
HANSON:
/s/ Douglas H. Hanson
----------------------------------
Douglas H. Hanson
SHAREHOLDERS:
/s/ Brian Dimoff
----------------------------------
Brian Dimoff
/s/ Paul B. Davis
----------------------------------
Paul B. Davis
/s/ Mike Mara
----------------------------------
Mike Mara
/s/ Monty Reagan
----------------------------------
Monty Reagan
/s/ Roy J. Dimoff
----------------------------------
Roy J. Dimoff
/s/ Tim Scanlon
----------------------------------
Tim Scanlon
/s/ Owen Scanlon
----------------------------------
Owen Scanlon
-5-
[Exhibit omitted]
<PAGE>
STOCK PURCHASE AGREEMENT
BETWEEN
DOUGLAS H. HANSON
AND
ROCKY MOUNTAIN INTERNET, INC.
OCTOBER 1, 1997
<PAGE>
STOCK PURCHASE AGREEMENT
This Agreement is made as of October 1, 1997 between Douglas H. Hanson
(the "Purchaser") and Rocky Mountain Internet, Inc., a Delaware corporation
(the "Company").
SECTION 1
Definitions
"ACCREDITED INVESTOR" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages (including consequential damages), dues,
penalties, fines, costs, amounts paid in settlement, Liabilities,
obligations, Taxes, liens, losses, expenses (including costs of investigation
and defense), and fees, including court costs and attorneys' fees and
expenses, but not including any special, indirect, or incidental damages or
damages resulting from lost profits.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"AFFILIATED GROUP" means any affiliated group within the meaning of Code
Section 1504 or any similar group defined under a similar provision of state,
local, or foreign law.
"APPLICABLE RATE" means 8% per annum.
"BASIS" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or reasonably could form the basis
for any specified consequence.
"BEST EFFORTS" means the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such
result is achieved as expeditiously as possible.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" means the common stock of the Company, $0.001 par value
per share.
"CONFIDENTIAL INFORMATION" means any information concerning the
businesses and affairs of the Company and its Subsidiaries that is not
already generally available to the public.
"CONTROLLED GROUP OF CORPORATIONS" means the Controlled Group of
Corporations (as such term is defined in Code Section 1563) of which the
Company is the common parent.
"DOCUMENTS" has the meaning set forth in Section 5.3(b) below.
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<PAGE>
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan,
(b) qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan
or arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or Material fringe
benefit plan or program.
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(1).
"ENVIRONMENT" means soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins, and wetlands), groundwaters, drinking water supply, stream sediments,
ambient air (including indoor air), plant and animal life, and any other
environmental medium or natural resource.
"ENVIRONMENTAL LAW" means any federal, state, local, municipal, foreign,
international, multinational, or other order, constitution, law, ordinance,
principle of common law, regulation, statute, or treaty that requires or
relates to:
(a) advising appropriate authorities, employees, and the public of intended
or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the
commencements of activities, such as resource extraction or construction,
that could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of pollutants
or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and used so
that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the transportation
of hazardous substances, pollutants, oil, or other potentially harmful
substances;
(g) cleaning up pollutants that have been released, preventing the threat
of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them, for
damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for
injuries done to public assets.
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<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FIDUCIARY" has the meaning set forth in ERISA Section 3(21).
"FINANCIAL STATEMENT" has the meaning set forth in Section 4.8 below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"INDEMNIFIED PARTY" has the meaning set forth in Section 9.4 below.
"INDEMNIFYING PARTY" has the meaning set forth in Section 9.4 below.
"INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof, (b) the names "Rocky
Mountain Internet, Inc." and "Rocky Mountain Internet," all fictional
business names, all registered and unregistered trademarks, service marks,
and applications, trade dress, logos, and trade names, together with all
translations, adaptations, derivations, and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all trade secrets and confidential business
information (including ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier
lists, pricing and cost information, and business and marketing plans and
proposals), (e) all computer software licensed or owned by the Company
(including data and related documentation), (f) all other proprietary rights,
and (g) all copies and tangible embodiments thereof (in whatever form or
medium).
"KNOWLEDGE" means, with respect to the Company, actual knowledge of any
of Brian W. Dimoff, Roy J. Dimoff, Richard Dingess, David L. Evans, Kevin R.
Loud, Michael R. Mara, Nancy P. Phillips, and D. Kirk Roberts, after
reasonable investigation.
"LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"MATERIAL" or "MATERIAL" means material in relation to the business,
operations, affairs, financial conditions, or properties of the Company and
its Subsidiaries, taken as a whole.
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<PAGE>
"MOST RECENT BALANCE SHEET" means the balance sheet contained within the
Most Recent Financial Statements.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth in Section
4.8 below.
"MOST RECENT FISCAL MONTH END" has the meaning set forth in Section 4.8
below.
"MOST RECENT FISCAL YEAR END" has the meaning set forth in Section 4.8
below.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Section 3(37).
"OCCUPATIONAL SAFETY AND HEALTH LAW" means any federal, state, local,
municipal, foreign, international, multinational, or other administrative
order, constitution, law, ordinance, principle of common law, regulation,
statute, or treaty designed to provide safe and healthful working conditions
and to reduce occupational safety and health hazards, and any program,
whether governmental or private (including those promulgated or sponsored by
industry associations and insurance companies), designed to provide safe and
healthful working conditions.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice.
"PARTY" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, a limited liability partnership, a limited liability
limited partnership, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"PROHIBITED TRANSACTION" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"PURCHASE PRICE" has the meaning set forth in Section 2.2 below.
"PURCHASER" has the meaning set forth in the preface above.
"REGISTRATION AGREEMENT" means that certain agreement of even date
herewith between the Company and the Purchaser pursuant to which the Company
has agreed to register the Shares, the Warrants, and the shares of Common
Stock issuable upon exercise of the Warrants for resale by the Purchaser.
"REPORTABLE EVENT" has the meaning set forth in ERISA Section 4043.
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<PAGE>
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable or for Taxes
that the taxpayer is contesting in good faith through appropriate
proceedings, (c) purchase money liens and liens securing rental payments
under capital lease arrangements, and (d) other liens arising in the Ordinary
Course of Business and not incurred in connection with the borrowing of money.
"SHARES" has the meaning set forth in Section 2.1 below.
"SUBSIDIARY" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has
the power to vote or direct the voting of sufficient securities to elect a
majority of the directors.
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof, dated on or after
December 31, 1987.
"THIRD PARTY CLAIM" has the meaning set forth in Section 9.4 below.
"WARRANT AGREEMENT" means that certain agreement of even date herewith
between the Company and the Purchaser pursuant to which the Company has
agreed to issue the Warrants to the Purchaser.
"WARRANTS" means the warrants to purchase 4,000,000 shares of Common
Stock for an exercise price of $1.90 per share, subject to adjustment, which
Warrants are issuable to the Purchaser pursuant to the Warrant Agreement.
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SECTION 2
Issuance, Purchase, and Sale of Common Stock and Warrants
2.1 ISSUANCE AND DELIVERY OF SHARES. Contemporaneously with the
execution of this Agreement, the Company has (i) issued 1,225,000 shares (the
"Shares") of its Common Stock, $0.001 par value per share, to the Purchaser
in such denominations as the Purchaser has determined; and (ii) entered into
the Warrant Agreement with the Purchaser.
2.2 PURCHASE AND SALE OF SHARES AND WARRANTS. Contemporaneously with the
execution of this Agreement, the Purchaser has purchased from the Company the
Shares and the Warrants for the purchase price of $2,450,000, by delivery and
tender of a certified or official bank check (the "Purchase Price").
SECTION 3
Acknowledgments of Receipt
The Company hereby acknowledges receipt of the Purchase Price. The
Purchaser hereby acknowledges receipt of the Shares.
SECTION 4
Representations and Warranties of the Company
The Company represents and warrants to the Purchaser that the statements
contained in this Section 4 are correct and complete as of the date of this
Agreement, except as set forth in the disclosure schedule delivered by the
Company to the Purchaser on the date hereof and initialed by the Parties (the
"Disclosure Schedule"). Nothing in the Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty made
herein, however, unless the Disclosure Schedule identifies the exception with
reasonable particularity and describes the relevant facts in reasonable
detail. Without limiting the generality of the foregoing, the mere listing
(or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the existence of the
document or other item itself). The Disclosure Schedule is arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 4.
4.1 ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Each of the
Company and its Subsidiaries is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation. Each of the Company and its Subsidiaries is duly authorized
to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required. Each of the Company and
its Subsidiaries has full corporate power and authority and all licenses,
permits, and authorizations necessary to carry on the businesses in which it
is engaged and in which it presently proposes to engage and to own and use
the properties owned and used by it. Section 4.1 of the Disclosure Schedule
lists the
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directors and officers of each of the Company and its Subsidiaries. The
Company has delivered to the Purchaser correct and complete copies of the
charter and bylaws of each of the Company and its Subsidiaries (as amended to
date). The minute books (containing the records of meetings of the
stockholders, the board of directors, and any committees of the board of
directors), copies of the contents of which were given to counsel by the
Company, contain a complete summary of all Material actions taken by the
Company since the time of incorporation and reflect all transactions referred
to in such minutes accurately in all Material respects. The stock
certificate books and the stock record books of each of the Company and its
Subsidiaries are correct and complete. None of the Company and its
Subsidiaries is in default under or in violation of any Material provision of
its charter or bylaws.
4.2 CAPITALIZATION. The authorized capital stock of the Company
consists of 10,000,000 shares of Common Stock, par value $0.001 per share, of
which 5,390,729 shares are issued and outstanding, and 1,000,000 shares of
Preferred Stock, par value $0.001 per share, of which 250,000 shares have
been designated "Series A Convertible Preferred Stock" (herein, "Series A
Preferred") and of which 92,500 shares are issued and outstanding. The
outstanding shares have been duly authorized and validly issued, and are
fully paid and nonassessable. The Company has reserved 92,500 shares of its
Common Stock for issuance upon conversion of the Series A Preferred, 552,300
shares of Common Stock for issuance to employees, consultants, or directors
under stock plans or arrangements approved by the Board of Directors, and
2,231,983 shares for issuance upon conversion of outstanding common stock
purchase warrants, options (other than options granted to employees,
consultants, or directors under stock plans or arrangements approved by the
Board of Directors), and other derivative securities, and pursuant to
antidilution provisions of currently outstanding securities (including
derivative securities). Options to purchase 514,437 shares of Common Stock
are issued and outstanding under the Company's 1996 Employees' Stock Option
Plan. Options to purchase 4,500 shares of Common Stock are issued and
outstanding under the Company's 1996 Non-Employees Directors' Stock Option
Plan. Options to purchase 40,370 shares of Common Stock are issued and
outstanding under the Company's 1997 Non-Qualified Stock Option Plan. All
outstanding securities of the Company were issued in substantial compliance
with applicable federal and state securities laws. Section 4.2(a) of the
Disclosure Schedule is a shareholders' list containing the names and stock
ownership of all record holders of the Company's Common Stock as of September
30, 1997. Section 4.2(b) of the Disclosure Schedule lists all authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require the
Company to issue, sell, or otherwise cause to become outstanding any of its
capital stock and the record owners of all such authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments that are outstanding. Section 4.2(c) of the
Disclosure Schedule lists all outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to the
Company and all outstanding awards thereunder. Except as set forth in this
Agreement and Section 4.2 of the Disclosure Schedule, the Company is not
under any obligation to register any of its currently outstanding securities
or any of its securities that may hereafter be issued. To the Knowledge of
the Company, there are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of the Company.
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4.3 AUTHORIZATION. All corporate action on the part of the Company and
its directors and shareholders necessary for the authorization, execution,
delivery, and performance of this Agreement by the Company, the
authorization, sale, issuance, and delivery of the Shares, and the
performance of all of the Company's obligations hereunder has been taken.
This Agreement constitutes a valid and binding obligation of the Company,
enforceable in accordance with its terms, except as such enforcement may be
limited by the application of bankruptcy, insolvency, reorganization, and
other laws of general applicability relating to creditors' rights and by
general principles of equity. The Shares are validly issued, fully paid, and
nonassessable and free of any liens or encumbrances, other than any liens or
encumbrances created by or imposed upon the holders thereof through no action
of the Company; provided, however, that the Shares will be subject to
restrictions on transfer under state and/or federal securities laws as set
forth herein. The Shares are not subject to any preemptive rights or rights
of first refusal.
4.4 NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, (i)
violates any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of the Company and its
Subsidiaries is subject or any provision of the charter or bylaws of any of
the Company and its Subsidiaries or (ii) conflicts with, results in a breach
of, constitutes a default under, results in the acceleration of, creates in
any party the right to accelerate, terminate, modify, or cancel, or require
any notice under any agreement, contract, lease, license, instrument, or
other arrangement to which any of the Company and its Subsidiaries is a party
or by which it is bound or to which any of its assets is subject (or results
in the imposition of any Security Interest upon any of its assets). None of
the Company and its Subsidiaries has been required to give any notice to,
make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order for the Parties to consummate
the transactions contemplated by this Agreement.
4.5 BROKERS' FEES. None of the Company and its Subsidiaries has any
Liability or obligation to pay any fees or commissions to any broker, finder,
or agent with respect to the transactions contemplated by this Agreement.
4.6 TITLE TO ASSETS. Except as disclosed in Section 4.6 of the
Disclosure Schedule, the Company and its Subsidiaries have good and
marketable title to, or a valid leasehold interest in, the properties and
assets (other than Intellectual Property) used by them, located on their
premises, or shown on the Most Recent Balance Sheet or acquired after the
date thereof, free and clear of all Security Interests, except for properties
and assets disposed of in the Ordinary Course of Business since the date of
the Most Recent Balance Sheet.
4.7 SUBSIDIARIES. Section 4.7 of the Disclosure Schedule sets forth for
each Subsidiary of the Company (i) its name and jurisdiction of
incorporation, (ii) the number of shares of authorized capital stock of each
class of its capital stock, (iii) the number of issued and outstanding shares
of each class of its capital stock, the names of the holders thereof, and the
number of shares held by each such holder, and (iv) the number of shares of
its capital stock held in treasury. The Company holds of record and owns
beneficially all of the outstanding shares of each Subsidiary of the Company,
free and clear of any restrictions on transfer (other than
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restrictions under the Securities Act and state securities laws), Taxes,
Security Interests, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. There are no outstanding or
authorized options, warrants, purchase rights, conversion rights, exchange
rights, or other contracts or commitments that could require any of the
Company's Subsidiaries to sell, transfer, or otherwise dispose of any capital
stock or that could require any Subsidiary of the Company to issue, sell, or
otherwise cause to become outstanding any of its own capital stock. There
are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of any capital stock of any Subsidiary of the Company.
Except as disclosed in Section 4.7 of the Disclosure Schedule, none of the
Company and its Subsidiaries controls directly or indirectly or has any
direct or indirect equity participation in any corporation, partnership,
trust, or other business association that is not a Subsidiary of the Company.
4.8 FINANCIAL STATEMENTS. Disclosed in Section 4.8 of the Disclosure
Schedule are the following financial statements (collectively the "Financial
Statements"): (i) audited balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal years ended
December 31, 1994, 1995, and 1996 (the "Most Recent Fiscal Year End") for the
Company and its Subsidiaries; and (ii) unaudited balance sheets and
statements of income, changes in stockholders' equity, and cash flow (the
"Most Recent Financial Statements") as of and for the 8 months ended August
31, 1997 (the "Most Recent Fiscal Month End") for the Company and its
Subsidiaries. The Financial Statements (including the notes thereto) have
been prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby, present fairly the financial
condition of the Company and its Subsidiaries as of such dates and the
results of operations of the Company and its Subsidiaries for such periods,
are correct and complete in all Material respects, and are consistent with
the books and records of the Company and its Subsidiaries (which books and
records are correct and complete in all Material respects); provided,
however, that the Most Recent Financial Statements are subject to normal
year-end adjustments (which will not be Material individually or in the
aggregate) and lack footnotes and other presentation items.
4.9 EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Since the Most
Recent Fiscal Year End, there has not been any Material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of any of the Company and its Subsidiaries. Without limiting the
generality of the foregoing, since that date, except as disclosed in Section
4.9 of the Disclosure Schedule:
(a) none of the Company and its Subsidiaries has sold, leased,
transferred, or assigned any of its assets, tangible or intangible, other
than for a fair consideration in the Ordinary Course of Business;
(b) none of the Company and its Subsidiaries has entered into any
agreement, contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) either involving more than $5,000 or
outside the Ordinary Course of Business;
(c) no party (including any of the Company and its Subsidiaries) has
accelerated, terminated, modified, or canceled any agreement, contract,
lease, or license (or series of
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related agreements, contracts, leases, and licenses) involving more than
$5,000 to which any of the Company and its Subsidiaries is a party or by
which any of them is bound;
(d) none of the Company and its Subsidiaries has imposed any Security
Interest upon any of its assets, tangible or intangible;
(e) none of the Company and its Subsidiaries has made any capital
expenditure (or series of related capital expenditures) either involving
more than $5,000 or outside the Ordinary Course of Business;
(f) none of the Company and its Subsidiaries has made any capital
investment in, any loan to, or any acquisition of the securities or assets
of, any other Person (or series of related capital investments, loans, and
acquisitions) either involving more than $5,000 or outside the Ordinary
Course of Business;
(g) none of the Company and its Subsidiaries has issued any note,
bond, or other debt security or created, incurred, assumed, or guaranteed
any indebtedness for borrowed money or capitalized lease obligation either
involving more than $3,000 individually or $5,000 in the aggregate;
(h) none of the Company and its Subsidiaries has delayed or postponed
the payment of accounts payable and other Liabilities outside the Ordinary
Course of Business;
(i) none of the Company and its Subsidiaries has canceled,
compromised, waived, or released any right or claim (or series of related
rights and claims) either involving more than $5,000 or outside the
Ordinary Course of Business;
(j) none of the Company and its Subsidiaries has granted any license
or sublicense of any rights under or with respect to any Intellectual
Property other than to customers in the Ordinary Course of Business;
(k) there has been no change made or authorized in the charter or
bylaws of any of the Company and its Subsidiaries;
(l) none of the Company and its Subsidiaries has issued, sold, or
otherwise disposed of any of its capital stock, or granted any options,
warrants, or other rights to purchase or obtain (including upon conversion,
exchange, or exercise) any of its capital stock;
(m) none of the Company and its Subsidiaries has declared, set aside,
or paid any dividend or made any distribution with respect to its capital
stock (whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock;
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(n) none of the Company and its Subsidiaries has experienced any
Material damage, destruction, or loss (whether or not covered by insurance)
to its property;
(o) none of the Company and its Subsidiaries has made any loan to, or
entered into any other transaction with, any of its directors, officers,
and employees other than travel advances and office advances made in the
ordinary course of business;
(p) none of the Company and its Subsidiaries has entered into any
employment contract or collective bargaining agreement, written or oral, or
modified the terms of any existing such contract or agreement;
(q) none of the Company and its Subsidiaries has granted any increase
in the base compensation of any of its directors, officers, and employees
outside the Ordinary Course of Business;
(r) none of the Company and its Subsidiaries has adopted, amended,
modified, or terminated any bonus, profit-sharing, incentive, severance, or
other plan, contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with respect
to any other Employee Benefit Plan);
(s) none of the Company and its Subsidiaries has made any other change
in employment terms for any of its directors, officers, and employees
outside the Ordinary Course of Business;
(t) none of the Company and its Subsidiaries has made or pledged to
make any charitable or other capital contribution outside the Ordinary
Course of Business;
(u) there has not been any other Material occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving any of the Company and its Subsidiaries; and
(v) none of the Company and its Subsidiaries has committed to any of
the foregoing.
4.10 UNDISCLOSED LIABILITIES. Except as disclosed in Section 4.10 of the
Disclosure Schedule, none of the Company and its Subsidiaries has any liability
(and there is no Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against any of them
giving rise to any liability ), except for (i) liabilities set forth on the face
of the Most Recent Balance Sheet (rather than in any notes thereto), and (ii)
liabilities that have arisen after the Most Recent Fiscal Month End in the
Ordinary Course of Business (none of which results from, arises out of, relates
to, is in the nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law).
4.11 LEGAL COMPLIANCE. Each of the Company, its Subsidiaries, and their
respective predecessors and Affiliates has substantially complied with all
applicable laws (including
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Material rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any failure so to comply.
4.12 TAX MATTERS.
(a) Except as disclosed in Section 4.12 of the Disclosure Schedule,
each of the Company and its Subsidiaries has filed all Tax Returns that it
was required to file. All such Tax Returns were correct and complete in all
respects. All Taxes owed by any of the Company and its Subsidiaries
(whether or not shown on any Tax Return) have been paid. None of the
Company and its Subsidiaries currently is the beneficiary of any extension
of time within which to file any Tax Return. No claim has ever been made by
an authority in a jurisdiction where any of the Company and its
Subsidiaries does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no Security Interests on any of
the assets of any of the Company and its Subsidiaries that arose in
connection with any failure (or alleged failure) to pay any Tax, except
Taxes not yet due and payable.
(b) Each of the Company and its Subsidiaries has withheld and paid all
Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(c) To the Knowledge of the Company, there is no Basis for any Tax
authority to assess any additional Taxes for any period for which Tax
Returns have been filed. There is no dispute or claim concerning any Tax
Liability of any of the Company and its Subsidiaries either (A) claimed or
raised by any Tax authority in writing or (B) as to which any of the
directors and officers (and employees responsible for Tax matters) of the
Company and its Subsidiaries has Knowledge based upon personal contact with
any agent of such authority. Section 4.12 of the Disclosure Schedule lists
all federal, state, local, and foreign income Tax Returns filed with
respect to any of the Company and its Subsidiaries for taxable periods
ended on or after December 31, 1992, indicates those Tax Returns that have
been audited, and indicates those Tax Returns that currently are the
subject of audit. The Company has delivered to the Purchaser correct and
complete copies of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by any of the
Company and its Subsidiaries since December 31, 1993.
(d) Except as disclosed in Section 4.12 of the Disclosure Schedule,
none of the Company and its Subsidiaries has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(e) None of the Company and its Subsidiaries has filed a consent under
Code Section 341(f) concerning collapsible corporations. None of the
Company and its Subsidiaries has made any payments, is obligated to make
any payments, or is a party to
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any agreement that under certain circumstances could obligate it to make
any payments that will not be deductible under Code Section 280G. None of
the Company and its Subsidiaries has been a United States real property
holding corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section 897(c)(1)(A)(ii). None of the
Company and its Subsidiaries is a party to any Tax allocation or sharing
agreement. None of the Company and its Subsidiaries (A) has been a member
of an Affiliated Group filing a consolidated federal income Tax Return
(other than a group the common parent of which was the Company) or (B) has
any Liability for the Taxes of any Person (other than any of the Company
and its Subsidiaries) under Treas. Reg. Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor,
by contract, or otherwise.
(f) The unpaid Taxes of the Company and its Subsidiaries (A) did not,
as of the Most Recent Fiscal Month End, exceed the reserve for Tax
Liability (rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set forth on the
face of the Most Recent Balance Sheet (rather than in any notes thereto)
and (B) will not exceed the reserve for Taxes established on the books and
records of the Company as of the date hereof in accordance with the
Ordinary Course of Business of the Company and its Subsidiaries in filing
their Tax Returns.
4.13. SECURITIES ACT AND EXCHANGE ACT FILINGS. Section 4.13 of the
Disclosure Schedule lists all registration statements (including amendments
thereto) filed with the Securities and Exchange Commission under the Securities
Act or the Securities Exchange Act and all reports (including amendments
thereto) filed with the Securities and Exchange Commission under the Securities
Exchange Act. The Company has made available to the Purchaser correct and
complete copies of all such registration statements and reports. Such
registration statements and reports do not contain any untrue statement of a
Material fact or omit to state any Material fact necessary in order to make the
statements contained therein not misleading.
4.14 REAL PROPERTY. Neither the Company nor any of its Subsidiaries owns
any real property.
(a) Neither the Company nor any of its Subsidiaries owns any real
property.
(b) Section 4.14(b) of the Disclosure Schedule lists and describes
briefly all real property leased or subleased to any of the Company and its
Subsidiaries. The Company has delivered to the Purchaser correct and
complete copies of the leases and subleases listed in Section 4.14(b) of
the Disclosure Schedule (as amended to date). With respect to each lease
and sublease listed in Section 4.14(b) of the Disclosure Schedule:
(1) the lease or sublease is legal, valid, binding, enforceable,
and in full force and effect;
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(2) the lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby;
(3) the Company is not and, to the Knowledge of the Company, no
other party to the lease or sublease is in breach or default, and no
event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(4) the Company has not and, to the Knowledge of the Company, no
other party to the lease or sublease has repudiated any provision
thereof;
(5) to the Knowledge of the Company, there are no disputes, oral
agreements, or forbearance programs in effect as to the lease or
sublease;
(6) with respect to each sublease, the representations and
warranties set forth in subsections (1) through (5) above are true and
correct with respect to the underlying lease;
(7) none of the Company and its Subsidiaries has assigned,
transferred, conveyed, mortgaged, deeded in trust, or encumbered any
interest in the leasehold or subleasehold;
(8) to the Knowledge of the Company, all facilities leased or
subleased thereunder have received all approvals of governmental
authorities (including licenses and permits) required in connection
with the operation thereof and have been operated and maintained in
accordance with applicable laws, rules, and regulations;
(9) to the Knowledge of the Company, all facilities leased
or subleased thereunder are supplied with utilities and other services
necessary for the operation of said facilities, including all
specialized needs due to the nature of the Company's business; and
(10) to the Knowledge of the Company, the owner of the facility
leased or subleased has good and marketable title to the parcel of
real property, free and clear of any Security Interest, easement,
covenant, or other restriction, except for installments of special
easements not yet delinquent and recorded easements, covenants, and
other restrictions which do not impair the current use, occupancy,
value, or marketability of title of the property subject thereto.
4.15 INTELLECTUAL PROPERTY.
(a) The Company and its Subsidiaries own or have the right to use
pursuant to license, sublicense, agreement, or permission all Intellectual
Property used in the
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operation of the businesses of the Company and its Subsidiaries as
presently conducted and as presently proposed to be conducted. Each item
of Intellectual Property owned or used by any of the Company and its
Subsidiaries immediately prior to the date hereof will be owned or
available for use by the Company or the Subsidiary on identical terms and
conditions immediately subsequent to the date hereof. Each of the Company
and its Subsidiaries has taken all commercially reasonable action to
maintain and protect each item of Intellectual Property that it owns or
uses.
(b) None of the Company and its Subsidiaries has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and, to the Knowledge of the
Company, neither the Company nor any of its Subsidiaries has ever received
any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any
claim that any of the Company and its Subsidiaries must license or refrain
from using any Intellectual Property rights of any third party). To the
Knowledge of the Company, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of any of the Company and its Subsidiaries.
(c) Section 4.15(c) of the Disclosure Schedule identifies each item of
Intellectual Property that any third party owns and that any of the Company
and its Subsidiaries uses pursuant to license, sublicense, agreement, or
permission. With respect to each item of Intellectual Property required to
be identified in Section 4.15(c) of the Disclosure Schedule:
(1) the license, sublicense, agreement, or permission covering
the item is legal, valid, binding, enforceable, and in full force and
effect as it applies to the Company;
(2) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms as it applies to the Company following
the date hereof;
(3) to the Knowledge of the Company, no party to the license,
sublicense, agreement, or permission is in breach or default, and no
event has occurred which with notice or lapse of time would constitute
a breach or default or permit termination, modification, or
acceleration thereunder;
(4) to the Knowledge of the Company, no party to the license,
sublicense, agreement, or permission has repudiated any provision
thereof;
(5) with respect to each sublicense, the representations and
warranties set forth in subsections (1) through (4) above are true and
correct with respect to the underlying license;
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(6) to the Knowledge of the Company, the underlying item of
Intellectual Property is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(7) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to the Knowledge of the
Company, is threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual Property; and
(8) none of the Company and its Subsidiaries has granted any
sublicense or similar right with respect to the license, sublicense,
agreement, or permission.
(d) To the Knowledge of the Company, the continued operation of the
business of the Company and its Subsidiaries will not interfere with,
infringe upon, misappropriate, or otherwise come into conflict with, any
Intellectual Property rights of third parties.
4.16 TANGIBLE ASSETS. The Company and its Subsidiaries own or lease all
buildings, machinery, equipment, and other tangible assets reasonably necessary
for the conduct of their businesses as presently conducted and as presently
proposed to be conducted. Each such tangible asset is free from defects (patent
and latent), has been maintained in accordance with normal industry practice, is
in good operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used and presently is
proposed to be used.
4.17 INVENTORY. The inventory of the Company and its Subsidiaries is fit
for the purpose for which it was procured, and all of it is substantially free
from damage and defects.
4.18 CONTRACTS. Section 4.18 of the Disclosure Schedule lists the following
contracts (other than contracts described in Sections 4.14 and 4.15(c)) and
other agreements to which any of the Company and its Subsidiaries is a party:
(a) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in
excess of $5,000 per annum;
(b) any agreement (or group of related agreements) for the purchase or
sale of raw materials, commodities, supplies, products, or other personal
property, or for the furnishing or receipt of services, the performance of
which will extend over a period of more than one year, will result in a
Material loss to any of the Company and its Subsidiaries, or involves
consideration in excess of $5,000;
(iii) any agreement concerning a partnership, joint venture,
collaborative enterprise, and all similar entities and ventures in which
the Company is an interest and similar agreements to which the Company is a
party;
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(iv) any agreement (or group of related agreements) under which it has
created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of $10,000 or under
which it has imposed a Security Interest on any of its assets, tangible or
intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any agreement with any of the Company and its Affiliates (other
than the Company and its Subsidiaries);
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other Material plan or
arrangement for the benefit of its current or former directors, officers,
and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $5,000 or providing severance benefits;
(x) any agreement under which it has advanced or loaned funds of any
amount to any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xi) any other agreement under which the consequences of a default or
termination could have an adverse effect on the business, financial
condition, operations, results of operations, or future prospects of any of
the Company and its Subsidiaries; or
(xii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $10,000.
The Company has delivered to the Purchaser a correct and complete copy of
each written agreement listed in Section 4.18 of the Disclosure Schedule (as
amended to date) and a written summary setting forth the Material terms and
conditions of each oral agreement referred to in Section 4.18 of the Disclosure
Schedule. With respect to each such agreement: (A) the agreement is legal,
valid, binding, enforceable, and in full force and effect; (B) the agreement
will continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (C) the Company is not, and, to the Knowledge, of the
Company, no other party is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the agreement; and (D) the
Company has not, and, to the Knowledge of the Company, no other party has
repudiated any provision of the agreement.
4.19 NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts receivable of
the Company and its Subsidiaries are reflected properly on their books and
records in accordance with GAAP, are valid receivables subject to no setoffs or
counterclaims, are current and collectible, and will
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be collected in accordance with their terms at their recorded amounts, subject
only to the reserve for bad debts set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) as adjusted through the date
hereof in accordance with the Ordinary Course of Business of the Company and its
Subsidiaries.
4.20 POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of any of the Company and its Subsidiaries.
4.21 INSURANCE. Section 4.21 of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which any of the Company and its Subsidiaries
has been a party, a named insured, or otherwise the beneficiary of coverage at
any time within the past three years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was on
a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will continue
to be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby; (C) neither the Company nor the Subsidiary is, and, to the Knowledge of
the Company, no other party to the policy is in breach or default (including
with respect to the payment of premiums or the giving of notices), and no event
has occurred which, with notice or the lapse of time, would constitute such a
breach or default, or permit termination, modification, or acceleration, under
the policy; and (D) neither the Company nor the Subsidiary has, and, to the
Knowledge of the Company, no other party to the policy has repudiated any
provision thereof. Each of the Company and its Subsidiaries has been covered
during the past three years by insurance in scope and amount customary and
reasonable for the businesses in which it has engaged during the aforementioned
period. Section 4.21 of the Disclosure Schedule describes any self-insurance
arrangements affecting any of the Company and its Subsidiaries.
4.22 LITIGATION. Section 4.22 of the Disclosure Schedule sets forth each
instance in which any of the Company and its Subsidiaries (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a
party or, to the Knowledge of the Company, is
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threatened to be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator. Except as disclosed in Section 4.22 of the Disclosure Schedule,
none of the actions, suits, proceedings, hearings, and investigations set forth
in Section 4.22 of the Disclosure Schedule could result in any material adverse
change in the business, financial condition, operations, results of operations,
or future prospects of any of the Company and its Subsidiaries.
4.23 PRODUCT WARRANTY. Each product sold, leased, or delivered by any of
the Company and its Subsidiaries has been in conformity with all applicable
contractual commitments, and none of the Company and its Subsidiaries has any
Liability (and, to the Knowledge of the Company, there is no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against any of them giving rise to any Liability)
for replacement or repair thereof or other damages in connection therewith. No
product sold, leased, or delivered by any of the Company and its Subsidiaries is
subject to any guaranty, warranty, or other indemnity beyond the applicable
standard terms and conditions of sale or lease. Section 4.23 of the Disclosure
Schedule includes copies of the standard terms and conditions of sale or lease
for each of the Company and its Subsidiaries (containing applicable guaranty,
warranty, and indemnity provisions).
4.24 PRODUCT LIABILITY. None of the Company and its Subsidiaries has any
Liability (and, to the Knowledge of the Company, there is no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against any of them giving rise to any Liability)
arising out of any injury to individuals or property as a result of the
ownership, possession, or use of any product sold, leased, or delivered by any
of the Company and its Subsidiaries.
4.25 EMPLOYEES. Except as disclosed in Section 4.25 of the Disclosure, to
the Knowledge of the Company, no executive, key employee, or group of employees
has any plans to terminate employment with any of the Company and its
Subsidiaries. None of the Company and its Subsidiaries is a party to or bound
by any collective bargaining agreement, nor has any of them experienced any
strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. None of the Company and its Subsidiaries has committed any
unfair labor practice. To the Knowledge of the Company, the is no
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of any of the Company and its
Subsidiaries. To the Knowledge of the Company, no employee of the Company is in
violation of any term of any employment agreement, patent disclosure agreement,
or any other agreement relating to the relationship of such employee with the
Company or any other party because of the nature of the business conducted or to
be conducted by the Company.
4.26 EMPLOYEE BENEFITS.
(a) Section 4.26 of the Disclosure Schedule lists each Employee
Benefit Plan that any of the Company and the Controlled Group of Companies
maintains or to which any of the Company and its Subsidiaries contributes.
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(1) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in all
Material respects with the applicable requirements of ERISA, the Code,
and other applicable laws.
(2) All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, PBGC-1's, and Summary Plan
Descriptions) have been filed or distributed appropriately with
respect to each such Employee Benefit Plan. The requirements of Part 6
of Subtitle B of Title 1 of ERISA and of Code Section 4980B have been
met with respect to each such Employee Benefit Plan which is an
Employee Welfare Benefit Plan.
(b) With respect to each Employee Benefit Plan that any of the
Company, its Subsidiaries, and the Controlled Group of Corporations (which
includes the Company and its Subsidiaries) maintains or ever has maintained
or to which any of them contributes, ever has contributed, or ever has been
required to contribute, there have been no Material Prohibited Transactions
with respect to any such Employee Benefit Plan. No Fiduciary has any
Material Liability for breach of fiduciary duty or any other failure to act
or comply in connection with the administration or investment of the assets
of any such Employee Benefit Plan. No action, suit, proceeding, hearing, or
investigation with respect to the administration or the investment of the
assets of any such Employee Benefit Plan (other than routine claims for
benefits) is pending or threatened. None of the directors and officers
(and employees with responsibility for employee benefits matters) of the
Company and its Subsidiaries has any Knowledge of any Basis for any such
action, suit, proceeding, hearing, or investigation.
(c) None of the Company and the other members of the Controlled Group
of Corporations that includes the Company contributes to, ever has
contributed to, or ever has been required to contribute to any
Multiemployer Plan or has any Liability (including withdrawal Liability)
under any Multiemployer Plan.
(d) None of the Company and the Controlled Group of Companies
maintains or ever has maintained or contributes, ever has contributed, or
ever has been required to contribute to any Employee Welfare Benefit Plan
providing medical, health, or life insurance or other welfare-type benefits
for current or future retired or terminated employees, their spouses, or
their dependents (other than in accordance with Code Section 4980B).
4.27 GUARANTIES. None of the Company and its Subsidiaries is a guarantor or
otherwise is liable for any Liability or obligation (including indebtedness) of
any other Person.
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4.28 ENVIRONMENT, HEALTH, AND SAFETY.
(a) To the Knowledge of the Company, each of the Company and its
Subsidiaries has complied with all Environmental Laws and all Occupational
Safety and Health Laws, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed
or commenced against any of them alleging any failure so to comply. To the
Knowledge of the Company, without limiting the generality of the preceding
sentence, each of the Company and its Subsidiaries has obtained and been in
compliance with all of the terms and conditions of all permits, licenses,
and other authorizations which are required under, and has complied with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are contained
in, all Environmental Laws and all Occupational Safety and Health Laws.
(b) To the Knowledge of the Company, none of the Company and its
Subsidiaries has any Liability for any illness of or personal injury to any
employee or other individual for any reason under any Environmental Laws
and all Occupational Safety and Health Law.
4.29 CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY AND ITS SUBSIDIARIES.
None of the Company and its Affiliates has been involved in any business
arrangement or relationship with each other or with any of the Company's
Subsidiaries within the past 12 months, and none of the Company's Affiliates
owns any asset, tangible or intangible, which is used in the business of any of
the Company and its Subsidiaries.
4.30 DISCLOSURE. The representations and warranties contained in this
Section 4 do not contain any untrue statement of a Material fact or omit to
state any Material fact necessary in order to make the statements and
information contained in this Section 4 not misleading.
SECTION 5
Representations and Warranties of the Purchaser
The Purchaser hereby represents and warrants to the Company with respect
to the purchase of the Shares and Warrants as follows:
5.1 ACCREDITED INVESTOR. The Purchaser is an Accredited Investor.
5.2 INVESTMENT. The Purchaser is acquiring the Shares for investment for
his own account, not as a nominee or agent, and not with the view to, or for
resale in connection with, any unregistered distribution thereof.
5.3 RESTRICTED SECURITIES. The Purchaser understands and acknowledges that
the Shares are not being registered under the Securities Act or relevant state
securities laws, but are being offered and sold pursuant to exemptions from such
registrations, and that the Purchaser may not
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sell, transfer, assign, convey, pledge, hypothecate, or otherwise dispose of
any of the Shares in any manner without first obtaining (i) an opinion of
counsel satisfactory to the Company that such proposed disposition or
transfer lawfully may be made without the registration of the Shares for such
purpose pursuant to the Securities Act, as then amended, and applicable state
securities laws; or (ii) such registration. In furtherance thereof, the
Purchaser represents and warrants to and agrees with the Company that the
Purchaser:
(a) has the financial ability to bear the economic risk for the
investment in the Shares, has adequate means for providing for his current
needs and contingencies, and has no need for liquidity with respect to the
investment in the Shares;
(b) has been furnished with a copy of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996, Forms 10-Q for the
quarters ended March 31, 1997 and June 30, 1997, and Current Report on Form
8-K dated August 15, 1997 (collectively, the "Documents") and has evaluated
the risks of a purchase of the Shares based on the information contained
therein and in this Agreement;
(c) has been given the opportunity to ask questions of, and receive
answers from, the management of the Company concerning the terms,
conditions, and other matters pertaining to the investment in the Shares
and has been given the opportunity to obtain such additional information
necessary to verify the accuracy of the information contained in the
Documents;
(d) except as described in Section 5.3(c), the Purchaser has not been
furnished with any oral or written representation or oral or written
information in connection with the offering of the Shares; and
(e) has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an
acquisition of the Shares and of making an informed investment decision
with respect thereto.
5.4 VALID AGREEMENT. This Agreement when executed and delivered by the
Purchaser will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms, except as such enforcement
may be limited by the application of bankruptcy, insolvency, reorganization, and
other laws of general applicability relating to creditors' rights.
5.5 BROKERS OR FINDERS. The Company has not incurred and will not incur,
directly or indirectly, as a result of any action taken by such Purchaser, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement.
5.6 DISCLOSURE. The representations and warranties contained in this
Section 5 do not contain any untrue statement of a Material fact or omit to
state any Material fact necessary in order to make the statements and
information contained in this Section 5 not misleading.
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SECTION 6
Actions Taken and Deliveries Made Prior to or Contemporaneously with the
Execution of this Agreement
The following actions have been taken or documents have been delivered,
as the case may be, prior to or contemporaneously with the execution of this
Agreement:
6.1 RESIGNATION OF OFFICERS AND DIRECTORS. Roy J. Dimoff has resigned from
all positions held by him as an officer or director of the Company. Gerald Van
Eeckhout has resigned from his position as chairman of the board of directors of
the Company.
6.2 ELECTION OF PURCHASER. The Company has caused the election of the
Purchaser has been appointed as the President, Chief Executive Officer, and
chairman of the board of directors of the Company, and Reynaldo Ortiz and D. D.
Hock have been appointed as directors of the Company.
6.3 OPINION OF COUNSEL. The Purchaser has received from counsel to the
Company an opinion in form satisfactory to the Purchaser
SECTION 7
[RESERVED]
SECTION 8
Post-Closing Covenants
The Parties hereby covenant and agree as follows:
8.1 GENERAL. In the event that at any time after the date hereof any
further action is necessary to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 9 below).
8.2 LITIGATION SUPPORT. In the event and for so long as any Party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the date hereof
involving any of the Company and its Subsidiaries, the other Party will
cooperate with him or it and his or its counsel in the contest or defense, make
available their personnel, and will provide such testimony and access to their
books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 9 below).
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8.3 RULE 144 REPORTING. With a view to making available to the Purchaser
the benefits of certain rules and regulations of the Securities and Exchange
Commission that may permit the sale of the Shares to the public without
registration, the Company agrees to use its Best Efforts to:
(a) make and keep adequate public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times after the date hereof; and
(b) use its Best Efforts to file with the Securities and Exchange
Commission in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act.
SECTION 9
Remedies for Breaches of This Agreement
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND COVENANTS. All of the
representations and warranties of the Parties contained in this Agreement
shall survive the closing of the transactions contemplated by this Agreement
(even if the damaged Party knew or had reason to know of any
misrepresentation or breach of warranty at the time of closing) and continue
in full force and effect for a period of three years thereafter (subject to
the prior expiration of any applicable statutes of limitations), except as to
representations and warranties regarding Tax matters, which shall survive for
a period equal to the longest period provided an any applicable statute of
limitations relating to such Tax matters. The covenants of the Parties set
forth in Section 8 shall survive the date hereof indefinitely.
9.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE PURCHASER. In the
event the Company has breached (or in the event any third party alleges facts
that, if true, would mean the Company has breached) any of its
representations, warranties, or covenants contained herein, and provided that
the Purchaser makes a written claim for indemnification against the Company
within the applicable survival period set forth in Section 9.1, then the
Company agrees to indemnify the Purchaser from and against the entirety of
any Adverse Consequences the Purchaser may suffer through and after the date
of the claim for indemnification (including any Adverse Consequences the
Purchaser may suffer after the end of any applicable survival period)
resulting from, arising out of, relating to, in the nature of, or caused by
such breach (or alleged breach).
9.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE COMPANY. In the event
the Purchaser has breached (or in the event any third party alleges facts
that, if true, would mean the Purchaser has breached) any of his
representations, warranties, or covenants contained herein, and provided that
the Company makes a written claim for indemnification against the Purchaser
within the applicable survival period set forth in Section 9.1, then the
Purchaser agrees to indemnify the Company from and against the entirety of
any Adverse Consequences the Company may suffer through and after the date of
the claim for indemnification (including any Adverse Consequences
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the Company may suffer after the end of any applicable survival period)
resulting from, arising out of, relating to, in the nature of, or caused by
such breach (or alleged breach).
9.4 MATTERS INVOLVING THIRD PARTIES.
(a) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") that may give
rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 9, then the Indemnified Party
shall promptly notify the Indemnifying Party thereof in writing; PROVIDED,
HOWEVER, that no delay on the part of the Indemnified Party in notifying
the Indemnifying Party shall relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is materially prejudiced thereby.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (A) the
Indemnifying Party notifies the Indemnified Party in writing within 15 days
after the Indemnified Party has given notice of the Third Party Claim that
the Indemnifying Party will indemnify the Indemnified Party from and
against the entirety of any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim, (B) the Indemnifying Party provides the
Indemnified Party with evidence reasonably acceptable to the Indemnified
Party that the Indemnifying Party will have the financial resources to
defend against the Third Party Claim and fulfill its indemnification
obligations hereunder, (C) the Third Party Claim involves only money
damages and does not seek an injunction or other equitable relief, (D)
settlement of, or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the Indemnified Party, likely
to establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (E) the
Indemnifying Party conducts the defense of the Third Party Claim actively
and diligently.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 9.4(b) above, (A) the
Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (B) the
Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party (not to be withheld
unreasonably), and (C) the Indemnifying Party will not consent to the entry
of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified Party (not
to be withheld unreasonably).
(d) In the event any of the conditions in Section 9.4(b) above is or
becomes unsatisfied, however, (A) the Indemnified Party may defend against,
and consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it may deem appropriate
(and the Indemnified Party need not consult with,
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or obtain any consent from, any Indemnifying Party in connection
therewith), (B) the Indemnifying Party will reimburse the Indemnified
Party promptly and periodically for the costs of defending against the
Third Party Claim (including attorneys' fees and expenses), and (C) the
Indemnifying Party will remain responsible for any Adverse Consequences
the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim to the
fullest extent provided in this Section 9.
(e) Notwithstanding anything contained in this Section 9 to the
contrary, if a full and unconditional settlement offer solely for money
damages is made by the applicable third party involved in the Third Party
Claim, as to which offer the Indemnifying Party notifies the Indemnified
Party in writing of the Indemnifying Party's willingness to accept, and the
Indemnified Party declines to accept such settlement offer, the Indemnified
Party may continue to contest such claim, free of any participation by the
Indemnifying Party, at the Indemnified Party's sole expense, and the amount
of any ultimate liability with respect to which the Indemnifying Party has
any obligation to pay under this Section 9 shall be equal to the lesser of:
(i) the amount of the settlement offer that the Indemnified Party declined
to accept; or (ii) the ultimate loss incurred by the Indemnified Party.
9.5 DETERMINATION OF ADVERSE CONSEQUENCES. The Parties shall take into
account the time cost of money (using the Applicable Rate as the discount rate)
in determining Adverse Consequences for purposes of this Section 9. All
indemnification payments under this Section 8 shall be deemed adjustments to the
Purchase Price.
9.6 OTHER INDEMNIFICATION PROVISIONS. In addition to the remedies provided
in Sections 9.2, 9.3, and 9.4 for breaches of any representation, warranty, or
covenant contained in this Agreement, all other statutory, equitable, and common
law remedies shall be available to the Parties.
SECTION 10
Miscellaneous
10.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the internal laws of the State of Colorado, without regard to any provisions
applicable to conflicts of laws.
10.2 [RESERVED]
10.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto.
The Purchaser may not assign any of his rights to indemnification under this
Agreement. The Company may not assign its rights to indemnification under this
Agreement except by operation of law or in connection with the sale, exchange,
transfer, or other disposition of all or substantially all of its assets.
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10.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Warrant Agreement,
and the Registration Agreement constitute the full and entire understanding
and agreement between the Parties with regard to the subjects hereof and
thereof, and neither Party shall be liable or bound to the other Party in any
manner by any warranties, representations, or covenants except as
specifically set forth herein or therein. Except as expressly provided
herein, neither this Agreement nor any term hereof may be amended, waived,
discharged, or terminated other than by a written instrument signed by the
Party against whom enforcement of any such amendment, waiver, discharge, or
termination is sought.
10.5 JURISDICTION; SERVICE OF PROCESS. Any action or proceeding by a
Party seeking to enforce any provision of, or based on any right arising out
of, this Agreement may be brought against the other Party in the courts of
the State of Colorado, City and County of Denver, or, if it has or can
acquire jurisdiction, in the United States District Court for the District of
Colorado, and each of the Parties consents to the jurisdiction of such courts
(and of the appropriate appellate courts) in any such action or proceeding
and waives any objection to venue laid therein. Process in any action or
proceeding referred to in the preceding sentence may be served on any Party
anywhere in the world. Each Party agrees that a final judgment in any action
or proceeding so brought shall be conclusive and may be enforced by suit on
the judgment or in any other manner provided by law or at equity.
10.6 WAIVER. Subject to the provisions of Section 9.6, the rights and
remedies of the parties to this Agreement are cumulative and not alternative.
Neither the failure nor any delay by any Party in exercising any right,
power, or privilege under this Agreement or the documents referred to in this
Agreement will operate as a waiver of such right, power, or privilege, and no
single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or
the exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this
Agreement or the documents referred to in this Agreement can be discharged by
one Party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other Party; (b) no waiver that may be
given by a Party will be applicable except in the specific instance for which
it is given; and (c) no notice to or demand on one Party will be deemed to be
a waiver of any obligation of such Party or of the right of the Party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
10.7 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, sent by telecopier, or otherwise delivered
by hand or by a nationally-recognized overnight courier, addressed (a) if to
the Purchaser, at the Purchaser's address or telecopier number set forth
below, or at such other address or telecopier number as the Purchaser shall
have furnished to the Company in writing, or (b) if to the Company, one copy
should be sent to its address or telecopier number set forth below and
addressed to the attention of the Corporate Secretary, or at such other
address or telecopier number as the Company shall have furnished to the
Purchaser.
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Such notices and communications shall be sent or delivered as follows:
If to the Company, to: Rocky Mountain Internet, Inc.
1099 Eighteenth Street
30th Floor
Denver, Colorado 80202
telephone: 303/672-0700
telecopy 303/672-0711
With a Copy to:
Robert Mintz, Esq.
Sherman & Howard, L.L.C.
633 Seventeenth Street
Suite 3000
Denver, Colorado 80202
telephone: 303/299-8001
telecopy: 303/298-0940
If to the Purchaser, to: Douglas H. Hanson
2925 East Exposition Avenue
Denver, Colorado 80209
telephone: 303/777-4311
telecopy: 303/777-4314
With a Copy to:
Ned A. Minor, Esq.
Minor & Brown, P.C.
650 South Cherry Street
Suite 1100
Denver, Colorado 80222
telephone: 303/320-1053
telecopy: 303/320-6330
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given (x) in the case of
personal delivery or delivery by telecopier, on the date of such delivery and
verified, in the case of telecopier transmission, by confirmation of such
transmission, (y) in the case of a nationally-recognized overnight courier, on
the day such delivery is confirmed by such courier or by the recipient, and (z)
in the case of mailing, on the third business day following that on which the
piece of mail containing such communication has been deposited in a regularly
maintained receptacle for the deposit of the United States mail, addressed and
mailed as aforesaid.
10.8 EXPENSES. The Company and the Purchaser shall each bear its or his
own expenses with respect to this Agreement and the transactions contemplated
hereby.
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<PAGE>
10.9 COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be executed in
any number of counterparts, each of which may be executed by less than all of
the Purchasers, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument. Execution of a facsimile copy of this Agreement by any Party and
delivery of a copy this Agreement bearing the facsimile signature of any Party
shall constitute the valid and binding execution and delivery of this Agreement,
and facsimile copies of this Agreement bearing the facsimile signature of any
Party shall constitute an original document enforceable against such Party.
10.10 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable, or void, this Agreement shall continue in full force and effect
without said provision.
10.10 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
10.11 CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local,
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
10.12 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
10.13 NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
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The foregoing Agreement is hereby executed as of the date first above
written.
PURCHASER
/s/ Douglas H. Hanson
- -------------------------------
Douglas H. Hanson
COMPANY
Rocky Mountain Internet, Inc., a Delaware corporation
By: /s/ David L. Evans
--------------------------
David L. Evans
Title: Executive Vice President
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[Exhibits and Disclosure Schedule omitted]
<PAGE>
STOCK PURCHASE AGREEMENT
BETWEEN
DOUGLAS H. HANSON
AND
ROY J. DIMOFF
OCTOBER 1, 1997
<PAGE>
STOCK PURCHASE AGREEMENT
This Agreement is made as of October 1, 1997 between Douglas H. Hanson
(the "Purchaser") and Roy J. Dimoff (the "Seller").
Recitals
The Seller owns 510,739 shares of issued and outstanding common stock,
par value $0.001 per share (the "Common Stock"), of Rocky Mountain Internet,
Inc., a Delaware corporation ("RMII").
This Agreement contemplates a transaction in which the Purchaser will
purchase from the Seller, and the Seller will sell to the Purchaser, 150,000
shares of common stock of RMII (the "Purchased Shares") in return for cash in
the amount of $2.00 per Purchased Share.
RMII and the Purchaser have entered into a stock purchase agreement
dated October 1, 1997 (the "RMII Stock Purchase Agreement") pursuant to which
the Purchaser has agreed to purchase from RMII, and RMII has agreed to issue
and sell to the Purchaser 1,225,000 shares (the "Shares") of its common
stock, $0.001 par value per share ("Common Stock"), and common stock purchase
warrants (the "Warrants") to purchase up to 4,000,000 shares of Common Stock
for an exercise price of $1.90 per share, subject to adjustment.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
SECTION 1
Definitions
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages (including incidental and consequential
damages), dues, penalties, fines, costs, amounts paid in settlement,
Liabilities, obligations, Taxes, liens, losses, expenses (including costs of
investigation and defense), diminution in value, and fees, including court
costs and attorneys' fees and expenses; provided, however, that, regardless
of the Adverse Consequences that the Purchaser may suffer, the aggregate
Liability of the Seller pursuant to Section 9 hereof shall in no event exceed
the amount obtained by multiplying 360,739 x (times) the highest Fair Market
Value of the Common Stock during the survival period applicable to a claim or
demand made by the Purchaser for indemnification pursuant to Section 9.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"AFFILIATED GROUP" means any affiliated group within the meaning of Code
Sec. 1504 or any similar group defined under a similar provision of state,
local or foreign law.
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"ANTICIPATED CLOSING DATE" means September 30, 1997.
"APPLICABLE RATE" means 8% per annum.
"BASIS" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"BEST EFFORTS" means the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such
result is achieved as expeditiously as possible.
"CLOSING" has the meaning set forth in Section 3.1 below.
"CLOSING DATE" has the meaning set forth in Section 3.1 below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" means Rocky Mountain Internet, Inc., a Delaware corporation.
"COMMON STOCK" means the common stock of the Company, $0.001 par value
per share.
"CONFIDENTIAL INFORMATION" means any information concerning the
businesses and affairs of the Company and its Subsidiaries that is not
already generally available to the public.
"CONTROLLED GROUP OF CORPORATIONS" has the meaning set forth in Code
Sec. 1563.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan,
(b) qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan
or arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA Sec.
3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA Sec.
3(1).
"ENVIRONMENTAL, HEALTH, AND SAFETY LAWS" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings,
and charges thereunder) of federal, state, local, and foreign governments
(and all agencies thereof) concerning pollution or protection of the
environment, public health and safety,
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<PAGE>
or employee health and safety, including laws relating to emissions,
discharges, releases, or threatened releases of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes into ambient
air, surface water, ground water, or lands or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
"ENVIRONMENT" means soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins, and wetlands), groundwaters, drinking water supply, stream sediments,
ambient air (including indoor air), plant and animal life, and any other
environmental medium or natural resource.
"ENVIRONMENTAL LAW" means any federal, state, local, municipal, foreign,
international, multinational, or other order, constitution, law, ordinance,
principle of common law, regulation, statute, or treaty that requires or
relates to:
(a) advising appropriate authorities, employees, and the public of intended
or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the
commencements of activities, such as resource extraction or construction,
that could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of pollutants
or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and used so
that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the transportation
of hazardous substances, pollutants, oil, or other potentially harmful
substances;
(g) cleaning up pollutants that have been released, preventing the threat
of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them, for
damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for
injuries done to public assets.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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<PAGE>
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in Sec. 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FAIR MARKET VALUE" with respect to the Common Stock means, (a) if the
Common Stock is listed on a national securities exchange or admitted to
unlisted trading privileges on such exchange, the last reported sale price of
the Common Stock on such exchange on the day of determination; or
(b) If the Common Stock is not listed or admitted to unlisted trading
privileges, the last reported sale price or the mean of the last reported bid
and asked prices reported by the NASDAQ Stock Market, Inc.'s NASDAQ SmallCap
Market ("NASDAQ") (or, if not so quoted on NASDAQ, on the OTC Bulletin Board)
on the last business day prior to the date of determination; or
(c) If the Common Stock is not so listed or admitted to unlisted
trading privileges and prices are not reported on NASDAQ or the OTC Bulletin
Board, the Fair Market Value shall be an amount, not less than the book
value, determined in such reasonable manner as may be prescribed by the Board
of Directors of the Company.
"FIDUCIARY" has the meaning set forth in ERISA Sec. 3(21).
"FINANCIAL STATEMENT" has the meaning set forth in Section 4.8 below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"INDEMNIFIED PARTY" has the meaning set forth in Section 9.4 below.
"INDEMNIFYING PARTY" has the meaning set forth in Section 9.4 below.
"INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof, (b) the name "Rocky
Mountain Internet, Inc.," all fictional business names, all registered and
unregistered trademarks, service marks, and applications, trade dress, logos,
and trade names, together with all translations, adaptations, derivations,
and combinations thereof and including all goodwill associated therewith, and
all applications, registrations, and renewals in connection therewith, (c)
all copyrightable works, all copyrights, and all applications, registrations,
and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all
trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information,
and business and marketing plans and proposals), (f) all computer software
licensed or owned by the Company (including data and related
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documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"KNOWLEDGE" of a fact, matter, or circumstance means actual knowledge or
knowledge that a prudent Person occupying a position similar to that occupied
by the Person sought to be charged with Knowledge could be expected to have,
discover, or otherwise become aware of under similar circumstances.
"LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"MOST RECENT BALANCE SHEET" means the balance sheet contained within the
Most Recent Financial Statements.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth in Section
4.8 below.
"MOST RECENT FISCAL MONTH END" has the meaning set forth in Section 4.8
below.
"MOST RECENT FISCAL YEAR END" has the meaning set forth in Section 4.8
below.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Sec. 3(37).
"OCCUPATIONAL SAFETY AND HEALTH LAW" means any federal, state, local,
municipal, foreign, international, multinational, or other administrative
order, constitution, law, ordinance, principle of common law, regulation,
statute, or treaty designed to provide safe and healthful working conditions
and to reduce occupational safety and health hazards, and any program,
whether governmental or private (including those promulgated or sponsored by
industry associations and insurance companies), designed to provide safe and
healthful working conditions.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency).
"PARTY" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, a limited liability partnership, a limited liability
limited partnership, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"PROHIBITED TRANSACTION" has the meaning set forth in ERISA Sec. 406 and
Code Sec. 4975.
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"PURCHASE PRICE" has the meaning set forth in Section 2.2 below.
"PURCHASER" has the meaning set forth in the preface above.
"RMII STOCK PURCHASE AGREEMENT" has the meaning set forth in the preface
above.
"REPORTABLE EVENT" has the meaning set forth in ERISA Sec. 4043.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable or for Taxes
that the taxpayer is contesting in good faith through appropriate
proceedings, (c) purchase money liens and liens securing rental payments
under capital lease arrangements, and (d) other liens arising in the Ordinary
Course of Business and not incurred in connection with the borrowing of money.
"SELLER" has the meaning set forth in the preface above.
"SHARES" has the meaning set forth in the preface above.
"SUBSIDIARY" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has
the power to vote or direct the voting of sufficient securities to elect a
majority of the directors.
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Sec.
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof, dated on or after
December 31, 1987.
"THIRD PARTY CLAIM" has the meaning set forth in Section 9.4 below.
"WARRANTS" has the meaning set forth in the preface above.
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<PAGE>
SECTION 2
Purchase and Sale of Purchased Shares
2.1 BASIC TRANSACTION. On and subject to the terms and conditions of
this Agreement, the Purchaser agrees to purchase from the Seller, and the
Seller agrees to sell to the Purchaser, the Purchased Shares for the
consideration specified below in this Section 2.
2.2 PURCHASE PRICE. The Purchaser agrees to pay to the Seller at the
Closing $2.00 per Purchased Share (the "Purchase Price"), in certified or
official bank check or by wire transfer of funds.
2.3 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Minor & Brown,
P.C., 650 South Cherry Street, Suite 1100, Denver, Colorado 80222 at 9:30
a.m., local time on the second business day following the satisfaction or
waiver of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with respect to
actions the respective Parties will take at the Closing itself) or such other
date as the Seller and the Purchaser shall agree (the date of the Closing is
hereinafter referred to as the "Closing Date").
2.4 DELIVERIES AT THE CLOSING. At the Closing, (i) the Seller will
deliver to the Purchaser stock certificates representing all of the Purchased
Shares owned by the Seller, endorsed in blank or accompanied by duly executed
assignment documents, with signature Medallion guaranteed, and (ii) the
Purchaser will deliver to the Seller the consideration specified in Section
2.2 above.
SECTION 3
Representations and Warranties Concerning the Transaction
3.1 REPRESENTATIONS AND WARRANTIES CONCERNING THE SELLER. The Seller
represents and warrants to the Purchaser that the statements contained in
this Section 3.1 are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 3.1) with respect to himself, except as set
forth in Annex I attached hereto.
(a) AUTHORITY. The Seller has full power and authority to execute and
deliver this Agreement and to perform his obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of the
Seller, enforceable in accordance with its terms and conditions, except as
such enforcement may be limited by the application of bankruptcy,
insolvency, reorganization, and other laws of general applicability
relating to creditors' rights.
(b) AUTHORIZATION OF TRANSACTION. The Seller need not give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or
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governmental agency in order to consummate the transactions contemplated
by this Agreement.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Seller is subject;
or (B) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to which the
Seller is a party or by which he is bound or to which any of his assets is
subject.
(d) BROKERS' FEES. The Seller has no Liability or obligation to pay
any fees or commissions to any broker, finder, or similar agent with
respect to the transactions contemplated by this Agreement for which the
Purchaser could become liable or obligated.
(e) OWNERSHIP OF PURCHASED SHARES. The Seller holds of record and
owns beneficially the 510,739 shares of Common Stock, free and clear of any
restrictions on transfer (other than any restrictions under the Securities
Act and state securities laws), Taxes, Security Interests, options,
warrants, purchase rights, contracts, commitments, equities, claims, and
demands. The Seller is not a party to any option, warrant, purchase right,
or other contract or commitment that could require the Seller to sell,
transfer, or otherwise dispose of any capital stock of RMII (other than
this Agreement). The Seller is not a party to any voting trust, proxy, or
other agreement or understanding with respect to the voting of any capital
stock of RMII.
3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants to the Seller that the statements contained in this
Section 3.2 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and
as though the Closing Date were substituted for the date of this Agreement
throughout this Section 3.2), except as set forth in Annex II attached hereto.
(a) AUTHORITY. The Purchaser has full power and authority to execute
and deliver this Agreement and to perform his obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms and conditions, except
as such enforcement may be limited by the application of bankruptcy,
insolvency, reorganization, and other laws of general applicability
relating to creditors' rights.
(b) BROKERS' FEES. The Purchaser has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which the Seller could
become liable or obligated.
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SECTION 4
Representations and Warranties Concerning the Company
The Seller represents and warrants to the Purchaser that the statements
contained in this Section 4 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Section 4), except as set forth in the
disclosure schedule delivered by the Company to the Purchaser on the date
hereof and initialed by the Parties (the "Disclosure Schedule"). Nothing in
the Disclosure Schedule shall be deemed adequate to disclose an exception to
a representation or warranty made herein, however, unless the Disclosure
Schedule identifies the exception with reasonable particularity and describes
the relevant facts in reasonable detail. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 4.
4.1 ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Each of the
Company and its Subsidiaries is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation. Each of the Company and its Subsidiaries is duly authorized
to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required. Each of the Company and
its Subsidiaries has full corporate power and authority and all licenses,
permits, and authorizations necessary to carry on the businesses in which it
is engaged and in which it presently proposes to engage and to own and use
the properties owned and used by it. Section 4.1 of the Disclosure Schedule
lists the directors and officers of each of the Company and its Subsidiaries.
The Company has delivered to the Purchaser correct and complete copies of
the charter and bylaws of each of the Company and its Subsidiaries (as
amended to date) pursuant to the RMII Stock Purchase Agreement. The portions
of the minute books containing the records of meetings of the stockholders,
the board of directors, and any committees of the board of directors for the
period during which the Seller has been the president and chief executive
officer of RMII, contain a complete summary of all meetings of directors and
shareholders since the time of incorporation and reflect all transactions
referred to in such minutes accurately in all material respects. To the
Knowledge of the Seller, the stock certificate books and the stock record
books of each of the Company and its Subsidiaries are correct and complete.
To the Knowledge of the Seller, none of the Company and its Subsidiaries is
in default under or in violation of any provision of its charter or bylaws.
4.2 CAPITALIZATION. The authorized capital stock of the Company
consists of 10,000,000 shares of Common Stock, par value $0.001 per share, of
which 5,390,729 shares are issued and outstanding, and 1,000,000 shares of
Preferred Stock, par value $0.001 per share, of which 250,000 shares have
been designated "Series A Convertible Preferred Stock" (herein, "Series A
Preferred") and of which 92,500 shares are issued and outstanding. The
outstanding shares have been duly authorized and validly issued, and are
fully paid and nonassessable. The Company has reserved 92,500 shares of its
Common Stock for issuance upon conversion of the Series A Preferred, 552,300
shares of Common Stock for issuance to employees, consultants, or directors
under stock plans or arrangements approved by the Board of Directors, and
2,231,983 shares for issuance upon conversion of outstanding common stock
purchase warrants, options (other than
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options granted to employees, consultants, or directors under stock plans or
arrangements approved by the Board of Directors), and other derivative
securities, and pursuant to antidilution provisions of currently outstanding
securities (including derivative securities). Options to purchase 514,437
shares of Common Stock are issued and outstanding under the Company's 1996
Employees' Stock Option Plan. Options to purchase 4,500 shares of Common
Stock are issued and outstanding under the Company's 1996 Non-Employees
Directors' Stock Option Plan. Options to purchase 40,370 shares of Common
Stock are issued and outstanding under the Company's 1997 Non-Qualified Stock
Option Plan. All outstanding securities of the Company were issued in
substantial compliance with applicable federal and state securities laws.
Section 4.2(a) of the Disclosure Schedule is a shareholders' list containing
the names and stock ownership of all record holders of the Company's Common
Stock as of September 30, 1997. To the Knowledge of the Seller, Section
4.2(b) of the Disclosure Schedule lists all authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments that could require the Company to issue, sell,
or otherwise cause to become outstanding any of its capital stock and the
record owners of all such authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts
or commitments that are outstanding. To the Knowledge of the Seller, Section
4.2(c) of the Disclosure Schedule lists all outstanding or authorized stock
appreciation, phantom stock, profit participation, or similar rights with
respect to the Company and all outstanding awards thereunder. Except as set
forth in this Agreement, the Company is not under any obligation to register
any of its currently outstanding securities or any of its securities that may
hereafter be issued. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of the capital stock
of the Company.
4.3 AUTHORIZATION. All corporate action on the part of the Company, its
directors and shareholders necessary for the authorization, execution,
delivery and performance of the RMII Stock Purchase Agreement by the Company,
the authorization, sale, issuance and delivery of the Shares, the Warrants,
and the shares of Common Stock issuable upon exercise of the Warrants, and
the performance of all of the Company's obligations hereunder has been taken
or will be taken prior to the Closing. To the Knowledge of the Seller, the
Company need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency
in order to consummate the transactions contemplated by this Agreement. To
the Knowledge of the Seller, the RMII Stock Purchase Agreement, when executed
and delivered by the Company, shall constitute a valid and binding obligation
of the Company, enforceable in accordance with its terms, except as such
enforcement may be limited by the application of bankruptcy, insolvency,
reorganization, and other laws of general applicability relating to
creditors' rights. The Purchased Shares are not subject to any preemptive
rights or rights of first refusal.
4.4 NONCONTRAVENTION. Neither the execution and the delivery of the RMII
Stock Purchase Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which any of
the Company and its Subsidiaries is subject or any provision of the charter
or bylaws of any of the Company and its Subsidiaries or (ii) conflict with,
result in a breach of, constitute a default under, result in the
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acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which any of the Company and its
Subsidiaries is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Security Interest upon any of its
assets). To the Knowledge of the Seller, none of the Company and its
Subsidiaries needs to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by the RMII
Stock Purchase Agreement.
4.5 BROKERS' FEES. To the Knowledge of the Seller, none of the Company and
its Subsidiaries has any Liability or obligation to pay any fees or commissions
to any broker, finder, or agent with respect to the transactions contemplated by
the RMII Stock Purchase Agreement.
4.6 TITLE TO ASSETS. To the Knowledge of the Seller, the Company and its
Subsidiaries have good and marketable title to, or a valid leasehold interest
in, the properties and assets used by them, located on their premises, or shown
on the Most Recent Balance Sheet or acquired after the date thereof, free and
clear of all Security Interests, except for properties and assets disposed of in
the Ordinary Course of Business since the date of the Most Recent Balance Sheet.
4.7 SUBSIDIARIES. Section 4.7 of the Disclosure Schedule sets forth for
each Subsidiary of the Company (i) its name and jurisdiction of incorporation,
(ii) the number of shares of authorized capital stock of each class of its
capital stock, (iii) the number of issued and outstanding shares of each class
of its capital stock, the names of the holders thereof, and the number of shares
held by each such holder, and (iv) the number of shares of its capital stock
held in treasury. One of the Company and its Subsidiaries holds of record and
owns beneficially all of the outstanding shares of each Subsidiary of the
Company, free and clear of any restrictions on transfer (other than restrictions
under the Securities Act and state securities laws), Taxes, Security Interests,
options, warrants, purchase rights, contracts, commitments, equities, claims,
and demands. There are no outstanding or authorized options, warrants, purchase
rights, conversion rights, exchange rights, or other contracts or commitments
that could require any of the Company's Subsidiaries to sell, transfer, or
otherwise dispose of any capital stock or that could require any Subsidiary of
the Company to issue, sell, or otherwise cause to become outstanding any of its
own capital stock. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of any capital stock of any Subsidiary
of the Company. None of the Company and its Subsidiaries controls directly or
indirectly or has any direct or indirect equity participation in any
corporation, partnership, trust, or other business association that is not a
Subsidiary of the Company.
4.8 FINANCIAL STATEMENTS. Disclosed in Section 4.8 of the Disclosure
Schedule are the following financial statements (collectively the "Financial
Statements"): (i) audited balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal years ended
December 31, 1994, 1995, and 1996 (the "Most Recent Fiscal Year End") for the
Company and its Subsidiaries; and (ii) unaudited balance sheets and statements
of income, changes in stockholders' equity, and cash flow (the "Most Recent
Financial Statements") as of and for the 8 months ended August 31, 1997 (the
"Most Recent Fiscal Month End") for the
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Company and its Subsidiaries. To the Knowledge of the Seller, the Financial
Statements (including the notes thereto) have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby,
present fairly the financial condition of the Company and its Subsidiaries as of
such dates and the results of operations of the Company and its Subsidiaries for
such periods, are correct and complete, and are consistent with the books and
records of the Company and its Subsidiaries (which books and records are correct
and complete); provided, however, that the Most Recent Financial Statements are
subject to normal year-end adjustments (which will not be material individually
or in the aggregate) and lack footnotes and other presentation items.
4.9 EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Except as disclosed
in Section 4.9 of the Disclosure Schedule since the Most Recent Fiscal Year End,
there has not been any material adverse change in the business, financial
condition, operations, results of operations, or future prospects of any of the
Company and its Subsidiaries. Without limiting the generality of the foregoing,
since that date, except as disclosed in Section 4.9 of the Disclosure Schedule:
(a) none of the Company and its Subsidiaries has sold, leased,
transferred, or assigned any of its assets, tangible or intangible, other
than for a fair consideration in the Ordinary Course of Business;
(b) none of the Company and its Subsidiaries has entered into any
agreement, contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) either involving more than $5,000 or
outside the Ordinary Course of Business;
(c) to the Knowledge of the Seller, no party (including any of the
Company and its Subsidiaries) has accelerated, terminated, modified, or
canceled any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) involving more than $5,000 to
which any of the Company and its Subsidiaries is a party or by which any of
them is bound;
(d) To the Knowledge of the Seller, Company and its Subsidiaries has
imposed any Security Interest upon any of its assets, tangible or
intangible;
(e) To the Knowledge of the Seller, none of the Company and its
Subsidiaries has made any capital expenditure (or series of related capital
expenditures) either involving more than $5,000 or outside the Ordinary
Course of Business;
(f) To the Knowledge of the Seller, none of the Company and its
Subsidiaries has made any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other Person (or series of
related capital investments, loans, and acquisitions) either involving more
than $5,000 or outside the Ordinary Course of Business;
(g) To the Knowledge of the Seller, none of the Company and its
Subsidiaries has issued any note, bond, or other debt security or created,
incurred, assumed, or guaranteed
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any indebtedness for borrowed money or capitalized lease obligation either
involving more than $3,000 singly or $5,000 in the aggregate;
(h) To the Knowledge of the Seller, none of the Company and its
Subsidiaries has canceled, compromised, waived, or released any right or
claim (or series of related rights and claims) either involving more than
$5,000 or outside the Ordinary Course of Business;
(i) To the Knowledge of the Seller, none of the Company and its
Subsidiaries has granted any license or sublicense of any rights under or
with respect to any Intellectual Property;
(j) there has been no change made or authorized in the charter or
bylaws of any of the Company and its Subsidiaries;
(k) none of the Company and its Subsidiaries has issued, sold, or
otherwise disposed of any of its capital stock, or granted any options,
warrants, or other rights to purchase or obtain (including upon conversion,
exchange, or exercise) any of its capital stock;
(l) none of the Company and its Subsidiaries has declared, set aside,
or paid any dividend or made any distribution with respect to its capital
stock (whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock;
(m) To the Knowledge of the Seller, none of the Company and its
Subsidiaries has experienced any damage, destruction, or loss (whether or
not covered by insurance) to its property;
(n) To the Knowledge of the Seller, none of the Company and its
Subsidiaries has made any loan to, or entered into any other transaction
with, any of its directors, officers, and employees other than travel
advances and office advances made in the Ordinary Course of Business;
(o) To the Knowledge of the Seller, none of the Company and its
Subsidiaries has entered into any employment contract or collective
bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(p) none of the Company and its Subsidiaries has granted any increase
in the base compensation of any of its directors, officers, and employees
outside the Ordinary Course of Business;
(q) none of the Company and its Subsidiaries has adopted, amended,
modified, or terminated any bonus, profit-sharing, incentive, severance, or
other plan, contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with respect
to any other Employee Benefit Plan);
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(r) none of the Company and its Subsidiaries has made any other change
in employment terms for any of its directors, officers, and employees
outside the Ordinary Course of Business;
(s) none of the Company and its Subsidiaries has made or pledged to
make any charitable or other capital contribution outside the Ordinary
Course of Business;
(t) there has not been any other material occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving any of the Company and its Subsidiaries; and
(u) none of the Company and its Subsidiaries has committed to any of
the foregoing.
4.10 UNDISCLOSED LIABILITIES. To the Knowledge of the Seller, none of the
Company and its Subsidiaries has any Liability (and there is no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against any of them giving rise to any Liability),
except for (i) Liabilities set forth on the face of the Most Recent Balance
Sheet and (ii) Liabilities that have arisen after the Most Recent Fiscal Month
End in the Ordinary Course of Business (none of which results from, arises out
of, relates to, is in the nature of, or was caused by any breach of contract,
breach of warranty, tort, infringement, or violation of law).
4.11 LEGAL COMPLIANCE. To the Knowledge of the Seller, each of the Company,
its Subsidiaries, and their respective predecessors and Affiliates has
substantially complied with all applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all agencies
thereof), and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply.
4.12 TAX MATTERS.
(a) To the Knowledge of the Seller, each of the Company and its
Subsidiaries has filed all Tax Returns that it was required to file. To the
Knowledge of the Seller, all such Tax Returns were correct and complete in
all respects. To the Knowledge of the Seller, all Taxes owed by any of the
Company and its Subsidiaries (whether or not shown on any Tax Return) have
been paid. None of the Company and its Subsidiaries currently is the
beneficiary of any extension of time within which to file any Tax Return.
No claim has ever been made by an authority in a jurisdiction where any of
the Company and its Subsidiaries does not file Tax Returns that it is or
may be subject to taxation by that jurisdiction. There are no Security
Interests on any of the assets of any of the Company and its Subsidiaries
that arose in connection with any failure (or alleged failure) to pay any
Tax.
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(b) To the Knowledge of the Seller, each of the Company and its
Subsidiaries has withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.
(c) The Seller does not expect any authority to assess any additional
Taxes for any period for which Tax Returns have been filed. To the
Knowledge of the Seller, there is no dispute or claim concerning any Tax
Liability of any of the Company and its Subsidiaries either (A) claimed or
raised by any authority in writing or (B) as to which the Seller has
Knowledge based upon personal contact with any agent of such authority. To
the Knowledge of the Seller, Section 4.12 of the Disclosure Schedule lists
all federal, state, local, and foreign income Tax Returns filed with
respect to any of the Company and its Subsidiaries for taxable periods
ended on or after December 31, 1992, indicates those Tax Returns that have
been audited, and indicates those Tax Returns that currently are the
subject of audit. The Company has delivered to the Purchaser correct and
complete copies of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by any of the
Company and its Subsidiaries since December 31, 1993.
(d) To the Knowledge of the Seller, none of the Company and its
Subsidiaries has waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or
deficiency.
(e) To the Knowledge of the Seller, none of the Company and its
Subsidiaries has filed a consent under Code Section 341(f) concerning
collapsible corporations. To the Knowledge of the Seller, none of the
Company and its Subsidiaries has made any payments, is obligated to make
any payments, or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be
deductible under Code Section 280G. To the Knowledge of the Seller, none
of the Company and its Subsidiaries has been a United States real property
holding corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section 897(c)(1)(A)(ii). To the
Knowledge of the Seller, none of the Company and its Subsidiaries is a
party to any Tax allocation or sharing agreement. To the Knowledge of the
Seller, none of the Company and its Subsidiaries (A) has been a member of
an Affiliated Group filing a consolidated federal income Tax Return (other
than a group the common parent of which was the Company) or (B) has any
Liability for the Taxes of any Person (other than any of the Company and
its Subsidiaries) under Treas. Reg. Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor,
by contract, or otherwise.
(f) To the Knowledge of the Seller, the unpaid Taxes of the Company
and its Subsidiaries (A) did not, as of the Most Recent Fiscal Month End,
exceed the reserve for Tax Liability (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax
income) set forth on the face of the Most Recent
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Balance Sheet (rather than in any notes thereto) and (B) do not exceed that
reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company and its
Subsidiaries in filing their Tax Returns.
4.13. SECURITIES ACT AND EXCHANGE ACT FILINGS. Section 4.13 of the
Disclosure Schedule lists all registration statements (including amendments
thereto) filed with the Securities and Exchange Commission under the Securities
Act or the Securities Exchange Act and all reports (including amendments
thereto) filed with the Securities and Exchange Commission under the Securities
Exchange Act. The Company has delivered to the Purchaser correct and complete
copies of all such registration statements and reports. To the Knowledge of the
Seller, such registration statements and reports do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements contained therein not misleading.
4.14 REAL PROPERTY.
(a) Neither the Company nor any of its Subsidiaries owns any real
property.
(b) Section 4.14(b) of the Disclosure Schedule lists and describes
briefly all real property leased or subleased to any of the Company and its
Subsidiaries. To the Knowledge of the Seller, the Company has delivered to
the Purchaser correct and complete copies of the leases and subleases
listed in Section 4.14(b) of the Disclosure Schedule (as amended to date).
To the Knowledge of the Seller, with respect to each lease and sublease
listed in Section 4.14(b) of the Disclosure Schedule:
(1) the lease or sublease is legal, valid, binding, enforceable,
and in full force and effect;
(2) the lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby;
(3) the Company is not and, to the Knowledge of the Seller, no
other party to the lease or sublease is in breach or default, and no
event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(4) the Company has not and, to the Knowledge of the Seller, no
other party to the lease or sublease has repudiated any provision
thereof;
(5) to the Knowledge of the Seller, there are no disputes, oral
agreements, or forbearance programs in effect as to the lease or
sublease;
(6) with respect to each sublease, the representations and
warranties set forth in subsections (1) through (5) above are true and
correct with respect to the underlying lease;
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(7) To the Knowledge of the Seller, none of the Company and its
Subsidiaries has assigned, transferred, conveyed, mortgaged, deeded in
trust, or encumbered any interest in the leasehold or subleasehold;
and
(10) to the Knowledge of the Seller, the owner of the facility
leased or subleased has good and marketable title to the parcel of
real property, free and clear of any Security Interest, easement,
covenant, or other restriction, except for installments of special
easements not yet delinquent and recorded easements, covenants, and
other restrictions which do not impair the current use, occupancy, or
value, or the marketability of title, of the property subject thereto.
4.15 INTELLECTUAL PROPERTY.
(a) To the Knowledge of the Seller, the Company and its Subsidiaries
own or have the right to use pursuant to license, sublicense, agreement, or
permission all Intellectual Property necessary or desirable for the
operation of the businesses of the Company and its Subsidiaries as
presently conducted and as presently proposed to be conducted. To the
Knowledge of the Seller, each item of Intellectual Property owned or used
by any of the Company and its Subsidiaries immediately prior to the Closing
hereunder will be owned or available for use by the Company or the
Subsidiary on identical terms and conditions immediately subsequent to the
Closing hereunder. To the Knowledge of the Seller, each of the Company and
its Subsidiaries has taken all necessary and desirable action to maintain
and protect each item of Intellectual Property that it owns or uses.
(b) To the Knowledge of the Seller, none of the Company and its
Subsidiaries has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of third
parties, and, to the Knowledge of the Seller, none of the Company and its
Subsidiaries has ever received any charge, complaint, claim, demand, or
notice alleging any such interference, infringement, misappropriation, or
violation (including any claim that any of the Company and its Subsidiaries
must license or refrain from using any Intellectual Property rights of any
third party). To the Knowledge of the Seller, no third party has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of any of the Company and
its Subsidiaries.
(c) Section 4.15(c) of the Disclosure Schedule identifies each patent
or registration which has been issued to any of the Company and its
Subsidiaries with respect to any of its Intellectual Property, identifies
each pending patent application or application for registration which any
of the Company and its Subsidiaries has made with respect to any of its
Intellectual Property, and identifies each license, agreement, or other
permission which any of the Company and its Subsidiaries has granted to any
third party with respect to any of its Intellectual Property (together with
any exceptions). The Company has delivered to the Purchaser correct and
complete copies of all such patents, registrations, applications, licenses,
agreements, and permissions (as amended to date) and has made
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available to the Purchaser correct and complete copies of all other written
documentation evidencing ownership and prosecution (if applicable) of each
such item. Section 4.15(c) of the Disclosure Schedule also identifies each
trade name or unregistered trademark used by any of the Company and its
Subsidiaries in connection with any of its businesses. With respect to each
item of Intellectual Property required to be identified in Section 4.15(c)
of the Disclosure Schedule:
(1) the Company and its Subsidiaries possess all right, title,
and interest in and to the item, free and clear of any Security
Interest, license, or other restriction;
(2) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(3) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to the Knowledge of the
Seller, threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(4) none of the Company and its Subsidiaries has ever agreed to
indemnify any Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(d) To the Knowledge of the Seller, Section 4.15(d) of the Disclosure
Schedule identifies each item of Intellectual Property that any third party
owns and that any of the Company and its Subsidiaries uses pursuant to
license, sublicense, agreement, or permission. The Company has delivered
to the Purchaser correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date). With
respect to each item of Intellectual Property required to be identified in
Section 4.15(d) of the Disclosure Schedule:
(1) the license, sublicense, agreement, or permission covering
the item is legal, valid, binding, enforceable, and in full force and
effect;
(2) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms following the Closing;
(3) to the Knowledge of the Seller, no party to the license,
sublicense, agreement, or permission is in breach or default, and no
event has occurred which with notice or lapse of time would constitute
a breach or default or permit termination, modification, or
acceleration thereunder;
(4) to the Knowledge of the Seller, no party to the license,
sublicense, agreement, or permission has repudiated any provision
thereof;
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(5) with respect to each sublicense, the representations and
warranties set forth in subsections (A) through (D) above are true and
correct with respect to the underlying license;
(6) to the Knowledge of the Seller, the underlying item of
Intellectual Property is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(7) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to the Knowledge of the
Seller, is threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual Property; and
(8) none of the Company and its Subsidiaries has granted any
sublicense or similar right with respect to the license, sublicense,
agreement, or permission.
(e) To the Knowledge of the Seller, the continued operation of the
business of the Company and its Subsidiaries will not interfere with,
infringe upon, misappropriate, or otherwise come into conflict with, any
Intellectual Property rights of third parties.
4.16 TANGIBLE ASSETS. To the Knowledge of the Seller, the Company and its
Subsidiaries own or lease all buildings, machinery, equipment, and other
tangible assets necessary for the conduct of their businesses as presently
conducted and as presently proposed to be conducted. To the Knowledge of the
Seller, each such tangible asset is free from defects (patent and latent), has
been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used and presently is
proposed to be used.
4.17 INVENTORY. To the Knowledge of the Seller, the inventory of the
Company and its Subsidiaries consists of raw materials and supplies,
manufactured and purchased parts, goods in process, and finished goods, all of
which is merchantable and fit for the purpose for which it was procured or
manufactured, and none of which is slow-moving, obsolete, damaged, or defective,
subject only to the reserve for inventory writedown set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) as adjusted for the
passage of time through the Closing Date in accordance with the past custom and
practice of the Company and its Subsidiaries.
4.18 CONTRACTS. To the Knowledge of the Seller, Section 4.18 of the
Disclosure Schedule lists the following contracts and other agreements to which
any of the Company and its Subsidiaries is a party:
(a) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in
excess of $5,000 per annum;
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(b) any agreement (or group of related agreements) for the purchase or
sale of raw materials, commodities, supplies, products, or other personal
property, or for the furnishing or receipt of services, the performance of
which will extend over a period of more than one year, result in a material
loss to any of the Company and its Subsidiaries, or involve consideration
in excess of $5,000;
(iii) any agreement concerning a partnership, joint venture,
collaborative agreements and arrangements, and all similar entities and
ventures in which the Company has an interest or to which the Company is a
party;
(iv) any agreement (or group of related agreements) under which it has
created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of $10,000 or under
which it has imposed a Security Interest on any of its assets, tangible or
intangible;
(v) any material agreement concerning confidentiality or
noncompetition;
(vi) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of its current or former directors, officers,
and employees;
(vii) any collective bargaining agreement;
(viii) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $5,000 or providing severance benefits;
(ix) any agreement under which it has advanced or loaned any amount to
any of its directors, officers, and employees outside the Ordinary Course
of Business;
(x) any agreement under which the consequences of a default or
termination could have an adverse effect on the business, financial
condition, operations, results of operations, or future prospects of any of
the Company and its Subsidiaries; or
(xi) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $10,000.
To the Knowledge of the Seller, with respect to each such agreement: (A)
the agreement is legal, valid, binding, enforceable, and in full force and
effect; (B) the agreement will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby; (C) no party is in breach
or default, and no event has occurred which with notice or lapse of time would
constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement; and (D) no party has repudiated any provision
of the agreement.
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4.19 NOTES AND ACCOUNTS RECEIVABLE. To the Knowledge of the Seller, all
notes and accounts receivable of the Company and its Subsidiaries are
reflected properly on their books and records, are valid receivables subject
to no setoffs or counterclaims, are current and collectible, and will be
collected in accordance with their terms at their recorded amounts, subject
only to the reserve for bad debts set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) as adjusted for the passage
of time through the Closing Date in accordance with the past custom and
practice of the Company and its Subsidiaries.
4.20 POWERS OF ATTORNEY. To the Knowledge of the Seller, there are no
outstanding powers of attorney executed on behalf of any of the Company and
its Subsidiaries.
4.21 INSURANCE. To the Knowledge of the Seller, Section 4.21 of the
Disclosure Schedule sets forth the following information with respect to each
insurance policy (including policies providing property, casualty, liability,
and workers' compensation coverage and bond and surety arrangements) to which
any of the Company and its Subsidiaries has been a party, a named insured, or
otherwise the beneficiary of coverage at any time within the past 3 years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was on
a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) to the Knowledge of the
Seller, the policy is legal, valid, binding, enforceable, and in full force
and effect; (B) to the Knowledge of the Seller, the policy will continue to
be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby; (C) neither any of the Company and its Subsidiaries nor, to the
Knowledge of the Seller, any other party to the policy is in breach or
default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; and (D) to the Knowledge of
the Seller, no party to the policy has repudiated any provision thereof.
During the period of time that the Seller has been the president and chief
executive officer of RMII, each of the Company and its Subsidiaries has been
covered during the past 3 years by insurance in scope and amount customary
and reasonable for the businesses in which it has engaged during the
aforementioned period. To the Knowledge of the
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Seller, Section 4.21 of the Disclosure Schedule describes any self-insurance
arrangements affecting any of the Company and its Subsidiaries.
4.22 LITIGATION. To the Knowledge of the Seller, Section 4.22 of the
Disclosure Schedule sets forth each instance in which any of the Company and
its Subsidiaries (i) is subject to any outstanding injunction, judgment,
order, decree, ruling, or charge or (ii) to the Knowledge of the Seller, is a
party or is threatened to be made a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction
or before any arbitrator. With the exception of threatened legal action by
Nancy Phillips against the Company, none of the actions, suits, proceedings,
hearings, and investigations set forth in Section 4.22 of the Disclosure
Schedule could result in any material adverse change in the business,
financial condition, operations, results of operations, or future prospects
of any of the Company and its Subsidiaries.
4.23 PRODUCT WARRANTY. To the Knowledge of the Seller, each product
manufactured, sold, leased, or delivered by any of the Company and its
Subsidiaries has been in conformity with all applicable contractual
commitments and all express and implied warranties, and none of the Company
and its Subsidiaries has any Liability (and, to the Knowledge of the Seller,
there is no Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against any of
them giving rise to any Liability) for replacement or repair thereof or other
damages in connection therewith, subject only to the reserve for product
warranty claims set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of
the Company and its Subsidiaries. To the Knowledge of the Seller, no product
manufactured, sold, leased, or delivered by any of the Company and its
Subsidiaries is subject to any guaranty, warranty, or other indemnity beyond
the applicable standard terms and conditions of sale or lease. To the
Knowledge of the Seller, Section 4.23 of the Disclosure Schedule includes
copies of the standard terms and conditions of sale or lease for each of the
Company and its Subsidiaries (containing applicable guaranty, warranty, and
indemnity provisions).
4.24 PRODUCT LIABILITY. To the Knowledge of the Seller, none of the
Company and its Subsidiaries has any Liability (and, to the Knowledge of the
Seller, there is no Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against any of
them giving rise to any Liability) arising out of any injury to individuals
or property as a result of the ownership, possession, or use of any product
manufactured, sold, leased, or delivered by any of the Company and its
Subsidiaries.
4.25 EMPLOYEES. To the Knowledge of the Seller, none of the Company and
its Subsidiaries is a party to or bound by any collective bargaining
agreement, nor has any of them experienced any strikes, grievances, claims of
unfair labor practices, or other collective bargaining disputes. To the
Knowledge of the Seller, none of the Company and its Subsidiaries has
committed any unfair labor practice. To the Knowledge of the Seller, no
employee of the Company is in violation of any term of any employment
agreement, patent disclosure agreement, or any other agreement relating to
the relationship of such employee with the Company or any other party because
of the nature of the business conducted or to be conducted by the Company.
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4.26 EMPLOYEE BENEFITS.
(a) To the Knowledge of the Seller, Section 4.26 of the Disclosure
Schedule lists each Employee Benefit Plan that any of the Company and its
Subsidiaries maintains or to which any of the Company and its Subsidiaries
contributes.
(1) To the Knowledge of the Seller, each such Employee Benefit
Plan (and each related trust, insurance contract, or fund) complies in
form and in operation in all material respects with the applicable
requirements of ERISA, the Code, and other applicable laws.
(2) To the Knowledge of the Seller, all required reports and
descriptions (including Form 5500 Annual Reports, Summary Annual
Reports, PBGC-1's, and Summary Plan Descriptions) have been filed or
distributed appropriately with respect to each such Employee Benefit
Plan. The requirements of Part 6 of Subtitle B of Title 1 of ERISA and
of Code Section 4980B have been met with respect to each such Employee
Benefit Plan which is an Employee Welfare Benefit Plan.
(3) To the Knowledge of the Seller, the Company has delivered to
the Purchaser correct and complete copies of the plan documents and
summary plan descriptions, the most recent determination letter
received from the Internal Revenue Service, the most recent Form 5500
Annual Report, and all related trust agreements, insurance contracts,
and other funding agreements which implement each such Employee
Benefit Plan.
(b) To the Knowledge of the Seller, with respect to each Employee
Benefit Plan that any of the Company, its Subsidiaries, and the Controlled
Group of Corporations which includes the Company and its Subsidiaries
maintains or ever has maintained or to which any of them contributes, ever
has contributed, or ever has been required to contribute, there have been
no Prohibited Transactions with respect to any such Employee Benefit Plan.
To the Knowledge of the Seller, no Fiduciary has any Liability for breach
of fiduciary duty or any other failure to act or comply in connection with
the administration or investment of the assets of any such Employee Benefit
Plan. No action, suit, proceeding, hearing, or investigation with respect
to the administration or the investment of the assets of any such Employee
Benefit Plan (other than routine claims for benefits) is pending or
threatened. The Seller has no Knowledge of any Basis for any such action,
suit, proceeding, hearing, or investigation.
(c) To the Knowledge of the Seller, none of the Company, its
Subsidiaries, and the other members of the Controlled Group of Corporations
that includes the Company and its Subsidiaries contributes to, ever has
contributed to, or ever has been required to contribute to any
Multiemployer Plan or has any Liability (including withdrawal Liability)
under any Multiemployer Plan.
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(d) To the Knowledge of the Seller, none of the Company and its
Subsidiaries maintains or ever has maintained or contributes, ever has
contributed, or ever has been required to contribute to any Employee
Welfare Benefit Plan providing medical, health, or life insurance or other
welfare-type benefits for current or future retired or terminated
employees, their spouses, or their dependents (other than in accordance
with Code Section 4980B).
4.27 GUARANTIES. to the Knowledge of the Seller, none of the Company and
its Subsidiaries is a guarantor or otherwise is liable for any Liability or
obligation (including indebtedness) of any other Person.
4.28 ENVIRONMENT, HEALTH, AND SAFETY.
(a) To the Knowledge of the Seller, each of the Company, its
Subsidiaries, and their respective predecessors and Affiliates has
complied with all Environmental Laws and all Occupational Safety and
Health Laws, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced
against any of them alleging any failure so to comply. Without limiting
the generality of the preceding sentence, to the Knowledge of the
Seller, each of the Company, its Subsidiaries, and their respective
predecessors and Affiliates has obtained and been in compliance with all
of the terms and conditions of all permits, licenses, and other
authorizations which are required under, and has complied with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are contained
in, all Environmental Laws and all Occupational Safety and Health Laws.
(b) To the Knowledge of the Seller, none of the Company and its
Subsidiaries has any Liability (and none of the Company, its
Subsidiaries, and their respective predecessors and Affiliates has
handled or disposed of any substance, arranged for the disposal of any
substance, exposed any employee or other individual to any substance or
condition, or owned or operated any property or facility in any manner
that could form the Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
against any of the Company and its Subsidiaries giving rise to any
Liability) for damage to any site, location, or body of water (surface
or subsurface), for any illness of or personal injury to any employee or
other individual, or for any reason under any Environmental Laws and all
Occupational Safety and Health Law.
(c) To the Knowledge of the Seller, all properties and equipment
used in the business of the Company, its Subsidiaries, and their
respective predecessors and Affiliates have been free of asbestos,
PCB's, methylene chloride, trichloroethylene,
1,2-trans-dichloroethylene, dioxins, dibenzofurans, and Extremely
Hazardous Substances.
4.29 CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY AND ITS
SUBSIDIARIES. To the Knowledge of the Seller, none of the Company and its
Affiliates has been involved in any
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business arrangement or relationship with each other or with any of the
Company's Subsidiaries within the past 12 months, and none of the Company's
Affiliates owns any asset, tangible or intangible, which is used in the
business of any of the Company and its Subsidiaries.
4.30 DISCLOSURE. To the Knowledge of the Seller, the representations and
warranties contained in this Section 4 do not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements and information contained in this Section 4 not misleading.
SECTION 5
Representations and Warranties of the Purchaser
The Purchaser hereby represents and warrants to the Seller with respect
to the purchase of the Purchased Shares as follows:
5.1 INVESTMENT. The Purchaser is acquiring the Purchased Shares for
investment for his own account, not as a nominee or agent, and not with the
view to, or for resale in connection with, any unregistered distribution
thereof.
5.2 RESTRICTED SECURITIES. The Purchaser understands and acknowledges
that the Purchased Shares are not being registered under the Securities Act
or relevant state securities laws, but are being offered and sold pursuant to
exemptions from such registrations, and that the Purchaser may not sell,
transfer, assign, convey, pledge, hypothecate, or otherwise dispose of any of
the Purchased Shares in any manner without first obtaining (i) an opinion of
counsel satisfactory to the Company and the Seller that such proposed
disposition or transfer lawfully may be made without the registration of the
Purchased Shares for such purpose pursuant to the Securities Act, as then
amended, and applicable state securities laws; or (ii) such registration. In
furtherance thereof, the Purchaser represents and warrants to and agrees with
the Seller that the Purchaser:
(a) has the financial ability to bear the economic risk for the
investment in the Purchased Shares, has adequate means for providing for
his current needs and contingencies, and has no need for liquidity with
respect to the investment in the Purchased Shares;
(b) has been furnished with a copy of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996, Forms 10-Q for the
quarters ended March 31, 1997 and June 30, 1997, and Current Report on Form
8-K dated August 15, 1997 (collectively, the "Documents") and has evaluated
the risks of a purchase of the Shares based on the information contained
therein and in this Agreement;
(c) has been given the opportunity to ask questions of, and receive
answers from, the management of the Company concerning the terms,
conditions, and other matters pertaining to the investment in the Purchased
Shares;
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(d) has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an
acquisition of the Purchased Shares and of making an informed investment
decision with respect thereto.
5.3 AUTHORIZATION. This Agreement when executed and delivered by the
Purchaser will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms, except as such
enforcement may be limited by the application of bankruptcy, insolvency,
reorganization, and other laws of general applicability relating to
creditors' rights.
5.4 BROKERS OR FINDERS. The Purchaser has no Liability or obligation to
pay any fees or commissions to any broker, finder, or similar agent with
respect to the transactions contemplated by this Agreement for which the
Seller could become liable or obligated.
SECTION 6
Pre-Closing Covenants
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.
6.1 GENERAL. Each of the Parties will use his Best Efforts to take all
action and to do all things necessary in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in Section
7 below).
6.2 NOTICES AND CONSENTS. Each of the Parties will give any notices to,
make any filings with, and use his Best Efforts to obtain any authorizations,
consents, and approvals of governments and governmental agencies in
connection with the matters referred to in Section 3.1(b) and 3.2(b) above.
6.3 EXCLUSIVITY. The Seller will not (i) solicit, initiate, or encourage
the submission of any proposal or offer from any Person relating to the
acquisition of any capital stock or other voting securities, or any
substantial portion of the assets of, RMII (including any acquisition
structured as a merger, consolidation, or share exchange) or (ii) participate
in any discussions or negotiations regarding, furnish any information with
respect to, assist or participate in, or facilitate in any other manner any
effort or attempt by any Person to do or seek any of the foregoing. The
Seller will not vote his Shares in favor of any such acquisition structured
as a merger, consolidation, or share exchange. The Sellers will notify the
Purchaser immediately if any Person makes any proposal, offer, inquiry, or
contact with respect to any of the foregoing.
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SECTION 7
CONDITIONS TO OBLIGATION TO CLOSE
7.1 CONDITIONS TO OBLIGATION OF THE PURCHASER. The obligation of the
Purchaser to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(a) the representations and warranties set forth in Section 3.1 and
Section 4 above shall be true and correct in all material respects at and
as of the Closing Date;
(b) the Seller shall have performed and complied with all of his
covenants hereunder in all material respects through the Closing;
(c) the Seller shall have procured all of the third party consents
specified in Section 6.2 above;
(d) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation, (C) affect adversely the right of
the Purchaser to own the Shares, the Warrants, or the Common Stock
underlying the Warrants, or (D) affect adversely the right of any of the
Company and its Subsidiaries to own its assets and to operate its
businesses (and no such injunction, judgment, order, decree, ruling, or
charge shall be in effect);
(e) the Seller shall have delivered to the Purchaser a certificate to
the effect that each of the conditions specified above in Section
7.1(a)-(d) is satisfied in all respects;
(f) the Purchaser shall have completed and closed the transactions
contemplated in RMII Stock Purchase Agreement; and
(g) all actions to be taken by the Seller in connection with
consummation of the transactions contemplated hereby and all certificates,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance
to the Purchaser.
The Purchaser may waive any condition specified in this Section 7.1 if he
executes a writing so stating at or prior to the Closing.
7.2 CONDITIONS TO OBLIGATION OF THE SELLER. The obligation of the Seller
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
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(a) the representations and warranties set forth in Section 3.2 above
shall be true and correct in all material respects at and as of the Closing
Date;
(b) the Purchaser shall have performed and complied with all of his
covenants hereunder in all material respects through the Closing;
(c) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement or (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
(d) the Purchaser shall have delivered to the Seller a certificate
to the effect that each of the conditions specified above in Section
7.2(a)-(c) is satisfied in all respects; and
(e) all actions to be taken by the Purchaser in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Seller.
The Seller may waive any condition specified in this Section 7.2 if he
executes a writing so stating at or prior to the Closing.
SECTION 8
Post-Closing Covenants
The Parties hereby covenant and agree as follows:
8.1 GENERAL. In the event that at any time after the Closing any further
action is necessary to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 9
below).
8.2 LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection
with (i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or
prior to the Closing Date involving any of the Company and its Subsidiaries,
the other Party will cooperate with him and his counsel in the contest or
defense, make available their personnel, and provide such testimony and
access to his books and records as shall be necessary in connection with the
contest or defense, all at the sole
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cost and expense of the contesting or defending Party (unless the contesting
or defending Party is entitled to indemnification therefor under Section 9
below).
SECTION 9
Remedies for Breaches of This Agreement
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Parties contained in this Agreement
shall survive the Closing hereunder (even if the damaged Party knew or had
reason to know of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect for a period of three years
thereafter (subject to any applicable statutes of limitations).
9.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE PURCHASER. In the event
the Seller has breached (or in the event any third party alleges facts that,
if true, would mean the Seller has breached) any of his representations,
warranties, and covenants contained herein, and provided that the Purchaser
makes a written claim for indemnification against the Seller, then the Seller
agrees to indemnify the Purchaser from and against the entirety of any
Adverse Consequences the Purchaser may suffer through and after the date of
the claim for indemnification (including any Adverse Consequences the
Purchaser may suffer after the end of any applicable survival period)
resulting from, arising out of, relating to, in the nature of, or caused by
the breach (or the alleged breach). The Purchaser need not make a written
claim for indemnification against the Seller immediately upon the discovery
of the breach or alleged breach but may make such claim at any time
thereafter during the survival period for such claim (subject to any
applicable statutes of limitations) so as to preserve the Purchaser's rights
to the fullest amount of Adverse Consequences that may be recoverable
hereunder.
The Purchaser may make additional written claims for indemnification
against the Seller for additional breaches or alleged breaches and may pursue
one or more claims for indemnification simultaneously or consecutively;
provided, however, that the Purchaser may not recover from the Seller in
respect of such claims any amounts in excess of Adverse Consequences.
9.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLER. In the event
the Purchaser breaches (or in the event any third party alleges facts that,
if true, would mean the Purchaser has breached) any of his representations,
warranties, and covenants contained herein, and provided that the Seller
makes a written claim for indemnification against the Purchaser, then the
Purchaser agrees to indemnify the Seller from and against the entirety of any
Adverse Consequences the Seller may suffer through and after the date of the
claim for indemnification (including any Adverse Consequences the Seller may
suffer after the end of any applicable survival period) resulting from,
arising out of, relating to, in the nature of, or caused by the breach (or
the alleged breach).
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9.4 MATTERS INVOLVING THIRD PARTIES.
(a) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") that may give
rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 9, then the Indemnified Party
shall promptly notify the Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party in
notifying the Indemnifying Party shall relieve the Indemnifying Party
from any obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of his
choice reasonably satisfactory to the Indemnified Party so long as (A)
the Indemnifying Party notifies the Indemnified Party in writing within
15 days after the Indemnified Party has given notice of the Third Party
Claim that the Indemnifying Party will indemnify the Indemnified Party
from and against the entirety of any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating
to, in the nature of, or caused by the Third Party Claim, (B) the
Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the indemnifying
Party will have the financial resources to defend against the Third
Party Claim and fulfill his indemnification obligations hereunder, (C)
the Third Party Claim involves only money damages and does not seek an
injunction or other equitable relief, (D) settlement of, or an adverse
judgment with respect to, the Third Party Claim is not, in the good
faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice materially adverse to the continuing
business interests of the Indemnified Party, and (E) the Indemnifying
Party conducts the defense of the Third Party Claim actively and
diligently.
(c) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 9.4(b) above, (A) the
Indemnified Party may retain separate co-counsel at his sole cost and
expense and participate in the defense of the Third Party Claim, (B) the
Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnifying Party (not to be withheld
unreasonably), and (C) the Indemnifying Party will not consent to the
entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnified
Party (not to be withheld unreasonably).
(d) In the event any of the conditions in Section 9.4(b) above is
or becomes unsatisfied, however, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it may
deem appropriate (and the Indemnified Party need not consult with, or
obtain any consent from, any Indemnifying Party in connection
therewith), (B) the Indemnifying Parties will reimburse the Indemnified
Party promptly and periodically for the costs of defending against the
Third Party Claim (including attorneys' fees and expenses), and (C) the
Indemnifying Parties will remain responsible for any Adverse
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Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party
Claim to the fullest extent provided in this Section 9.
9.5 DETERMINATION OF ADVERSE CONSEQUENCES. The Parties shall take into
account the time cost of money (using the Applicable Rate as the discount
rate) in determining Adverse Consequences for purposes of this Section 9.
All indemnification payments under this Section 8 shall be deemed adjustments
to the Purchase Price.
9.6 OTHER INDEMNIFICATION PROVISIONS. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy any Party may have for breach of
representation, warranty, or covenant.
SECTION 10
Termination
10.1 TERMINATION OF AGREEMENT. The Parties may terminate this Agreement
as provided below:
(a) the Purchaser and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(b) the Purchaser may at his option terminate this Agreement by
giving written notice to the Sellers on or before the Closing Date if the
Purchaser is not satisfied with the results of his continuing business,
legal, and accounting due diligence regarding RMII in connection with his
proposed purchase of common stock from RMII pursuant to the RMII Stock
Purchase Agreement;
(c) the Purchaser may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the event the
Seller has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, the Purchaser has
notified the Seller of the breach, and the breach has continued without
cure until the Anticipated Closing Date; and
(d) the Purchaser may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing if there has been any
adverse change in, or any development reasonably expected to result in a
prospective adverse change in, the condition, financial or otherwise, or in
the earnings, business affairs of business prospects of the Company,
whether or not arising in the Ordinary Course of Business.
10.2 EFFECT OF TERMINATION. If either Party terminates this Agreement
pursuant to Section 10.1 above, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other
Party (except for any Liability of any Party then in breach).
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10.3 NON-PERFORMANCE. In the event of a failure of the Seller to close in
accordance with the terms hereof or in the event of a breach by the Seller of
the covenants, warranties, representations and obligations hereof, the
Purchaser may pursue any of all of the following remedies:
(a) Terminate this Agreement and be reimbursed by Seller for all of
the expenses incurred by the Purchaser in seeking to close the transaction
contemplated herein;
(b) Waive such default or breach and close the transaction
contemplated herein; and
(c) Institute an action against the Seller for specific performance.
The Seller acknowledges and agrees that the Purchaser would be damaged
irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached.
Accordingly, the Purchaser shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereofin any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter, in addition to any other remedy
to which the Purchaser may be entitled, at law or in equity.
SECTION 11
Miscellaneous
11.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the internal laws of the State of Colorado.
11.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by the Purchaser and the
closing of the transactions contemplated hereby.
11.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties
hereto.
11.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other documents
delivered pursuant hereto at the Closing constitute the full and entire
understanding and agreement between the Parties with regard to the subjects
hereof and thereof, and neither Party shall be liable or bound to the other
Party in any manner by any warranties, representations, or covenants except
as specifically set forth herein or therein. Except as expressly provided
herein, neither this Agreement nor any term hereof may be amended, waived,
discharged, or terminated other than by a written instrument signed by the
Party against whom enforcement of any such amendment, waiver, discharge or
termination is sought.
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11.5 JURISDICTION; SERVICE OF PROCESS. Any action or proceeding seeking
to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the
State of Colorado, City and County of Denver, or, if it has or can acquire
jurisdiction, in the United States District Court for the District of
Colorado, and each of the parties consents to the jurisdiction of such courts
(and of the appropriate appellate courts) in any such action or proceeding
and waives any objection to venue laid therein. Process in any action or
proceeding referred to in the preceding sentence may be served on any Party
anywhere in the world. Each Party agrees that a final judgment in any action
or proceeding so brought shall be conclusive and may be enforced by suit on
the judgment or in any other manner provided by law or at equity
11.6 WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
Party in exercising any right, power, or privilege under this Agreement or
the documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such
right, power, or privilege will preclude any other or further exercise of
such right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim
or right arising out of this Agreement or the documents referred to in this
Agreement can be discharged by one Party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other
Party; (b) no waiver that may be given by a Party will be applicable except
in the specific instance for which it is given; and (c) no notice to or
demand on one Party will be deemed to be a waiver of any obligation of such
Party or of the right of the Party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.
11.7 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, sent by telecopier, or otherwise delivered
by hand or by a nationally-recognized overnight courier, addressed (a) if to
the Purchaser, at the Purchaser's address or telecopier number set forth
below, or at such other address or telecopier number as the Purchaser shall
have furnished to the Seller in writing, or (b) if to the Seller, one copy
should be sent to his address or telecopier number set forth below, or at
such other address or telecopier number as the Seller shall have furnished to
the Purchaser. Such notices and communications shall be sent or delivered as
follows:
If to the Seller: Roy J. Dimoff
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With a Copy to:
Woody Davis, Esq.
Rothgerber, Appel, Powers & Johnson, L.L.P.
1200 Seventeenth Street
Suite 3000
Denver, Colorado 80202-5839
telephone: 303/623-9000
telecopy: 303/623-9222
If to the Purchaser, to: Douglas H. Hanson
2925 East Exposition Avenue
Denver, Colorado 80209
telephone: 303/777-4311
telecopy: 303/777-4314
With a Copy to:
Ned A. Minor, Esq.
Minor & Brown, P.C.
650 South Cherry Street
Suite 1100
Denver, Colorado 80222
telephone: 303/320-1053
telecopy: 303/320-6330
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given (x) in the case of
personal delivery or delivery by telecopier, on the date of such delivery and
verified, in the case of telecopier transmission, by confirmation of such
transmission, (y) in the case of a nationally-recognized overnight courier,
on the day such delivery is confirmed by such courier or by the recipient and
(z) in the case of mailing, on the third business day following that on which
the piece of mail containing such communication has been deposited in a
regularly maintained receptacle for the deposit of the United States mail,
addressed and mailed as aforesaid.
11.8 EXPENSES. The Seller and the Purchaser shall bear his own expenses
incurred on his behalf with respect to this Agreement and the transactions
contemplated hereby.
11.9 COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be executed
in any number of counterparts, each of which may be executed by less than all
of the Purchasers, each of which shall be enforceable against the parties
actually executing such counterparts, and all of which together shall
constitute one instrument. Execution of a facsimile copy of this Agreement
by any Party and delivery of a copy this Agreement bearing the facsimile
signature of any Party shall constitute the valid and binding execution and
delivery of this Agreement, and facsimile copies of this Agreement bearing
the facsimile signature of any Party shall constitute an original document
enforceable against such Party.
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11.10 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
11.10 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing
or interpreting this Agreement.
11.11 CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. The word "including" shall mean including without
limitation. The Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any Party
has breached any representation, warranty, or covenant contained herein in
any respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative
levels of specificity) which the Party has not breached shall not detract
from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
11.12 INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES. The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein
by reference and made a part hereof.
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The foregoing Agreement is hereby executed as of the date first above
written.
PURCHASER:
/s/ Douglas H. Hanson
------------------------------------
Douglas H. Hanson
SELLER:
/s/ Roy J. Dimoff
------------------------------------
Roy J. Dimoff
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[Exhibits and Disclosure Schedule omitted]
<PAGE>
STOCK PURCHASE AGREEMENT
AMONG
DOUGLAS H. HANSON,
AS PURCHASER,
AND
CHRISTOPHER K. PHILLIPS,
JIM D. WELCH,
AND
KEVIN R. LOUD,
AS SELLERS
OCTOBER 1, 1997
<PAGE>
STOCK PURCHASE AGREEMENT
Agreement entered into as of October 1, 1997, by and among Douglas H.
Hanson, an individual (the "Purchaser"), Christopher K. Phillips
("Phillips"), Jim D. Welch ("Welch"), and Kevin R. Loud ("Loud"). Phillips,
Welch, and Loud are referred to collectively herein as the "Sellers" and
individually as a "Seller." The Purchaser and the Sellers are referred to
collectively herein as the "Parties."
Each Seller owns the number of shares of issued and outstanding common
stock of Rocky Mountain Internet, Inc., a Delaware corporation ("RMII"), set
forth next in the first column next to the respective Seller's name in
Exhibit A hereto.
This Agreement contemplates a transaction in which the Purchaser will
purchase from each of the Sellers, and each of the Sellers will sell to the
Purchaser, the number of the issued and outstanding shares of common stock of
RMII set forth next to the respective Seller's name in the second column of
Exhibit A hereto (the "Purchased Shares") in return for cash in the amount of
$2.00 per Purchased Share.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages (including incidental and consequential
damages), dues, penalties, fines, costs, amounts paid in settlement,
Liabilities, obligations, Taxes, liens, losses, expenses (including costs of
investigation and defense), diminution in value, and fees, including court
costs and attorneys' fees and expenses.
"APPLICABLE RATE" means 8% per annum.
"BEST EFFORTS" means the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such
result is achieved as expeditiously as possible.
"CLOSING" has the meaning set forth in Section 2(c) below.
"CLOSING DATE" has the meaning set forth in Section 2(c) below.
"CODE" means the Internal Revenue Code of 1986, as amended.
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<PAGE>
"CONFIDENTIAL INFORMATION" means any information concerning the
businesses and affairs of RMII and its Subsidiaries that is not already
generally available to the public.
"INDEMNIFIED PARTY" has the meaning set forth in Section 8(d) below.
"INDEMNIFYING PARTY" has the meaning set forth in Section 8(d) below.
"LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency).
"PARTY" has the meaning set forth in the preface above.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, a limited liability partnership, a limited liability
limited partnership, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"PURCHASE PRICE" has the meaning set forth in Section 2(b) below.
"PURCHASED SHARES" has the meaning set forth in the preface above.
"PURCHASER" has the meaning set forth in the preface above.
"RMII" has the meaning set forth in the preface above.
"RMII SHARE" means any share of the Common Stock, par value $0.001 per
share, of RMII.
"RMII STOCK PURCHASE AGREEMENT" has the meaning set forth in Section
7(a)(iv) below.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable or for Taxes
that the taxpayer is contesting in good faith through appropriate
proceedings, (c) purchase money liens and liens securing rental payments
under capital lease arrangements, and (d) other liens arising in the Ordinary
Course of Business and not incurred in connection with the borrowing of money.
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<PAGE>
"SELLER" has the meaning set forth in the preface above.
"TAX" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A),
customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"THIRD PARTY CLAIM" has the meaning set forth in Section 8(d) below.
2. PURCHASE AND SALE OF PURCHASED SHARES.
(a) BASIC TRANSACTION. On and subject to the terms and conditions of
this Agreement, the Purchaser agrees to purchase from each of the Sellers,
and each of the Sellers agrees to sell to the Purchaser, the number of
Purchased Shares set forth next to the respective Seller's name in the second
column of Exhibit A hereto for the consideration specified below in this
Section 2.
(b) PURCHASE PRICE. The Purchaser agrees to pay to each of the Sellers
at the Closing $2.00 multiplied by the number of Purchased Shares set forth
next to the respective Seller's name in the second column of Exhibit A hereto
(the "Purchase Price"), in certified or official bank check or by wire
transfer of funds.
(c) THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Minor & Brown,
P.C., 650 South Cherry Street, Suite 1100, Denver, Colorado 80222 at 9:30
a.m., local time on the second business day following the satisfaction or
waiver of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with respect to
actions the respective Parties will take at the Closing itself) or such other
date as the Company and the Purchaser shall agree (the date of the Closing is
hereinafter referred to as the "Closing Date").
(d) DELIVERIES AT THE CLOSING. At the Closing, (i) each of the Sellers
will deliver to the Purchaser stock certificates representing all of the
Purchased Shares owned by such Seller, endorsed in blank or accompanied by
duly executed assignment documents, with signature Medallion guaranteed, and
(iv) the Purchaser will deliver to the Sellers the Purchase Price.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
(a) REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Each of the Sellers
represents and warrants to the Purchaser that the statements contained in
this Section 3(a) are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 3(a)) with respect to himself, except as
set forth in Annex I attached hereto.
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<PAGE>
(i) AUTHORIZATION OF TRANSACTION. The Seller has full power and
authority to execute and deliver this Agreement and to perform his
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of the Seller, enforceable in accordance with its terms
and conditions, except as such enforcement may be limited by the application
of bankruptcy, insolvency, reorganization, and other laws of general
applicability relating to creditors' rights. The Seller need not give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
(ii) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Seller is subject; or
(B) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to which the
Seller is a party or by which he is bound or to which any of his assets is
subject.
(iii) BROKERS' FEES. The Seller has no Liability or obligation to pay any
fees or commissions to any broker, finder, or similar agent with respect to
the transactions contemplated by this Agreement for which the Purchaser could
become liable or obligated.
(iv) RMII SHARES. The Seller holds of record and owns beneficially the
number of RMII Shares set forth next to his name in the first column next to
such Seller's name in Exhibit A hereto, free and clear of any restrictions on
transfer (other than any restrictions under the Securities Act and state
securities laws), Taxes, Security Interests, options, warrants, purchase
rights, contracts, commitments, equities, claims, and demands. The Seller is
not a party to any option, warrant, purchase right, or other contract or
commitment that could require such Seller to sell, transfer, or otherwise
dispose of any capital stock of RMII (other than this Agreement). The Seller
is not a party to any voting trust, proxy, or other agreement or understanding
with respect to the voting of any capital stock of RMII except that certain
Shareholders' Voting Agreement and Irrevocable Proxy among the Sellers and the
Purchaser of even date herewith.
(b) REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants to the Sellers that the statements contained in this
Section 3(b) are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and
as though the Closing Date were substituted for the date of this Agreement
throughout this Section 3(b)), except as set forth in Annex II attached
hereto.
(i) AUTHORIZATION OF TRANSACTION. The Purchaser has full power and
authority to execute and deliver this Agreement and to perform his
obligations hereunder. This
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<PAGE>
Agreement constitutes the valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms and conditions. The
Purchaser need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency
in order to consummate the transactions contemplated by this Agreement.
(ii) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(A) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Purchaser is subject or (B) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Purchaser is a party or by which
he is bound or to which any of his assets is subject.
(iii) INVESTMENT. The Purchaser is acquiring the Purchased Shares for
investment for his own account, not as a nominee or agent, and not with the
view to, or for resale in connection with, any unregistered distribution
thereof.
(iv) RESTRICTED SECURITIES. The Purchaser understands and acknowledges
that the Purchased Shares are not being registered under the Securities Act
or relevant state securities laws in connection with the sale to the Purchaser,
but are being offered and sold pursuant to exemptions from such registrations,
and that the Purchaser may not sell, transfer, assign, convey, pledge,
hypothecate, or otherwise dispose of any of the Purchased Shares in any manner
without first obtaining (i) an opinion of counsel satisfactory to the Company
that such proposed disposition or transfer lawfully may be made without the
registration of the Purchased Shares for such purpose pursuant to the Securities
Act, as then amended, and applicable state securities laws; or (ii) such
registration. In furtherance thereof, the Purchaser represents and warrants to
and agrees with the Sellers that the Purchaser:
(A) has been furnished with a copy of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996, Forms 10-Q for
the quarters ended March 31, 1997 and June 30, 1997, and Current Report on
Form 8-K dated August 15, 1997 (collectively, the "Documents") and has
evaluated the risks of a purchase of the Shares based on the information
contained therein and in this Agreement; and
(B) has been given the opportunity to ask questions of, and
receive answers from, the management of the Company concerning the terms,
conditions, and other matters pertaining to the investment in the Purchased
Shares.
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<PAGE>
(v) BROKERS' FEES. The Purchaser has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which any Seller could
become liable or obligated.
4. DUTY TO UPDATE REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN.
Each Party will give prompt written notice to the others of any material
adverse development causing a breach of any of his own representations and
warranties in Section 3 above. No disclosure by any Party pursuant to this
Section 4, however, shall be deemed to amend or supplement Annex I or Annex
II or to prevent or cure any misrepresentation, breach of warranty, or breach
of covenant.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) GENERAL. Each of the Parties will use his Best Efforts to take all
action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth
in Section 7 below).
(b) NOTICES AND CONSENTS. Each of the Parties will give any notices to,
make any filings with, and use his Best Efforts to obtain any authorizations,
consents, and approvals of governments and governmental agencies in
connection with the matters referred to in Section 3(a)(ii) and Section
3(b)(ii) above.
(c) EXCLUSIVITY. None of the Sellers will (i) solicit, initiate, or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities, or any
substantial portion of the assets of, RMII (including any acquisition
structured as a merger, consolidation, or share exchange) or (ii) participate
in any discussions or negotiations regarding, furnish any information with
respect to, assist or participate in, or facilitate in any other manner any
effort or attempt by any Person to do or seek any of the foregoing. None of
the Sellers will vote his Shares in favor of any such acquisition structured
as a merger, consolidation, or share exchange. The Sellers will notify the
Purchaser immediately if any Person makes any proposal, offer, inquiry, or
contact with respect to any of the foregoing.
6. POST-CLOSING COVENANTS. The Parties agree as follows with respect
to the period following the Closing.
(a) GENERAL. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request. Unless the requesting Party is entitled to indemnification therefor
under Section 8 below, all costs and expenses associated with the taking of such
further action
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<PAGE>
(except for the payment of attorney's fees and costs) shall be reimbursed by
the requesting Party upon the presentation of valid receipts for such
expenses.
(b) LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection
with (i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or
prior to the Closing Date involving RMII, each of the other Parties will
cooperate with him and his counsel in the contest or defense, make available
their personnel, and provide such testimony and access to their books and
records as shall be necessary in connection with the contest or defense.
Unless the Party requesting such cooperation is entitled to indemnification
therefor under Section 8 below, all costs and expenses associated with the
taking of such further action (except for the payment of attorney's fees and
costs) shall be reimbursed by the requesting Party upon the presentation of
valid receipts for such expenses.
(c) TRANSITION. None of the Sellers will take any action that is
intended to discourage any lessor, licensor, customer, supplier, or other
business associate of RMII from maintaining the same business relationships
with RMII after the Closing or termination of this Agreement as it maintained
with RMII prior to the execution of this Agreement.
(d) CONFIDENTIALITY. Each of the Parties will treat and hold as such
all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and
deliver promptly to the disclosing Party or destroy, at the request and
option of the disclosing Party, all tangible embodiments (and all copies) of
the Confidential Information that are in his possession. In the event that
any of the Sellers is requested or required (by oral question or request for
information or documents in connection with any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information, that Seller will notify the Purchaser
promptly of the request or requirement so that the Purchaser may seek an
appropriate protective order or waive compliance with the provisions of this
Section 6(d). If, in the absence of a protective order or the receipt of a
waiver hereunder, any Seller is, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand liable
for contempt, that Seller may disclose the Confidential Information to the
tribunal; PROVIDED, HOWEVER, that the disclosing Seller shall use his Best
Efforts to obtain, at the request of the Purchaser, an order or other
assurance that confidential treatment will be accorded to such portion of the
Confidential Information required to be disclosed as the Purchaser shall
designate.. The foregoing provisions shall not apply to any Confidential
Information that is generally available to the public immediately prior to
the time of disclosure.
7. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF THE PURCHASER. The obligation of the
Purchaser to consummate the transactions to be performed by him in connection
with the Closing is subject to satisfaction of the following conditions:
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<PAGE>
(i) the representations and warranties set forth in Section 3(a)
above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Sellers shall have performed and complied with all of their
covenants hereunder in all respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation, or (C) affect adversely the right of
the Purchaser to own the Purchased Shares;
(iv) the Purchaser shall have completed and closed the purchase and
sale of 1,225,000 shares of common stock of RMII from RMII, as contemplated
in that certain Stock Purchase Agreement dated as of October 1, 1997 between
the Purchaser and RMII (the "RMII Stock Purchase Agreement");
(v) the Purchase shall have entered into a Shareholders' Voting
Agreement and Irrevocable Proxy with the Sellers; and
(vi) all actions to be taken by the Sellers in connection with
consummation of the transactions contemplated hereby and all certificates,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to
the Purchaser.
The Purchaser may waive any condition specified in this Section 7(a) if it
executes a writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATION OF THE SELLERS. The obligation of the
Sellers to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3(b)
above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Purchaser shall have performed and complied with all of his
covenants hereunder in all material respects through the Closing.
(iii) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions
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<PAGE>
contemplated by this Agreement or (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation (and
no such injunction, judgment, order, decree, ruling, or charge shall be in
effect); and
(iv) all actions to be taken by the Purchaser in connection with
consummation of the transactions contemplated hereby and all certificates,
instruments, and other documents required to effect the tansactions
contemplated hereby will be reasonably satisfactory in form and substance
to the Sellers.
Any Seller may waive any condition specified in this Section 7(b) if they
execute a writing so stating at or prior to the Closing.
8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Parties contained in this Agreement
shall survive the Closing hereunder (even if the damaged Party knew or had
reason to know of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect forever thereafter (subject to
any applicable statutes of limitations).
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE PURCHASER. In the event
that any of the Sellers breaches (or in the event any third party alleges
facts that, if true, would mean that any of the Sellers has breached) any of
his representations, warranties, and covenants contained herein, and,
provided that the Purchaser makes a written claim for indemnification
against any of the Sellers in accordance with the notice provisions of
Section 10(i) below, then each of the Sellers agrees to indemnify the
Purchaser from and against any Adverse Consequences the Purchaser may
suffer through and after the date of the claim for indemnification
(including any Adverse Consequences the Purchaser may suffer after the end
of any applicable survival period) resulting from, arising out of, relating
to, in the nature of, or caused by the breach (or the alleged breach).
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLERS. In the
event the Purchaser breaches (or in the event any third party alleges facts
that, if true, would mean the Purchaser has breached) any of his
representations, warranties, and covenants contained herein, and, provided
that any of the Sellers makes a written claim for indemnification against the
Purchaser pursuant to Section 10(i) below within such survival period, then
the Purchaser agrees to indemnify such Seller from and against the entirety
of any Adverse Consequences such Seller may suffer through and after the date
of the claim for indemnification resulting from, arising out of, relating to,
in the nature of, or caused by the breach (or the alleged breach).
(d) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") that may give
rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 8, then the Indemnified
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<PAGE>
Party shall promptly notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party in
notifying any Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is prejudiced.
(ii) (ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of his choice
reasonably satisfactory to the Indemnified Party so long as (A) the
Indemnifying Party notifies the Indemnified Party in writing within 15 days
after the Indemnified Party has given notice of the Third Party Claim that
the Indemnifying Party will indemnify the Indemnified Party from and
against the entirety of any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim, (B) the Indemnifying Party provides the
Indemnified Party with evidence reasonably acceptable to the Indemnified
Party that the indemnifying Party will have the financial resources to
defend against the Third Party Claim and fulfill his indemnification
obligations hereunder, (C) the Third Party Claim involves only money
damages and does not seek an injunction or other equitable relief, (D)
settlement of, or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the Indemnified Party, likely
to establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (E) the
Indemnifying Party conducts the defense of the Third Party Claim actively
and diligently.
(iii) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 8(d)(ii) above, (A) the
Indemnified Party may retain separate co-counsel at his sole cost and
expense and participate in the defense of the Third Party Claim, (B) the
Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party (not to be withheld unreasonably),
and (C) the Indemnifying Party will not consent to the entry of any judgment
or enter into any settlement with respect to the Third Party Claim without
the prior written consent of the Indemnified Party (not to be withheld
unreasonably).
(iv) In the event any of the conditions in Section 8(d)(ii) above is or
becomes unsatisfied, however, (A) the Indemnified Party may defend against,
and consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it may deem appropriate (and
the Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (B) the Indemnifying Party will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including attorneys' fees and
expenses), and (C) the Indemnifying Party will remain responsible for any
Adverse Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the Third Party
Claim to the fullest extent provided in this Section 8.
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<PAGE>
(e) DETERMINATION OF ADVERSE CONSEQUENCES. The Parties shall take into
account the time cost of money (using the Applicable Rate as the discount
rate) in determining Adverse Consequences for purposes of this Section 8.
All indemnification payments under this Section 8 shall be deemed adjustments
to the Purchase Price.
(f) OTHER INDEMNIFICATION PROVISIONS. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy any Party may have for breach of
representation, warranty, or covenant.
9. TERMINATION.
(a) TERMINATION OF AGREEMENT. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Purchaser and the Sellers may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Purchaser may at his option terminate this Agreement by
giving written notice to the Sellers on or before the Closing Date if the
Purchaser is not satisfied with the results of his continuing business,
legal, and accounting due diligence regarding RMII in connection with his
proposed purchase of common stock from RMII pursuant to the RMII Stock
Purchase Agreement;
(iii) the Purchaser may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing in the event any of
the Sellers has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, the Purchaser has
notified the Sellers of the breach, and the breach has continued without
cure;
(iv) the Sellers may terminate this Agreement by giving written notice
to the Purchaser at any time prior to the Closing in the event the
Purchaser has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, the Sellers have
notified the Purchaser of the breach, and the breach has continued without
cure; and
(v) the Purchaser may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing if there has been
any adverse change in, or any development reasonably expected to result in
a prospective adverse change in, the condition, financial or otherwise, or
in the earnings, business affairs of business prospects of RMII, whether or
not arising in the Ordinary Course of Business.
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 9(a) above, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other
Party (except for any Liability of any Party then in breach).
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<PAGE>
(c) NON-PERFORMANCE. In the event of a failure of the Sellers to close
in accordance with the terms hereof or in the event of a breach by any Seller
of the covenants, warranties, representations and obligations hereof,
Purchaser may pursue any or all of the following remedies:
(i) Terminate this Agreement and be reimbursed by the Sellers for
all of the expenses incurred by Purchaser in seeking to close the transaction
contemplated herein;
(ii) Waive such default or breach and close the transaction
contemplated herein; and
(iii) Institute an action against the Sellers for specific
performance. The Sellers acknowledge and agree that the Purchaser would be
damaged irreparably in the event any of the provisions of this Agreement are
not performed in accordance with their specific terms or otherwise are
breached. Accordingly, the Purchaser shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in
any action instituted in any court of the United States or any state thereof
having jurisdiction over the Parties and the matter, in addition to any other
remedy to which Purchaser may be entitled, at law or in equity.
10. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter
of this Agreement prior to the Closing without the prior written approval of
the Purchaser and the Sellers; PROVIDED, HOWEVER, that any Party may make any
public disclosure it believes in good faith is required by applicable law or
any listing or trading agreement concerning RMII's publicly-traded securities
(in which case the disclosing Party will use his Best Efforts to advise the
other Parties prior to making the disclosure).
(b) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes
any prior understandings, agreements, or representations by or among the
Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement
or any of his rights, interests, or obligations hereunder without the prior
written approval of the Purchaser and the Sellers; provided, however, that
the Purchaser may without the approval of the Sellers (i) assign any or all
of his rights and interests hereunder and (ii) designate one or more of his
Affiliates to perform his obligations hereunder (in
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<PAGE>
any or all of which cases the Purchaser nonetheless shall remain responsible
for the performance of all of his obligations hereunder).
(e) COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be executed
in any number of counterparts, each of which may be executed by less than all
of the Purchasers, each of which shall be enforceable against the parties
actually executing such counterparts, and all of which together shall
constitute one instrument. Execution of a facsimile copy of this Agreement
by any Party and delivery of a copy of this Agreement bearing the facsimile
signature of any Party shall constitute the valid and binding execution and
delivery of this Agreement, and facsimile copies of this Agreement bearing
the facsimile signature of any Party shall constitute an original document
enforceable against such Party.
(h) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(i) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given upon the
earlier of actual delivery to the intended recipient or the first attempted
delivery by personal delivery, expedited courier, messenger service, or
registered or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
If to Phillips: Christopher K. Phillips
4580 Star Ridge Drive
Colorado Springs, CO 80916
With a Copy to:
Dominic A. Lloyd, Esq.
Hall & Evans, LLC
1200 Seventeenth Street
Suite 1700
Denver, CO 80202
Telephone: 303/628-3300
Telecopy: 303/628-3368
If to Welch: Jim D. Welch
1326 Sorrento Road
Colorado Springs, CO 80910
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<PAGE>
With a Copy to:
Dominic A. Lloyd, Esq.
Hall & Evans, LLC
1200 Seventeenth Street
Suite 1700
Denver, CO 80202
Telephone: 303/628-3300
Telecopy: 303/628-3368
If to Loud: Kevin R. Loud
1643 Sand Lily Drive
Golden, CO 80401
With a Copy to:
Dominic A. Lloyd, Esq.
Hall & Evans, LLC
1200 Seventeenth Street
Suite 1700
Denver, CO 80202
Telephone: 303/628-3300
Telecopy: 303/628-3368
If to the Purchaser: Douglas H. Hanson
2925 East Exposition Avenue
Denver, Colorado 80209
telecopy: 303/777-4314
With a Copy to:
Ned A. Minor, Esq.
Minor & Brown, P.C.
650 South Cherry Street
Suite 1100
Denver, Colorado 80222
telecopy: 303/320-6330
Any attempted delivery by any of the methods set forth above may be
verified by the person attempting personal delivery, the courier, the
messenger service, or the United States Postal Service, as the case may be,
through whom or which such delivery was attempted. Any Party may send any
notice, request, demand, claim, or other communication hereunder to the
intended recipient at the address set forth above using any other means
(including telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until, in the case of ordinary mail, it
actually is received by the intended recipient, and, in the case of delivery
by telecopier,
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<PAGE>
telex, or electronic mail, on the date of such delivery and verified by
confirmation of such transmission.
Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
(j) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Colorado without giving
effect to any choice or conflict of law provision or rule.
(k) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
the Purchaser and the Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
such occurrence.
(l) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
(m) EXPENSES. Each of the Parties will bear at Closing his own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby. The Sellers agree that
none of RMII and its Subsidiaries has borne or will bear any of the Sellers'
costs and expenses (including any of their legal fees and expenses) in
connection with this Agreement or any of the transactions contemplated hereby.
(n) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. The word "including" shall mean including without
limitation. The Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any Party
has breached any representation, warranty, or covenant contained herein in
any respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative
levels of specificity) which the Party has not breached shall not detract
from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
(o) INCORPORATION OF EXHIBITS AND ANNEXES. The Exhibits, Annexes and
other documents identified in this Agreement are incorporated herein by
reference and made a part hereof.
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<PAGE>
(p) SUBMISSION TO JURISDICTION. Any action or proceeding seeking to
enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the
State of Colorado, City and County of Denver, or, if it has or can acquire
jurisdiction, in the United States District Court for the District of
Colorado, and each of the parties consents to the jurisdiction of such courts
(and of the appropriate appellate courts) in any such action or proceeding
and waives any objection to venue laid therein. Process in any action or
proceeding referred to in the preceding sentence may be served on any Party
anywhere in the world. Each Party agrees that a final judgment in any action
or proceeding so brought shall be conclusive and may be enforced by suit on
the judgment or in any other manner provided by law or at equity.
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
PURCHASER:
/s/ Douglas H. Hanson
------------------------------------
Douglas H. Hanson
SELLERS:
/s/ Christopher K. Phillips
------------------------------------
Christopher K. Phillips
/s/ Jim D. Welch
------------------------------------
Jim D. Welch
/s/ Kevin R. Loud
------------------------------------
Kevin R. Loud
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<PAGE>
EXHIBIT A TO STOCK PURCHASE AGREEMENT
Ownership of Common Stock, par value $0.001 per share, of Rocky
Mountain Internet, Inc. by Sellers and Shares of Common Stock to be Sold to
Purchaser
<TABLE>
<CAPTION>
SHARES TO BE SOLD PURCHASE
SELLER SHARES OWNED ("PURCHASED SHARES") PRICE
- ------- ------------ -------------------- ---------
<S> <C> <C> <C>
Christopher K. Phillips 426,000 50,000 $100,000
Jim D. Welch 433,574 50,000 $100,000
Kevin R. Loud 483,500 25,000 $50,000
</TABLE>
<PAGE>
ANNEX I
Exceptions to Sellers' Representations and Warranties
Each of the Shareholders is a party to a Lock-Up Agreement for
shareholders among the RMII, the Shareholder and Neidiger, Tucker, Bruner,
Inc. (the "Underwriter"), dated on or about July 8, 1996, which prohibits the
Shareholder from selling any shares of RMII's common stock for period of 18
months without the Underwriter's consent.
<PAGE>
ANNEX II
Exceptions to Purchaser's Representations and Warranties
[None]
<PAGE>
FOR IMMEDIATE RELEASE
Company Contacts:
Wendy St. Clair, Marketing Manager
Phone: 303/672-0732 direct
http:///www.rmi.net
[email protected]
Doug Hanson Becomes Rocky Mountain Internet's Largest Shareholder,
Chairman, President and CEO
Denver, Colorado October 2, 1997 -- Rocky Mountain Internet, Inc. (NASDAQ):
RMIIU, RMII, RMIIW has announced its Board of Directors has approved a
transaction to give Douglas H. Hanson voting control of the company, and make
him RMI's largest individual shareholder. In addition, Hanson will take over as
Chairman, President and CEO of Rocky Mountain Internet.
Hanson is a known leader in the telecommunications industry, having served as
President and CEO of Qwest Communications. He left that position in November of
1996 in pursuit of an entrepreneurial venture where he could have greater
influence over the company's direction. After exploring numerous opportunities,
Hanson set his sights on RMI.
"I investigated several companies then decided to pursue a relationship with
Rocky Mountain Internet. RMI has the best, most extensive infrastructure in
Colorado. They have excellent technical staff, and an underutilized network," he
said. Hanson added that his first priority as RMI's chairman and CEO will be to
develop a strategy to optimize the use of that network.
"RMI has the capabilities to support a wide range of services. My goals are to
extend RMI's geographic reach based on market opportunity, and to enhance the
company's product offerings to match our capabilities," he said.
RMI's CFO, David Evans, said he expects the changes to be very positive for the
company and its shareholders.
"RMI is very enthusiastic about Doug joining the company. He has significant
industry experience, and is extremely focused on delivering shareholders a
return on their investment," he said.
<PAGE>
Hanson has served on the executive committee of the Board of Directors of the
Competitive Telecommunications Association "CompTel" (a communications industry
trade association), and lobbied for the successful bid to pass the 1996
Communications Act. In Colorado, Hanson has sat on Denver's Mayoral Business
Advisory Committee, the Downtown Denver Partnership Board, and the Metropolitan
State College Foundation Board, among other civic activities.
Hanson brings with him to RMI two additional board members: Del Hock, recently
retired chairman and CEO of Public Service Company of Colorado; and Reynie
Ortiz, who previously served as Vice President at USWest and Jones Intercable.
Rocky Mountain Internet provides Internet access, web development/hosting, and
co-location services to clients throughout the Rocky Mountain region. The
Company's frame relay backbone is the only Colorado-based network utilizing the
industry-leading Cascade switching technology, with broadband B-STDX 9000
switches strategically placed throughout Denver, Boulder and Colorado Springs to
provide full network redundancy.
# # #
