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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): December 8, 1998
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 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 8, 1998, the Company completed the acquisition of
substantially all of the assets of DataXchange Network, Inc., a
Florida corporation ("DataXchange"), pursuant to the terms of an Agreement
and Plan of Reorganization and Liquidation dated as of December 4, 1998 (the
"DataXchange Purchase Agreement") by and among the Company, DataXchange and
certain shareholders of DataXchange. The consideration for the assets
acquired was comprised of up to 535,000 shares of common stock of the
Company, 410,000 of which were issued at closing, and warrants to purchase up
to 535,000 shares of common stock of the Company, 410,000 of which were
issued at closing. The remaining 125,000 shares of common stock and warrants
to purchase 125,000 shares of the Company's common stock are payable by the
Company upon achievement of certain financial performance objectives as set
forth in the DataXchange Purchase Agreement and are subject to reduction for
the amount of damages, if any, awarded to the Company for losses suffered by
the Company as a result of breaches of DataXchange's and DataXchange's
shareholders' representations and warranties set forth in the DataXchange
Purchase Agreement and related agreements. The consideration that the
Company agreed to pay to DataXchange was determined through arm's-length
negotiation. There was no material relationship between the parties prior to
the acquisition. The Company intends to continue to utilize substantially
all of the assets acquired from DataXchange in the same manner that
DataXchange utilized the assets prior to their acquisition by the Company. A
copy of the DataXchange Purchase Agreement and a copy of the press release
dated December 9, 1998 announcing the DataXchange asset purchase are attached
hereto as Exhibits 2.4 and 99.6, respectively.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
The following financial statements are filed as a part of this Report:
(a) Financial statements of business acquired.
Financial statements of DataXchange are not included herewith, as
it is impracticable to include such financial statements with this Current
Report. Such financial statements will be included in an amendment to this
Current Report not later than 60 days after the date that this Current Report
is required to be filed.
(b) Pro forma financial information.
Pro forma financial information giving effect to the acquisition of
the assets of DataXchange is not included herewith, as it is impracticable to
include such pro forma financial information with this Current Report. Such
pro forma financial information will be included in an amendment to this
Current Report not later than 60 days after the date that this Current Report
is required to be filed.
(c) Exhibits.
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2.4 Form of Agreement and Plan of Reorganization and Liquidation by and
Among Rocky Mountain Internet, Inc., DataXchange Network, Inc., and Certain
of the Shareholders of DataXchange Network, Inc., dated as of December 8,
1998.
99.6 News Release dated December 9, 1998 announcing the acquisition of
the assets of DataXchange Network, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed by its behalf by the
undersigned hereunto duly authorized.
Rocky Mountain Internet, Inc.
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(Registrant)
Date: December 21, 1998 By: /s/ Peter J. Kushar
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Peter J. Kushar, Secretary,
Treasurer, and Chief Financial
Officer
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AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION
By and Among
ROCKY MOUNTAIN INTERNET, INC.,
a Delaware corporation,
DATAXCHANGE NETWORK, INC.,
a Florida corporation,
and
CERTAIN OF THE SHAREHOLDERS OF
DATAXCHANGE NETWORK, INC.
December __, 1998
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TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE ITHE EXCHANGE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 The Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(a) Cash and Cash Equivalents. . . . . . . . . . . . . . . . . . 2
(b) Receivables. . . . . . . . . . . . . . . . . . . . . . . . . 2
(c) Hardware . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(d) Software . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(e) Tangible Personal Property . . . . . . . . . . . . . . . . . 2
(f) Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(g) Customer Contracts . . . . . . . . . . . . . . . . . . . . . 3
(h) Contracts and Other Agreements Relating to the Business. . . 3
(i) Books, Records, Lists and Other Data . . . . . . . . . . . . 3
(j) Licenses and Permits . . . . . . . . . . . . . . . . . . . . 3
(k) Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . 3
(l) Proprietary Rights . . . . . . . . . . . . . . . . . . . . . 3
(m) General Intangibles. . . . . . . . . . . . . . . . . . . . . 3
1.2 Excluded Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Assumed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . 4
1.4 Excluded Liabilities . . . . . . . . . . . . . . . . . . . . . . . 4
1.5 Title to Purchased Assets; Documents of Conveyance . . . . . . . . 4
ARTICLE IICONSIDERATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 Reorganization Consideration . . . . . . . . . . . . . . . . . . . 4
2.2 Adjustments to Reorganization Consideration; Additional
Warrant Terms. . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 RMI Share Value. . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Registration of RMI Common Stock and Warrants. . . . . . . . . . . 6
2.5 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE IIIREPRESENTATIONS AND WARRANTIES REGARDING THE PRINCIPAL SHAREHOLDERS 7
3.1 Authorization of Transaction . . . . . . . . . . . . . . . . . . . 7
3.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 Receipt of Disclosure Documents. . . . . . . . . . . . . . . . . . 7
3.4 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5 Ability to Evaluate Risks and Merits . . . . . . . . . . . . . . . 8
3.6 Suitability of Investment. . . . . . . . . . . . . . . . . . . . . 8
3.7 Access to Information. . . . . . . . . . . . . . . . . . . . . . . 8
3.8 Potential Lack of Liquidity. . . . . . . . . . . . . . . . . . . . 8
3.9 Legal Accounting, Brokers' and Other Fees and Expenses . . . . . . 9
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3.10 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IVREPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY . . . . . . . . 9
4.1 Organization, Qualification, and Corporate Power . . . . . . . . . 9
4.2 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . .10
4.4 Authorization of Transaction . . . . . . . . . . . . . . . . . . .10
4.5 Title to Assets. . . . . . . . . . . . . . . . . . . . . . . . . .10
4.6 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . .10
4.7 Financial Statements . . . . . . . . . . . . . . . . . . . . . . .10
4.8 Events Subsequent to July 31, 1998.. . . . . . . . . . . . . . . .11
4.9 Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . .13
4.10 Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . .13
4.11 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . .13
4.12 Proprietary Rights; Customers. . . . . . . . . . . . . . . . . . .14
4.13 Real Property and Personal Property. . . . . . . . . . . . . . . .14
4.14 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
4.15 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . .16
4.16 Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . .16
4.17 Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . .16
4.18 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
4.19 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
4.20 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
4.21 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . .17
4.22 Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
4.23 Environmental, Health, and Safety Matters. . . . . . . . . . . . .17
4.24 Certain Business Relationships with the Company. . . . . . . . . .17
4.25 Legal, Accounting, Brokers' and Other Fees and Expenses. . . . . .18
4.26 Compliance with State Securities Laws. . . . . . . . . . . . . . .18
4.27 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
ARTICLE VREPRESENTATIONS AND WARRANTIES OF RMI . . . . . . . . . . . . . . . .18
5.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . .18
5.2 Authorization of Transaction . . . . . . . . . . . . . . . . . . .18
5.3 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . .19
5.4 Legal, Accounting, Brokers' and Other Fees and Expenses. . . . . .19
5.5 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . .19
5.6 Nasdaq Listing . . . . . . . . . . . . . . . . . . . . . . . . . .19
5.7 Information. . . . . . . . . . . . . . . . . . . . . . . . . . . .19
ARTICLE VICOVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
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6.1 Pre-Closing Covenants. . . . . . . . . . . . . . . . . . . . . . .20
(a) General. . . . . . . . . . . . . . . . . . . . . . . . . . .20
(b) Notices and Consents . . . . . . . . . . . . . . . . . . . .20
(c) Financial Statements . . . . . . . . . . . . . . . . . . . .20
(d) Operation of Business. . . . . . . . . . . . . . . . . . . .20
(e) Preservation of Business . . . . . . . . . . . . . . . . . .21
(f) Full Access. . . . . . . . . . . . . . . . . . . . . . . . .21
(g) Notice of Developments . . . . . . . . . . . . . . . . . . .21
(h) Exclusivity. . . . . . . . . . . . . . . . . . . . . . . . .21
(i) No Transfer. . . . . . . . . . . . . . . . . . . . . . . . .22
(j) Repayment. . . . . . . . . . . . . . . . . . . . . . . . . .22
6.2 Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . .22
(a) General. . . . . . . . . . . . . . . . . . . . . . . . . . .22
(b) Litigation Support . . . . . . . . . . . . . . . . . . . . .22
(c) Transition . . . . . . . . . . . . . . . . . . . . . . . . .22
(d) Confidentiality. . . . . . . . . . . . . . . . . . . . . . .23
(e) Non-Solicitation . . . . . . . . . . . . . . . . . . . . . .24
(f) Covenant Not to Compete. . . . . . . . . . . . . . . . . . .24
(g) Tax-Free Reorganization; Plan of Liquidation . . . . . . . .25
(h) Nasdaq Listing of Underlying Warrant Shares. . . . . . . . .25
ARTICLE VII CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING. . . . .26
7.1 Conditions to Obligation of RMI. . . . . . . . . . . . . . . . . .26
7.2 Conditions to Obligation of Principal Shareholders and the
Company. . . . . . . . . . . . . . . . . . . . . . . . . . .27
ARTICLE VIIIREMEDIES FOR BREACH. . . . . . . . . . . . . . . . . . . . . . . .28
8.1 Survival of Representations and Warranties . . . . . . . . . . . .28
8.2 Indemnification Provisions for Benefit of RMI. . . . . . . . . . .28
8.3 Indemnification Provisions for Benefit of Principal
Shareholders . . . . . . . . . . . . . . . . . . . . . . . .28
8.4 Matters Involving Third Parties. . . . . . . . . . . . . . . . . .29
8.5 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
8.6 Limitations on Indemnification; Payment in Shares of RMI
Common Stock . . . . . . . . . . . . . . . . . . . . . . . .30
8.7 Other Indemnification Provisions. . . . . . . . . . . . . . . . . . .30
ARTICLE IXTERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
9.1 Termination of Agreement. . . . . . . . . . . . . . . . . . . . .31
9.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . .31
ARTICLE XMISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
10.1 Press Releases and Public Announcements. . . . . . . . . . . . . .32
10.2 No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . .32
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10.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . .32
10.4 Succession and Assignment. . . . . . . . . . . . . . . . . . . . .32
10.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . .32
10.6 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
10.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
10.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . .33
10.9 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . .34
10.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . .34
10.11 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . .34
10.12 Incorporation of Exhibits, Appendices and Schedules. . . . . . . .34
10.13 Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . .34
</TABLE>
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EXHIBITS
Exhibit A - Form of Passive Shareholder Agreement
Exhibit B - Form of Bill of Sale, Assignment and Assumption Agreement
Exhibit C - Form of Closing Date Warrant Certificate
Exhibit D - Form of Determination Date Warrant Certificate
Exhibit E - Form of Principal Shareholder Lock-Up Agreement
Exhibit F - Form of Warrant Lock-Up Agreement
Exhibit G - The Company and Principal Shareholders Closing Certificate
Exhibit H - Employment Agreement for Robert Laughlin
Exhibit I - Employment Agreement for Sylvan Corazzi
Exhibit J - Employment Agreement for Howard Sherman
Exhibit K - Non-Compete Agreement for David S. Goldman
Exhibit L - Non-Compete Agreement for Digital Systems Corporation
Exhibit M - Form of Opinion of Company and Principal Shareholders Counsel
APPENDICES
Appendix I - Shareholders; Capitalization; Reorganization Consideration and
Warrant Allocation
SCHEDULES
Schedule 1.1(c) - Hardware
Schedule 1.1(d) - Software
Schedule 1.1(e) - Personal Property
Schedule 1.1(f) - Leases
Schedule 1.1(g) - Customer Contracts
Schedule 1.1(h) - Other Contracts
Schedule 1.1(l) - Proprietary Rights
Schedule 1.5 - Permitted Encumbrances
Schedule 2.1 - School Contracts
Schedule 4.3 - Required Notices and Consents
Schedule 4.7 - Financial Statements
Schedule 4.8 - Events Subsequent to July 31, 1998
Schedule 4.11 - Tax Matters
Schedule 4.13 - Real Property and Personal Property
Schedule 4.14 - Contracts
Attachment A - Form of Customer Contract
Attachment B - Form of Customer Contract
Attachment C - Form of Customer Contract
Attachment D - Form of Customer Contract
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Schedule 4.15 - Licenses and Permits
Schedule 4.16 - Receivables
Schedule 4.19 - Litigation
Schedule 4.21 - Employee Benefits
Schedule 4.24 - Certain Business Relationships
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AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION
This AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION (the
"Agreement") is entered into as of December __, 1998, by and among ROCKY
MOUNTAIN INTERNET, INC., a Delaware corporation ("RMI"), DATAXCHANGE
NETWORK, INC., a Florida corporation (the "Company"), and DAVID S. GOLDMAN
AND LENOR D. GOLDMAN, DIGITAL SYSTEMS CORPORATION, SYLVAN CORAZZI AND ROBERT
LAUGHLIN (each a "Principal Shareholder"; collectively, the "Principal
Shareholders"). RMI, Company and the Principal Shareholders are sometimes
each individually referred to herein as a "Party" and collectively as the
"Parties". The term "Shareholders" when used herein shall include both the
Principal Shareholders and the Passive Shareholders (as defined below).
RECITALS
A. The Company is in the business of providing Internet access
services (the "Business").
B. The Company owns and leases certain assets and properties, real and
personal, tangible and intangible, which are used by or useful to the Company
in the conduct of the Business.
C. Subject to the terms and conditions contained in this Agreement,
RMI desires to acquire from the Company, and the Company desires to transfer
to RMI, all of the Company's assets used in, or useful to and related to, the
operation of the Business.
D. RMI shall assume certain of the liabilities and obligations of the
Company relating to the Business (and none others), as more specifically set
forth herein.
E. In exchange for all of the assets of the Company, the Company will
receive shares of common stock, par value $.001 per share of RMI (the "RMI
Common Stock") and warrants to purchase RMI Common Stock, which shares and
warrants the Company has instructed RMI to issue to the shareholders of the
Company as part of a plan of dissolution and liquidation of the Company.
F. As an essential inducement for and as a condition for RMI's
obligation to consummate the transactions contemplated by this Agreement,
each of the shareholders of the Company who is not a Principal Shareholder
(collectively, the "Passive Shareholders") shall execute and deliver to RMI
the
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Agreement and Certificate (the "Passive Shareholder Agreement") substantially
in the form of EXHIBIT A attached hereto.
G. The board of directors of each of the Company and RMI have approved
this Agreement and the transactions contemplated hereby, upon the terms and
subject to the conditions set forth herein.
H. It is intended that the transactions contemplated by this Agreement
shall qualify as a reorganization (the "Reorganization") within the meaning
of Section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended (the
"Code").
AGREEMENT
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:
ARTICLE I
THE EXCHANGE
I.1 THE EXCHANGE. On the terms and subject to the conditions contained
herein, at the Closing (as defined in Section 2.5 below) the Company shall
sell to RMI, free and clear of all liens, claims, security interests,
encumbrances or rights of others whatsoever, except for the Permitted
Encumbrances (as defined in Section 1.5 below), all of the Company's right,
title and interest in and to the assets (the "Purchased Assets") used by the
Company in the Business existing as of the date on which the Reorganization
is consummated (the "Closing Date") or received after such date in the
ordinary course of business, including, but not limited to, the following:
(a) CASH AND CASH EQUIVALENTS. All cash and cash equivalents
(including all bank account balances and deposits and all petty cash).
(b) RECEIVABLES. All accounts receivable, notes receivable,
deposits, advances and similar receivables accruing from the Business (the
"Receivables").
(c) HARDWARE. All of the hardware listed on SCHEDULE 1.1(c), any
related documentation or manuals, and the Company's rights under related
warranties.
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(d) SOFTWARE. All of the software listed on SCHEDULE 1.1(d) (the
"Software"), including all inventories of computer program code for the
Software, any related documentation or manuals, and the Company's rights
under all related warranties.
(e) TANGIBLE PERSONAL PROPERTY. The fixed assets listed on
SCHEDULE 1.1(e), and all other tangible personal property listed on SCHEDULE
1.1(e) (collectively, the "Personal Property").
(f) LEASES. The Company's leasehold interests in the real
property (the "Real Property") listed on SCHEDULE 1.1(f) (the "Real Property
Leases") and in the hardware, fixed assets and other tangible personal
property listed on SCHEDULE 1.1(f) (the "Personal Property Leases").
(g) CUSTOMER CONTRACTS. All contracts, agreements, licenses,
permits, arrangements, permissions and other commitments with customers of
the Business, including but not limited to those listed on SCHEDULE 1.1(g)
(the "Customer Contracts").
(h) CONTRACTS AND OTHER AGREEMENTS RELATING TO THE BUSINESS. All
agreements, licenses, permits, personal property leases, permissions and
other commitments and arrangements, oral or written, relating to the Business
as listed on SCHEDULE 1.1(h) (including all agreements with WorldCom, copies
of which are attached thereto) (collectively with the Customer Contracts, the
"Acquired Contracts").
(i) BOOKS, RECORDS, LISTS AND OTHER DATA. All files, books,
records, invoices, accounts, surveys, customer lists and records, supplier
lists, catalogs, price lists, marketing and advertising information,
purchasing histories, profiles and material, technical bulletins, books and
records of account and other financial, customer and credit data, and all
firmware, tapes and other materials used to store, record or produce such
data, owned, leased or licensed by the Company and used in or useful to the
Business.
(j) LICENSES AND PERMITS. All federal, state, local and other
governmental licenses, permits, approvals and authorizations that relate to
the operation of the Business (to the extent transferable) (the "Licenses and
Permits").
(k) PREPAYMENTS. All security, utility or similar deposits or
prepaid expenses of the Company.
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(l) PROPRIETARY RIGHTS. All technology, data and documentation
(including electronic media), trade secrets (technical and non-technical),
know-how and other confidential business information and proprietary rights,
including, without limitation, inventions, patents, patent disclosures,
copyrights, mask works, trademarks, service marks, trade dress, trade names,
domain names (including, "dx.net"), corporate names (including, "DataXchange
Network, Inc.") and licenses or other agreements to or from third parties
regarding the foregoing, which are used in or useful to the Business
(including the applications and registrations and the goodwill associated
with any such patent, copyright, trademark or trade name) as listed on
SCHEDULE 1.1(l) (collectively, the "Proprietary Rights").
(m) GENERAL INTANGIBLES. All general intangibles used by or
useful to the Business including, without limitation, all goodwill as a going
concern and any and all causes of action or claims of the Company against any
third party that arose or will arise in connection with the Business prior to
the Closing Date.
I.2 EXCLUDED ASSETS. Notwithstanding the foregoing, the following
assets shall be and hereby are expressly excluded from the definition of
"Purchased Assets": corporate seals, articles of incorporation, bylaws,
minute books, stock books and other records relating to the Company's
organization and capitalization, copies of which records have been provided
to RMI.
I.3 ASSUMED LIABILITIES. At the Closing, RMI shall assume and shall
thereafter pay, discharge and perform only those obligations of the Company
(i) reflected on the Company's balance sheet dated as of October 31, 1998
(the "Ending Balance Sheet"), a copy of which is attached to SCHEDULE 4.7
hereof, (ii) incurred in the ordinary course of the Business after October
31, 1998 (provided that the liabilities incurred in the ordinary course of
business after October 31, 1998 have been paid prior to the Closing in
accordance with their terms) and (iii) the obligations of the Company as of
the Closing Date pursuant to the Real Property Leases, the Personal Property
Leases and the Acquired Contracts (collectively, the "Assumed Liabilities").
The Assumed Liabilities shall also include amounts due to MCI, which amounts
shall not exceed $279,000.
I.4 EXCLUDED LIABILITIES. Notwithstanding anything to the contrary
contained in this Agreement, RMI will not assume nor will it be liable for,
and the Company will retain and remain responsible for, all of the Company's
debts, liabilities and obligations of any nature whatsoever, other than the
Assumed Liabilities, whether accrued, absolute or contingent, whether known
or unknown, whether due or to become due and whether related to the
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Purchased Assets or otherwise, and regardless of when asserted (the "Excluded
Liabilities").
I.5 TITLE TO PURCHASED ASSETS; DOCUMENTS OF CONVEYANCE. At the
Closing, the Company shall convey all of its rights, title and interest in
and to the Purchased Assets to RMI, free and clear of all liabilities,
obligations, liens, encumbrances and rights of others whatsoever, excepting
only the Assumed Liabilities and the liens and encumbrances set forth on
SCHEDULE 1.5 (collectively, the "Permitted Encumbrances"). Title to the
Purchased Assets shall be conveyed by the Company to RMI pursuant to a Bill
of Sale, Assignment and Assumption Agreement, in the form of EXHIBIT B
attached hereto, and by such other documents as are reasonably acceptable to
counsel for RMI in accordance with the terms hereof. Each of the Parties
hereto agrees to use its best efforts to take or cause to be taken all
action, and to do, or cause to be done, all things reasonably necessary,
proper or advisable, whether before or after Closing, to ensure that the
transfer of title to the Purchased Assets to RMI occurs as contemplated
hereunder.
ARTICLE II
CONSIDERATION
II.1 REORGANIZATION CONSIDERATION. On and as of the Closing Date,
subject to the adjustments set forth in Section 2.2 below:
(a) RMI shall issue 410,000 shares (the "Closing Date Shares") of
RMI Common Stock;
(b) RMI shall have reserved for issuance 125,000 shares of RMI
Common Stock, which shares (the "Determination Date Shares") shall be issued
on the date which is the earlier of (the "Determination Date") (A) thirty
(30) days after RMI's confirmation that the
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Company is entitled to receive minimum aggregate annual revenue from Internet
services (excluding revenue from local access) for the twelve-month period
immediately following the Closing Date of at least $1,000,000 (the "Target
School Revenue") pursuant to the terms of the School Contracts (as defined
below) and (B) ninety (90) days after the Closing Date; provided that such
shares shall not be issuable unless (x) the Company then has binding, written
agreements with the school districts identified on SCHEDULE 2.1 hereof, which
agreements shall be fully assignable to RMI without the consent of any party
(the "School Contracts"); (y) pursuant to which agreements the Company is
entitled to receive the Target School Revenue (and if below the Target School
Revenue, the number of shares of RMI Common Stock issuable pursuant to this
Subsection 2.1(b) will be reduced by .125 shares for each dollar below
$1,000,000 the Company is entitled to receive); and (z) there shall not be
any material breach by any party under any School Contract as of such date;
(c) subject to Section 2.2 below, RMI shall issue warrants (the
"Closing Date Warrants") to purchase a total of 410,000 shares of RMI Common
Stock plus an additional number of shares of RMI Common Stock (collectively,
the "Closing Date Warrant Shares") which is equal to 125,000 multiplied by a
fraction (i) the numerator of which is the actual annual revenue earnable by
the Company from the School Contracts as of the Closing Date and (ii) the
denominator of which is $1,000,000 (provided that in no event shall such
number of shares exceed 125,000), which warrants shall be subject to the
terms and conditions set forth in a Warrant Certificate, the form of which is
attached hereto as EXHIBIT C; and
(d) subject to Section 2.2 below, RMI shall have authorized for
issuance warrants (the "Determination Date Warrants") to purchase an
additional number of shares of RMI Common Stock equal to (i) 125,000
multiplied by a fraction (A) the numerator of which is the actual annual
revenue earnable by the Company from the School Contracts as of the
Determination Date and (B) the denominator of which is $1,000,000 (provided
that in no event shall such number of shares exceed 125,000); minus (ii) the
number of Closing Date Warrant Shares (the "Determination Date Warrant
Shares"), which warrants shall be subject to the terms and conditions set
forth in clauses (x), (y) and (z) of Subsection 2.1(b) above (except for the
parenthetical in clause (y)) and those set forth in a Warrant Certificate,
the form of which is attached hereto as EXHIBIT D, and which warrants shall
be issued on the Determination Date.
The Closing Date Warrants and the Determination Date Warrants are
collectively referred to herein as the "Warrants". The Closing Date Shares,
the
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Determination Date Shares, the Closing Date Warrant Shares and the
Determination Date Warrant Shares are collectively referred to herein as the
"Reorganization Consideration." The Reorganization Consideration payable to
the Company shall be allocated to the Shareholders on a pro rata basis based
on each Shareholder's relative percentage ownership of the shares of common
stock of the Company (the "Company Common Stock") immediately prior to the
Closing Date, pursuant to instructions from the Company as reflected on
APPENDIX I attached hereto.
II.2 ADJUSTMENTS TO REORGANIZATION CONSIDERATION; ADDITIONAL WARRANT
TERMS.
(a) As soon as practicable after the first anniversary date (the
"Anniversary Date") of the Closing Date (but in no event later than thirty
(30) days from the date thereof), the actual annual revenue derived from the
Business for the twelve-month period following the Closing Date shall be
determined by RMI. If such actual annual revenue is less that $3,000,000
(other than by reason of RMI's failure to substantially perform its
obligations under the School Contracts) (the "Target Revenue"), then the
number of shares of RMI Common Stock comprising the Second Tranche Warrant
Shares (as defined in the Warrant Certificates) shall be reduced on a pro
rata basis to reflect the ratio the actual annual revenue bears to the Target
Revenue (i.e., if the actual revenue is $2,400,000, the number of shares of
RMI Common Stock comprising the total number of Second Tranche Warrant Shares
shall be reduced by twenty percent (20%)).
(b) Notwithstanding anything contained herein or in the Warrant
Certificates to the contrary, RMI shall have the right to call any
unexercised Warrants at any time prior to the expiration of such Warrants at
their exercise price if RMI completes a debt or equity financing (or a series
of related financings) of $20 million or more (a "Call Trigger Event"). As
of the date of the Call Trigger Event, all warrant shares which are issuable
pursuant to the Warrant Certificates shall be deemed earned and issuable
notwithstanding the adjustment provisions contained in Section 2.2(a) above.
The Warrant holders shall have the right for thirty (30) days after receipt
of notice of the Call Trigger Event to either (i) exercise the Warrants or
(ii) tender the Warrants to RMI in exchange for the applicable call
consideration. If no action is taken in such thirty (30) day period, the
Warrants shall expire.
II.3 RMI SHARE VALUE. For all purposes of this Agreement, shares of
RMI Common Stock shall be valued at the average of the closing trading prices
of RMI's Common Stock on the Nasdaq SmallCap Market for the ten (10)
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trading days immediately prior to the date of this Agreement ("RMI Share
Value").
II.4 REGISTRATION OF RMI COMMON STOCK AND WARRANTS. The securities
comprising the Reorganization Consideration will be registered when issued
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant
to RMI's registration statement on Form S-1, as amended (File No. 333-52731;
the "Form S-1") which Form S-1 was declared effective as of November 19,
1998. Notwithstanding the foregoing, the shares of RMI Common Stock issuable
to the Principal Shareholders shall be subject to lock-up agreements
substantially in the form of EXHIBIT E hereto (the "Principal Shareholder
Lock-Up Agreements") and the Warrants and the underlying Closing Date Warrant
Shares and Determination Date Warrant Shares issued to the Principal
Shareholders shall be subject to lock-up agreements substantially in the form
of EXHIBIT F hereto (the "Warrant Lock-Up Agreements").
II.5 CLOSING. The consummation of the transactions contemplated
hereby (the "Closing") shall occur as soon as practicable after all of the
conditions to closing set forth in this Agreement have been satisfied, as
determined by RMI. The Parties shall use their best efforts to complete the
Closing on or before November 30, 1998, at the offices of RMI's counsel, or
by facsimile and hand deliveries should the Parties otherwise agree.
ARTICLE III
REPRESENTATIONS AND WARRANTIES REGARDING THE
PRINCIPAL SHAREHOLDERS
To induce RMI to enter into this Agreement and consummate the
Reorganization, each of the Principal Shareholders, severally and not
jointly, represent and warrant to RMI that the statements contained in this
Article III are true, correct and complete as of the date of this Agreement
and will be true, 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 Article III).
III.1 AUTHORIZATION OF TRANSACTION. Principal Shareholder has the
legal capacity and the full power and authority to execute and deliver this
Agreement and to perform the obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of Principal
Shareholder, enforceable in accordance with its terms and conditions.
Principal Shareholder need not give any notice to, make any filing with, or
obtain any authorization,
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consent, or approval of any government or governmental agency in order to
consummate the Reorganization.
III.2 CAPITALIZATION. Principal Shareholder holds of record and
owns beneficially all of the shares of the Company Common Stock set forth
next to his, her or its name on APPENDIX I attached 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,
encumbrances, demands or rights of other whatsoever. No Principal Shareholder
is a party to any option, warrant, purchase right, or other contract or
commitment that could require the Company or such Principal Shareholder to
sell, transfer, or otherwise dispose of any capital stock of the Company. No
Principal Shareholder is a party to any voting trust, proxy or other
agreement or understanding with respect to the voting of any capital stock of
the Company.
III.3 RECEIPT OF DISCLOSURE DOCUMENTS. Principal Shareholder has
received and carefully reviewed, and understands the information contained
in, the documents identified below (collectively, the "Disclosure Documents")
including the risk factors contained therein. In evaluating the suitability
of the Reorganization and the resulting acquisition of the Reorganization
Consideration and all other shares of RMI Common Stock and rights, whether
contingent or fixed, to receive shares of RMI Common Stock (collectively the
"Securities"), Principal Shareholder has not relied upon any representations
or other information (whether oral or written) from RMI, its officers,
directors, or employees or from any other person affiliated with or acting on
behalf of RMI other than as set forth in the Disclosure Documents. The
Disclosure Documents include, but are not limited to, the following:(i) RMI's
Annual Report on Form 10-KSB for the year ended December 31, 1997, (ii) RMI's
Proxy Statement for its annual meeting held on March 12, 1998, (iii) RMI's
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998, June
30, 1998 and September 30, 1998, and Amendment to the Quarterly Report on
Form 10-QSB/A-1 for the quarter ended March 31, 1998, (iv) RMI's Prospectus
dated November 19, 1998 (the "Prospectus"), (v) RMI's Current Reports on Form
8-K, dated June 5, 1998 (disclosing the acquisition of Infohiway, Inc., and
the signing of an agreement and plan of merger with Internet Communications
Corporation ("ICC")) and dated June 30, 1998 (disclosing the acquisition of
Application Methods, Inc.), and Amendments No. 1 and No. 2 to the Current
Report on Form 8-K/A dated June 5, 1998; and (vi) the press releases issued
by ICC and RMI on or about October 14, 1998 with respect to claims asserted
by ICC.
III.4 RISK OF LOSS. Principal Shareholder is in a financial position
to hold the Securities for an indefinite period of time and is able to bear the
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economic risk and withstand a complete loss of such Principal Shareholder's
investment in the Securities.
III.5 ABILITY TO EVALUATE RISKS AND MERITS. Principal Shareholder
is an accredited investor within the meaning of Rule 501 promulgated under
the Securities Act and has such knowledge and experience in financial and
business matters that such Principal Shareholder is capable of evaluating the
merits and risks of an investment in the Securities and has the capacity to
protect the Principal Shareholder's own individual interests in connection
with an investment in the Securities and has the net worth to undertake such
risks.
III.6 SUITABILITY OF INVESTMENT. Principal Shareholder has obtained,
to the extent such Principal Shareholder deems necessary, his, her or its own
professional advice with respect to the risks inherent in the investment in
the Securities and the suitability of an investment in the Securities in
light of such Principal Shareholder's financial condition and investment
needs.
III.7 ACCESS TO INFORMATION. Principal Shareholder has been given
sufficient access to full and complete information regarding the Company and
RMI and has utilized such access to such Principal Shareholder's
satisfaction, for the purposes of asking questions and receiving answers
concerning the terms and conditions of the Reorganization (including the
offering of the Securities in connection with the Reorganization) or
verifying the information included in the Disclosure Documents and obtaining
any of the documents described in the Disclosure Documents. Principal
Shareholder has been given the opportunity to ask questions of, and to
receive answers from, representatives of the Company and RMI to obtain
information concerning the Reorganization and to receive any additional
information, to the extent reasonably available, necessary to verify the
accuracy of information provided in the Disclosure Documents.
III.8 POTENTIAL LACK OF LIQUIDITY. Principal Shareholder recognizes
that RMI has not been profitable since its inception and that an investment
in the Securities involves a high degree of risk, including, but not limited
to, the risk of loss of all of Principal Shareholder's investment in the
Securities; and Principal Shareholder further recognizes that trading in
RMI's Common Stock has been inactive until only recently. There can be no
assurance that an active market can or will be maintained for the trading of
the Securities. Principal Shareholder may, therefore, find it difficult to
dispose of the Securities.
III.9 LEGAL ACCOUNTING, BROKERS' AND OTHER FEES AND EXPENSES.
Principal Shareholder acknowledges that all of the Principal Shareholder's
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legal, accounting and other fees, costs and expenses associated with the
Reorganization shall be borne by the Principal Shareholder. Principal
Shareholder hereby acknowledges its obligations to Santa Fe Capital for the
brokerage or finders' fees resulting from this proposed transaction.
III.10 DISCLOSURE. The representations and warranties contained in
this Agreement do not contain any untrue statement of a fact or omit to state
any fact necessary in order to make the statements and information contained
in this Agreement not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
To induce RMI to enter into this Agreement and consummate this
transaction, the Company and each of the Principal Shareholders, jointly and
severally, represent and warrant to RMI that the statements contained in this
Article IV are true, correct and complete as of the date of this Agreement
and will be true, 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 Article IV).
IV.1 ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Company
is a corporation duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation. The Company is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required other than where the
failure to be duly qualified would not have a material adverse effect. The
Company has full power and authority and all licenses, permits, and
authorizations necessary to carry on the Business and to own and use the
properties owned and used by it other than where the failure to have such
would not have a material adverse effect. The Principal Shareholders have
delivered, or have caused the Company to deliver, to RMI true, correct and
complete copies of the Company's Articles of Incorporation, Bylaws (as
amended to date), minute books (containing the records of meetings of the
Shareholders, the board of directors, and any committees of the board of
directors), stock certificate books, and stock record books of the Company.
The Company is not in default under or in violation of any provision of its
Articles of Incorporation or Bylaws.
IV.2 CAPITALIZATION. The entire authorized capital stock of the
Company consists of 20,000,000 shares of common stock, of which 1,228,464
shares of Company Common Stock are issued and outstanding. All of the issued
and outstanding shares of Company Common Stock have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record by
Shareholders as set forth in APPENDIX I. There are no outstanding or
authorized options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, or other contracts or commitments that
could require the Company to issue, purchase, acquire, sell, or cause to
become outstanding any of its capital stock. There are no outstanding or
authorized
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stock appreciation, phantom stock, profit participation, or similar rights
with respect to the Company. There are no voting trusts, proxies, or other
agreements or understandings with respect to the capital stock of the Company.
IV.3 NONCONTRAVENTION. Neither the execution and the delivery of
this 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 the Company is subject or
any provision of the Articles of Incorporation or Bylaws of the Company or
(ii) 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 or consent under any
agreement, contract, lease, license, instrument, or other arrangement to
which the Company 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). Except as set forth on SCHEDULE 4.3, the Company need
not give any notice to, make any filing with, or obtain any authorization,
consent or approval of any governmental agency or third party in order for
the Parties to consummate the transaction contemplated by this Agreement.
IV.4 AUTHORIZATION OF TRANSACTION. The Company has the full power
and authority to execute and deliver this Agreement and to perform the
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of the Company, enforceable in accordance with its terms
and conditions. 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.
IV.5 TITLE TO ASSETS. The Company has good and marketable title to,
or a valid leasehold interest in, the Purchased Assets, free and clear of all
liens, encumbrances, security interests or rights of others whatsoever,
except for the Permitted Encumbrances listed on SCHEDULE 1.5.
IV.6 SUBSIDIARIES. There are not now nor have there ever been any
subsidiaries of the Company.
IV.7 FINANCIAL STATEMENTS. The Company and the Principal
Shareholders have provided or shall provide prior to Closing copies of the
following financial statements (collectively the "Financial Statements"):
(i) audited balance sheets and income statements dated as of July 31, 1998
and (ii) unaudited financial statements for August, September and October,
1998. The audited Financial Statements have been prepared in accordance with
generally accepted accounting principles ("GAAP"), consistently applied, and
maintained throughout the periods indicated, and the Financial Statements
fairly present the financial condition of the Company as at their respective
dates and the results of operations for the periods covered thereby. The
Financial Statements do not contain any items of special or non-recurring
income or any other income not earned in the ordinary course of business,
except as expressly specified
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therein or on SCHEDULE 4.7 attached hereto, and such Financial Statements
include all adjustments (including all normal recurring accruals for unusual
or non-recurring items) necessary for a fair presentation, and no adjustments
or restatements are or will be necessary in respect of any items of an
unusual or non-recurring nature, except as expressly specified therein.
There has been no change in the Company's method of accounting or keeping of
its books account or accounting practices with respect to the Financial
Statements in the past three (3) years.
IV.8 EVENTS SUBSEQUENT TO JULY 31, 1998. Since July 31, 1998, there
has not been any material adverse change in the business, financial
condition, operations, results of operations, or future prospects of the
Company. Without limiting the generality of the foregoing, and except as set
forth on SCHEDULE 4.8 attached hereto, since that date:
(a) the Company has not 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) the Company has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases, and
licenses) involving more than $10,000 or outside the ordinary course of
business;
(c) the Company has not accelerated, terminated, modified, or
canceled any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) involving more than $10,000 to
which the Company is a party or by which it is bound;
(d) the Company has not imposed any security interest upon any of
its assets, tangible or intangible;
(e) the Company has not made any capital expenditure (or series of
related capital expenditures) having either an individual cost in excess of
$7,500, or an aggregate cost in excess of $10,000 or outside the ordinary
course of business;
(f) the Company has not 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);
(g) the Company has not 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
$10,000 or outside the ordinary course of business;
(h) the Company has not delayed or postponed the payment of
accounts payable and other liabilities outside the ordinary course of
business;
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(i) the Company has not canceled, compromised, waived, or released
any right or claim (or series of related rights and claims);
(j) the Company has not granted any license or sublicense of any
rights under or with respect to any Proprietary Rights;
(k) there has been no change made or authorized in the Articles of
Incorporation or Bylaws of the Company;
(l) the Company has not 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) the Company has not 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;
(n) the Company has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property;
(o) the Company has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees outside
the ordinary course of business;
(p) the Company has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of
any existing such contract or agreement;
(q) the Company has not granted any increase in the base
compensation of any of its directors, officers, and employees outside the
ordinary course of business;
(r) the Company has not 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 (i) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan (as such term is defined in the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), Section 3(2)), (ii) qualified
defined contribution retirement plan or arrangement which is an Employee
Pension Benefit Plan, (iii) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan (as such term is defined in ERISA Section 3(37)), or (iv)
Employee Welfare Benefit Plan (as such term is defined in ERISA Section 3(l))
or material fringe benefit plan or program))(collectively, "Employee Benefit
Plans");
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(s) the Company has not made any other change in employment terms
for any of its directors, officers, and employees outside the ordinary course
of business;
(t) the Company has not made or pledged to make any charitable or
other capital contribution;
(u) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the ordinary course
of business involving the Company;
(v) the Company has not lost any material customer or group of
customers which, when aggregated, would be material to the Company; and
(w) the Company has not committed to any of the foregoing.
IV.9 UNDISCLOSED LIABILITIES. The Company has no liability (and
there is no basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against the
Company giving or that could give rise to any liability), except for (i)
liabilities set forth on the face of the Ending Balance Sheet (rather than in
any notes thereto) and (ii) liabilities which have arisen after the date
thereof 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).
IV.10 LEGAL COMPLIANCE. The Company, its predecessors and
affiliates, have complied with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings,
and charges thereunder) of federal, state or local governments (and all
agencies thereto), and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced
against the Company alleging any failure so to comply other than where the
failure to comply would not have a material adverse effect.
IV.11 TAX MATTERS. Except as set forth on SCHEDULE 4.11, all
federal, state, local and foreign tax returns and reports of the Company
required by law to be filed have been duly filed, and all federal, state,
local, foreign and any other taxes (including interest and penalties),
assessments, fees and other governmental charges with respect to the
employees, properties, assets, income or franchises of the Company relating
to the Business or the Purchased Assets which have become due have been paid.
The Company 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 or other third party.
IV.12 PROPRIETARY RIGHTS; CUSTOMERS. The Company does not own nor
has any right to use pursuant to any license, sublicense, agreement or
permission any proprietary rights except for the Proprietary Rights
identified on SCHEDULE 1.1(l). The Company has not interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any proprietary
rights of third parties, and the Principal Shareholders, directors and
officers (and employees with
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responsibility for Proprietary Rights matters) of the Company have not
received any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any
claim that the Company must license or refrain from using any proprietary
rights of any third party). SCHEDULE 1.1(g) lists all customers of the
Company as of October 31, 1998 (the "Customers"). Neither the Company nor
the Principal Shareholders knows, or has a reasonable basis to believe, that
any material Customer, or group of Customers which, when aggregated, would be
material to the Company, intends to terminate its relationship with the
Company.
IV.13 REAL PROPERTY AND PERSONAL PROPERTY.
(a) Except as set forth on SCHEDULE 4.13, the Company has good and
marketable title to (or valid leasehold or contractual interests in) and
rightful possession of all of its Real and Personal Property, tangible and
intangible, comprising the Purchased Assets free and clear of all liens,
claims, charges, set-offs, encumbrances, rights of others or restrictions of
every kind except for the Permitted Encumbrances. Each 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, and is
suitable for the purposes for which it presently is used, all subject to
normal wear and tear. The documents of transfer to be executed and delivered
by the Company at the Closing will be sufficient to convey good and
marketable title to (or valid leasehold or contractual interests in) the
Purchased Assets to RMI, free and clear of all liens, claims, charges,
set-offs, encumbrances, rights of others or restrictions of every kind, other
than Permitted Encumbrances. The Purchased Assets to be transferred
hereunder include all of the properties, assets, rights, contracts, leases,
easements, licenses and personal property utilized by the Company in the
conduct of its Business as of the date hereof.
(b) All machinery, equipment and tangible assets of the Company
being used in the conduct of the Business, are usable by or useful to the
Company in the ordinary course of its Business, and are in operating
condition and repair to the extent necessary for the operation of the
Business as conducted as of the date hereof and as of the Closing Date.
IV.14 CONTRACTS. SCHEDULE 4.14 lists the following contracts and
other agreements to which the Company is a party:
(a) the School Contracts (copies of which are attached to SCHEDULE
4.14);
(b) 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 $10,000 per annum;
(c) 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 loss to the
Company, or involve consideration in excess of $10,000;
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(d) any agreement concerning a partnership or joint venture;
(e) 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;
(f) any agreement concerning confidentiality or noncompetition;
(g) any agreement with Shareholders or their affiliates (other
than the Company);
(h) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or arrangement
for the benefit of the Company's current or former directors, officers, and
employees;
(i) any collective bargaining agreement;
(j) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing, annual
compensation in excess of $40,000 or providing severance benefits;
(k) any agreement under which it has advanced or loaned any amount
to any of the Company's directors, officers, and employees outside the
ordinary course of business;
(l) 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 the
Company; or
(m) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $10,000.
The Principal Shareholders have delivered to RMI a true, correct and complete
copy of each written agreement listed on SCHEDULE 4.14 (as amended to date)
and a written summary setting forth the terms and conditions of each oral
agreement referred to on SCHEDULE 4.14. With respect to each such agreement:
(i) the agreement is legal, valid, binding, enforceable, and in full force
and effect; (ii) the agreement will continue to be legal, valid, binding,
enforceable, and in full force and effect in identical terms following the
consummation of the transaction contemplated hereby; (iii) 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 (iv) no party has
repudiated any provision of the agreement. All Customers of the Company have
executed a contract with the Company substantially in the form of either
ATTACHMENT A, B C or D to SCHEDULE 4.14.
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IV.15 LICENSES AND PERMITS. Except as set forth on SCHEDULE 4.15,
all Licenses and Permits are freely transferable by the Company. The Company
has complied with the terms and conditions of all Licenses and Permits. No
additional license, certificate, or permit is required from any federal,
state, county or local government agency or body thereof in connection with
the conduct of the Business, which the failure to obtain would have a
material adverse effect on the Business or the Purchased Assets.
IV.16 RECEIVABLES. Except as set forth on SCHEDULE 4.16, all
Receivables (i) have arisen in the ordinary course of business of the
Company; (ii) represent bona fide payment obligations of the applicable
account debtors; (iii) subject only to reserves for bad debts set forth on
the Ending Balance Sheet, which reserves have been computed in a manner
consistent with past practice and subject to customer trade discounts
consistent with past practice, have been collected or will be collected in
the ordinary course of business of the Company in the aggregate recorded
amounts thereof in accordance with their terms; and (iv) are not subject to
any recoupments, set-offs or counterclaims, except as allowed in clause (iii).
IV.17 POWERS OF ATTORNEY. There are no outstanding powers of
attorney executed on behalf of the Company.
IV.18 INSURANCE. The Principal Shareholders have delivered, or have
caused the Company to deliver, to RMI copies of all insurance policies
applicable to the Company including all policies providing property,
casualty, liability, and workers' compensation coverage and bond and surety
arrangements to which the Company has been a party, a named insured, or
otherwise the beneficiary of coverage at any time within the past two (2)
years. With respect to each such insurance policy: (i) the policy is legal,
valid, binding, enforceable, and in full force and effect; (ii) the policy
will continue to be legal, valid, enforceable, and in full force and effect
on identical terms following the consummation of the transactions
contemplated hereby; (iii) neither the Company nor 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 (iv)
no party to the policy has repudiated any provision thereof. The Company has
been covered since its incorporation by insurance in scope and amount
customary and reasonable for the businesses in which it has engaged during
such period.
IV.19 LITIGATION. SCHEDULE 4.19 sets forth each instance in which
the Company (i) is subject to any outstanding injunction, judgment, order,
decree, ruling, or charge or (ii) is a party or, to the knowledge of the
Principal Shareholders, directors and officers (and employees with
responsibility for litigation matters) of the Company, 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 or local jurisdiction or before any arbitrator. None of the
actions, suits, proceedings, hearings, and investigations set forth on
SCHEDULE 4.19 could
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result in a material adverse change in the business, financial condition,
operations, results of operations, or future prospects of the Company. None
of the Principal Shareholders, directors and officers (and employees with
responsibility for litigation matters) of the Company has any reason to
believe that any such action, suit, proceeding, hearing, or investigation may
be brought or threatened against the Company.
IV.20 EMPLOYEES. Except for David S. Goldman and Rita Redman, to
the knowledge of the Principal Shareholders, no executive, key employee, or
group of employees has any plans to terminate employment with the Company.
The Company is not a party to or bound by any collective bargaining
agreement, nor has the Company experienced any strikes, grievances, claims of
unfair labor practices, or other collective bargaining disputes. The Company
has not committed any unfair labor practice. None of the Principal
Shareholders, directors and officers (and employees with responsibility for
employment matters) of the Company has any knowledge of any organizational
effort presently being made or threatened by or on behalf of any labor union
with respect to employees of the Company.
IV.21 EMPLOYEE BENEFITS. SCHEDULE 4.21 sets forth a list of all
Employee Benefit Plans as of the date hereof, whether or not subject to
ERISA. Except as set forth on SCHEDULE 4.21, the Company does not maintain or
contribute to or have any obligation or liability to or under any Employee
Benefit Plans. The Company does not have any obligation to create any
additional such plan or to amend any such plan so as to increase benefits
thereunder. All Employee Benefit Plans are in material compliance with and
are and have been operated in accordance with, as applicable, ERISA, the
Code, and any other applicable federal, state or local laws, regulations or
rules. All necessary government approvals have been obtained, and/or a
favorable determination as to the qualification under the Code has been made
by the Internal Revenue Service, where applicable.
IV.22 GUARANTIES. The Company is not a guarantor or otherwise is
liable for any liability or obligation (including indebtedness) of any other
person.
IV.23 ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS. No claim has been
made by any governmental authority (and to the knowledge of the Principal
Shareholders, no such claim is anticipated) to the effect that the Company
fails to comply with any applicable governmental, public utility, health,
safety and environmental laws, regulations, orders, permits, licenses,
approvals, ordinances and directives.
IV.24 CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY. Except as
set forth on SCHEDULE 4.24, no Shareholder, nor any affiliate thereof, has
been involved in any business arrangement or relationship with the Company
within the past twelve (12) months, and the Shareholders or any affiliate
thereof do not own any asset, tangible or intangible, which is used in the
Business.
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IV.25 LEGAL, ACCOUNTING, BROKERS' AND OTHER FEES AND EXPENSES.
Except for the obligation to Santa Fe Capital, which obligation shall be
satisfied prior to the Closing by the Principal Shareholders, the Company 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. Principal Shareholders acknowledge that all of the Company's and
Principal Shareholders' legal, accounting and other fees, costs and expenses
associated with the Reorganization shall be borne by the Company and the
Principal Shareholders.
IV.26 COMPLIANCE WITH STATE SECURITIES LAWS. The Company has
complied with all state securities laws with respect to the allocation and
distribution of the Reorganization Consideration to the Shareholders and such
allocation and distribution will not and does not violate any such state
securities laws.
IV.27 DISCLOSURE. The representations and warranties contained in
this Article IV do not contain any untrue statement of a fact or omit to
state any fact necessary in order to make the statements and information
contained in this Article IV not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF RMI
RMI represents and warrants to the Company and the Principal
Shareholders that the statements contained in this Article V are true,
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
Article V).
V.1 ORGANIZATION. RMI is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation. RMI is duly authorized to conduct business and is in good
standing under the laws of each jurisdiction where such qualification is
required other than where the failure to be duly qualified would not have a
material adverse effect. RMI has full power and authority and all licenses,
permits, and authorizations necessary to carry on the businesses in which it
is engaged and to own and use the properties owned and used by it other than
where the failure to have such would not have a material adverse effect. RMI
is not in default under or in violation of any provision of its Certificate
of Incorporation, as amended or Bylaws.
V.2 AUTHORIZATION OF TRANSACTION. RMI has full corporate power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of RMI, enforceable in accordance with its terms and
conditions. Except to comply with the applicable federal and state securities
laws, RMI 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
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V.3 NONCONTRAVENTION. Neither the execution and the delivery of this
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 RMI is subject or any
provision of the Certificate of Incorporation, as amended or Bylaws of RMI or
(ii) 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 RMI 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).
V.4 LEGAL, ACCOUNTING, BROKERS' AND OTHER FEES AND EXPENSES. RMI 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 Principal Shareholders could become liable or
obligated. RMI acknowledges that all of RMI's legal, accounting and other
fees, costs and expenses associated with the Reorganization, including, but
not limited to, all filing fees payable to the Securities and Exchange
Commission (the "SEC"), Nasdaq or any state in connection with any required
"blue sky" filings, shall be borne by RMI.
V.5 CAPITALIZATION. The capitalization of RMI is as stated in the
Prospectus as of the date stated therein.
V.6 NASDAQ LISTING. RMI has submitted to The Nasdaq SmallCap Market
its notification pursuant to SEC Rule 10b-17 for listing the Closing Date
Shares, the Determination Date Shares and the Warrants along with the
appropriate filing fee therefor (the "Nasdaq Listing"). RMI has not received
any notice of any intent by The Nasdaq SmallCap Market to delist the RMI
Common Stock or the Warrants.
V.7 INFORMATION. The Disclosure Documents filed with the SEC did not
at the time they were filed contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. Notwithstanding the foregoing, RMI
shall not be deemed to represent or warrant the accuracy of any information
included in the Disclosure Documents that was provided to RMI by the Company
or by a Principal Shareholder.
ARTICLE VI
COVENANTS
VI.1 PRE-CLOSING COVENANTS. The Parties agree as follows with respect
to the period between the execution of this Agreement and the Closing.
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(a) GENERAL. Each of the Parties will use his, her or its
reasonable 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 of the
closing conditions set forth in Article VII below).
(b) NOTICES AND CONSENTS. The Principal Shareholders will cause
the Company to give any notices to third parties, and will cause the Company
to use its best efforts to obtain any third party consents that are required
or that RMI may request in connection with this transaction. Each of the
Parties will (and the Principal Shareholders will cause the Company to) give
any notices to, make any filings with, and use its best efforts to obtain any
authorizations, consents, and approvals of governments and governmental
agencies.
(c) FINANCIAL STATEMENTS. The Principal Shareholders will obtain
and deliver to RMI prior to the date which is two (2) days prior to the
Closing Date unaudited financial statements for the month ended October 31,
1998.
(d) OPERATION OF BUSINESS. After the date hereof, the Company
will not engage in any practice, take any action, or enter into any
transaction outside the ordinary course of business without prior written
consent from RMI. Without limiting the generality of the foregoing:
(i) the Company will not authorize or effect any change in its
Articles of Incorporation or Bylaws;
(ii) the Company will not grant any options, warrants, or other
rights to purchase or obtain any of its capital stock or issue, sell, or
otherwise dispose of any of its capital stock;
(iii) the Company will not declare, set aside, or pay any
dividend or distribution with respect to its capital stock (whether in cash
or in kind), or redeem, repurchase, or otherwise acquire any of its capital
stock;
(iv) the Company will not issue any note, bond, or other debt
security or create, incur, assume, or guarantee any indebtedness for
borrowed money or capitalized lease obligation or create or suffer the
creation of any other liability of the Company other than liabilities
arising in the ordinary course of business;
(v) the Company will not sell, dispose or otherwise transfer any
of its assets, including without limitation waive any material rights or
claims, or impose any security interest upon any of its assets;
(vi) the Company will not make any capital investment in, make
any loan to, or acquire the securities or assets of any other person;
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(vii) the Company will not make any change in employment
terms for any of its directors, officers, and employees;
(viii) the Company will not commit to any of the foregoing;
and
(ix) otherwise engage in any practice, take any action, or enter
into any transaction of the sort described above or that would cause any
condition, representation or warranty to be breached or to become untrue.
(e) PRESERVATION OF BUSINESS. The Principal Shareholders will
cause the Company to keep its Business and the Purchased Assets substantially
intact, including its present operations, physical facilities, working
conditions, and relationships with lessors, licensors, suppliers, customers,
and employees.
(f) FULL ACCESS. The Principal Shareholders will permit, and the
Principal Shareholders will cause the Company to permit, representatives of
RMI to have full access (including providing introductions, where necessary
to) all premises, properties, personnel, customers, lessors, licensors,
vendors, supplies, creditors, books, records (including tax records),
contracts, and documents of or pertaining to the Company. The Company will
cause its independent accountants to make available their work papers with
respect to the Company and to otherwise provide such assistance as is
reasonably requested by RMI.
(g) NOTICE OF DEVELOPMENTS. The Company and the Principal
Shareholders will give prompt written notice to RMI of any adverse
development causing a breach or a potential breach of any of the
representations and warranties in the Passive Shareholder Agreement and
Article IV above. No disclosure by the Principal Shareholders or the Company
or discovery by RMI shall be deemed to amend or supplement any Schedule or to
prevent or cure any misrepresentation, breach of warranty, or breach of
covenant.
(h) EXCLUSIVITY. The Company will not and the Principal
Shareholders will not cause or permit the Company to (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 the Company (including, any acquisition
structured as a merger, consolidation, or share exchange) or (ii) participate
fin 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
Principal Shareholders will not vote their Company Common Stock in favor of
any such acquisition structured as a merger, consolidation, or share exchange
other than for this transaction. The Principal Shareholders will notify RMI
immediately if any person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing. If the Company or the Principal
Shareholders breach this Section 6.1(h), RMI shall, in addition to the other
rights it
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may have hereunder or as a matter of law or in equity, be entitled to receive
$125,000 from such breaching Party(ies).
(i) NO TRANSFER. The Principal Shareholders will not sell,
pledge, encumber or otherwise transfer any shares of Company Common Stock.
(j) REPAYMENT. At or before Closing, the Principal Shareholders
and any of their affiliates shall repay all advances from and notes and
receivables owing to the Company from such person.
VI.2 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, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor
under Article VIII below). The Principal Shareholders and the Company
acknowledge and agree that from and after Closing, RMI will be entitled to
possession of all documents, books, records (including tax records),
agreements, and financial data of any sort relating to the Business.
(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 accruing
on or prior to the Closing Date involving the Business or the Purchased
Assets, each of the other Parties will cooperate with it and its 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, 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 Article VIII below).
(c) TRANSITION. The Principal Shareholders will not take any
action that is designed, intended or could reasonably be expected to have the
effect of discouraging any lessor, licensor, customer, supplier, or other
business associate of the Business from maintaining the same business
relationships with RMI after Closing as it maintained with the Company with
respect to the Business prior to the Closing. The Company and the Principal
Shareholders will refer all customer inquiries relating to the Business to
RMI from and after the Closing. The Company agrees that, for a period of one
week, as soon as practicable after the Closing Date, it will cause Rita
Redman to travel to Denver and aid and assist RMI during the transition of
transferring the Purchased Assets to RMI immediately following the Closing.
RMI agrees to
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provide a prepaid airline ticket and hotel room for this purpose and to pay,
upon receipt of supportive documentation, all other reasonable travel and
related costs and expenses incurred by Rita Redman in connection with such
stay in Denver, plus the sum of $100 per day for such services; provided,
however, RMI shall have no obligation to pay Rita Redman any salary during
such period. RMI acknowledges that (i) except as otherwise provided for
herein, (ii) except for the assistance to be provided by Rita Redman set
forth in this Subsection 6.2(c) and (iii) except for the obligations as
employees of RMI of Robert Laughlin, Sylvan Corazzi and Howard Sherman under
their respective Employment Agreements to be executed and delivered at
Closing pursuant to Section 7.1 hereof, the Company and the remaining
Principal Shareholders shall have no obligation to assist RMI in any manner
during the period following Closing with respect to the transfer to RMI of
the Purchased Assets.
(d) CONFIDENTIALITY. Each of the Principal Shareholders and the
Company 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 RMI or destroy, at the request
and option of RMI, all tangible embodiments (and all copies) of the
confidential information which are in his, her or its possession. In the
event that the Company or any Principal Shareholder is requested or required
(by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any confidential information, the Company or such
Principal Shareholder will notify RMI promptly of the request or requirement
so that RMI may seek an appropriate protective order or waive compliance with
the provisions of this Section 6.2. If, in the absence of a protective order
or the receipt of a waiver hereunder, the Company or such Principal
Shareholder is, on the advice of counsel, compelled to disclose any
confidential information to any tribunal or else stand liable for contempt,
the Company or such Principal Shareholder may disclose the confidential
information to the tribunal; PROVIDED, HOWEVER, that the Company or such
Principal Shareholder shall use his, her or its best efforts to obtain, at
the request of RMI, an order or other assurance that confidential treatment
will be accorded to such portion of the confidential information required to
be disclosed as RMI shall designate. The foregoing provisions shall not
apply to any confidential information which is generally available to the
public immediately prior to the time of disclosure.
The Company and each of the Principal Shareholders acknowledge and
understand that confidential information, including the existence of this
Agreement, may include "material, non-public information," as the term is
understood and interpreted under federal and state securities laws and rules.
The Company and each of the Principal Shareholders further acknowledge and
understand that purchasing or selling securities while in possession of
material non-public information may subject the purchaser, seller and/or
person(s) who have provided such information to liability under such laws,
including potential criminal liability. The Company and each of the
Principal Shareholders hereby agrees that all confidential information,
whether furnished before or after the date of this Agreement, shall be
treated confidentially.
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(e) NON-SOLICITATION. The Company and each of the Principal
Shareholders agrees that for a period of two (2) years after termination of
this Agreement, he, she or it will not, in any manner whether with or without
cause, directly or indirectly, either as owner, officer, employer, employee,
independent contractor, stockholder, agent, principal, manager, employee,
consultant, partner or otherwise (i) induce any employee, agent or contractor
of RMI or an affiliate company thereof to terminate his, her or its
employment, agency or contractor relationship with RMI or an affiliate
company thereof, or (ii) hire or attempt to hire any employee, agent or
contractor of RMI or an affiliate company thereof.
The Company and each of the Principal Shareholders agrees that for a
period of two (2) years after termination of this Agreement, he, she or it
will not, in any manner, whether with or without cause, directly or
indirectly, either as owner, officer, employer, employee, independent
contractor, stockholder, agent, principal, manager, consultant, partner or
otherwise, have any business or employment relationship with any Customer of
the Business and/or RMI without the prior written consent of RMI, which
consent shall not be unreasonably withheld, following written notice by the
Company or such Principal Shareholder to RMI detailing the name of the
Customer and the nature of the proposed relationship. It shall not be
unreasonable for RMI to withhold consent if such relationship could cause or
result in any adverse or detrimental impact to RMI. The term "Customer"
includes, but is not limited to, persons or entities located within the
Geographical Market (as defined below) who are or were Customers of the
Business and/or RMI.
(f COVENANT NOT TO COMPETE. The Company and each Principal
Shareholder agrees that for a period of two (2) years following the
termination of this Agreement, within the Geographical Market (defined
below), he, she or it will not, directly or indirectly, in any manner own,
manage, operate, control, be employed by, participate in, or be connected in
any manner with the ownership, management, operation, or control of any
business substantially similar to the Business, RMI or any affiliate thereof
at any time during the term of this Covenant Not to Compete.
For purposes of this Agreement "Geographical Market" shall mean the
United States, Mexico and Canada. The Company and each Principal Shareholder
hereby acknowledges that RMI is a full service, national communications
company providing Internet access, local telephone service and IP telephone
long distance service, Web development and hosting, network management,
system integration and co-location services to clients and customers
throughout the United States. The Company and each Principal Shareholder
further acknowledges that RMI plans expansions into the international market,
including Mexico and Canada, and continued growth both within and outside the
United States. The Company and each Principal Shareholder further
acknowledges that RMI's acquisition of the Purchased Assets as contemplated
by this Agreement evidences RMI's intent to integrate the Business as an
integral part of RMI's plans for growth and expansion.
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The Company and each Principal Shareholder agrees that the covenants he,
she or it has made in this Section 6.2 are reasonable with respect to their
duration, geographical area and proscription. The Company and each Principal
Shareholder further agrees that the covenants he, she or it has made in this
Section 6.2 shall be construed as an agreement independent of any other
provision of this Agreement. Hence, the covenants made in this Section 6.2
shall survive the termination of this Agreement. Moreover, the existence of
any claim or cause of action of Principal Shareholders against RMI, whether
or not predicated upon the terms of this Agreement, shall not constitute a
defense to the enforcement by RMI of these covenants. Notwithstanding
anything contained herein to the contrary, the provisions of this Section 6.2
will not prohibit David S. Goldman from investing in any public or private
entity so long as (i) he is not a director on the board of directors or a
manager or general partner (or similar position) of any such entity; (ii) he
does not participate in the management of any such entity as an officer or
otherwise; (iii) his equity ownership in any such entity does not exceed
twenty-five percent (25%); and (iv) any such entity is not an Internet
Service Provider.
(g TAX-FREE REORGANIZATION; PLAN OF LIQUIDATION. The Parties
hereto shall use their reasonable best efforts to cause the transactions
contemplated hereby to be treated as a reorganization under Section
368(a)(1)(C) of the Code and any other applicable state or federal law. The
Company and the Principal Shareholders intend to, following the Closing,
promptly effect the Company's complete liquidation and distribute all of its
assets (including the RMI Common Stock and the Warrants received pursuant to
the terms and conditions hereof) in accordance with its Articles of
Incorporation, bylaws and applicable Florida statutes to the Shareholders.
The Company shall timely file all tax returns necessary, and pay all taxes
applicable, with respect to such liquidation. The Company and the Principal
Shareholders acknowledge that RMI (nor any affiliate of RMI) shall have any
liability whatsoever to any party or governmental authority in the event the
Reorganization does not qualify as a reorganization under the Code, and the
Company and the Principal Shareholders hereby indemnify and agree to hold RMI
harmless with respect to any such claim or assertion.
(h NASDAQ LISTING OF UNDERLYING WARRANT SHARES. RMI agrees that
upon the initial exercise by any Shareholder of any Warrant issued hereunder,
it will file with The Nasdaq SmallCap Market a notification pursuant to SEC
Rule 10b-17 to list, in the aggregate, all of the Closing Date Warrant Shares
and the Determination Date Warrant Shares.
ARTICLE VII
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
VII.1 CONDITIONS TO OBLIGATION OF RMI. The obligation of RMI to
consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(a this Agreement and the Reorganization shall have received the
requisite Shareholders approval and there shall not be any dissenters;
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(b the Company shall have procured all required third party and
governmental consents, including, but not limited to, the consent from
WorldCom to the transfer of the contractual relationship to RMI;
(c each Passive Shareholder shall have executed and delivered to
RMI the Passive Shareholder Agreement;
(d all of the representations and warranties set forth in the
Passive Shareholder Agreement and in Articles III and IV above shall be true
and correct in all material respects at and as of the Closing Date and the
Principal Shareholders and the Company shall have performed and complied with
all of their covenants hereunder in all material respects through the
Closing, and RMI shall have received a certificate of the Company and the
Principal Shareholders in the form of EXHIBIT G attached hereto to that
effect; .
(e no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, or local jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (i) prevent
consummation of any of the transactions contemplated by this Agreement, or
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation;
(f the Principal Shareholders shall each have delivered to RMI a
Principal Shareholder Lock-Up Agreement substantially in the form attached
hereto as EXHIBIT E;
(g the Principal Shareholders shall each have delivered to RMI a
Warrant Lock-Up Agreement substantially in the form attached hereto as
EXHIBIT F;
(h Robert Laughlin shall have delivered to RMI an Employment
Agreement, substantially in the form attached hereto as EXHIBIT H;
(i Sylvan Corazzi shall have delivered to RMI an Employment
Agreement, substantially in the form attached hereto as EXHIBIT I;
(j Howard Sherman shall have delivered to RMI an Employment
Agreement, substantially in the form attached hereto as EXHIBIT J;
(k David S. Goldman shall have delivered to RMI a Non-Compete
Agreement, substantially in the form attached hereto as EXHIBIT K;
(l Digital Systems Corporation shall have delivered to RMI a
Non-Compete Agreement, substantially in the form attached hereto as EXHIBIT L;
28
<PAGE>
(m RMI shall have received from counsel to the Company and the
Principal Shareholders an opinion, addressed to RMI, and dated as of the
Closing Date substantially in the form attached hereto as EXHIBIT M; and
(n the Company shall have recurring monthly revenues of at least
$167,000 from Internet Service Providers and shall have executed School
Contracts which satisfy the Target School Revenue requirement.
RMI may waive any condition specified in this Section 7.1 only if it executes
a writing so stating, at or prior to the Closing.
VII.2 CONDITIONS TO OBLIGATION OF PRINCIPAL SHAREHOLDERS AND THE
COMPANY. The obligation of Principal Shareholders and the Company to
consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
(a each of the representations and warranties set forth in
Article V above shall be true and correct in all material respects at and as
of the Closing Date;
(b RMI shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(c no action, suit, or proceeding shall be pending 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 (i)
prevent consummation of any of the transactions contemplated by this
Agreement or (ii) 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 RMI Common Stock, the Warrants, the Closing Date Warrant
Shares and the Determination Date Warrant Shares shall have all been
registered under the Securities Act and there shall be no stop order with
respect thereto in effect; and
(e the Nasdaq Listing shall have been filed and shall be in
effect. The Principal Shareholders and the Company may waive any condition
specified in this Section 7.2 if they execute a writing so stating at or
prior to the Closing.
ARTICLE VIII
REMEDIES FOR BREACH
VIII.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
29
<PAGE>
or covenant at the time of Closing) and continue in full force and effect
until nine (9) months from the date of Closing; PROVIDED, HOWEVER, that (i)
the representations and warranties of the Passive Shareholders set forth in
the Passive Shareholder Agreement shall survive indefinitely, (ii) the
representations and warranties of the Principal Shareholders set forth in
Article III hereof shall survive indefinitely, (iii) the representations and
warranties contained in Sections 4.2 and 4.4 shall survive indefinitely and
(iv) the representations and warranties contained in Section 4.11 shall
survive for the applicable statute of limitations period.
VIII.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF RMI. Subject to the
limitations set forth in Section 8.6 below, Principal Shareholders agree to
indemnify RMI and hold RMI harmless from and against the entirety of any and
all actions, suits, proceedings, hearings, investigations, charges,
complaints, claims, demands, injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties, fines, costs, amounts paid in settlement,
liabilities, obligations, taxes, liens, losses, expenses, interest and fees,
including court costs and attorneys' fees and expenses (collectively,
"Adverse Consequences") RMI may suffer (including any Adverse Consequences
suffered after the making of any claim for indemnification or after the end
of any applicable survival period) resulting from, arising out of, relating
to, in the nature of, or caused by any of the following (i) any Shareholders'
or the Company's breach (or the allegation by any third party of facts that,
if true, would mean any has breached) of any of the representations,
warranties, and covenants contained in this Agreement or in the Passive
Shareholder Agreement; (ii) any liability or obligation of the Company of any
nature accruing on, prior to or after the Closing Date other than the Assumed
Liabilities; and (iii) any actions, judgments, costs and expenses (including
reasonable attorney fees and all other expenses incurred in investigating,
preparing or defending any litigation or proceeding, commenced or threatened)
incident to any of the foregoing.
VIII.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF PRINCIPAL
SHAREHOLDERS. Subject to the limitations set forth in Section 8.6, RMI agrees
to indemnify the Principal Shareholders from and against the entirety of any
and all Adverse Consequences the Principal Shareholders may suffer (including
any Adverse Consequences suffered after the making of any claim for
indemnification or after the end of any applicable survival period)
resulting, from, arising, out of, relating to, in the nature of, or caused by
(i) RMI's breach (or the allegation by any third party of facts that, if
true, would mean it has breached) of any of RMI's representations, warranties
and covenants contained in this Agreement; (ii) any liability or obligation
relating to the Assumed Liabilities; and (iii) any actions, judgments, costs
and expenses (including reasonable attorney fees and all other expenses
incurred in investigating, preparing or defending any litigation or
proceeding, commenced or threatened) incident to the foregoing.
VIII.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") which may give
rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Article VIII, 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.
(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 (i) the
Indemnifying Party notifies the Indemnified Party in writing within five (5)
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, (ii) 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, (iii) the Third Party Claim involves only money damages and does
not seek an injunction or other equitable relief, (iv) 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 adverse to the continuing business interests of the
Indemnified Party, and (v) the Indemnifying Party conducts the defense of the
Third Party Claim actively and diligently. Notwithstanding anything herein to
the contrary, 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
unreasonably withheld, conditioned or delayed).
(c So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 8.4(b) above, (i) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim and (ii) 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 unreasonably withheld,
conditioned or delayed).
(d In the event any of the conditions in Section 8.4(b) above is
or becomes unsatisfied, however, (i) 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 reasonably
may deem appropriate (and the Indemnified Party need not consult with, or
obtain any consent from, any Indemnifying Party in connection therewith);
(ii) the Indemnifying Parties will reimburse the Indemnified Party promptly
and periodically for the costs of defending against the Third Party Claim
(including reasonable attorneys' fees and expenses), and (iii) the
Indemnifying Parties 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 Article VIII; PROVIDED, HOWEVER, that notwithstanding
anything in this Subsection 8.4(d) to the contrary, if such judgment or
settlement requires a payment of any value by the Indemnifying Party, the
Indemnified Party must first
31
<PAGE>
obtain the written consent of the Indemnifying Party prior to the entry of
any such judgment or prior to entering into any such settlement.
VIII.5 REMEDIES. The foregoing indemnification provisions are in
addition to, and not in derogation of, any statutory, equitable, or common
law remedy any Party may have with respect to the transactions contemplated
by this Agreement. Without limiting the generality of the foregoing, RMI
shall be entitled, but not required, to setoff any amounts due pursuant to
this Article VIII against any and all amounts payable to the Principal
Shareholders under this Agreement or otherwise.
VIII.6 LIMITATIONS ON INDEMNIFICATION; PAYMENT IN SHARES OF RMI
COMMON STOCK.
(a Except as otherwise provided in this Agreement, no Party to
this Agreement shall be required to indemnify any other Party unless and
until the total amount of the indemnification claim is equal to or exceeds
Seventy-Five Thousand and No/100 Dollars ($75,000) ("Indemnification
Threshold") in the aggregate. If such Indemnification Threshold is reached,
all indemnification liability shall be assessed irrespective of such
Indemnification Threshold. The Company and the Principal Shareholders
acknowledge that the Indemnification threshold shall not apply in any manner
to the calculation of the Target School Revenue or the Closing Date Warrant
Shares or the Determination Date Warrant Shares.
(b The Principal Shareholders shall have the right, but not the
obligation, to satisfy their indemnification obligations hereunder by
delivering to RMI for cancellation stock certificates evidencing that number
of shares of RMI Common Stock that have an aggregate value on the date of
such payment equal to the amount of the Adverse Consequences. For purposes
of this Subsection 8.6(b), such shares of RMI Common Stock shall be valued at
the RMI Share Value. If the Principal Shareholders are unable or unwilling to
deliver such shares, the amount of the Adverse Consequences shall be paid in
cash.
VIII.7 OTHER INDEMNIFICATION PROVISIONS. Each of the Principal
Shareholders hereby agrees that he, she or it will not make any claim for
indemnification against the Company by reason of the fact that he, she or it
was a director, officer, employee, or agent of any such entity or was serving
at the request of any such entity as a partner, trustee, director, officer,
employee, or agent of another entity (whether such claim is for judgments,
damages, penalties, fines, costs, amounts paid in settlement, losses,
expenses, or otherwise and whether such claim is pursuant to any statute,
charter document, bylaw, agreement, or otherwise) with respect to any action,
suit, proceeding, complaint, claim, or demand brought by RMI against such
Principal Shareholder (whether such action, suit, proceeding, complaint,
claim, or demand is pursuant to this Agreement, applicable law, or otherwise).
32
<PAGE>
ARTICLE IX
TERMINATION
IX.1 TERMINATION OF AGREEMENT. Any of the Parties may terminate this
Agreement with the prior authorization of its board of directors (whether
before or after receiving the requisite Shareholders' approval) as provided
below:
(a the Parties may terminate this Agreement by mutual written
consent at any time prior to the Closing Date;
(b RMI may terminate this Agreement by giving written notice to
the Company at any time prior to the Closing Date (i) in the event the
Company or Shareholders has breached any representation, warranty, or
covenant contained in this Agreement or the Passive Shareholder Agreement or
(ii) if the Closing shall not have occurred on or before December 5, 1998, by
reason of the failure of any condition precedent under Section 7.1 hereof
(unless the failure results primarily from RMI breaching any representation,
warranty, or covenant contained in this Agreement). RMI's knowledge of the
existence of a condition that would entitle RMI to so terminate this
Agreement shall not be construed as a waiver of its rights to so terminate at
any later date prior to the Closing Date.
(c Principal Shareholders and the Company may terminate this
Agreement by giving written notice to RMI at any time prior to the Closing
Date (i) in the event RMI has breached any representation, warranty, or
covenant contained in this Agreement or (ii) if the Closing shall not have
occurred on or before December 5, 1998, by reason of the failure of any
condition precedent under Section 7.2 hereof (unless the failure results
primarily from any Shareholder or the Company breaching any representation,
warranty, or covenant contained in this Agreement or Shareholder's
Certificate). A Principal Shareholder's or the Company's knowledge of the
existence of a condition that would entitle Principal Shareholders or the
Company to so terminate this Agreement shall not be construed as a waiver of
their rights to so terminate at any later date prior to the Closing Date.
IX.2 EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 9.1 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), except that the
provisions contained in Sections 3.9, 4.25 and 5.4 and Subsection 6.2(d)
above shall survive termination.
ARTICLE X
MISCELLANEOUS
33
<PAGE>
X.1 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. Except as required by
law or regulation, neither Party shall issue any press release or make any
public announcement of the transactions contemplated hereby without the prior
written consent of the other Party.
X.2 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.
X.3 ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein, including, but not limited to, the Shareholder's Certificates)
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.
X.4 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, her or its rights, interests, or obligations hereunder without
the prior written approval of RMI on the one hand and the Principal
Shareholders and the Company on the other hand.
X.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
X.6 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.
X.7 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 when
received or two business days after it is sent by registered or certified
mail, return receipt requested, postage prepaid, and addressed to the
intended recipient as set forth below:
If to RMI: Rocky Mountain Internet, Inc
Douglas H. Hanson, President, CEO and Chairman
1099 18th Street, 30th Floor
Denver, Colorado 80202
Facsimile: (303) 672-0711
34
<PAGE>
Copy to: Jacobs Chase Frick Kleinkopf & Kelley LLC
Matthew R. Perkins
1050 17th Street, Suite 1500
Denver, Colorado 80265
Facsimile: (303) 685-4869
If to the Company: DataXchange Network, Inc.
611 Druid Road, Suite 702
Clearwater, Florida 33756
Facsimile: (813) 449-1748
Copy to: Shumaker, Loop & Kendrick, LLP
Paul R. Lynch, Esq.
Gregory C. Yadley, Esq.
101 East Kennedy Boulevard, Suite 2800
Tampa, Florida 33602
Facsimile: (813) 229-1660
If to Principal David S. Goldman
Shareholders: 851 Indian Rock Road
Bellair, Florida 33576
Copy to: Shumaker, Loop & Kendrick, LLP
Paul R. Lynch, Esq.
Gregory C. Yadley, Esq.
101 East Kennedy Boulevard, Suite 2800
Tampa, Florida 33602
Facsimile (813) 229-1660
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 personal delivery, expedited courier, messenger
service, 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 it actually is received by the intended
recipient. 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.
X.8 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 (whether of the
State of Colorado or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of Colorado.
X.9 AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing, and signed by
RMI, the Principal Shareholders and the Company. No waiver by any Party of
any default, misrepresentation, or breach of
35
<PAGE>
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.
X.10 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.
X.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, or local 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.
X.12 INCORPORATION OF EXHIBITS, APPENDICES AND SCHEDULES. The
Exhibits, Appendices and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.
X.13 SUBMISSION TO JURISDICTION. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Denver, Colorado in any
action or proceeding arising out of or relating to this Agreement and agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each party also agrees not to bring any action
or proceeding arising out of or relating to this Agreement in any other
court. Each of the Parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond,
surety, or other security that might be required of any other Party with
respect thereto. Any Party may make service on any other Party by sending or
delivering a copy of the process to the Party to be served at the address and
in the manner provided for the giving of notices in Section 10.7 above.
Nothing in this Section 10.13, however, shall affect the right of any Party
to serve legal process in any other manner permitted by law or at equity.
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 and
Plan of Reorganization and Liquidation as of the date first above written.
ROCKY MOUNTAIN INTERNET, INC., a Delaware
corporation
By:
---------------------------------------
Douglas H. Hanson, CEO, President,
and Chairman of the Board
DATAXCHANGE NETWORK, INC., a
Florida corporation
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
PRINCIPAL SHAREHOLDERS:
------------------------------------------
------------------------------------------
David S. Goldman and Lenor D. Goldman,
as Tenancy by Entirety
Digital Systems Corporation, a Maryland
corporation
By:
---------------------------------------
Name: Robert Laughlin
Title:
------------------------------------
------------------------------------------
Sylvan Corazzi
------------------------------------------
Robert Laughlin
<PAGE>
RMI Becomes One of Nation's Largest Back Bone Providers
Page
[LOGO] ROCK MOUNTAIN INTERNET
FOR IMMEDIATE RELEASE
CONTACTS:
Barbara Archer or Robyn Phipps Shiloh Kelly
Metzger Associates Director of Communications
[email protected] Rocky Mountain Internet Inc.
[email protected] [email protected]
(303) 786-7000 (303) 672-0732
Robert Laughlin
President
DataXchange Network, Inc.
(301) 829-2955
ROCKY MOUNTAIN INTERNET BECOMES ONE OF THE NATION'S
LARGEST INTERNET BACKBONE PROVIDERS
COMPANY SOLIDIFIES ITS POSITION AS A NATIONAL IP-BASED COMMUNICATIONS COMPANY
BY ACQUIRING DATAXCHANGE
DENVER - December 9, 1998 - Rocky Mountain Internet Inc. (NASDAQ SmallCap
Market-RMII, RMIIW) announced today it has completed the acquisition of
DataXchange Network Inc., in an asset acquisition of 410,000 shares of RMI
common stock and warrants to acquire an additional 410,000 shares of RMI common
stock plus up to an additional 125,000 shares and warrants based on certain
revenue targets. For 1998, DataXchange is experiencing a revenue run rate in
excess of $2 million.
"DataXchange is a significant acquisition for us," said Douglas H. Hanson,
chairman, president and CEO of Rocky Mountain Internet (http://www.rmi.net).
"This acquisition, coupled with our recent acquisitions of InternetNow,
Stonehenge and Unicom, have truly changed the dynamics of our company. From our
electronic commerce capabilities to our nationwide backbone, we believe RMI is
now positioned to take advantage of its national presence."
The acquisition gives RMI ownership of DataXchange's state-of-the-art nationwide
backbone, which is rated by BOARDWATCH magazine as the 11th-largest overall
among the
<PAGE>
36 national backbones, when it comes to backbone market share. The dx.net
backbone is expected to allow RMI to reduce its networking costs and provide a
full-solutions, IP-based communications company.
"By joining forces with RMI, we will be able to offer the expanded package of
communication products necessary to our ISP customers and to excel in today's
market place," commented Robert Laughlin, president and CEO of DataXchange.
Laughlin will become the chief technology officer of the combined companies.
DataXchange Network is a national backbone provider that has 150 regional ISPs
as its subscribers. The company, with offices in California and Washington,
D.C., connects its customers via a nationwide network as well as a number of
dedicated high bandwidth business customers and a backbone that has been
engineered using the top-of-the-line Cisco 7500 routers and fully meshed T-3 ATM
ports. DataXchange peers at multiple NAPs (network access points) with all
significant backbone providers, ensuring customers with redundancy and
exceptional quality.
ABOUT ROCKY MOUNTAIN INTERNET
Rocky Mountain Internet (http://www.rmi.net) is a national Web Solutions and
e-commerce company providing a wide range of Internet and data communication
services to businesses and consumers with an emphasis on e-commerce solutions.
Services include: a comprehensive browser-based electronic commerce software
package (www.e-sell.com); a leading-edge portal site (www.infohiway.com); and a
browser-based banner advertising management software package
(www.infohiway.com/adcafe/). Other RMI services consist of dedicated, DSL,
dial-up and wireless Internet access, network management, system integration and
co-location.
Rocky Mountain Broadband, a subsidiary and communications division of RMI,
offers a wide range of services; including, paging, voice mail, local and long
distance phone service, 800 service and IP Telephony (www.ic-ephone.net).
(This press release contains forward-looking statements. These forward-looking
statements are subject to risks and uncertainties. Actual results may differ
materially from such forward-looking statements as a result of risks and
uncertainties which are described in the cautionary statements section of the
company's 10K dated December 31, 1997, and include the need for additional
financing, the ICC litigation, ability to successfully integrate acquisitions,
changing technology, competition, possible future government regulation,
competition for talented employees, the Company's ability to fund future
operations and the Company's need to refinance debt.)
# # #
