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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): November 20, 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 November 20, 1998, the Company acquired all of the issued
outstanding common stock of Internet Now, a Nevada corporation headquartered
in Phoenix, Arizona ("Internet Now"), pursuant to the terms of the Merger
Agreement dated November 20, 1998 (the "Internet Now Merger Agreement") by
and among the Company, RMI-INI, Inc., a Colorado corporation, Internet Now,
and Hutchinson Persons, Leslie Kelly, Taufik Islam, Susan Coupal and Gary
Kim, the shareholders of Internet Now (the "Internet Now Shareholders"). The
acquisition was effectuated by way of a merger (the "Internet Now Merger") of
Internet Now with and into RMI-INI, Inc., a wholly-owned subsidiary of the
Company. Pursuant to the Internet Now Merger Agreement, the Internet Now
Shareholders received, in the aggregate, $150,000 in cash and 171,250 shares
of common stock of the Company. The consideration given to the Internet Now
Shareholders was determined through arm's-length negotiation. There was no
material relationship between the Company and either Internet Now or the
Internet Now Shareholders prior to the Internet Now Merger. A copy of the
Internet Now Merger Agreement and a copy of the press release dated November
23, 1998 announcing the Internet Now Merger are attached hereto as Exhibits
10.19 and 99.3, respectively.
On November 24, 1998, the Company acquired certain assets that
comprised the access and hosting business of Unicom Communications, Inc., a
Kansas corporation headquartered in Overland Park, Kansas ("Unicom") pursuant
to the terms of the Asset Purchase Agreement dated November 24, 1998 (the
"Unicom Asset Purchase Agreement") by and between the Company and Unicom.
The consideration for the assets acquired was 172,152 shares of common stock
of the Company, of which 137,722 were issued to Unicom at the closing of the
acquisition, 17,215 are required to be issued to Unicom on January 3, 1999,
and 17,215 are to be issued and deposited into an escrow account. The shares
deposited into the escrow account are to be released from that account
approximately 12 months after the closing of the acquisition, 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 Unicom's
representations or warranties given to the Company in connection with the
acquisition. The consideration that the Company agreed to pay to Unicom 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 the assets acquired from
Unicom in the same manner that Unicom utilized the assets prior to their
acquisition by the Company. A copy of the Unicom Asset Purchase Agreement
and a copy of the press release dated November 25, 1998 announcing the Unicom
asset purchase are attached hereto as Exhibits 10.20 and 99.4, respectively.
ITEM 5. OTHER EVENTS.
Effective as of November 1, 1998, the Company acquired substantially
all of the assets of Stonehenge Business Systems Corporation, a Colorado
corporation that provides Internet and networking services, located in
Englewood, Colorado ("Stonehenge"), pursuant to the terms of the Asset
Purchase Agreement dated November 30, 1998 (the "Stonehenge Asset Purchase
Agreement") by and among the Company, Stonehenge, Todd Keener, and Danette
Keener. The consideration for the assets acquired was
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49,862 shares of common stock of the Company, of which 39,890 were issued to
Stonehenge at the closing of the acquisition and 9,972 were issued and
deposited into an escrow account, and the assumption of certain liabilities.
The shares deposited into the escrow account are to be released from that
account in part upon the release of certain liens on certain of the assets
acquired and upon the determination of the adjustments to the purchase price,
as set forth in the Stonehenge Asset Purchase Agreement, with the remaining
shares to be released approximately 18 months after the closing of the
acquisition, 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
Stonehenge's representations or warranties given to the Company in connection
with the acquisition. The purchase price for the assets purchased from
Stonehenge was determined through arm's-length negotiation. There was no
material relationship between the Company and any of the other parties prior
to the acquisition. The Company intends to continue to utilize substantially
all of the assets acquired from Stonehenge in the same manner that Stonehenge
utilized the assets prior to their acquisition by the Company. A copy of the
Stonehenge Asset Purchase Agreement and a copy of the press release dated
December 1, 1998 announcing the Stonehenge asset purchase are attached hereto
as Exhibits 10.21 and 99.5, 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.
(None required)
(b) Pro forma financial information.
(None required)
(c) Exhibits.
10.19 Merger Agreement among Rocky Mountain Internet, Inc., RMI-INI,
Internet Now, Hutchinson Persons, Leslie Kelly, Taufik Islam, Susan Coupal
and Gary Kim.
10.20 Asset Purchase Agreement between Rocky Mountain Internet, Inc.
and Unicom Communications, Inc.
10.21 Asset Purchase Agreement among Rocky Mountain Internet, Inc.,
Stonehenge Business Systems Corporation, Todd Keener, and Danette Keener.
99.3 News Release dated November 23, 1998, 1998 announcing the
Internet Now Merger.
99.4 News Release dated November 25, 1998 announcing the Unicom asset
purchase.
99.5 News Release dated December 1, 1998 announcing the Stonehenge
asset purchase.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Rocky Mountain Internet, Inc.
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(Registrant)
Date: December 7, 1998 By: /s/ Peter J. Kushar
--------------------------
Peter J. Kushar, Secretary,
Treasurer, and Chief Financial
Officer
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MERGER AGREEMENT
AMONG
ROCKY MOUNTAIN INTERNET, INC.,
a Delaware corporation,
RMI-INI, INC.,
a Colorado corporation,
AND
INTERNET NOW
an Nevada corporation,
AND
HUTCHINSON PERSONS,
LESLIE KELLY,
TAUFIK ISLAM,
SUSAN COUPAL,
AND
GARY KIM,
Shareholders
November 20, 1998
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MERGER AGREEMENT
THIS MERGER AGREEMENT (this "Agreement") is entered into on November
20, 1998, by and among Rocky Mountain Internet, Inc., a Delaware corporation
("RMI"), RMI-INI, Inc., a Colorado corporation and wholly-owned subsidiary of
RMI ("Subsidiary"), Internet Now, an Nevada corporation ("Internet Now") and
Hutchinson Persons, Leslie Kelly, Taufik Islam, Susan Coupal and Gary Kim, the
shareholders of Internet Now (individually "Shareholder" and collectively
"Shareholders"). RMI, Subsidiary, Internet Now and Shareholders are
collectively referred to herein as the "Parties".
This Agreement contemplates a transaction in which RMI through
Subsidiary will acquire all of the outstanding capital stock of Internet Now for
cash and registered common stock of RMI delivered to Shareholders in a forward
subsidiary merger whereby Internet Now will be merged with and into Subsidiary.
Now, therefore, in consideration of the Earnest Money Deposit paid by
RMI to Richard C. Onsager, P.C., as escrow agent, delivered in accordance with
that certain Agreement by and between RMI and Internet Now dated October 21,
1998, the mutual promises made herein, and in consideration of the
representations, warranties, and covenants herein contained, the Parties agree
as follows:
1. DEFINITIONS. Capitalized terms used in this Agreement have the
meaning provided in the above preface and in Section 12 below.
2. BASIC TRANSACTION.
(a) THE MERGER. On and subject to the terms and conditions of this
Agreement, Internet Now will merge with and into Subsidiary (the "MERGER") at
the Closing in exchange for the Merger Consideration (defined below).
Subsidiary shall be the corporation surviving the Merger ("SURVIVING
CORPORATION").
(b) EARNEST MONEY DEPOSIT. RMI has delivered to Richard C. Onsager,
P.C., as escrow agent, for the benefit of the Shareholders and RMI, an earnest
money deposit in the amount of Twenty Thousand Dollars ($20,000) ("Earnest Money
Deposit"), in accordance with that certain agreement by and between RMI and
Internet Now dated October 21, 1998, which shall be released by Mr. Onsager
pursuant to such agreement.
(c) MERGER CONSIDERATION. Shareholders shall receive as consideration at
Closing the purchase price as follows (collectively the "Purchase Price"): (i)
Earnest Money Deposit plus One Hundred Thirty Thousand and No/Dollars
($130,000.00) payable by wire transfer or delivery of immediately available
funds to the Shareholders as set forth below and (ii)one hundred seventy
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one thousand two hundred fifty (171,250) shares of RMI common stock registered
in accordance with RMI Registration Statement on Form S-1 (File No. 333-52731)
("RMI Shares") to be distributed to the Shareholders as set forth below:
<TABLE>
<CAPTION>
SHAREHOLDER (i) EARNEST MONEY DEPOSIT (ii) RMI SHARES
----------- ------------------------- ---------------
PLUS CASH
---------
<S> <C> <C>
Hutchinson Persons $ 85,285.50 98,866 RMI Shares
Leslie Kelly $ 56,872.50 65,931 RMI Shares
Taufik Islam $ 4,889.00 4,023 RMI Shares
Susan Coupal $ 1,500.50 1,235 RMI Shares
Gary Kim $ 1,452.50 1,195 RMI Shares
</TABLE>
(d) THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place by facsimile and telephone commencing
at 9:00 a.m. Denver and Phoenix time on or before November 30, 1998, or such
other date as the Parties mutually agree (the "Closing Date").
(e) ACTIONS AT THE CLOSING. At the Closing: (i) Shareholders will
deliver to RMI the various certificates, instruments, and documents referred to
in Section 8 below; (ii) RMI will deliver to Shareholders the Purchase Price;
and (iii) RMI and Internet Now will each file or caused to be filed with each of
the respective Secretaries of States of the State of Colorado and Nevada
Articles of Merger in substantially the form attached hereto as EXHIBIT A and
such other forms as required by the respective Secretaries of States (
collectively the "Articles of Merger").
(f) EFFECT OF MERGER.
(i) IN GENERAL. The Merger shall become effective at the time
(the "EFFECTIVE TIME") RMI and Internet Now file or cause to be filed
the Articles of Merger with each of the Secretaries of the State of the
States of Colorado and Nevada. The Merger shall have the effect set
forth in the Colorado Business Corporation Act and the Nevada Revised
Statutes. The Subsidiary, as the Surviving Corporation, may, at any
time after the Effective Time, take any action (including executing and
delivering any document) in the name and on behalf of either Internet
Now or Subsidiary in order to carry out and effectuate the transactions
contemplated by this Agreement.
(ii) ARTICLES OF INCORPORATION. The Articles of Incorporation of
Subsidiary in effect at and as of the Effective Time shall remain the
Articles of Incorporation of Surviving Corporation without modification
or amendment.
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(iii) BYLAWS. The Bylaws of Subsidiary in effect at and as of the
Effective Time shall remain the Bylaws of Surviving Corporation without
modification or amendment.
(iv) DIRECTORS AND OFFICERS. The directors and officers of
Subsidiary in office at and as of the Effective Time shall remain the
directors and officers of the Surviving Corporation (retaining their
respective positions and terms of office).
(g) CONVERSION OF SECURITIES. At the Effective Time, by virtue of the
Merger and without any further action on the part of RMI, Subsidiary, Internet
Now or Shareholders, the shares of capital stock of Subsidiary and Internet Now
shall be cancelled or converted as follows:
(i) CAPITAL STOCK OF SUBSIDIARY. Each issued and outstanding
share of capital stock of Subsidiary shall continue to be issued and
outstanding.
(ii) CANCELLATION OF CERTAIN SHARES OF CAPITAL STOCK OF INTERNET
NOW. All Internet Now Shares that are owned directly or indirectly by
Internet Now shall be cancelled and no stock of RMI or other
consideration shall be delivered in exchange therefor.
(iii) CONVERSION OF INTERNET NOW SHARES. The Internet Now Shares
issued and outstanding (except the shares cancelled pursuant to Section
2(g)(ii) above) immediately prior to the Effective Time shall
automatically be converted into the right to receive the Merger
Consideration and then such Internet Now Shares shall be cancelled and
retired, without any action on the part of the holders thereof, and each
holder of a certificate representing such Internet Now Shares shall
cease to have any rights with respect thereto, except as provided in
this Section 2(g)(iii) upon the surrender of such certificates
representing Internet Now Shares.
(h) CLOSING OF TRANSFER RECORDS. After the Closing transfers of Internet
Now Shares outstanding prior to the Effective Time shall not be made on the
stock transfer books of the Surviving Corporation. If any certificates
representing such shares are so presented to the Surviving Corporation, they
shall be cancelled and the only right of the holder of such certificate shall be
to share in the Merger Consideration.
3. REPRESENTATIONS AND WARRANTIES CONCERNING SHAREHOLDERS. To induce RMI
to enter into this Agreement and consummate this transaction, each of the
Shareholders, in his or her individual capacity and not on behalf of any other
Shareholder, represents and warrants, except as otherwise specifically provided
in this Section 3, to RMI that the statements contained in this Section 3 are
true, correct and complete as of the date of this Agreement and will be true,
correct,
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complete as of Closing (as though made then and as though the Closing Date were
substituted for the date of this Agreement).
(a) AUTHORIZATION OF TRANSACTION. 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 such Shareholder, enforceable in accordance with
its terms and conditions. Shareholder 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.
(b) INTERNET NOW SHARES. Shareholder holds of record and owns
beneficially all of the Internet Now Shares set forth next to his or her name in
Section 4(b) of the Disclosure Schedule, free and clear of any restrictions on
transfer (other than any restrictions under any federal and state securities
laws), Taxes, security interests (other than security interests that will be
released at or prior to Closing), options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. Shareholder is not a party to any
option, warrant, purchase right, or other contract or commitment that could
require Internet Now or such Shareholder to sell, transfer, or otherwise dispose
of any capital stock of Internet Now (other than this Agreement). Shareholder is
not a party to any voting trust, proxy, or other agreement or understanding with
respect to the voting of any capital stock of Internet Now.
(c) RMI PROSPECTUS. Each Shareholder hereby acknowledges that each has
received and reviewed a copy of that certain Prospectus of RMI dated November
19, 1998 including all supplements and amendments thereto (as supplemented, the
"RMI Prospectus") contained in RMI's shelf registration statement on Form S-1
(File No. 333-52731) as filed with the SEC.
(d) SECURITIES REPRESENTATIONS. Each Warranting Shareholder fully
understands the nature, scope and duration of the limitations on transfer
contained herein and under applicable laws, including but not limited to SEC
Rule 145.
(e) AFFILIATES. The Warranting Shareholders are the only persons who
are affiliates of Internet Now within the meaning of Rule 145 promulgated under
the Securities Act.
(f) SHAREHOLDERS NOT SUBJECT TO BACKUP WITHHOLDING. Each Shareholder
hereby individually certifies under penalty of perjury, that each such
Shareholder individually is not subject to the backup withholding provisions of
Section 3406 of the Code.
(g) RESTRICTIVE LEGEND. The Warranting Shareholders acknowledge and
understand that a legend will be placed on all stock certificates representing
the RMI Shares received by Warranting Shareholders as the Purchase Price
substantially to the following effect:
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THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION PURSUANT TO RULE 145 UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND THEY MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR
PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF.
(h) LEGAL, ACCOUNTING AND OTHER FEES AND EXPENSES. Each Shareholder
acknowledges and agrees that all legal, accounting and other fees, costs and
expenses associated with this transaction incurred by such Shareholder and
Internet Now shall be the sole obligation of and shall be paid by such
Shareholder, and shall not be the obligation of Internet Now or RMI.
(i) DISCLOSURE. The representations and warranties contained in this
Section 3 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
Section 3 not misleading.
4. REPRESENTATIONS AND WARRANTIES CONCERNING INTERNET NOW. To induce RMI
to enter into this Agreement and consummate this transaction, each of the
Warranting Shareholders, jointly and severally, represents and warrants to RMI
that the statements contained in this Section 4 are true, correct and complete
as of the date of this Agreement and will be true, correct and complete as of
Closing (as though made then and as though the Closing Date were substituted for
the date of this Agreement), except as set forth in the Disclosure Schedule
delivered by Shareholders to RMI on the date hereof and updated as of the
Closing Date and initialed by each of the Warranting Shareholders (the
"DISCLOSURE SCHEDULE"). Nothing in the Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty made herein,
however, unless the Disclosure Schedule identifies the exception with
particularity and describes the relevant facts in detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other item itself). The
Disclosure Schedule will be arranged in Sections corresponding to the lettered
and numbered paragraphs and subparagraphs contained in this Agreement.
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Internet Now is a
corporation duly organized, validly existing, and in good standing under the
laws of Nevada. Internet Now is duly authorized to conduct business and is in
good standing under the laws of the States of Arizona and Nevada. Internet Now
has no offices or personnel outside the State of Arizona. To the Warranting
Shareholders' Knowledge, Internet Now 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.
Notwithstanding the forgoing, the Parties acknowledge that
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Internet Now is not qualified to do business in any state other than Arizona and
Nevada. Section 4(a) of the Disclosure Schedule lists the directors and
officers of Internet Now. Shareholders have delivered to RMI true, correct and
complete copies of Internet Now's Articles of Incorporation (Certified by the
Secretaries of State of the States of Nevada, dated within 45 days of the
Closing), Certificate of Good Standing from the Secretary of States of the
States of Arizona and Nevada, 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 Internet Now. Internet Now is not in default under or in
violation of any provision of its Articles of Incorporation or bylaws.
(b) CAPITALIZATION. The entire authorized capital stock of Internet Now
consists of 25,000 common stock shares, of which 3,099 shares are issued and
outstanding. All of the issued and outstanding Internet Now Shares have been
duly authorized, are validly issued, fully paid, and nonassessable, and are held
of record by Shareholders as set forth in Section 4(b) of the Disclosure
Schedule. There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require Internet Now or any Shareholder to
issue, purchase, acquire, sell, transfer, otherwise dispose of or cause to
become outstanding any capital stock of Internet Now, other than pursuant to
this Agreement or that certain Employment Agreement by and between Internet Now
and George D. Wood, Ph.D. dated April 3,1998 (which shall be terminated by
Internet Now at or prior to Closing, in a form approved by RMI). There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Internet Now. There are no
voting trusts, proxies, or other agreements or understandings with respect to
the capital stock of Internet Now. The Internet Now Shares represent all of the
issued and outstanding capital stock of Internet Now.
(c) NONCONTRAVENTION. Except as set forth on Section 4(c) of the
Disclosure Schedule, to the Warranting Shareholders' Knowledge, 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 Internet
Now is subject or any provision of the Articles of Incorporation or bylaws of
Internet Now 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
Internet Now 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) which would have a material adverse effect on Internet Now.
(d) AUTHORIZATION OF TRANSACTION. Internet Now 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 Internet Now, enforceable in accordance
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with its terms and conditions. To the Warranting Shareholders' Knowledge,
Internet Now need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any Person or governmental agency in
order to consummate the transactions contemplated by this Agreement.
(e) TITLE TO ASSETS. Section 4(e) of the Disclosure Schedule sets forth
a true, correct and complete list of the properties and assets owned or leased
by Internet Now indicating such as either owned or leased. Except as set forth
on Section 4(e) of the Disclosure Schedule, Internet Now has good and marketable
title to, or a valid leasehold interest in, the properties and assets used by
it, located on its premises, or shown on Internet Now's October 31, 1997 balance
sheet or acquired after the date thereof, free and clear of all liens,
encumbrances or security interests, except for properties and assets disposed of
in the Ordinary Course of Business for adequate consideration since the October
31, 1997 balance sheet.
(f) SUBSIDIARIES, PREDECESSORS AND OTHER OWNERSHIP INTERESTS. There are
not now nor have there ever been any subsidiaries of Internet Now. There are no
predecessors to Internet Now. Internet Now is not a party to any joint
ventures, partnerships of other types of associations. Internet Now has no
ownership interest in any other entities.
(g) FINANCIAL STATEMENTS. Section 4(g) of the Disclosure Schedule sets
forth, as of Closing, copies of the following financial statements of Internet
Now (collectively the "FINANCIAL STATEMENTS"): (i) audited balance sheets and
statements of income, changes in stockholders' equity, and cash flow as of and
for the fiscal year ended October 31, 1997 ("Audited Financial Statements");
(ii) unaudited balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal year ended October 31, 1996;
(iii) unaudited balance sheets and statements of income, changes in
stockholders' equity and cash flow as of and for each full month since the
Audited Financial Statements and through each full month ended prior to Closing
Date; (iv) accounts payables, accounts receivables, cash balances and loan and
line of credit balances current to within two (2) business days of the Closing
Date; and (v) all advances from and to and notes, receivables and payables owing
between Internet Now and Shareholders or any of their Affiliates. To the
Warranting Shareholders' Knowledge, the Financial Statements (including the
notes thereto), present fairly the financial condition of Internet Now as of
such dates and the results of operations of Internet Now for such periods, are
true, correct and complete, and are consistent with the books and records of
Internet Now (which books and records are true, correct and complete). The
Parties acknowledge that RMI's certified public accountants prepared the Audited
Financial Statements based upon information provided by Shareholders and
Internet Now. The Warranting Shareholders have had sufficient opportunity to
review the Audited Financial Statements to make the representations and
warranties set forth in this Section 4(g). All information provided by
Shareholders and Internet Now to RMI and RMI's certified public accountants in
conjunction with the preparation of Audited Financial Statements
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was at the time provided and is as of the Closing Date, without the necessity of
updating, to the Warranting Shareholders' Knowledge, true, correct and complete.
(h) EVENTS SUBSEQUENT TO OCTOBER 31, 1997. Except as set forth on
Section 4(h) of the Disclosure Schedule, to the Warranting Shareholders'
Knowledge, since October 31, 1997, there has not been any material adverse
change in the business, financial condition, operations, results of operations,
or future prospects of Internet Now. Without limiting the generality of the
foregoing, to the Warranting Shareholders' Knowledge, since that date:
(i) Internet Now 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;
(ii) Internet Now has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases,
and licenses) involving more than $5,000 or outside the Ordinary Course
of Business;
(iii) Internet Now has not accelerated, terminated, modified, or
cancelled any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) to which Internet
Now is a party or by which it is bound involving more than $5,000 or
outside the Ordinary Course of Business;
(iv) Internet Now has not imposed any security interest upon any
of its assets, tangible or intangible;
(v) Internet Now has not made any capital expenditure (or series
of related capital expenditures) either involving more than $5,000 or
outside the Ordinary Course of Business;
(vi) Internet Now 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) other than loans to the Warranting Shareholders in a total
amount of less than one hundred twenty thousand dollars ($120,000);
(vii) Internet Now 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 $5,000 or outside the Ordinary Course of Business;
(viii) Internet Now has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of
Business;
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(ix) Internet Now has not cancelled, compromised, waived, or
released any right or claim (or series of related rights and claims)
involving more than $5,000 or outside the Ordinary Course of Business;
(x) Internet Now has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(xi) there has been no change made or authorized in the Articles
of Incorporation or bylaws of Internet Now;
(xii) Internet Now 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 other than pursuant to that certain
Employment Agreement by and between Internet Now and George D. Wood,
Ph.D. dated April 3, 1998 (which shall be terminated by Internet Now at
or prior to Closing, in a manner approved by RMI);
(xiii) Internet Now 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;
(xiv) Internet Now has not experienced any damage, destruction,
or loss (whether or not covered by insurance) to its property involving
more than $5,000 dollars;
(xv) Internet Now 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 other than loans to the
Warranting Shareholders in a total amount of less than one hundred
twenty thousand dollars ($120,000);
(xvi) Internet Now 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 other than that certain
Employment Agreement by and between Internet Now and George D. Wood,
Ph.D. dated April 3, 1998 (which shall be terminated by Internet Now at
or prior to Closing, in a manner approved by RMI);
(xvii) Internet Now has not granted any increase in the base
compensation of any of its directors, officers, and employees outside
the Ordinary Course of Business other than increases to the Warranting
Shareholders as set forth in the Disclosure Schedule;
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(xviii) Internet Now 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
other Employee Benefit Plan);
(xix) Internet Now has not made any other change in employment
terms for any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xx) Internet Now has not made or pledged to make any charitable
or other capital contribution;
(xxi) there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving Internet Now; and
(xxii) Internet Now has not made any commitments or agreements
of any kind or nature with respect to any of the foregoing.
(i) UNDISCLOSED LIABILITIES. Except as set forth on Section 4(i) of the
Disclosure Schedule, as of the Closing Date, Internet Now has no Liability (and
to the Warranting Shareholders' Knowledge, there is no Basis) for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against Internet Now giving or that could give rise to any
Liability, except for (i) Liabilities set forth on the face of the Audited
Financial Statements (rather than in any notes thereto) and (ii) Liabilities
which have arisen after the Audited Financial Statements 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).
(j) LEGAL COMPLIANCE. To the Warranting Shareholders' Knowledge,
Internet Now and its 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 thereof), and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed or
commenced or is pending or to the Knowledge of the Warranting Shareholders
threatened against Internet Now alleging any failure so to comply other than
where the failure to comply would not have a material adverse effect.
Notwithstanding the forgoing, the Parties acknowledge that Internet Now has not
qualified or registered to do business in any state other than the States of
Arizona and Nevada.
(k) TAX MATTERS. Except as set forth on Section 4(k) of the Disclosure
Schedule:
(i) Internet Now has timely filed all federal and State of
Arizona Tax Returns that it was required to file. All such Tax Returns
were true, correct and complete in all
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respects. All Taxes owed by Internet Now (whether or not shown on any
Tax Return) have been paid. Internet Now currently is not the
beneficiary of any extension of time within which to file any Tax
Return. Internet Now has not filed Tax Returns in any state other than
Arizona, but to the Warranting Shareholders' Knowledge, no claim has
ever been made by an authority in a jurisdiction where Internet Now does
not file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no security interests on any of the assets of
Internet Now that arose in connection with any failure (or alleged
failure) to pay any Tax.
(ii) Internet Now has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to
any employee, independent contractor, creditor, stockholder, or other
third party.
(iii) Neither Warranting Shareholder expects any authority to
assess any additional Taxes for any period for which Tax Returns have
been filed. There is no dispute or claim concerning any Tax Liability of
Internet Now either (A) claimed or raised by any authority in writing or
(B) as to which the Warranting Shareholders has Knowledge based upon
contact with any agent of such authority.
(iv) Section 4(k) of the Disclosure Schedule lists all federal,
state, and local Tax Returns filed with respect to Internet Now for
taxable periods ended on or after December 31, 1995, indicates those Tax
Returns that have been audited, and indicates those Tax Returns that
currently are the subject of audit. Shareholders have delivered to RMI
correct and complete copies of all federal and state income Tax Returns,
examination reports, and statements of deficiencies assessed against or
agreed to by Internet Now since December 31, 1995.
(v) Internet Now has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a
Tax assessment or deficiency.
(vi) Internet Now has not made any payments, is not obligated to
make any payments, or is not a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be
deductible under Code Section 280G. Internet Now has disclosed on its
federal income Tax Returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax within the
meaning of Code Section 6662. Internet Now is not a party to any Tax
allocation or sharing agreement. Internet Now (A) has not been a member
of an Affiliated Group filing a consolidated federal income Tax Return
or (B) has no Liability for the Taxes of any Person under Reg. Section
1.1502-6 (or any similar provision of state or local law), as a
transferee or successor, by contract, or otherwise.
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(l) REAL PROPERTY.
(i) Internet Now does not own and has never owned any real
property.
(ii) Section 4(l) of the Disclosure Schedule lists and describes
briefly all real property leased or subleased to Internet Now. Attached
to Section 4(l) of the Disclosure Schedule, as of the Closing Date, is
an estoppel certificate, in a form satisfactory to RMI, executed by each
landlord or sublandlord. Warranting Shareholders have delivered to RMI
true, correct and complete copies of the leases and subleases listed in
Section 4(l) of the Disclosure Schedule (as amended through the Closing
Date). Except as set forth on Section 4(l) of the Disclosure Schedule
and to the Warranting Shareholders' Knowledge, with respect to each
lease and sublease listed in Section 4(l) of the Disclosure Schedule:
(A) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(B) the lease or sublease will continue to be legal,
valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions
contemplated hereby;
(C) no party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse of
time, would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(D) no party to the lease or sublease has repudiated any
provision thereof;
(E) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
(F) Internet Now has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold;
(G) all facilities leased or subleased thereunder have
received all approvals of governmental authorities (including
licenses and permits) required in connection with the operation
thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations;
(H) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the
operation of said facilities; and
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(I) the owner of the facility leased or subleased has
good and marketable title to the parcel of real property, free
and clear of any security interest, easement, covenant, or other
restriction, except for installments of special easements not yet
delinquent and recorded easements, covenants, and other
restrictions which do not impair the current use, occupancy, or
value, or the marketability of title, of the property subject
thereto.
(m) INTELLECTUAL PROPERTY. To the Knowledge of Warranting Shareholders:
(i) Internet Now owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property
necessary for the operation of the business of Internet Now as presently
conducted. Each item of Intellectual Property owned or used by Internet
Now immediately prior to the Closing hereunder will be owned or
available for use by RMI on identical terms and conditions immediately
subsequent to the Closing hereunder. Internet Now has taken all
reasonable and necessary actions to maintain and protect each item of
Intellectual Property that it owns or uses.
(ii) Internet Now has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and Internet Now has not received any
charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including
any claim that Internet Now must license or refrain from using any
Intellectual Property rights of any third party).No third party has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of Internet Now.
(iii) Internet Now has no patents or registrations with respect
to any of its Intellectual Property. Internet Now has not granted any
licenses, agreements, or other permission to any third party with
respect to any of its Intellectual Property.
(iv) Internet Now has registered the service mark "doitnow" with
the Country of Tunisia, and the domain names "doitnow.com",
"doitnow.net", "ramworld.com" and "webmovers.com" with Internic Domain
Registration Service. Internet Now has no other trade names or
unregistered trademarks used in connection with its business. With
respect to each name above:
(A) Internet Now possess all right, title, and interest
in and to the item, free and clear of any Security Interest,
license, or other restriction;
(B) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
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(C) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or is threatened
which challenges the legality, validity, enforceability, use, or
ownership of the item; and
(D) Internet Now has not agreed to indemnify any Person
for or against any interference, infringement, misappropriation,
or other conflict with respect to the item.
(v) Section 4(m) of the Disclosure Schedule identifies each item
of Intellectual Property that any third party owns and that Internet Now
uses pursuant to license, sublicense, agreement, permission or
otherwise. Shareholders have delivered to RMI true, correct and
complete copies of all such licenses, sublicenses, agreements, and
permissions (as amended to date). With respect to each item of
Intellectual Property required to be identified in Section 4(m) of the
Disclosure Schedules:
(A) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and in full
force and effect and no party thereto has repudiated any provision
thereof;
(B) the license, sublicense, agreement, or permission
will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby;
(C) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(D) Internet Now has not granted any sublicense or
similar right with respect to such license, sublicense, agreement, or
permission.
(vi) Internet Now has not granted any licenses, agreements, or
permission to any third party with respect to any of its Intellectual
Property.
(n) TANGIBLE ASSETS. Section 4(n) of the Disclosure Schedule list all
of the tangible assets of Internet Now, indicating those assets leased by
Internet Now. Except as set forth on Section 4(n) of the Disclosure Schedule,
Internet Now owns or leases all buildings, machinery, equipment, and other
tangible assets necessary for the conduct of its businesses as presently
conducted. Except as set forth on Section 4(n) of the Disclosure Schedule, to
the Knowledge of the Warranting Shareholders, each such tangible asset is free
from defects, has been maintained in
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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.
(o) INVENTORY. Internet Now has no inventory.
(p) CONTRACTS. Section 4(p) of the Disclosure Schedule lists the
following contracts and other agreements to which Internet Now is a party as of
the Closing Date:
(i) any agreement (or group of related agreements) for the lease
of personal property to or from any Person;
(ii) 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 involves consideration in excess of $1,000.00,
other than to customers of Internet Now in the Ordinary Course of
Business;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any agreement with Shareholders or Affiliates (other than
Internet Now);
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors,
officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, independent contractor or other basis
providing annual compensation in excess of $40,000 or providing
severance benefits;
(x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees or any
affiliates thereof outside the Ordinary Course of Business;
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(xi) any agreement under which a Shareholder provided a personal
guarantee;
(xii) any agreement under which the consequences of a default or
termination could have a material adverse effect on the business,
financial condition, operations, results of operations, or future
prospects of Internet Now; or
(xiii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $5,000.
Shareholders have delivered to RMI a true, correct and complete copy of each
written agreement listed in Section 4(p) of the Disclosure Schedule (as amended
to date) and a written summary setting forth the terms and conditions of each
oral agreement referred to in Section 4(p) of the Disclosure Schedule. To the
Warranting Shareholders' Knowledge, with respect to each such agreement: (A) the
agreement is legal, valid, binding, enforceable, and in full force and effect;
(B) the agreement will continue to be legal, valid, binding, enforceable, and in
full force and effect in identical terms following the consummation of the
transaction contemplated hereby; (C) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default, or permit termination, modification, or acceleration, under the
agreement; and (D) no party has repudiated any provision of the agreement.
(q) NOTES AND ACCOUNTS RECEIVABLE. As of the Closing Date Section 4(q)
of the Disclosure Schedule will set forth a true, correct and complete list of
all notes and accounts receivables. Except as set forth Section 4(q) of the
Disclosure Schedule, all notes and accounts receivable of Internet Now are
reflected properly on the books and records, are valid receivables subject to no
setoffs or counterclaims, are current and collectible, and will be collected in
accordance with their terms at their recorded amounts.
(r) POWERS OF ATTORNEY. Except as set forth on Section 4(r) of the
Disclosure Schedule, there are no outstanding powers of attorney executed on
behalf of Internet Now.
(s) INSURANCE. Section 4(s) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which Internet Now has been a party, a named
insured, or otherwise the beneficiary of coverage at any time within the past
two (2) years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and
the name of each covered insured;
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(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage
was on a claims made, occurrence, or other basis) and amount (including
a description of how deductibles and ceilings are calculated and
operate) of coverage;
(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements; and
(vi) claims reports and loss runs.
To the Warranting Shareholders Knowledge, with respect to each such insurance
policy, prior to and as of the Closing Date, each policy is legal, valid,
binding, enforceable, and in full force and effect. Internet Now 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.
Internet Now has no self-insurance arrangements.
(t) LITIGATION. Section 4(t) of the Disclosure Schedule sets forth each
instance in which, to the Warranting Shareholders' Knowledge, Internet Now (i)
is subject to any outstanding injunction, judgment, order, decree, ruling, or
charge or (ii) is a party or, to the Knowledge of Warranting Shareholders, 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.
Except as set forth of Section 4(t) of the Disclosure Schedule, none of the
actions, suits, proceedings, hearings, and investigations set forth in Section
4(t) of the Disclosure Schedule could result in a material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of Internet Now. None of the Warranting Shareholders has any reason to
believe that any such action, suit, proceeding, hearing, or investigation may be
brought or threatened against Internet Now.
(u) PRODUCT WARRANTY. Internet Now does not provide any warranties or
guaranties for any product manufactured, sold, leased, or delivered by Internet
Now.
(v) PRODUCT LIABILITY. To the Knowledge of Warranting Shareholders,
Internet Now has no Liability (and there is no Basis for any present or, future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against Internet Now giving rise to any Liability) arising out of any
injury to individuals or property as a result of the ownership, possession, or
use of any product manufactured, sold, leased, or delivered by Internet Now.
(w) EMPLOYEES. All employees providing services to Internet Now (other
than the Warranting Shareholders) are leased to Internet Now by AmeriCare
Employers Group, Inc. Section 4(w) of the Disclosure Schedules lists all such
employees and contractors along with their
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respective job titles, current salary and other benefits offered by Internet
Now. To the Knowledge of the Warranting Shareholders, no key employee or
contractors or group of employees or contractors has any plans to terminate
employment with Internet Now. To the Knowledge of the Warranting Shareholders,
Internet Now has not committed any unfair labor practice. Section 4(w) of the
Disclosure Schedule has attached to it true, correct and complete copies of all
contracts, agreements and a written summary setting forth the terms and
conditions of each oral agreement with respect to such employee or contractor,
including but not limited to that contract by and between Internet Now and
AmeriCare Employers Group, Inc., as amended as of the Closing Date.
(x) EMPLOYEE BENEFITS. Internet Now does not maintain or contribute and
has never maintained or contributed, or to the Knowledge of the Warranting
Shareholders, ever been required to maintain or contribute to any Employee
Benefit Plan, Employee Pension Benefit Plan, Multiemployer Plan or Employee
Welfare Benefit Plan providing medical, health, or life insurance or other
welfare-type benefits for current or future retired or terminated employees,
their spouses, or their dependents (other than in accordance with Code Section
4980B).
(y) GUARANTIES. Internet Now is not a guarantor or otherwise liable
for any Liability or obligation (including indebtedness) of any other Person.
(z) ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS. Except as set forth
on Section 4(z) of the Disclosure Schedule and to the Warranting Shareholders'
Knowledge, Internet Now and Affiliates have complied and are in compliance with
all Environmental, Health, and Safety Requirements.
(aa) CERTAIN BUSINESS RELATIONSHIPS WITH INTERNET NOW. Except as set
forth on Section 4(aa) of the Disclosure Schedule, Shareholders and any
Affiliates have not been involved in any business arrangement or relationship
with Internet Now, other than as employees, within the past twelve (12) months,
and Shareholders and any Affiliates do not own any asset, tangible or
intangible, which is used in the business of Internet Now.
(bb) AVERAGE MONTHLY REVENUES. On the date of Closing, Internet Now has
or will have at least 5,700 "Internet Service Customers" (defined below).
Internet Now's average monthly gross revenues from its Internet Service
Customers for internet access under their subscription agreement (described
below) for the months of August, September and October, 1998 (determined in
accordance with GAAP) is $110,000. For purposes of this Section 4(bb),
"Internet Service Customers" shall mean all customers of Internet Now: (i) whose
subscription for internet access is in effect, (ii) whose payment for such
access is not more than twenty-nine days past due, and (iii) with respect to
whom Internet Now has not received notice of termination of such subscription
for internet access.
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(cc) Specific Liabilities. On the date of Closing, Internet Now has or
will have specific liabilities in the following categories of not more than:
(A) $65,000 of future obligations from the date of Closing
through May 31, 2000 under that certain Sublease dated
May 30, 1996 between Goodnet Incorporated, as sublessor,
and Internet Now, as sublessee, for the property located
at 404 South Mill Avenue, Suite 201, Tempe, Arizona;
(B) $165,000 of future obligations from the date of Closing
in capital equipment leases; and
(C) $250,000 of Deferred Revenue Liabilities. For purposes
of this subsection, "Deferred Revenue Liabilities" shall
mean amounts prepaid to Internet Now by it's Customers
for Internet services, such service which have not yet
been delivered to said Customers at the time of Closing.
These Amounts shall be calculated as follows: The amount
paid by the Customer for prepaid service shall be divided
by the number of full Customer Months of service
remaining for such Customer at the Closing. For purposes
of this subsection, a "Customer Month" shall be
determined based on a particular Customer's next
scheduled rebilling date. A "Customer" is as defined in
Section 4 (bb). Thus, if a Customer is scheduled to be
re-billed on the 3rd of a given month, the Customer
Month, for this example Customer, shall be from the 3rd
of a given month to the 2nd of the following month. For
example, if on November 3, 1999 a Customer is scheduled
to be re-billed $204 for one year's service and the
merger Closing Date is November 20, 1998, the prepaid
revenue liability for this example Customer shall be $187
(11/12 of $204 = $17, $17 x 11 full Customer Months
remaining = $187).
(dd) BROKERS' FEES. Internet Now 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. The Parties acknowledge and agree
that any brokerage or other fees due to Rampart Associates, Inc. as a result of
this transaction shall be paid by RMI.
(ee) LEGAL, ACCOUNTING AND OTHER FEES AND EXPENSES. Warranting
Shareholders, jointly and severally, acknowledge and agree that all of Internet
Now's legal, accounting and other fees, costs and expenses associated with this
transaction shall be the sole obligation of and shall be paid by the
Shareholders, and shall not be the obligation of Internet Now. Notwithstanding
the forgoing, the Parties acknowledge and agree that RMI shall be solely
responsible for the costs of its certified public accountants to complete the
Audited Financial Statements and any audits requested by RMI for the stub period
from October 31, 1997 through the Closing Date.
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(ff) DISCLOSURE. The representations and warranties contained in this
Section 4 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
Section 4 not misleading.
5. REPRESENTATIONS AND WARRANTIES OF RMI. RMI represents and warrants
to Internet Now and Shareholders that the statements contained in this Section 5
are true, correct and complete as of the date of this Agreement and will be
true, correct and complete as of Closing (as though made then and as though the
Closing Date were substitutes for the date of this Agreement).
(a) ORGANIZATION. RMI is a corporation duly organized, validly existing,
and in good standing under the laws of the jurisdiction of its incorporation.
RMI has the requisite corporate power and authority to own, lease and operate
its properties and is duly authorized and licensed to carry on its business as
such business is currently being conducted, except where such would not have a
material adverse effect.
(b) AUTHORIZATION OF TRANSACTION. RMI has the 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. The execution,
delivery and performance of this agreement by RMI has been duly authorized by
all requisite corporate action on the part of RMI.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
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 its
charter or bylaws.
(d) RMI PROSPECTUS. At the Closing, the RMI Prospectus will not contain
any untrue statements of material fact or omit to state any material fact
necessary to make the statements contained therein not materially misleading, or
omit to state any material fact which would have a material adverse effect on
the business of RMI, its future prospects, or the value or marketability of the
RMI Stock. Notwithstanding the foregoing, however, RMI makes no representation
or warranty as to the future performance or business of RMI, its future
prospects, or the value or marketability of the RMI stock.
6. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) NOTICES AND CONSENTS. Shareholders will assist RMI and its counsel
to give any notices to third parties, and will assist RMI to obtain any third
party consents, that are required or that
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RMI deems necessary in connection with this transaction. Each of the Parties
will (and Shareholder will cause Internet Now 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.
(b) TERMINATION OF GEORGE D. WOOD'S EMPLOYMENT AGREEMENT. At or prior
to Closing, Internet Now will terminate that certain Employment Agreement by and
between Internet Now and George D. Wood, Ph.D. dated April 3, 1998 in a form
acceptable to RMI and its counsel.
(c) LOANS TO WARRANTING SHAREHOLDERS. Internet Now will in a form
satisfactory to RMI, its counsel and certified public accountants pay a bonus to
the Warranting Shareholders as an entry on the books and records of Internet Now
effective October 31, 1998 to offset the loans made by Internet Now to the
Warranting Shareholders in an amount not to exceed one hundred fifty thousand
and no/Dollars ($150,000) in such a manner that Internet Now shall only be
responsible for one half and Warranting Shareholders shall be responsible for
one half of any local, state or federal withholding, employment, income or any
other Taxes in connection with the fees paid to Warranting Shareholders. Each
Warranting Shareholder agrees to hold Internet Now and RMI and its respective
officers, directors and agents harmless with respect to any loss, liability,
cost or expenses pertaining to any of these taxes related to the compensation
payable to the Warranting Shareholders, including any and all interest and
penalties associated therewith.
(d) PRESERVATION OF BUSINESS. Warranting Shareholders will cause
Internet Now to keep its business, properties and goodwill substantially intact,
including its present operations, physical facilities, working conditions, and
relationships with lessors, licensors, suppliers, customers, and employees.
(e) FULL ACCESS. Shareholders will permit, and Shareholders will cause
Internet Now to permit, representatives of RMI to have full access (including
providing introductions, where necessary), to all premises, properties,
personnel, customers, lessors, licensors, licensees, vendors, supplies,
creditors, debtors, books, records (including Tax records), contracts, and
documents of or pertaining to Internet Now. Notwithstanding the forgoing, RMI
shall contact Hutchinson Persons prior to contacting or interviewing any
customer, employee or subcontracted staff member of Internet Now. Mr. Persons
shall have the right to be present at all interviews of said customers,
employees or subcontracted staff members. In addition, Shareholders will
provide to RMI's legal counsel copies of or description of all personnel,
customers, lessors, licensors, licensees, vendors, suppliers, creditors,
debtors, books, records (including Tax records), contracts, and documents of or
pertaining to Internet Now. Internet Now will cause its independent accountants
to make available their work papers with respect to Internet Now and to
otherwise provide such assistance as is reasonably requested by RMI. No
discovery by RMI shall
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be deemed to amend or supplement the Disclosure Schedule or to prevent or cure
any misrepresentation, breach of warranty, or breach of covenant.
7. 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 Section 9 below).
Shareholders and Internet Now 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 Internet
Now.
(b) WITHHOLDING TAXES ON LOAN TO WARRANTY SHAREHOLDERS. Warranty
Shareholders shall be individually responsible for one half of any local, state
or federal withholding, employment income or any other Taxes in connection with
the bonus paid to Warranting Shareholders pursuant to Section 6(c) above. In
addition, Warranting Shareholders shall be solely responsible for any and all
interest and penalties assessed against the Warranting Shareholders and Internet
Now in connection therewith, if any.
(c) COOPERATION IN THE ISSUANCE OF THE AUDITED FINANCIAL STATEMENTS.
The Warranting Shareholders shall cooperate with RMI and KPMG Peat Marwick in
the issuance of the Audited Financial Statements, including but not limited to
the execution of all documents reasonably requested by RMI or KPMG Peat Marwick
to finalize the Audited Financial Statements.
(d) 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 Internet Now, each of the other Parties
will cooperate with the contesting party 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 Section 9 below).
(e) TRANSITION. During the term of the covenant not to compete set forth
in Section 7(i), 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, employee, independent
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contractor or other business associate of Internet Now from maintaining the same
business relationships with Internet Now after Closing as it maintained with
Internet Now prior to the Closing. During the term of the covenant not to
compete set forth in Section 7(i) below, Shareholders will refer all customer
inquiries relating to the businesses of Internet Now to RMI. For no additional
consideration, each of the Shareholders active in the business of Internet Now
prior to Closing shall provide assistance to RMI, its employees, agents and
advisors in the transition of the management of Internet Now on a full time
basis as requested by RMI for a period not to exceed one (1) month following
Closing. In addition for a period not to exceed an additional two (2) months
thereafter, such Shareholders active in the business of Internet Now shall
provide assistance to RMI, its employees, agents and advisors on a paid
consulting basis, as mutually agreed to by RMI and each such Shareholder.
(f) RELEASE OF SHAREHOLDER PERSONAL GUARANTEES. RMI will use its best
efforts to obtain within 30 days of Closing the release of any obligations of
Internet Now which are personally guaranteed by a Shareholder and set forth on
Section 7(f) of the Disclosure Schedule, including but not limited to sending a
certified letter to each such lender, landlord, vendor or other Person at the
address set forth on Section 7(f) of the Disclosure Schedule, offering to
substitute the guaranty of RMI for the personal guarantee of such Shareholder.
If RMI is unable to obtain the release of any Shareholder's personal guarantee
within 30 days of Closing, RMI shall agree to be primary guarantor of such
obligation within 60 days of Closing. If RMI is not accepted as a primary
guarantor, RMI shall offer to be an additional guarantor. Section 7(f) of the
Disclosure Schedule sets forth the personal guarantees of the Shareholders by
name, address, principal contact person of each such obligee to which such
request shall be sent and the nature and amount of the personal guarantee along
with the name of the Shareholder granting the personal guarantee. Shareholders
shall have provided true, correct and complete copies of all such contracts
containing any personal guarantees. RMI shall not be obligated to request the
release of any personal guarantees not set forth on Section 7(f) of the
Disclosure Schedules. RMI agrees to indemnify and hold harmless such
Shareholder from and against any costs or liability accruing from and after
Closing with respect to any liability specifically set forth on Section 7(f) of
the Disclosure Schedule. RMI shall not be responsible and shall not indemnify
nor hold harmless such Shareholder from or against any liability accruing prior
to or as of the Closing Date.
(g) CONFIDENTIALITY. The Parties acknowledge and agree that RMI is
acquiring as part of this transaction all of the Confidential Information of
Internet Now and the Shareholders will deliver any and all tangible evidence of
Internet Now's Confidential Information to RMI prior to the Closing Date.
Notwithstanding the foregoing, each Shareholder may retain copies of any
agreements or other documents to which such Shareholder, in his or her
individual capacity and not in the capacity as a shareholder, officer, director
or agent of Internet Now is or was a party. Each of the Shareholders and
Internet Now will treat and hold as confidential all of the Confidential
Information, refrain from using any of the Confidential Information except in
connection with this Agreement, and deliver promptly to RMI as of Closing all
tangible
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embodiments (and all copies) of the Confidential Information which are in his,
her or its possession. In the event that any 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, such 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 7(g).
If, in the absence of a protective order or the receipt of a waiver hereunder,
such Shareholder is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for contempt, such
Shareholder may disclose the Confidential Information to the tribunal; PROVIDED,
HOWEVER, that such Shareholder shall use his or her best efforts to obtain, at
the request of RMI and at RMI's expense, 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 or such
Confidential Information and information that is currently in a Shareholders
possession on a non-confidential basis. This Section 7(g) shall survive
Closing.
(h) NON-SOLICITATION. Each Shareholder agrees that for a period of one
(1) year from and after Closing, he or she will not, in any manner, directly or
indirectly, either as owner, officer, employer, employee, independent
contractor, stockholder, agent, principal, manager, consultant, advisor, partner
or otherwise, (i) solicit any Person who is a customer of Internet Now as of the
Closing Date, (ii) induce any Person who is an employee, agent, contractor or
subcontractor of RMI, Internet Now and/or any affiliate thereof as of the
Closing Date to terminate his, her or its employment, agency, contractor or
subcontractor relationship with RMI, Internet Now or any affiliate thereof, or
(iii) hire or attempt to hire any Person who is an employee, agent, contractor
or subcontractor of RMI, Internet Now or any affiliate thereof as of the Closing
Date. In the case of any Shareholder other than the Warranting Shareholders,
the prohibition of this Section 7(h) shall only apply to the extent such
Shareholder does not personally engage or personally participate in the
prohibited conduct.
EACH SHAREHOLDER AGREES THAT THE COVENANTS MADE IN THIS SECTION ARE
REASONABLE WITH RESPECT TO THEIR DURATION AND PROSCRIPTION. Shareholder further
agrees that the covenants made in this Section 7(h) shall be construed as an
agreement independent of any other provision of this Agreement. Hence, the
covenants made in this Section 7(h) shall survive Closing. Moreover, the
existence of any claim or cause of action of Shareholders against RMI, whether
or not predicated upon the terms of this Agreement, shall not constitute a
defense to the enforcement by Internet Now or RMI of these covenants.
(i) COVENANT NOT TO COMPETE. For a period of one (1) year from and after
the Closing Date, Hutchinson Persons and Leslie Kelly will not directly or
indirectly own, manage, operate, control, be employed by, participate in or be
connected in any manner with the ownership,
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management, operation or control of any business providing Internet access or
web hosting services in the State of Arizona; PROVIDED, HOWEVER, that no owner
of less than five percent (5%) of the outstanding stock of any publicly-traded
corporation shall be deemed to engage solely by reason thereof in any of its
businesses. If the final judgment of a court of competent jurisdiction declares
that any term or provision of this Section is invalid or unenforceable, the
Parties agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration, or area of
the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
EACH WARRANTING SHAREHOLDER AGREES THAT THE COVENANTS MADE IN THIS
SECTION ARE REASONABLE WITH RESPECT TO THEIR DURATION, GEOGRAPHICAL AREA AND
PROSCRIPTION. Each Warranting Shareholder further agrees that the covenants
made in this Section 7(i) shall be construed as an agreement independent of any
other provision of this Agreement. Hence, the covenants made in this Section
7(i) shall survive Closing. Moreover, the existence of any claim or cause of
action of any Warranting Shareholder against Internet Now or RMI, whether or not
predicated upon the terms of this Agreement, shall not constitute a defense to
the enforcement by Internet Now or RMI of these covenants.
(j) INTERNET ACCESS. For a period not to exceed one (1) year from and
after the Closing Date, RMI shall provide to the Shareholders at no cost to them
basic dial-up national internet access service, if available and offered by RMI.
In addition, for a period not to exceed one (1) year from and after the Closing
Date, RMI shall provide to Hutchinson Persons at no cost to him (except that
Hutchinson shall be solely responsible for all US WEST or other such carrier
charges) DSL internet access service in the Phoenix, Arizona area, if available
and offered by RMI. Notwithstanding the forgoing, RMI may terminate such access
in the event any Shareholder is in breach of any provision of this Agreement.
(k) SECURITIES MATTERS. RMI shall furnish to Warranting Shareholders
such reasonable number of copies of the RMI Prospectus and such other
documentation as may be necessary to facilitate the sale of the RMI Shares by
the Warranting Shareholders.
(l) PERSONAL PROPERTY. The Parties acknowledge and agree that at
Closing, Internet Now shall transfer to Hutchinson Persons ownership of the
laptop computer currently used by him in its "as is" condition.
(m) PARKING SPACE. After Closing for so long as Subsidiary, RMI or any
Affiliate thereof is a tenant and during the initial term of the lease for the
office space located at 404 South Mill Avenue, Suite 201, Tempe, Arizona (Hayden
Square), Subsidiary, RMI or its Affiliate shall
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permit Hutchinson to use one (1) of the parking spaces in the Hayden Square
Garage at no cost to Hutchinson Persons, provided that, Hutchinson Persons
grants to Subsidiary, RMI or its Affiliate the use of one (1) parking space
elsewhere in the Hayden Square Garage at no cost to Subsidiary, RMI or its
Affiliate. Each of Subsidiary, RMI or its Affiliate, as the case may be, and
Hutchinson Persons shall comply with all reasonable requests of the landlord of
the premises with respect to the parking space, including but not limited to
parking in such space as designated by landlord, affixing an identification
sticker(s) to the automobile, complying with all rules and regulations
established by the landlord. Neither Subsidiary, RMI, or its Affiliate, nor
Hutchinson Persons shall not be responsible or liable for any loss (including
without limitation, loss of identification stickers or parking entrance cards,
if any) or the damage arising out of or related to the use or occupancy of the
parking privileges granted by the landlord.
8. DELIVERIES AT CLOSING.
(a) INTERNET NOW AND SHAREHOLDER DELIVERIES. At the Closing,
Shareholders and Internet Now shall provide or cause to be provided the
following documents:
(i) evidence satisfactory to RMI that this Agreement, the Merger
and the transaction contemplated hereby has received the Requisite
Stockholder Approval and Internet Now's Board of Director's approval;
(ii) Shareholder and Internet Now shall have delivered to RMI and
Subsidiary a Disclosure Schedule as of Closing;
(iii) Shareholder shall have delivered to RMI and Subsidiary a
Merger Agreement by and between the Surviving Corporation and Internet
Now in the form attached hereto as EXHIBIT A;
(iv) Certificates of the Secretary of Internet Now dated as of
the Closing Date certifying that the following are true, correct and
complete copies or the originals thereof: Articles of Incorporation of
Internet Now, as amended, and certified by the Nevada Secretary of State
since August 1, 1998, 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, transfer ledger and stock record books of Internet
Now;
(v) Certificate of Warranting Shareholders dated as of the
Closing Date certifying that the following are true, correct and
complete copies: the Financial Statements, Accounts Payable Aging
Report, Accounts Receivables Aging Report, Accrued Employee Benefits
Report, current cash balances, loan and line of credit balances, amount
of all
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advances from and to and notes, receivables and payables owing between
Internet Now and Shareholders or any of their Affiliates;
(vi) an opinion of counsel from Richard C. Onsager, P.C. in form
and substance satisfactory to counsel for RMI, addressed to RMI, and
dated as of the Closing Date;
(vii) resignations, effective as of the Closing Date, of each
director and officer of Internet Now, satisfactory to RMI and its
counsel;
(viii) evidence satisfactory to RMI and its counsel of the
termination of that certain Employment Agreement by and between Internet
Now and George D. Wood, Ph.D. dated April 3, 1998 in a form acceptable
to RMI and its counsel; and
(ix) evidence satisfactory to RMI, its counsel and certified
public accountants of the bonuses paid to the Warranting Shareholders as
an entry on the books and records of Internet Now to offset the loans
made by Internet Now to the Warranting Shareholders in such a manner
that Internet Now shall only be responsible for one half and Warranting
Shareholders shall be responsible for one half of any local, state or
federal withholding, employment, income or any other taxes in connection
with the fees paid to Warranting Shareholders. Each Warranting
Shareholder agrees to hold Internet Now and RMI and its respective
officers, directors and agents harmless with respect to any loss,
liability, cost or expenses pertaining to any of these taxes related to
the compensation payable to the Warranting Shareholders, including any
and all interest and penalties associated therewith.
(b) RMI DELIVERIES. At Closing, RMI shall provide or cause to be
provided the Merger Consideration and evidence satisfactory to Internet Now and
Shareholders that this Agreement, the Merger and the transaction contemplated
hereby has received the approval of the Board of Directors of RMI and the
Subsidiary.
9. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Parties contained in this Agreement shall
survive the Closing hereunder (even if the damaged Party knew or had reason to
know of any misrepresentation or breach of warranty or covenant at the time of
Closing) and continue in full force and effect until March 31, 2000, except that
the representations and warranties set forth in Sections 3(b), 4(b), 4(e), 4(k)
and 4(x) hereof shall survive for the applicable statute of limitations.
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF RMI. Shareholders agree
to indemnify RMI from and against the entirety of any Adverse Consequences RMI
may suffer (including any Adverse Consequences suffered after the making of any
claim for indemnification or after the end
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of any applicable survival period) resulting from, arising out of, relating to,
in the nature of, or caused by any of the following:
(i) Shareholders' or Internet Now's breach (or the allegation by
any third party of facts that, if true, would mean either has breached)
of any of the representations, warranties, and covenants contained in
this Agreement. For purposes of the representations and warranties set
forth in Section 3 of this Agreement, such indemnification shall be from
the Shareholder violating such representation or warranty, individually
and not jointly and severally with the remaining Shareholders. For
purposes of the representations and warranties set forth in Section 4 of
this Agreement, such indemnification of the Warranting Shareholders
shall be joint and several. For purposes of calculating the amount of
any Adverse Consequences, qualifications such as "material,"
"materiality" or similar qualification, shall be disregarded;
(ii) any Liability of Internet Now (x) for any Taxes of Internet
Now with respect to any Tax year or portion thereof ending on or before
the Closing Date (or for any Tax year beginning before and ending after
the Closing Date to the extent allocable (determined in a manner
consistent with Section 10(c)) to the portion of such period beginning
before and ending on the Closing Date), to the extent such Taxes are not
reflected in the reserve for Tax Liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book
and Tax income) shown on the face of the Closing Balance Sheet, and (y)
for the unpaid Taxes of any Person (other than Internet Now) under Reg.
Section 1.1502-6 (or any similar provision of state, local, or foreign
law) or as a transferee or successor, by contract, or otherwise; or
(iii) any actions, judgements, 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.
RMI's knowledge of a breach of a representation, warranty or covenant shall not
be considered as a waiver of any of the above conditions.
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF SHAREHOLDERS. In the event
RMI breaches (or in the event any third party alleges facts that, if true, would
mean RMI has breached) any of its representations, warranties, and covenants
contained herein, then RMI agrees to indemnify Shareholders from and against the
entirety of any Adverse Consequences Shareholders may suffer through and after
the date of the claim for indemnification (including any Adverse Consequences
Shareholders may suffer after the end of any applicable survival period)
resulting from, arising out of, relating to, in the nature of, or caused by the
breach (or the alleged breach).
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(d) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party shall notify any Party (the "INDEMNIFIED
PARTY") with respect to any matter (a "THIRD PARTY CLAIM") which may
give rise to a claim for indemnification against any other Party (the
"INDEMNIFYING PARTY") under this Section 9, then the Indemnified Party
shall promptly notify each Indemnifying Party thereof in writing;
PROVIDED, HOWEVER, that no delay on the part of the Indemnified Party in
notifying any Indemnifying Party shall relieve the Indemnifying Party
from any obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its
choice reasonably satisfactory to the Indemnified Party so long as (A)
the Indemnifying Party notifies the Indemnified Party in writing within
fifteen (15) days after the Indemnified Party has given notice of the
Third Party Claim that the Indemnifying Party will indemnify the
Indemnified Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party
Claim, (B) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against
the Third Party Claim and fulfill its indemnification obligations
hereunder, (C) the Third Party Claim involves only money damages and
does not seek an injunction or other equitable relief, (D) settlement
of, or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice adverse to the continuing
business interests of the Indemnified Party, and (E) the Indemnifying
Party conducts the defense of the Third Party Claim actively and
diligently. 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 withheld
unreasonably).
(iii) So long as the Indemnifying Party is conducting the defense
of the Third Party Claim in accordance with Section 9(d)(ii) above, (A)
the Indemnified Party may retain separate co-counsel at its sole cost
and expense and participate in the defense of the Third Party Claim and
(B) the Indemnified Party will not consent to the entry of any judgment
or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying Party (not to be
unreasonably withheld, conditioned or delayed).
(iv) In the event any of the conditions in Section 9(d)(ii) above
is or becomes unsatisfied, however, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim
29
<PAGE>
in any manner it reasonably may deem appropriate (and the Indemnified
Party shall consult with and obtain consent from, any Indemnifying Party
in connection therewith not to be unreasonably withheld, conditioned or
delayed), (B) 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 (C) 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 Section 9.
(e) REMEDIES. The foregoing indemnification provisions are in addition
to, and not in derogation of, any statutory, equitable, or common law remedy
(including without limitation any such remedy arising under Environmental,
Health, and Safety Requirements) any Party may have with respect to Internet
Now, or the transactions contemplated by this Agreement.
(f) OTHER INDEMNIFICATION PROVISIONS. Each of the Shareholders hereby
agrees that they will not make any claim for indemnification against Internet
Now by reason of the fact that he 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 Shareholders (whether such action, suit, proceeding, complaint, claim, or
demand is pursuant to this Agreement, applicable law, or otherwise).
10. TAX MATTERS. The following provisions shall govern the allocation of
responsibility as between RMI and Shareholders for certain tax matters following
the Closing Date:
(a) TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE. Warranting
Shareholders shall be responsible for filing all Tax Returns except the Federal
and State Income Tax Returns for the Fiscal Year ended October 31, 1998 and any
Tax Return set forth on Section 10(a) of the Disclosure Schedule. Shareholders
shall cooperate with RMI in the preparation and filing of the Federal and State
Income Tax Returns for the Fiscal Year ended October 31, 1998 and those Tax
Returns set forth on Section 10(a) of the Disclosure Schedule for Internet Now.
RMI shall obtain the consent of the Warranting Shareholders (which consent shall
not be unreasonably withheld or delayed) prior to filing of the Federal and
State Income Tax Returns for the Fiscal Year ended October 31, 1998 and any Tax
Return set forth on Section 10(a) of the Disclosure Schedule. Shareholders
shall permit RMI to review and comment on any Tax Return filed by Internet Now
after October 31, 1998.
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(b) COOPERATION ON TAX MATTERS.
(i) RMI, Internet Now and Shareholders shall each cooperate
fully, as and to the extent reasonably requested by the other parties,
in connection with the filing of Tax Returns pursuant to this Section
and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include retention and, upon the other party's
request, provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder.
Internet Now and Shareholders shall provide to RMI, who agrees to
retain, all books and records with respect to Tax matters pertinent to
Internet Now relating to any taxable period beginning before the Closing
Date until the expiration of the statute of limitations and, to the
extent notified by Shareholders, any extensions thereof of the
respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority.
(ii) RMI and Shareholders further agree, upon request, to use
their best efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including,
but not limited to, with respect to the transactions contemplated
hereby).
(iii) RMI and Shareholders further agree, upon request, to
provide the other party with all information that either party may be
required to report pursuant to Section 6043 of the Code and all Treasury
Department Regulations promulgated thereunder.
(c) CERTAIN TAXES. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with the execution and consummation of the
transaction contemplated by this Agreement shall be paid by Shareholders when
due, and Shareholders will, at their own expense, file all necessary Tax Returns
and other documentation with respect to all such transfer, documentary, sales,
use, stamp, registration and other Taxes and fees, and, if required by
applicable law, RMI will, and will cause its affiliates to, join in the
execution of any such Tax Returns and other documentation.
11. TERMINATION.
(a) TERMINATION OF AGREEMENT. Either Party may terminate this Agreement
in its sole and absolute discretion by giving written notice to the other party
at any time on or before the Closing Date.
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(b) EFFECT OF TERMINATION. If a Party terminates this Agreement pursuant
to Section 11(a) above, all rights and obligations of the Parties hereunder
shall terminate without any liability of any Party to any other Party (except
for any liability of any Party then in breach); provided however, the Earnest
Money Deposit shall be distributed in accordance with that certain Agreement by
and between Internet Now and RMI dated October 21, 1998.
12. DEFINED TERMS.
"ADVERSE CONSEQUENCES" means 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.
"AFFILIATE" has the meaning set forth in Rules 12b-2 and 16b-1 of the
regulations promulgated under the Securities Exchange Act.
"AFFILIATED GROUP" means any affiliated group within the meaning of Code
Section 1504(a) or any similar group defined under a similar provision of
federal, state or local law.
"BASIS" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"CLOSING" has the meaning set forth in Section 2(d).
"CLOSING DATE" has the meaning set forth in Section 2(d).
"CODE" means the Internal Revenue Code of 1986 and any regulation
thereunder, as amended from time to time.
"CONFIDENTIAL INFORMATION" means any information concerning the
businesses and affairs of Internet Now that is not already or becomes generally
known, used or available to the public other than through a breach of this
Agreement or other breach.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 4.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit
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<PAGE>
Plan (including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(1).
"ENVIRONMENTAL, HEALTH, AND SAFETY REQUIREMENTS" shall mean all federal,
state, local and foreign statutes, regulations, ordinances and other provisions
having the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning public
health and safety, worker health and safety, and pollution or protection of the
environment, including without limitation all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances
or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation, each as amended and as now or
hereafter in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"FIDUCIARY" has the meaning set forth in ERISA Section 3(21).
"FINANCIAL STATEMENT" has the meaning set forth in Section 4(g).
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"INDEMNIFIED PARTY" has the meaning set forth in Section 9(d).
"INDEMNIFYING PARTY" has the meaning set forth in Section 9(d).
"INTERNET NOW" has the meaning set forth in the preface above.
"INTERNET NOW SHARE" means any share of the Common Stock, no par value
per share, of Internet Now.
"INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations,
33
<PAGE>
and combinations thereof and including all goodwill associated therewith, and
all applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"KNOWLEDGE" means actual knowledge after due inquiry and investigation
or which should have reasonably been known.
"LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Section 3(37).
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PARTY" has the meaning set forth in the preface above.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"REQUISITE SHAREHOLDERS APPROVAL" means the affirmative vote of the
holders of all Internet Now Shares in favor of this Agreement and this
transaction required by federal or state law, corporate charters or bylaws, or
other agreement.
"RMI" has the meaning set forth in the preface above.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SHAREHOLDERS" has the meaning set forth in the preface.
34
<PAGE>
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"THIRD PARTY CLAIM" has the meaning set forth in Section 9(d).
"WARRANTING SHAREHOLDERS" shall mean Hutchinson Persons and Leslie
Kelly.
13. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. Internet Now and
Shareholders shall not issue any press release or make any public announcement
relating to the subject matter of this Agreement without the prior written
approval of RMI in its sole and absolute discretion before and after Closing.
Upon execution of this definitive agreement, RMI shall disclose or issue a
statement or communication to the public regarding the proposed transaction.
(b) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his
or its rights, interests, or obligations hereunder without the prior written
approval of RMI and Internet Now.
(e) 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.
35
<PAGE>
(f) 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.
(g) 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 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
WITH A COPY TO: Minor & Brown, P.C.
Lisa A. D'Ambrosia
650 South Cherry Street, Suite 1100
Denver, Colorado 80246
Facsimile: (303) 320-6336
IF TO ANY WARRANTING
SHAREHOLDER: Hutchinson Persons
2051 South Dobson #17-214
Mesa, Arizona 85202
WITH A COPY TO: Richard C. Onsager, P.C.
Richard C. Onsager
3200 North Central Avenue, Suite 1112
Phoenix, Arizona 85012
Facsimile: (602) 631-6786
IF TO ANY SHAREHOLDER, INDIVIDUALLY, THEN TO SUCH INDIVIDUAL SHAREHOLDERS,
RESPECTIVELY:
Hutchinson Persons
Leslie Kelly
2051 South Dobson #17-214
Mesa, Arizona 85202
Susan Coupal
2855 S. Extension Rd. #243
Mesa, AZ 85210
36
<PAGE>
Gary Kim
6951 S. Knolls Way
Littleton, CO 80122
Taufik Islam
15850 North Thompson Peak Parkway, #2160
Scottsdale AZ 85260
WITH A COPY TO: Richard C. Onsager, P.C.
Richard C. Onsager
3200 North Central Avenue, Suite 1112
Phoenix, Arizona 85012
Facsimile: (602) 631-6786
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.
(h) 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.
(i) 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
and Internet Now. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(j) 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.
(k) 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
37
<PAGE>
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.
(l) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Disclosure
Schedule identified in this Agreement are incorporated herein by reference and
made a part hereof.
[INTENTIONALLY LEFT BLANK]
38
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
RMI: RMI-INI:
Rocky Mountain Internet, Inc., RMI-INI, Inc., a Colorado
a Delaware corporation corporation
By:/s/Douglas H. Hanson By: /s/Douglas H. Hanson
------------------------------- ------------------------------
Douglas H. Hanson, CEO, President, Douglas H. Hanson, President
and Chairman of the Board
INTERNET NOW:
Internet Now,
a Nevada corporation
By: /s/Hutchinson Persons
-------------------------
Hutchinson Persons, President
SHAREHOLDERS:
/s/Hutchinson Persons /s/Taufik Islam
- ---------------------------------- ---------------------------
Hutchinson Persons, Shareholder Taufik Islam, Shareholder
/s/Leslie Kelly /s/Susan Coupal
- ---------------------------------- ---------------------------
Leslie Kelly, Shareholder Susan Coupal, Shareholder
/s/Gary Kim
- ----------------------------------
Gary Kim, Shareholder
39
<PAGE>
EXECUTION COPY
ASSET PURCHASE AGREEMENT
By and Between
ROCKY MOUNTAIN INTERNET, INC.,
a Delaware corporation,
and
UNICOM COMMUNICATIONS, INC.,
a Kansas corporation
November 24, 1998
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
ARTICLE I SALE AND PURCHASE OF SELLER'S ASSETS . . . . . . . . . . . . . . . 1
1.1 Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) Receivables . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) Hardware. . . . . . . . . . . . . . . . . . . . . . . . . . 2
(c) Acquired Software . . . . . . . . . . . . . . . . . . . . . 2
(d) Third Party Software. . . . . . . . . . . . . . . . . . . . 2
(e) Tangible Personal Property. . . . . . . . . . . . . . . . . 2
(f) Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(g) Customer Contracts. . . . . . . . . . . . . . . . . . . . . 2
(h) Contracts and Other Agreements Relating to the Business . . 2
(i) Books, Records, Lists and Other Data. . . . . . . . . . . . 2
(j) Licenses, Permits . . . . . . . . . . . . . . . . . . . . . 3
(k) Prepayments . . . . . . . . . . . . . . . . . . . . . . . . 3
(l) Marks and Names . . . . . . . . . . . . . . . . . . . . . . 3
(m) Copyrights. . . . . . . . . . . . . . . . . . . . . . . . . 3
(n) Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2 Licensed Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Excluded Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Retained Assets . . . . . . . . . . . . . . . . . . . . . . 3
(b) Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Assumed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Excluded Liabilities . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Title to the Purchased Assets; Documents of Conveyance . . . . . . 5
1.7 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.8 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . . 5
1.9 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . 6
2.1 Organization, Qualification, and Corporate Power . . . . . . . . . 6
2.2 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 Authorization of Transaction . . . . . . . . . . . . . . . . . . . 7
2.4 Title to Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 7
2.6 Events Subsequent to August 31, 1998 . . . . . . . . . . . . . . . 7
2.7 Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.8 Real Property and Personal Property. . . . . . . . . . . . . . . . 8
2.9 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . 8
2.10 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
2.11 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . .10
2.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
2.13 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . .11
<PAGE>
2.14 Brokers' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . .11
2.15 Receipt of Disclosure Documents. . . . . . . . . . . . . . . . . .11
2.16 Ability to Evaluate Risks and Merits . . . . . . . . . . . . . . .12
2.17 Suitability of Investment; No Plan of Distribution . . . . . . . .12
2.18 Access to Information. . . . . . . . . . . . . . . . . . . . . . .12
2.19 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . . . . . . .12
3.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . .12
3.2 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . .13
3.3 Authorization of Transaction . . . . . . . . . . . . . . . . . . .13
3.4 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
3.5 Brokers' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . .13
3.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
3.7 Registration . . . . . . . . . . . . . . . . . . . . . . . . . . .14
ARTICLE IV COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
4.1 Pre-Closing Covenants. . . . . . . . . . . . . . . . . . . . . . .14
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . .14
(b) Notices and Consents. . . . . . . . . . . . . . . . . . . .14
(c) Financial Statements. . . . . . . . . . . . . . . . . . . .14
(d) Operation of Business . . . . . . . . . . . . . . . . . . .14
(e) Preservation of Business. . . . . . . . . . . . . . . . . .14
(f) Access. . . . . . . . . . . . . . . . . . . . . . . . . . .14
(g) Notice of Developments. . . . . . . . . . . . . . . . . . .15
4.2 Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . .15
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . .15
(b) Litigation Support. . . . . . . . . . . . . . . . . . . . .15
(c) Transition. . . . . . . . . . . . . . . . . . . . . . . . .16
(d) Receivables . . . . . . . . . . . . . . . . . . . . . . . .16
(e) Confidentiality . . . . . . . . . . . . . . . . . . . . . .16
(f) Noncompetition and Nonsolicitation. . . . . . . . . . . . .17
(g) Prospectus. . . . . . . . . . . . . . . . . . . . . . . . .17
(h) Customer Contracts. . . . . . . . . . . . . . . . . . . . .17
(i) Equipment Inventory; Customer List for Retained Business. .17
<PAGE>
ARTICLE V CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING . . . .17
5.1 Conditions to Obligation of Purchaser. . . . . . . . . . . . . . .17
5.2 Conditions to Obligation of Seller . . . . . . . . . . . . . . . .19
ARTICLE VI REMEDIES FOR BREACH . . . . . . . . . . . . . . . . . . . . . . .20
6.1 Survival of Representations and Warranties . . . . . . . . . . . .20
6.2 Indemnification Provisions for Benefit of Purchaser. . . . . . . .21
6.3 Indemnification Provisions for Benefit of Seller . . . . . . . . .21
6.4 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
6.5 Basket . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
6.6 Maximum Liability. . . . . . . . . . . . . . . . . . . . . . . . .22
ARTICLE VII TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . .22
7.1 Termination of Agreement . . . . . . . . . . . . . . . . . . . . .22
7.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . .23
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . .23
8.1 Press Releases and Public Announcements. . . . . . . . . . . . . .23
8.2 No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . .23
8.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . .23
8.4 Succession and Assignment. . . . . . . . . . . . . . . . . . . . .23
8.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . .23
8.6 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
8.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
8.8 Equitable Relief; Arbitration. . . . . . . . . . . . . . . . . . .24
8.9 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . .25
8.10 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . .25
8.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . .25
8.12 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . .25
8.13 Incorporation of Exhibits and Schedules. . . . . . . . . . . . . .26
8.14 Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . .26
</TABLE>
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
Exhibit A-1 - Form of License Agreement (License - 1 Software)
Exhibit A-2 - Form of License Agreement (License - 3 Software)
Exhibit B - Form of Bill of Sale, Assignment and Assumption Agreement
Exhibit C - Form of Escrow Agreement
Exhibit D - Form of Noncompetition and Nonsolicitation Agreement
Exhibit E - Form of Seller's Closing Certificate
Exhibit F - Form of Employment Agreements
Exhibit G - Form of Seller's Counsel Opinion
Exhibit H - Form of Purchaser's Closing Certificate
Exhibit I - Form of Purchaser's Counsel Opinion
SCHEDULES
Schedule 1 - The Business and the Retained Business
Schedule 1.1(b) - Hardware
Schedule 1.1(c) - Acquired Software
Schedule 1.1(d) - Third Party Software
Schedule 1.1(e) - Tangible Personal Property
Schedule 1.1(f) - Real Property
Schedule 1.1(g) - Customer Contracts
Schedule 1.1(h) - Other Contracts
Schedule 1.1(l) - Marks and Names
Schedule 1.1(m) - Patents and Copyrights
Schedule 1.2 - Licensed Assets
Schedule 1.3(a) - Retained Assets
Schedule 2.2 - Required Notices and Consents
Schedule 2.4 - Permitted Encumbrances
Schedule 2.8 - Real and Personal Property
Schedule 2.9 - Intellectual Property
Schedule 2.10 - Contracts
Schedule 2.12 - Litigation
Schedule 2.13 - Employee Benefits
</TABLE>
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT ("Agreement") is entered into as of
November 24, 1998, by and between ROCKY MOUNTAIN INTERNET, INC., a Delaware
corporation ("Purchaser"), and UNICOM COMMUNICATIONS, INC., a Kansas
corporation (the "Seller"). Purchaser and Seller are each individually
referred to as a "Party" and collectively referred to as the "Parties."
RECITALS
A. Seller is in the business in part of conducting the Business as
defined in Schedule 1.
B. Seller owns and leases certain assets and properties, real and
personal, tangible and intangible, which are used by Seller in the conduct of
the Business.
C. Seller also is in the business of conducting the Retained
Business as defined in Schedule 1.
D. Seller owns and leases certain assets and properties, real and
personal, tangible and intangible, which are used by Seller in the conduct of
the Retained Business.
E. Subject to the terms and conditions contained in this
Agreement, Seller desires to transfer to Purchaser, and Purchaser desires to
acquire from Seller, substantially all of Seller's assets that are used in the
operation of the Business (the "Acquisition"), but not in the operation of the
Retained Business.
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
SALE AND PURCHASE OF SELLER'S ASSETS
I.1 PURCHASED ASSETS. On the terms and subject to the conditions
contained herein, at the Closing (as defined in Section 1.9 below) Seller shall
sell to Purchaser, free and clear of all liens, claims, security interests,
encumbrances or rights of others, except for the Permitted Encumbrances (as
defined in Section 1.6 below), all of Seller's right, title and interest in and
to the assets (the "Purchased Assets") used by Seller in the Business existing
as of the date on which the transactions contemplated hereby are consummated
(the "Closing Date"), and which are listed below:
<PAGE>
(a) RECEIVABLES. All accounts receivable, notes receivable
and similar receivables accruing from the Business and existing as of the
Closing Date and accruing after the Closing Date.
(b) HARDWARE. All of the hardware listed on SCHEDULE 1.1(b),
any related documentation or manuals, and Seller's rights under related
warranties.
(c) ACQUIRED SOFTWARE. All of the software listed on
SCHEDULE 1.1(c) (the "Acquired Software"), including all inventories of computer
program code for that software, any related documentation or manuals, and
Seller's rights under all related warranties.
(d) THIRD PARTY SOFTWARE. All third party software licensed
by Seller and listed on SCHEDULE 1.1(d), including any related documentation and
user materials, and Seller's rights under all related warranties (the "Third
Party Software").
(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). The tangible personal property included in the Purchased Assets is sold
"as is, where is," without express or implied warranties of condition,
merchantability, suitability for a particular purpose or otherwise.
(f) LEASES. That portion of Seller's leasehold interest in
the real property listed on SCHEDULE 1.1(f) (the "Real Property Leases") and
used in the Business (which leasehold interest shall be assigned pursuant to a
mutually acceptable Sublease and/or other documentation to be entered into by
the Parties after the Closing Date) and all of Seller's leasehold interest 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 with
respect to the Business 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, or the parts thereof, that
relate only to the Business and not to the Retained Business and that are listed
on SCHEDULE 1.1(h) (collectively with Customer Contracts, the "Acquired
Contracts").
(i) BOOKS, RECORDS, LISTS AND OTHER DATA. Copies of all
customer lists used directly in the Business and the related books, records,
files, invoices, accounts, surveys, records, supplier lists, catalogs, price
lists, marketing and advertising information, purchasing histories, profiles and
materials, 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 Seller
and used directly in the Business.
2
<PAGE>
(j) LICENSES, PERMITS. All applicable governmental licenses,
permits, approvals and authorizations that relate to the operation of the
Business (to the extent transferable).
(k) PREPAYMENTS. All security, utility or similar deposits
or prepaid expenses of Seller.
(l) MARKS AND NAMES . The trademarks, service marks, and
trade names (including registrations, licenses, and applications to register
pertaining thereto) listed on SCHEDULE 1.1(l).
(m) COPYRIGHTS. The copyrights (including registrations,
licenses, and applications to register pertaining thereto), and other
intellectual property rights, trade secrets, and other proprietary information,
processes, and formulas necessary for the operation of, the Business and listed
on SCHEDULE 1.1(m).
(n) GOODWILL. All goodwill of the Business as a going
concern associated with the Business including the trademarks, service marks,
trade names and domain names set forth in SCHEDULES 1.2(l) AND 1.2(m) and
excluding the goodwill associated with the Retained Business.
I.2 LICENSED ASSETS. On the Closing Date and pursuant to the terms
of the License Agreements in the forms of EXHIBITS A-1 AND A-2 attached hereto,
Seller shall grant to Purchaser permanent, paid-up, royalty-free, non-exclusive
licenses for the software listed on SCHEDULE 1.2 (the "Licensed Software") for
the uses and subject to the limitations described on SCHEDULE 1.2.
I.3 EXCLUDED ASSETS. The assets of Seller not expressly set forth
in SECTION 1.1 (the "Excluded Assets") shall be retained by Seller, including
without limitation the following:
(a) RETAINED ASSETS. All assets of Seller used in or
material to or necessary to the operation of the Retained Business, including
without limitation the items listed on SCHEDULE 1.3(a).
(b) CASH. Cash and cash equivalents held by Seller.
I.4 ASSUMED LIABILITIES. At the Closing, Purchaser shall assume
and shall thereafter pay, discharge and perform all of the obligations of Seller
related to the Business arising after the Closing (the "Assumed Liabilities"),
which consist of the following:
(a) All obligations related to the Real Property Leases and
Personal Property Leases arising after the Closing Date, PROVIDED THAT
liabilities resulting from the obligation to make lease payments on the Personal
Property Leases assumed hereunder shall not exceed, in the
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aggregate, $230,447 from and after the Closing Date through the date of
termination in effect for each lease on the date hereof.
(b) All obligations related to the Acquired Contracts arising
after the Closing Date.
(c) All accounts payable relating to the Business and arising
after the Closing Date.
(d) Obligations related to the Meridian Phone System;
Purchaser and Seller agree that, with respect to the Meridian phone system,
Purchaser shall assume the rental cost under the existing lease and Seller shall
agree to pay Purchaser at least $750 per month for twelve months for use of such
phone system.
For the remainder of the month in which the Closing Date occurs (the
"Closing Month"), Seller shall immediately forward to Purchaser all invoices due
with respect to the Business (but not with respect to the Retained Business),
and Purchaser shall pay all invoices relating to the Assumed Liabilities when
due. Within forty-five (45) days after the Closing Date, the Parties will
jointly prepare a reconciliation of such payments and obligations, at which
time, Seller shall reimburse Purchaser for its pro rata share of such payments
and obligations based upon the number of days elapsed from the Closing Date to
the end of the Closing Month.
I.5 EXCLUDED LIABILITIES. Other than as set forth in Section 1.4,
Purchaser shall not assume or be liable for, and Seller shall retain and remain
responsible for, all of Seller's debts, liabilities and obligations of any
nature whatsoever, whether accrued, absolute or contingent, whether known or
unknown, whether due or to become due and whether related to the Purchased
Assets or otherwise, including without limitation:
(a) Income and capital gains taxes incurred as a result of
the transactions contemplated hereby.
(b) All accounts payable of the Business arising in periods
on or before the Closing Date notwithstanding when any billing statement
therefor is received.
(c) All obligations with respect to employees of Seller who
are subsequently hired by Purchaser arising on or prior to the Closing Date,
including, without limitation, discharge of all wages and salaries of the
employees and all other costs and expenses related to their employment,
including any taxes, accrued holiday pay, accrued bonus, and contributions to
retirement benefit plans or other sums payable in respect of service prior to
such date.
I.6 TITLE TO THE PURCHASED ASSETS; DOCUMENTS OF CONVEYANCE. At the
Closing, Seller shall convey all of its right, title and interest in and to the
Purchased Assets to Purchaser, free and clear of all liabilities, obligations,
liens, encumbrances and rights of others, excepting only the liens, claims,
encumbrances or rights of others set forth on SCHEDULE 2.4 attached hereto
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(the "Permitted Encumbrances"). Title to the Purchased Assets shall be conveyed
by Seller to the Purchaser 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 Purchaser 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 Purchaser occurs as
contemplated hereunder.
I.7 PURCHASE PRICE. The purchase price for the Purchased Assets
shall be $1,700,000 (the "Purchase Price").
I.8 PAYMENT OF PURCHASE PRICE.
(a) The Purchase Price shall be paid in the form of shares
(the "Purchaser Shares") of Purchaser's common stock, par value $.001 per share
(the "Purchaser Common Stock"), which shares shall be valued at the average of
the closing trading prices of Purchaser's Common Stock on the Nasdaq SmallCap
Market for the five (5) trading days immediately prior to the Closing. The
Purchaser Shares issued shall be registered when issued under the Securities Act
of 1933, as amended (the "Securities Act").
(b) The Purchase Price shall be paid as follows:
(i) 80% of the Purchaser Shares shall be issued at
Closing;
(ii) 10% of the Purchaser Shares shall be issued on the
date which is thirty (30) days after the Closing Date (but in no event
prior to January 3, 1999); and
(iii) 10% of the Purchaser Shares shall be deposited
(the "Escrow Deposit") with a mutually acceptable escrow agent (the
"Escrow Agent") pursuant to the terms of an escrow agreement in the form
of EXHIBIT C attached hereto (the "Escrow Agreement") by and among
Purchaser, the Company and the Escrow Agent. The Escrow Deposit shall
be distributed as follows: Within five (5) business days after the date
which is twelve (12) months after the Closing Date, Purchaser shall
instruct the Escrow Agent to disburse to the Seller from the Escrow
Deposit that number of Purchaser Shares remaining after reducing such
number of shares by the aggregate amount of any and all damages awarded
to Purchaser as of such date under a final judgment of a court of law or
arbitral body for Purchaser Losses pursuant to Article VI hereto.
I.9 CLOSING. The consummation of the transactions contemplated
hereby (the "Closing") shall occur as soon as practicable after the date hereof,
but in no event later than the date which is ten (10) days after the
satisfaction or waiver of all of the conditions precedent set forth herein, as
determined by Purchaser, at the offices of Purchaser's counsel, or by facsimile
should the Parties so agree.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
To induce Purchaser to enter into this Agreement and consummate this
transaction, Seller represents and warrants to Purchaser that the statements
contained in this Article II 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 II). As used in this Agreement, the term
"Material Adverse Effect" means a material adverse effect on the operations,
properties, assets, condition (financial or other) or results of operations of
the Business.
II.1 ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Seller
is a corporation duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation. Seller 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. Seller 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. Seller has provided to Purchaser (i) true and correct
copies of the Seller's Articles of Incorporation and all amendments thereto;
(ii) true and correct copies of the Seller's bylaws and all amendments thereto;
and (ii) a list of the current directors and officers of Seller. Seller is not
in default under or in violation of any provision of its Articles of
Incorporation or bylaws.
II.2 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 Seller is subject or any provision of the
Articles of Incorporation or bylaws of Seller 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 Seller 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 where such action would not have a Material
Adverse Effect. Except as set forth on SCHEDULE 2.2, Seller 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 transactions contemplated by this Agreement including, but not
limited to, the assignment of the Acquired Contracts.
II.3 AUTHORIZATION OF TRANSACTION. Seller 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 Seller, enforceable in accordance with its terms and conditions. This
Agreement has been approved by the Board of Directors and the shareholders of
the Seller, and no other corporate proceedings on the part of the Seller are
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necessary to authorize the execution and delivery of this Agreement or the
consummation by the Seller of the transactions contemplated hereby. Seller
believes it has provided adequate information to its shareholders on which the
shareholders can make an informed decision regarding the approval of the
transactions contemplated hereby.
II.4 TITLE TO ASSETS. Seller has good and marketable title to, or a
valid leasehold interest in, the Purchased Assets and the Licensed Software,
free and clear of all liens, claims, security interests, encumbrances or rights
of others, except for the Permitted Encumbrances listed on SCHEDULE 2.4.
II.5 FINANCIAL STATEMENTS. Seller has provided or shall provide
prior to Closing copies of the following financial statements relating to the
Business (collectively the "Financial Statements"): (i) unaudited financial
statements and a related report with respect to the fiscal year of Seller ended
December 31, 1997 and for the period ended August 31, 1998 (prorated financial
statement for the Business); (ii) accounts payables and accounts receivables
current within two (2) business days of the date hereof; and (iii) the balance
sheet for the Business for the period ended October 31, 1998 (the "Ending
Balance Sheet"). The Ending Balance Sheet has been prepared in accordance with
generally accepted accounting principles, consistently applied (except as may be
indicated thereon or in the notes thereto) and fairly presents the financial
condition of the Seller's Business as of the date thereof and the results of its
operations and changes in financial condition for the periods then ended,
subject, in the case of unaudited interim financial statements, to normal
year-end and audit adjustments and any other adjustments described therein; the
other material comprising the Financial Statements have been prepared on a
comprehensive basis of accounting other than generally accepted accounting
principles.
II.6 EVENTS SUBSEQUENT TO AUGUST 31, 1998. Since August 31, 1998:
(a) Seller has conducted its Business in the ordinary course
and has not undergone any change in the business, financial condition,
operations, results of operations, or future prospects of Seller that would
reasonably be expected to result in a Material Adverse Effect.
(b) Seller has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases, and
licenses) related to the Business involving more than $10,000 or outside the
ordinary course of business;
(c) Seller has not delayed or postponed the payment of
material accounts payable and other material liabilities related to the Business
outside the ordinary course of business; and
(d) Seller has not canceled, compromised, waived, or released
any material right or claim (or series of related material rights and claims)
related to the Business;
II.7 LEGAL COMPLIANCE. Seller, its predecessors and affiliates,
have complied with all applicable laws (including rules, regulations, codes,
plans, injunctions, judgments, orders,
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decrees, rulings, and charges thereunder) of federal, state or local governments
(and all agencies thereto) applicable to the Business, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against Seller alleging any failure so to comply
other than where the failure to comply would not have a Material Adverse Effect.
II.8 REAL PROPERTY AND PERSONAL PROPERTY. SCHEDULE 2.8 sets forth
a list containing a description of all interests in Real Property (including,
without limitation, leasehold interests) and Personal Property owned or
leased by Seller and necessary to the conduct of the Business. Seller has
good and marketable title to (or leasehold interests in) and rightful
possession of all of its Real and Personal Property, tangible and intangible,
necessary to the conduct of the Business, including that reflected in the
Ending Balance Sheet and all assets acquired by Seller since the date of the
Ending Balance Sheet. Except for the Permitted Encumbrances, the Real and
Personal Property necessary to the conduct of the Business is owned by Seller
free and clear of any liens, encumbrances, security interests, claims or
rights of another (including any rights of a subsidiary or other affiliate).
The tangible personal property of Seller is in good operating condition and
repair, normal wear and tear excepted, but is sold "as is, where is," without
express or implied warranties of condition, merchantability, suitability for
a particular purpose or otherwise. The Purchased Assets and the Licensed
Assets reflected in the Ending Balance Sheet, and any fully-depreciated
assets, acquired since the date of the Ending Balance Sheet, constitute all
the assets of Seller with respect to the Business. The operation of the
Business of Seller in the manner in which they are now operated does not
violate any material rules, regulations, or laws.
II.9 INTELLECTUAL PROPERTY.
(a) To the best of Seller's knowledge, Seller owns or has
the rights to use pursuant to license, sublicense, agreement, or permission all
intellectual property necessary for the operation of the Business of Seller as
presently conducted. To the best of Seller's knowledge, each item of
intellectual property owned or used by Seller immediately prior to the Closing
hereunder that is a Purchased Asset will be owned or available for use by
Purchaser on identical terms and conditions immediately subsequent to the
Closing hereunder. Seller has taken all necessary actions to maintain and
protect each item of intellectual property that it owns or uses in connection
with the Business.
(b) In the conduct of the Business, to the best of Seller's
knowledge, Seller has not interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any material intellectual property rights of
third parties, and Seller, directors and officers (and employees with
responsibility for intellectual property matters) of Seller have not received
any charge, complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that Seller
must license or refrain from using any intellectual property rights of any third
party) asserting such infringement, misappropriation or conflict. To the
knowledge of the Seller, directors and officers (and employees with
responsibility for intellectual property matters) of Seller, no third party has
interfered with,
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infringed upon, misappropriated, or otherwise come into conflict with any
intellectual property rights of Seller.
(c) SCHEDULE 2.9 identifies each trade name or unregistered
trademark used by Seller in connection with its Business. With respect to each
item of intellectual property required to be identified on SCHEDULE 2.9, except
as indicated on such SCHEDULE 2.9:
(i) Seller possesses all right, title, and interest in
and to the item, free and clear of any security interest, license, or
other restriction;
(ii) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to the
knowledge of the Seller, directors and officers (and employees with
responsibility for intellectual property matters) of Seller, is
threatened which challenges the legality, validity, enforceability, use,
or ownership of the item; and
(iv) Seller has not agreed to indemnify any person for
or against any interference, infringement, misappropriation, or other
conflict with respect to the item.
(d) To the best of Seller's knowledge, SCHEDULE 2.9
identifies each item of intellectual property that any third party owns and that
Seller uses in the conduct of the Business pursuant to license, sublicense,
agreement, or permission. To the best of Seller's knowledge, Seller has
delivered to Purchaser true, correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date). With respect to
each item of intellectual property required to be identified on SCHEDULE 2.9, to
the best of Seller's knowledge and except as set forth on such Schedule 2.9:
(i) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and in full
force and effect;
(ii) the license, sublicense, agreement, or permission
will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby;
(iii) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(iv) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
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(v) with respect to each sublicense, the
representations and warranties set forth in subsections (i) through (iv)
above are true and correct with respect to the underlying license;
(vi) the underlying item of intellectual property is
not subject to any outstanding injunction, judgment, order, decree,
ruling, or charge;
(vii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to the
knowledge of the Seller, directors and officers (and employees with
responsibility for intellectual property matters) of Seller, is
threatened which challenges the legality, validity, or enforceability of
the underlying item of intellectual property; and
(viii) Seller has not granted any sublicense or similar
right with respect to the license, sublicense, agreement, or permission.
(e) SCHEDULE 2.9 identifies each domain name, dedicated Access
customer IP block, trade name or unregistered trademark used by Seller in
connection with the Business.
II.10 CONTRACTS. SCHEDULE 1.1(g) is a complete list of all of
Seller's customer contracts that relate to the Business. The Acquired Contracts
set forth in SCHEDULE 1.1(h) comprise all of the material contracts of Seller
related to the Business. Except as disclosed on SCHEDULE 2.10:
(a) Seller has fulfilled all material obligations required
to be performed by it prior to the date hereof with respect to each of the
Acquired Contracts; and
(b) To Seller's knowledge, no other contracting party to an
Acquired Contract is in breach thereof.
II.11 ACCOUNTS RECEIVABLE. The accounts receivable of the Business
(i) have arisen in the ordinary course of business of Seller; (ii) represent
bona fide payment obligations of the applicable account debtors; (iii) subject
only to reserves for bad debts set forth on the Financial Statements, 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 Seller in
the aggregate recorded amounts thereof in accordance with their terms; and (iv)
they are not subject to any recoupments, set-offs or counterclaims, except as
allowed in clause (iii).
II.12 LITIGATION. Other than as set forth on SCHEDULE 2.12, in
relation to the Business there is no material outstanding injunction, judgment,
order, decree, ruling, or charge, and no pending or, to the knowledge of Seller,
threatened, adverse material claim, dispute, 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.
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II.13 EMPLOYEE BENEFITS. SCHEDULE 2.13 identifies the material
employee benefits and all employee benefit plans to which the Business's
employees are entitled.
II.14 BROKERS' FEES. Other than its fee payable to Davids &
Associates, Seller 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.
II.15 RECEIPT OF DISCLOSURE DOCUMENTS. Seller has received and
carefully reviewed, and understands the information contained in, the
Disclosure Documents identified below (including the risk factors contained
therein) and all other documents Seller has requested from Purchaser. In
evaluating the suitability of the Acquisition and the resulting acquisition
of the Purchaser Shares and all other rights, whether contingent or fixed, to
receive Purchaser Shares (collectively the "Securities") (the Acquisition and
resulting acquisition of the Securities hereinafter referred to as the
"investment in the Securities"), Seller has not relied upon any
representations or other information (whether oral or written) from
Purchaser, its officers, directors, or employees or from any other person
other than as set forth herein, in the Disclosure Documents and in other
documents requested by Seller from Purchaser.
The "Disclosure Documents" consist of the following: (i) Purchaser's Annual
Report on Form 10-KSB for the year ended December 31, 1997, (ii) Purchaser's
Proxy Statement for its annual meeting held on March 12, 1998, (iii) 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) the Registration Statement on Form S-1
dated November __, 1998, File No. 333-52731, with respect to the Purchaser
Shares to be issued pursuant to the terms of this Agreement (the "Registration
Statement"), including the prospectus contained therein (the "Prospectus"), (v)
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 Purchaser on or about October 14, 1998 with respect to the
claims asserted by ICC.
II.16 ABILITY TO EVALUATE RISKS AND MERITS. Seller has such
knowledge and experience in financial and business matters that Seller is
capable of evaluating the merits and risks of an investment in the Securities
and has the capacity to protect Seller's own interests in connection with an
investment in the Securities and has the net worth to undertake such risks.
II.17 SUITABILITY OF INVESTMENT; NO PLAN OF DISTRIBUTION. Seller has
obtained, to the extent Seller deems necessary, 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 Seller's financial
condition and investment needs. Seller does not intend to engage in any
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transfer of the Purchaser Shares that is set forth in Rule 145(a) promulgated
under the Securities Act.
II.18 ACCESS TO INFORMATION. Seller has been given access to full
and complete information regarding Purchaser and has utilized such access to
Seller's satisfaction, for the purposes of asking questions and receiving
answers concerning the terms and conditions of the Acquisition (including the
offering of the Securities in connection with the Acquisition) or verifying the
information included in the Disclosure Documents and obtaining any of the
documents described in the Disclosure Documents. Seller has been given the
opportunity to ask questions of, and to receive answers from, representatives of
Purchaser to obtain information concerning the Acquisition and to receive any
additional information, to the extent reasonably available, necessary to verify
the accuracy of information provided in the Disclosure Documents.
II.19 EXPENSES. Seller acknowledges that all costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby are the sole responsibility of each
Party and Seller will pay its respective costs and expenses; provided, however
that Purchaser and Seller shall each be responsible for one-half of the Escrow
Agent's fees.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
To induce Seller to enter into this Agreement and consummate this
transaction, Purchaser represents and warrants to Seller 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 ORGANIZATION. Purchaser is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation. Purchaser 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 on Purchaser. Purchaser 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 on Purchaser, as the case may be.
III.2 NONCONTRAVENTION. Neither the execution nor 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 Purchaser is subject or any provision of
the Articles of Incorporation or bylaws of Purchaser 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,
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instrument, or other arrangement to which Purchaser 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 where such action would
not have a material adverse effect on Purchaser. Except to comply with federal
and state securities laws, Purchaser 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.
III.3 AUTHORIZATION OF TRANSACTION. Purchaser 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 Purchaser, enforceable in accordance with its terms and
conditions. No vote is required by the shareholders of Purchaser for the
consummation of the transactions contemplated by this Agreement. The Purchaser
Shares issuable pursuant to the terms hereof have been, or will be prior to the
Closing Date, duly authorized and reserved for issuance.
III.4 DISCLOSURE. As of the date thereof, the Registration Statement
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
III.5 BROKERS' FEES. Purchaser does not have any liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which Seller
could become liable or obligated.
III.6 EXPENSES. Purchaser acknowledges that all costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby are the sole responsibility of each
Party and Purchaser will pay its respective costs and expenses; provided,
however that Purchaser and Seller shall each be responsible for one-half of the
Escrow Agent's fees.
III.7 REGISTRATION. The Purchaser Shares shall be registered under
the Securities Act when issued pursuant to the Registration Statement. Other
than state "Blue Sky" laws compliance, no further registration or qualification
is necessary for the issuance to Seller, and the Seller's shares shall be issued
without any restrictive legends of any kind; Seller acknowledges the terms of
Subsection 4.2(g) below.
ARTICLE IV
COVENANTS
IV.1 PRE-CLOSING COVENANTS. The Parties agree as follows with
respect to the period between the execution of this Agreement and the Closing.
(a) GENERAL. Each of the Parties will use his or its
reasonable best efforts to take all action and to do all things necessary,
proper, or advisable in order to consummate and
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make effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in Article V
below).
(b) NOTICES AND CONSENTS. Seller will give any notices to
third parties, and Parties will use their best efforts to obtain any third party
consents, that are required or that Purchaser may reasonably request in
connection with this transaction. Each of the Parties will 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 Seller will obtain and
deliver to Purchaser prior to the date which is three (3) days prior to the
Closing Date unaudited financial statements of Seller for the month-end
preceding the Closing Date.
(d) OPERATION OF BUSINESS. After the date hereof, with
respect to the Business, Seller 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 Purchaser. Without limiting the generality
of the foregoing, Seller will not (i)sell, dispose or otherwise transfer any of
the assets related to the Business, including without limitation waive any
material rights or claims, or impose any security interest upon any of its
assets, (ii) commit to doing any of the foregoing; or (ii) 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. Seller will keep the Business,
its properties and related goodwill substantially intact, including its present
operations, physical facilities, working conditions, and relationships with
lessors, licensors, suppliers, customers, and employees.
(f) ACCESS. Seller will permit representatives of Purchaser
to have reasonable access (including providing introductions, where necessary)
to all premises, properties, personnel, lessors, licensors, vendors, supplies,
creditors, books, records (including tax records), contracts, and documents of
or pertaining to Seller. Seller will cause its independent accountants to make
available their work papers with respect to Seller and to otherwise provide such
assistance as is reasonably requested by Purchaser.
(g) NOTICE OF DEVELOPMENTS. Seller will give prompt written
notice to Purchaser of any adverse development causing a breach or a potential
breach of any of the representations and warranties in Article II above.
Purchaser shall give prompt written notice to Seller of any adverse development
causing a breach or a potential breach of any of the representations and
warranties in Article III above, and of any event that could reasonably have a
material adverse effect on the financial condition of Purchaser or the market
for its shares of Common Stock. No disclosure or discovery by a party hereto
shall be deemed to amend or supplement any Schedule hereto or to prevent or cure
any misrepresentation, breach of warranty, or breach of covenant.
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(h) EXCLUSIVITY. Seller will not (i) solicit, initiate, or
encourage the submission of any proposal or offer from any person relating to
the acquisition of any capital stock or other voting securities, or any
substantial portion of the assets, of Seller (including, any acquisition
structured as a merger, consolidation, or share exchange) or (ii) participate in
any discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other manner any effort or
attempt by any person to do or seek any of the foregoing. Seller will notify
Purchaser immediately if any person makes any proposal, offer, inquiry, or
contact with respect to any of the foregoing. Seller acknowledges that the
restriction set forth in this Section 4.1(h) is material to Purchaser and, that,
if breached, Purchaser shall be entitled to equitable relief.
IV.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 VI below). Seller agrees that from and after Closing for a period of
one year, upon a reasonable request by Purchaser, Seller will promptly supply
copies of any 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 Seller, 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 VI below).
(c) TRANSITION. Seller 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 Seller from maintaining the same business relationships with Seller
after Closing as it maintained with Seller prior to the Closing. Seller will
refer all customer inquiries relating to the Business of Seller to Purchaser
from and after the Closing.
(d) RECEIVABLES. Purchaser and Seller each agree to
cooperate in the collection of accounts receivable of the other party.
Purchaser will attempt to collect the accounts receivable of Seller in a manner
consistent with Seller's reasonable commercial practices prior to the Closing
Date (but without resort to litigation or the use of collection
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agencies or similar efforts). If Purchaser receives funds attributable to an
account receivable of Seller, or Seller receives funds attributable to an
account receivable of Purchaser (including receivables arising after the Closing
Date which are attributable to the Business), the party receiving such funds
shall promptly convey them to the other party.
(e) CONFIDENTIALITY. The parties will treat and hold as
confidential all of the confidential information, refrain from using any of
the confidential information of the other party except as provided in this
Agreement, and deliver promptly to the other party, or destroy, at the
request and option of that party, all tangible embodiments (and all copies)
of the confidential information which are in his or its possession. In the
event that either party 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, such party will notify the other party promptly of
the request or requirement so that the party subject to the request or
requirement may seek an appropriate protective order or waive compliance with
the provisions of this Section 4.2(e). If, in the absence of a protective
order or the receipt of a waiver hereunder, a party hereto is, on the advice
of counsel, compelled to disclose any confidential information to any
tribunal or else stand liable for contempt, such party may disclose the
confidential information to the tribunal; PROVIDED, HOWEVER, that the party
subject to such request or requirement shall use its best efforts to obtain,
at the request of such party, an order or other assurance that confidential
treatment will be accorded to such portion of the confidential information
required to be disclosed as such Party 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.
Seller acknowledges and understands that confidential information,
including the existence of this Agreement before dissemination to the public,
may include "material, non-public information," as the term is understood and
interpreted under federal and state securities laws and rules. Seller further
acknowledges and understands 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. Seller hereby agrees that all
confidential information, whether furnished before or after the date of this
Agreement, shall be treated confidentially.
(f) NONCOMPETITION AND NONSOLICITATION. Seller and Purchaser
agree to comply with the terms and conditions set forth in the Noncompetition
and Nonsolicitation Agreement, the form of which is attached hereto as EXHIBIT
D.
(g) PROSPECTUS. As long as Seller holds Purchaser Shares, a
current prospectus regarding the common stock of Purchaser shall be available
for use by Seller for one (1) year after the Closing Date; provided such
prospectus may not be available at times when Purchaser has to update the
disclosure pursuant to a supplement or post-effective amendment; provided
further that any such period of unavailability shall not exceed thirty (30) days
and the total of such periods shall not exceed ninety (90) days in the one year
following the Closing Date (and
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any excess beyond ninety (90) days shall automatically extend such one-year
period by an equivalent number of days).
(h) CUSTOMER CONTRACTS. Purchaser and Seller shall each
perform the obligations under the Customer Contracts reasonably attributable to
the Business or the Retained Business, respectively.
(i) EQUIPMENT INVENTORY; CUSTOMER LIST FOR RETAINED BUSINESS.
Within ten (10) business days after the Closing Date, Seller shall deliver to
Purchaser a comprehensive inventory of all Personal Property included in the
Purchased Assets. Within thirty (30) days after the Closing Date, Seller shall
deliver to Purchaser a comprehensive list of Seller's customers with respect to
the Retained Business (the "Retained Business Customers").
ARTICLE V
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
V.1 CONDITIONS TO OBLIGATION OF PURCHASER. The obligation of
Purchaser 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 Acquisition shall have received
the requisite Seller approval;
(b) Seller shall have procured all third party consents as
set forth on SCHEDULE 2.2;
(c) Seller shall have procured all necessary governmental
consents, and Purchaser shall have obtained a valid effectiveness order from the
Securities and Exchange Commission and shall have obtained any applicable state
securities law approvals;
(d) all of the representations and warranties set forth in
Articles II above shall be true and correct in all respects at and as of the
Closing Date and Purchaser shall have received a certificate of Seller in the
form of EXHIBIT E hereto to that effect;
(e) Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(f) 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,
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation or (iii) affect adversely the right of
Purchaser to own the Purchased Assets, (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
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(g) Seller shall deliver to Purchaser, a Certificate of the
Secretary of Seller dated as of Closing certifying that the following are true,
correct and complete copies and the originals thereof: Articles of Incorporation
of Seller, as amended, and certified by the Kansas Secretary of State, bylaws
(as amended to date), resolutions of the board of directors recommending
approval of the Acquisition;
(h) Seller shall have delivered to Purchaser a certificate to
the effect that each of the conditions specified above in this Section 5.1 have
been satisfied in all respects, in the form attached hereto as EXHIBIT E;
(i) Seller shall have delivered to Purchaser a Noncompetition
and Nonsolicitation Agreement by and between it and Purchaser, substantially in
the form attached hereto as EXHIBIT D;
(j) Grant Rogers and Gerald Combs shall have executed and
delivered to Purchaser the Employment Agreements, substantially in the form of
EXHIBIT F attached hereto;
(k) Purchaser shall have received an opinion from Seller's
counsel substantially in the form of EXHIBIT G attached hereto;
(l) Seller shall have at the Closing Date annualized revenues
(measured retrospectively based on the last full month immediately preceding the
Closing Date) of at least $1,100,000, of which $1,000,000 shall be from
recurring sources provided that if Seller does not have such revenue levels,
Purchaser shall have the right to acquire the Purchased Assets at an adjusted
Purchase Price based on agreed upon multiple of revenues. Such revenue shall be
generated from:
(i) at least 146 content hosting customers generating
$18,000 monthly recurring revenue;
(ii) at least 100 dedicated access service customers
generating $30,000 in monthly recurring revenue;
(iii) at least 1,700 dial-up access customers generating
$32,000 in monthly recurring revenue; and
(iv) guaranteed monthly recurring revenue of at least
$5,000 from Seller.
(m) Purchaser shall have received the Financial Statements;
(n) all actions to be taken by Seller in connection with
consummation of the transactions contemplated hereby and all certificates,
instruments, and other documents required
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to effect the transactions contemplated hereby will be reasonably satisfactory
in form and substance to Purchaser; and
(o) there shall have been no Material Adverse Change since
August 31, 1998.
Purchaser may waive any condition specified in this Section 5.1 only if it
executes a writing so stating, at or prior to the Closing.
V.2 CONDITIONS TO OBLIGATION OF SELLER. The obligation of Seller
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
(a) all of the representations and warranties set forth in
Article III above shall be true and correct in all respects at and as of the
Closing Date and Seller shall have received a certificate of Purchaser in the
form of EXHIBIT H hereto to that effect;
(b) Seller shall have procured all necessary governmental
consents and Purchaser shall have obtained a valid effectiveness order from the
Securities and Exchange Commission and shall have obtained any applicable state
securities law approvals;
(c) Purchaser shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(d) 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);
(e) Purchaser shall deliver to Seller, a Certificate of the
Secretary of Purchaser dated as of Closing and certifying the resolutions of the
board of directors approving the Acquisition and all transactions contemplated
by this Agreement;
(f) Purchaser shall have delivered to Seller the Non-Compete
Agreement by and between Purchaser and Seller, substantially in the form
attached hereto as EXHIBIT D;
(g) Purchaser shall have delivered to Seller the
Non-Solicitation Agreement by and between Purchaser and Seller, substantially in
the form attached hereto as EXHIBIT C;
(h) Seller shall have received an opinion from Purchaser's
counsel substantially in the form of EXHIBIT I attached hereto.
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(i) the shelf registration statement of Purchaser with
respect to the resale by Seller of the Purchaser Shares shall continue to be
effective under the Securities Act with no stop order pending or threatened;
(j) all actions to be taken by Purchaser in connection with
consummation of the transactions contemplated hereby and all certificates,
instruments, and other documents required to effect the transactions
contemplated hereby will be satisfactory in form and substance to Seller; and
(k) there shall have been no event which could reasonably
have a material adverse effect on the financial condition of Purchaser from the
date hereof until the Closing Date.
Seller may waive any condition specified in this Section 5.2 only if it executes
a writing so stating, at or prior to the Closing.
ARTICLE VI
REMEDIES FOR BREACH
VI.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Parties contained in this Agreement shall
survive the Closing hereunder and continue in full force and effect until one
(1) year from the date of Closing.
VI.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF PURCHASER. Seller
shall indemnify, defend and hold harmless Purchaser, the officers, directors,
employees, partners, members, shareholders, of Purchaser, affiliates of
Purchaser (and their officers, directors, employees, members, partners and
shareholders), and agents (collectively, the "Purchaser Indemnified Parties")
from and against any action, loss, liability, damage, claim, fine, penalty, lien
or expense, including legal costs, attorneys' fees, and expenses, (collectively,
"Purchaser Loss") to the extent the same arises out of (i) any breach by Seller
of any representation, warranty, agreement, or covenant made by Seller in
Article II herein, (ii) Seller's failure to comply with any bulk sales or
similar law, (iii) any tax, including use or sales tax, for which Seller or any
of its shareholders, directors or officers is or may be liable in respect of the
conduct of the Business prior to the Closing, (iv) any claim arising out of or
in connection with the conduct of the Business prior to the Closing Date
alleging that all, or any portion of, the Business infringes any intellectual
property right or other interest of any person or entity, (v) any obligation of
Seller that is an Excluded Liability, whether arising before or after the
Closing and (vi) any claim by any shareholder of Seller with respect to the
transactions contemplated hereby. Each Purchaser Indemnified Party will give
prompt notice to Seller of any claim or condition to which the foregoing
indemnification covenant relates. At its election, Seller may control the
defense of such claim, at its expense, but shall not settle any such claim
without the consent of the respective Purchaser Indemnified Party or Parties,
which consent will not be unreasonably withheld.
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VI.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF SELLER. Purchaser
shall indemnify, defend and hold harmless Seller, its officers, directors,
employees, partners, members, shareholders, affiliates (and their officers,
directors, employees, members, partners and shareholders), and agents
(collectively, the "Seller Indemnified Parties") from and against any action,
loss, liability, damage, claim, fine, penalty, lien or expense, including legal
costs, attorneys' fees, and expenses, (collectively, "Seller Loss") to the
extent the same arises out of (i) any breach by Purchaser of any representation
or warranty made by Purchaser in Article III herein, (ii) any tax, including use
or sales tax, for which Purchaser or any of its shareholders, directors or
officers is or may be liable in respect of the conduct of the Business after the
Closing Date, (iii) any claim incurred and arising from the conduct of the
Business after the Closing Date alleging that all, or any portion of, the
Business infringes any intellectual property right or other interest of any
person or entity, and (iv) any obligation of Seller expressly assumed by
Purchaser as an Assumed Obligation, to the extent such obligation was incurred
and arose from the conduct of the Business after the Closing. Each Seller
Indemnified Party will give prompt notice to Purchaser of any claim or condition
to which the foregoing indemnification covenant relates. At its election,
Purchaser may control the defense of such claim, at its expense, but shall not
settle any such claim without the consent of the respective Seller Indemnified
Party or Parties, which consent will not be unreasonably withheld.
VI.4 REMEDIES. Except with respect to any breach of Sections 4.1(h)
and 4.2(e), (f) and (g), and except with respect to any Party's obligation to
consummate the transactions contemplated hereby after the applicable conditions
set forth in Article V have been satisfied, the remedies set forth in this
Article VI shall be the exclusive remedy of Seller and Purchaser with respect to
the transactions contemplated by this Agreement.
VI.5 BASKET. No Party shall have liability under this Article VI
until the aggregate amount of indemnifiable losses (i.e., Purchaser Losses or
Seller Losses, as the case may be) to the indemnified Party (i.e., a Purchaser
Indemnified Party or a Seller Indemnified Party) as a result of all matters
covered by this Article VI exceeds $25,000 (the "Basket"). If the aggregate
amount of such indemnified losses exceeds the Basket, the indemnifying Party
shall be liable for all indemnifiable losses, including the first $25,000 of
such losses.
VI.6 MAXIMUM LIABILITY. In no event shall Seller, on the one hand,
or Purchaser, on the other hand, be liable under this Agreement for an aggregate
amount in excess of $500,000.
ARTICLE VII
TERMINATION
VII.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 Seller Approval) as provided below:
(a) the parties may terminate this Agreement by mutual
written consent at any time prior to the Closing Date;
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(b) Purchaser may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing Date (i) in the event
Seller has breached any representation, warranty, or covenant contained in this
Agreement or (ii) if the Closing shall not have occurred on or before the date
which is fifteen (15) days after the date hereof; provided that such date shall
be extended if the conditions to Closing set forth in Section 5.2 above which
are in the control of Purchaser or its representatives have not yet been
satisfied. Purchaser's knowledge of the existence of a condition that would
entitle Purchaser so to terminate this Agreement shall not be construed as a
waiver of its rights so to terminate at any later date prior to the Closing
Date.
(c) Seller may terminate this Agreement by giving written
notice to Purchaser at any time prior to the Closing Date (i) in the event
Purchaser has breached any representation, warranty, or covenant contained in
this Agreement or (ii) if the Closing shall not have occurred on or before the
date which is fifteen (15) days after the date hereof; provided that such date
shall be extended if the conditions to Closing set forth in Section 5.1 above
which are in the control of Seller or its representatives have not yet been
satisfied. Seller's knowledge of the existence of a condition that would
entitle Seller so to terminate this Agreement shall not be construed as a waiver
of its rights so to terminate at any later date prior to the Closing Date.
VII.2 EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 7.1(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach), except that the
provisions contained in Section 4.2(e) above shall survive termination.
ARTICLE VIII
MISCELLANEOUS
VIII.1 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. Seller shall not
issue any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of Purchaser both
before and after Closing.
VIII.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.
VIII.3 ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
VIII.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
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Party may assign either this Agreement or any of his or its rights, interests,
or obligations hereunder without the prior written approval of Purchaser and
Seller.
VIII.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.
VIII.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.
VIII.7 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, mailed by
registered or certified mail (return receipt requested), sent by overnight
courier or sent via facsimile to the Parties at the following addresses (or at
such other address for a Party as shall be specified by like notice):
If to Purchaser: Rocky Mountain Internet, Inc
Douglas H. Hanson, President, CEO and
Chairman
1099 18th Street, 30th Floor
Denver, Colorado 80202
Facsimile: (303) 672-0711
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 Seller: Unicom Communications, Inc.
Elie Balas, CEO
7223 W. 95th Street
Suite 325
Overland Park, Kansas 66212
Facsimile: (913) 327-5376
Copy to: Morrison & Foerster LLP
Matthew D. Berger
555 West Fifth Street
Suite 3500
Los Angeles, CA 90013
Facsimile: (213) 892-5454
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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.
VIII.8 EQUITABLE RELIEF; ARBITRATION. If the Parties have been
unable to resolve any dispute or controversy arising under this Agreement,
then any such dispute or controversy arising with respect to any such claim
hereunder shall be settled by arbitration in Denver, Colorado by a panel of
three arbitrators in accordance with the commercial rules of the American
Arbitration Association, whose decisions shall be final, binding and
non-appealable; PROVIDED, HOWEVER, that notwithstanding the foregoing, the
Parties shall pursue all equitable remedies, if any (such as specific
performance, injunctive relief, rescission, etc.), in a state or federal
court of law in Colorado if the non-breaching party elects to do so and, in
such case, the breaching party shall not be permitted to dispute such claim
or claims in an arbitration proceeding. The three arbitrators shall be
selected pursuant to the rules of the American Arbitration Association from a
panel of independent and disinterested persons with at least ten years
experience in significant corporate, business or accounting matters, and who
are familiar with the purchase and sale of business concerns. The expenses
of both Parties in the arbitration, including reasonable attorneys' fees and
arbitration expenses, shall be paid by the prevailing party. If each party
prevails in part, the arbitrators will determine the appropriate allocation
of expenses among the Parties utilizing the principal described above.
Judgment upon the award rendered by the arbitrators may be entered in any
court having jurisdiction therefor, and the Parties consent to the
jurisdiction of the Colorado courts for this purpose.
VIII.9 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.
VIII.10 AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing, and signed by
Purchaser and the Seller. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
VIII.11 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.
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VIII.12 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.
VIII.13 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
VIII.14 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 8.7 above. Nothing in this Section 8.14,
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.
* * * * * *
25
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
ROCKY MOUNTAIN INTERNET, INC., a Delaware
corporation
By: /s/ Douglas H. Hanson
-----------------------------------
Douglas H. Hanson, CEO, President,
and Chairman of the Board
UNICOM COMMUNICATIONS, INC., a Kansas
corporation
By: /s/ Elie Balas
-----------------------------------
Elie Balas, Chief Executive Officer
26
<PAGE>
SCHEDULE 1
Definitions of "Business" and "Retained Business"
1. The "Business" shall mean Seller's business providing the
following services to customers: (y) Access, or a dedicated link of varying
bandwidth between the Internet and a customer's content on a server or between
the Internet and a customer via a direct dial-up to a server; and (z) Hosting,
or the regular provision of hard disk storage space on, processing time from,
and other use of the hardware, operating system, Internet server software, and
certain core Internet application software of an Internet server in order to
allow access via the Internet to, security for, and backup of a customer's
content and Hosting services.
2. The "Retained Business" shall mean Seller's business of providing
the following services to the existing customers: (y) Content Development, or
the design, creation, development, construction, enabling, maintenance,
modification, enhancement, and editing of a customer's software content in
whatever form, including but not limited to text, graphics, audio, video, data,
and computer code; and (z) Software Development, or the design, creation,
development, construction, enabling, maintenance, modification, and enhancement
of hardware, software, software systems and web-based services.
<PAGE>
Exhibit 10.21
ASSET PURCHASE AGREEMENT
By and Among
ROCKY MOUNTAIN INTERNET, INC.,
a Delaware corporation,
STONEHENGE BUSINESS SYSTEMS CORPORATION
a Colorado corporation,
TODD KEENER,
an individual,
and
DANETTE KEENER,
an individual
November 30, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE I SALE AND PURCHASE OF SELLER'S ASSETS . . . . . . . . . . . . . . .1
1.1 Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . . .1
(a) Receivables . . . . . . . . . . . . . . . . . . . . . . . . .2
(b) Inventories . . . . . . . . . . . . . . . . . . . . . . . . .2
(c) Tangible Personal Property. . . . . . . . . . . . . . . . . .2
(d) Real Property . . . . . . . . . . . . . . . . . . . . . . . .2
(e) Contracts and Other Agreements Relating to the Business . . .2
(f) Books, Records, Lists and Other Data. . . . . . . . . . . . .2
(g) Licenses, Permits . . . . . . . . . . . . . . . . . . . . . .3
(h) Proprietary Rights. . . . . . . . . . . . . . . . . . . . . .3
(i) General Intangibles . . . . . . . . . . . . . . . . . . . . .3
(j) Other Assets. . . . . . . . . . . . . . . . . . . . . . . . .3
1.2 Assumed Liabilities; No Assumption of Other Liabilities. . . . . .3
1.3 Title to the Purchased Assets; Documents of Conveyance . . . . . .4
1.4 Purchase Price; Adjustment . . . . . . . . . . . . . . . . . . . .4
1.5 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . .5
1.6 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
1.7 Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
1.8 Proration of Revenues and Expenses . . . . . . . . . . . . . . . .7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS. . . . . . . . . .8
2.1 Authorization of Transaction . . . . . . . . . . . . . . . . . . .8
2.2 Legal, Accounting and Other Fees and Expenses. . . . . . . . . . .8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . .8
3.1 Organization, Qualification, and Corporate Power . . . . . . . . .9
3.2 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.3 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . .9
3.4 Authorization of Transaction . . . . . . . . . . . . . . . . . . 10
3.5 Title to Assets. . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . 10
3.7 Events Subsequent to July 31, 1998.. . . . . . . . . . . . . . . 10
3.8 Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . 13
3.9 Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . 13
3.10 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.11 Real Property and Personal Property. . . . . . . . . . . . . . . 15
3.12 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . 15
3.13 Tangible Assets. . . . . . . . . . . . . . . . . . . . . . . . . 18
3.14 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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3.15 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.16 Notes and Accounts Receivable. . . . . . . . . . . . . . . . . . 20
3.17 Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . 20
3.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.19 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.20 Product Warranty . . . . . . . . . . . . . . . . . . . . . . . . 21
3.21 Product Liability. . . . . . . . . . . . . . . . . . . . . . . . 21
3.22 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.23 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . 22
3.24 Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.25 Environmental, Health, and Safety Matters. . . . . . . . . . . . 24
3.26 Certain Business Relationships with Seller . . . . . . . . . . . 26
3.27 Relationships with Suppliers and Carriers. . . . . . . . . . . . 26
3.28 Customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.29 Legal, Accounting and Other Fees and Expenses. . . . . . . . . . 26
3.30 Receipt of Disclosure Documents. . . . . . . . . . . . . . . . . 26
3.31 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . . . . . . . 27
4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.2 Authorization of Transaction . . . . . . . . . . . . . . . . . . 27
4.3 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . 28
4.4 Brokers' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.5 Purchaser Common Stock . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE V COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.1 Pre-Closing Covenants. . . . . . . . . . . . . . . . . . . . . . 28
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(b) Notices and Consents. . . . . . . . . . . . . . . . . . . . 28
(c) Operation of Business . . . . . . . . . . . . . . . . . . . 29
(d) Preservation of Business. . . . . . . . . . . . . . . . . . 30
(e) Full Access . . . . . . . . . . . . . . . . . . . . . . . . 30
(f) Notice of Developments. . . . . . . . . . . . . . . . . . . 30
(g) Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . 30
(h) Repayment . . . . . . . . . . . . . . . . . . . . . . . . . 30
(i) Financial Statements. . . . . . . . . . . . . . . . . . . . 31
(j) Insurance Policies. . . . . . . . . . . . . . . . . . . . . 31
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<PAGE>
5.2 Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . 31
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(b) Litigation Support. . . . . . . . . . . . . . . . . . . . . 31
(c) Transition. . . . . . . . . . . . . . . . . . . . . . . . . 32
(d) Confidentiality . . . . . . . . . . . . . . . . . . . . . . 32
(e) Non-Solicitation. . . . . . . . . . . . . . . . . . . . . . 33
(f) Covenant Not to Compete . . . . . . . . . . . . . . . . . . 34
(g) Release of Liens. . . . . . . . . . . . . . . . . . . . . . 34
(h) Public Information Requirement. . . . . . . . . . . . . . . 34
ARTICLE VI CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING . . . 35
6.1 Conditions to Obligation of Purchaser. . . . . . . . . . . . . . 35
6.2 Conditions to Obligation of Shareholders and Seller. . . . . . . 37
ARTICLE VII REMEDIES FOR BREACH. . . . . . . . . . . . . . . . . . . . . . 37
7.1 Survival of Representations and Warranties . . . . . . . . . . . 37
7.2 Indemnification Provisions for Benefit of Purchaser. . . . . . . 38
7.3 Indemnification Provisions for Benefit of Seller and
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.4 Matters Involving Third Parties. . . . . . . . . . . . . . . . . 39
7.5 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.6 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VIII TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.1 Termination of Agreement. . . . . . . . . . . . . . . . . . . . 41
8.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.1 Press Releases and Public Announcements. . . . . . . . . . . . . 41
9.2 No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . 42
9.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 42
9.4 Succession and Assignment. . . . . . . . . . . . . . . . . . . . 42
9.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.6 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.9 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . 43
9.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.11 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.12 Incorporation of Exhibits and Schedules. . . . . . . . . . . . . 44
9.13 Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . 44
iii
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9.14 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.15 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 45
iv
<PAGE>
EXHIBITS
Exhibit A - Bill of Sale and Assignment Agreement
Exhibit B - Seller and Shareholders Closing Certificate
Exhibit C - Employment Agreement for Todd Keener
Exhibit D - Employment Agreement for Danette Keener
Exhibit E - Form of Opinion of Seller's and Shareholders' Counsel
SCHEDULES
Schedule 1.1 - Excluded Assets
Schedule 1.1(g) - Licenses and Permits
Schedule 1.2 - Assumed Liabilities
Schedule 1.3 - Permitted Encumbrances
Schedule 1.7 - Allocation Schedule
Schedule 3.1 - Seller Articles of Incorporation; Bylaws; Officers and
Directors
Schedule 3.3 - Required Notices and Consents
Schedule 3.10 - Tax Matters
Schedule 3.11 - Real and Personal Property
Schedule 3.12 - Intellectual Property
Schedule 3.15 - Contracts
Schedule 3.18 - Insurance
Schedule 3.19 - Litigation
Schedule 3.20 - Product Warranties
Schedule 3.23 - Employee Benefits
Schedule 3.24 - Guaranties
Schedule 3.25 - Environmental Health and Safety Matters
Schedule 3.26 - Certain Business Relationships
Schedule 3.27 - Supplier and Carrier Relationships
Schedule 3.28 - Customers
v
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of
November 30, 1998, by and among ROCKY MOUNTAIN INTERNET, INC., a Delaware
corporation (the "Purchaser"), STONEHENGE BUSINESS SYSTEMS CORPORATION, a
Colorado corporation (the "Seller"), and TODD KEENER, an individual and a
shareholder of Seller, DANETTE KEENER, an individual and a shareholder of Seller
(collectively, the "Shareholders"), on behalf of themselves and the other
shareholders of Seller. Purchaser, Seller and Shareholders are each
individually referred to as a "Party" and collectively referred to as the
"Parties."
RECITALS
A. Seller is engaged in the business of providing Internet and networking
services (such business of Seller referred to herein as the "Business").
B. Seller owns and leases certain assets and properties, real and
personal, tangible and intangible, which are used by Seller in the conduct of
the Business.
C. Subject to the terms and conditions contained in this Agreement,
Purchaser desires to acquire from Seller, and Seller desires to transfer to
Purchaser, substantially all of Seller's assets used in the operation of the
Business (the "Acquisition").
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, the representations, warranties, and covenants herein contained,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Parties agree as follows.
ARTICLE I
SALE AND PURCHASE OF SELLER'S ASSETS
1.1 PURCHASED ASSETS. On the terms and subject to the conditions
contained herein, Purchaser shall acquire from Seller at the Closing (as defined
in Section 1.6 below) all of Seller's right, title and interest in and to all
assets used by Seller in the Business existing as of the Effective Date (as
defined in Section 1.6 below), except for the assets described on SCHEDULE 1.1
attached hereto (the "Excluded Assets"), free and clear of all liens, claims,
security interests,
1
<PAGE>
encumbrances or rights of others, except for the Permitted Encumbrances (as
defined in Section 1.3 below). Without limiting the generality of the
foregoing, the assets to be purchased by Purchaser (collectively, the
"Purchased Assets") shall include the following:
(a) RECEIVABLES. All accounts receivable, notes receivable and
similar receivables accruing from the Business and existing as of the Effective
Date or accruing after the Effective Date.
(b) INVENTORIES. All inventory items held by Seller and reflected on
Seller's unaudited consolidated balance sheet as of the end of the month
immediately preceding the Effective Date (the "Ending Balance Sheet"), plus any
inventory items acquired by Seller in the ordinary course of business after the
date of the Ending Balance Sheet but prior to Closing and minus any inventory
items sold by Seller in the ordinary course of business after the date of the
Ending Balance Sheet but prior to Closing. Inventory items shall include,
without limitation, finished goods, work in progress, raw materials and
supplies, but shall not include inventory items that are not saleable, are
obsolete or are damaged.
(c) TANGIBLE PERSONAL PROPERTY. All tangible personal property, such
as equipment, machinery, tools, manufactured and purchased parts, supplies,
furniture, fixtures, leasehold improvements, non-inventoried stores and
supplies, trucks, vans, automobiles, forklifts, and other vehicles, computers
and peripherals, any related documentation or manuals and Seller's rights under
related warranties, and all maintenance and other operating supplies (whether
inventoried or not) and other miscellaneous tangible personal property of Seller
used in the Business, whether or not located at Seller's principal place of
business at the Closing Date (as defined in Section 1.6 below) and whether or
not reflected on the Ending Balance Sheet, a list of which is set forth on
SCHEDULE 3.11 (collectively, the "Personal Property").
(d) REAL PROPERTY. All real property and interests in real property,
such as leaseholds, subleaseholds, options or rights therein, and all plant,
warehouse, office facilities, buildings, easements, rights of way and
appurtenances thereon and thereto and other improvements and fixtures attached
to such real property owned by Seller (collectively, the "Real Property"). All
Real Property is identified as owned or leased and described on SCHEDULE 3.11
attached hereto.
(e) CONTRACTS AND OTHER AGREEMENTS RELATING TO THE BUSINESS. All
contracts (written or oral), licenses, leases, subleases, instruments, security
interests and other agreements or arrangements of Seller that relate to the
Business, including all agreements with customers, as set forth on SCHEDULE 3.15
attached hereto, and all insurance policies relating to the Purchased Assets, as
set forth on SCHEDULE 3.18 attached hereto.
(f) BOOKS, RECORDS, LISTS AND OTHER DATA. All files, books, records,
invoices, accounts, surveys, customer lists and records, supplier lists,
catalogs, price lists, marketing and
2
<PAGE>
advertising information, purchasing histories, profiles and materials,
technical bulletins, books and records of account and other financial,
customer and credit data, and all computer programs, software, source code,
hardware, firmware, tapes and other materials used to store, record or
produce such data, owned, leased or licensed by Seller and used in or useful
to the Business; PROVIDED, HOWEVER, that the Purchased Assets shall not
include the corporate charter or minute books of Seller.
(g) LICENSES, PERMITS. All applicable governmental licenses,
permits, approvals and authorizations that relate to the operation of the
Business (to the extent transferable, a complete list of which is set forth on
SCHEDULE 1.1(g).
(h) PROPRIETARY RIGHTS. All technology, mechanical processes,
computer software used in the Business (including all inventories of computer
program code for such software, all third-party software licensed by Seller, any
related documentation or manuals and Seller's rights under all related
warranties), source code, data and documentation (including electronic media),
trade secrets (technical and non-technical), know-how, customer lists, pricing
and cost information, business and marketing plans and proposals and other
confidential business information and proprietary rights, including, without
limitation, inventions, patents, patent disclosures, copyrights, copyrightable
works, trademarks, service marks, trade dress, logos, domain names, trade names,
IP addresses, corporate names and licenses or other agreements to or with third
parties regarding the foregoing, which are used in or useful to the Business
(including applications and registrations and the goodwill associated with any
such patent, copyright, trademark, service mark, trade dress, logo, domain name,
trade name or corporate name and including the name "Stonehenge"), all other
proprietary rights and all copies and tangible embodiments thereof (in whatever
form or medium), along with all licenses and sublicenses granted and obtained
with respect to such proprietary rights, remedies against infringements thereof
and rights to protection of interests therein under the laws of all
jurisdictions. SCHEDULE 3.12 sets forth a complete list of such proprietary
rights.
(i) 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 Seller against any third party
that arose or will arise in connection with the Business prior to the Effective
Date.
(j) OTHER ASSETS. All other assets of Seller used in the conduct of
the Business, whether or not reflected in the Ending Balance Sheet or on the
books or records of Seller or the Business.
1.2 ASSUMED LIABILITIES; NO ASSUMPTION OF OTHER LIABILITIES.
(a) Notwithstanding anything to the contrary contained in this
Agreement, except for the liabilities of Seller expressly set forth on SCHEDULE
1.2 (the "Assumed Liabilities"),
3
<PAGE>
which Purchaser shall assume effective as of the Effective Date, Purchaser
shall not assume or be liable for any of Seller's debts, liabilities and
obligations of any nature whatsoever, whether accrued, absolute or
contingent, whether known or unknown, whether due or to become due and
whether related to the Purchased Assets or otherwise, including but not
limited to, all income and capital gains taxes incurred as a result of the
transactions contemplated hereby, and costs, expenses and liabilities of the
Business incurred on or prior to the Effective Date notwithstanding when any
billing statement therefor is received (collectively, the "Liabilities"); and
Seller shall retain and remain responsible for all such Liabilities.
(b) Seller shall perform and discharge all obligations in respect of
all its employees for its own account through the Closing Date including,
without limitation, discharging all wages and salaries of the employees and all
other costs and expenses related to their employment (including, without
limitation, any taxes, accrued holiday pay, accrued bonus, and contributions to
retirement benefit plans or other sums payable in respect of service prior to
such date). The aggregate amount of any such obligations which arise on or
after the Effective Date shall be included in the Seller's Reimbursement Amount
(as defined in Section 1.8 below).
1.3 TITLE TO THE PURCHASED ASSETS; DOCUMENTS OF CONVEYANCE. At the
Closing, Seller shall convey all of its right, title and interest in and to the
Purchased Assets to Purchaser, free and clear of all liabilities, obligations,
liens, encumbrances and rights of others, excepting only the liens, claims,
encumbrances or rights of others set forth on SCHEDULE 1.3 attached hereto (the
"Permitted Encumbrances"). Title to the Purchased Assets shall be conveyed by
Seller to the Purchaser pursuant to a Bill of Sale and Assignment Agreement, in
the form of EXHIBIT A attached hereto, and by such other documents as are
reasonably acceptable to counsel for Purchaser 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 Purchaser occurs as
contemplated hereunder.
1.4 PURCHASE PRICE; ADJUSTMENT.
(a) The purchase price for the Purchased Assets shall be $450,000,
subject to adjustment as set forth in Section 1.4(b) below (the "Purchase
Price").
(b) By January 31, 1999, the Purchase Price shall be adjusted as
follows: if, as of the Measurement Date (as defined below), the Business does
not have at least 2,000 non-dedicated accounts and 13 dedicated access accounts
delivering monthly revenues (including those generated by any new accounts
established in the Yuma, Colorado and Sterling, Colorado markets after the
Effective Date) of at least $45,200, with recurring monthly revenues of at least
$41,200 (the "Recurring Revenue Target") and non-recurring monthly
4
<PAGE>
revenues of at least $4,000 (the "Non-Recurring Revenue Target") (with any
recurring monthly revenues in excess of the Recurring Revenue Target to be
counted toward the Non-Recurring Revenue Target), the Purchase Price shall be
decreased by the amount equal to the sum of (i) the product of 9.15 times the
amount by which the aggregate recurring monthly revenues are less than the
Recurring Revenue Target (or zero, if the aggregate recurring monthly
revenues meet or exceed the Recurring Revenue Target) and (ii) the amount by
which the aggregate non-recurring monthly revenues are less than the
Non-Recurring Revenue Target (or zero, if the aggregate non-recurring monthly
revenues meet or exceed the Non-Recurring Revenue Target). The "Measurement
Date" shall be the date on which the Business' customers are billed for
services to be provided in the month of December 1998.
If the Parties, acting in good faith, are unable to agree upon the actual
amounts of any adjustment to the Purchase Price pursuant to this Section 1.4(b)
within thirty (30) days of the Measurement Date, then Seller and Purchaser shall
each select an accounting firm and the two accounting firms selected shall
select a third accounting firm (such third accounting firm referred to herein as
the "Auditors") to conduct a review audit and determine such amounts in
accordance with this Section 1.4(b). The decision of the Auditors shall be
binding upon the Parties and the fees and expenses of the Auditors shall be
borne equally by Seller and Purchaser.
1.5 PAYMENT OF PURCHASE PRICE.
(a) The Purchase Price shall be paid in the form of shares (the
"Purchaser Shares") of Purchaser's common stock, par value $.001 per share (the
"Purchaser Common Stock"), which shares shall be valued at the average of the
closing trading prices of Purchaser's Common Stock on the Nasdaq SmallCap
National Market for the ten (10) trading days immediately prior to the Effective
Date. The Purchaser Shares issued shall be registered when issued under the
Securities Act of 1933, as amended (the "Securities Act").
(b) The Purchase Price shall be paid as follows:
(i) 80% of the Purchaser Shares shall be issued at Closing; and
(ii) 20% of the Purchaser Shares shall be deposited (the "Escrow
Deposit") with a mutually acceptable escrow agent (the "Escrow Agent")
pursuant to the terms of an escrow agreement (the "Escrow
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<PAGE>
Agreement") by and among Purchaser, Seller, the Shareholders and the
Escrow Agent. The Escrow Deposit shall be distributed as follows:
(A) upon receipt of written notice from the Purchaser that
all liens set forth as liens to be released in connection with
the Acquisition on SCHEDULE 1.3 attached hereto have been
released, the Escrow Agent shall distribute 50% of the Escrow
Deposit to Seller;
(B) upon receipt of written notice executed by Purchaser
and Seller setting forth the determination of the
Purchase Price adjustment pursuant to Section 1.4(b) above, the
Escrow Agent shall distribute to Purchaser the number of shares
the value of which equals any downward adjustment of the Purchase
Price (with such shares being valued in the same manner as set
forth in Section 1.5(a) above; and
(C) within five (5) business days after the date which is
eighteen (18) months after the Closing Date, Purchaser shall
instruct the Escrow Agent to disburse to the Seller from the
Escrow Deposit that number of Purchaser Shares remaining after
reducing such number of shares by the number of shares the value
of which equals the aggregate amount of any and all damages
awarded to Purchaser as of such date pursuant to the provisions
of this Agreement as a result of any breach of the Seller's
and/or Shareholders' representations and warranties contained in
this Agreement, provided, that Purchaser shall give prompt notice
of any such breach to Seller and allow Seller and Shareholders
ten (10) days from the date of such notice to cure such breach,
so long as the ten-day cure period does not detrimentally affect
Purchaser. Such shares shall be valued in the same manner as set
forth in Section 1.5(a) above.
1.6 CLOSING. The consummation of the transactions contemplated hereby
(the "Closing") shall occur as soon as reasonably practicable after the date
hereof, as determined by the Parties, at the offices of Purchaser's counsel, or
by facsimile should the Parties so agree, to be effective as of November 1, 1998
(the "Effective Date"). The actual date of Closing is referred to herein as the
"Closing Date."
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1.7 ALLOCATION. The Purchase Price shall be allocated among the Purchased
Assets for all purposes (including financial accounting and tax purposes) in
accordance with the allocation schedule set forth on SCHEDULE 1.7 attached
hereto.
1.8 PRORATION OF REVENUES AND EXPENSES.
(a) Seller shall be entitled to all revenues from, and responsible
for all expenses incurred in connection with, the Purchased Assets prior to the
Effective Date. Beginning the Effective Date, Purchaser shall be entitled to
all revenues from, and responsible for all expenses incurred in connection with,
the Purchased Assets.
(b) Seller shall be entitled to reimbursement from Purchaser (i) for
all expenses paid for by Seller on or after the Effective Date in connection
with the Purchased Assets and (ii) for all expenses of the Business paid for by
Seller prior to the Effective Date for periods on or after the Effective Date,
including the pro rata post-October 31, 1998 portion of any expenses which
properly apply to periods commencing prior to and ending on or after the
Effective Date (such amounts collectively referred to herein as the "Seller's
Reimbursement Amount").
(c) Purchaser shall be entitled to receive from Seller all amounts
received by Seller as prepayment for services provided to the customers of the
Business subsequent to the Effective Date (the "Purchaser's Prepayment Share").
(d) Within thirty (30) days after Closing, Seller shall provide
Purchaser, for Purchaser's review and approval, a detailed accounting of all
revenues and expenses of the Business, based upon which Seller and Purchaser
shall calculate the Seller's Reimbursement Amount and the Purchaser's Prepayment
Share. If the Seller's Reimbursement Amount is greater than the Purchaser's
Prepayment Share, Purchaser, within ten (10) business days after such
accounting, shall pay Seller in cash the amount by which the Seller's
Reimbursement Amount exceeds the Purchaser's Prepayment Share. If the
Purchaser's Prepayment Share is greater than the Seller's Reimbursement Amount,
Seller, within ten (10) business days after such accounting, shall pay Purchaser
in cash the amount by which the Purchaser's Prepayment Share exceeds the
Seller's Reimbursement Amount.
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(e) In the event Seller and Purchaser are unable to agree on the
calculations of the Seller's Reimbursement Amount and the Purchaser's
Prepayment Share within the thirty-day period after Closing, they shall
appoint the Auditors, selected according to the procedure set forth in
Section 1.4(b) above, to conduct a review audit and determine such amounts in
accordance with this Section 1.8. The decision of the Auditors shall be
binding upon Seller and Purchaser and the fees and expenses of the Auditors
shall be borne equally by Seller and Purchaser.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
To induce Purchaser to enter into this Agreement and consummate this
transaction, each of the Shareholders, jointly and severally, represents and
warrants to Purchaser that the statements contained in this Article II 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 II).
2.1 AUTHORIZATION OF TRANSACTION. Shareholders have 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 each of the Shareholders, enforceable in
accordance with its terms and conditions. Shareholders 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.
2.2 LEGAL, ACCOUNTING AND OTHER FEES AND EXPENSES. All of
Shareholders' legal, accounting and other fees, costs and expenses associated
with this transaction shall be borne by them; provided, however, Purchaser
and Seller shall share equally the costs associated with the Escrow
Agreement. None of the Shareholders has any liability or obligation to pay
any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
To induce Purchaser to enter into this Agreement and consummate this
transaction, Seller and each of the Shareholders, jointly and severally,
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represent and warrant to Purchaser 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).
3.1 ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Seller is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. Seller 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. Seller 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. SCHEDULE 3.1 has attached thereto
(i) true and correct copies of the Seller's Articles of Incorporation and all
amendments thereto; (ii) true and correct copies of the Seller's bylaws and
all amendments thereto; and (iii) a list of the current directors and
officers of Seller. Seller is not in default under or in violation of any
provision of its Articles of Incorporation or bylaws. Seller has no
predecessors.
3.2 SUBSIDIARIES. Seller has no direct or indirect interest in any
corporation, partnership, limited liability company, joint venture or other
entity. The Business is conducted by Seller and not through any other party
or entity.
3.3 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 Seller is subject or any
provision of the Articles of Incorporation or bylaws of Seller 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 Seller 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 3.3, Seller 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
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consummate the transactions contemplated by this Agreement, including without
limitation the assignment of the contracts and other agreements set forth on
SCHEDULE 3.15.
3.4 AUTHORIZATION OF TRANSACTION. Seller 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 Seller, enforceable in accordance with its terms and
conditions. Seller need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions contemplated by
this Agreement. This Agreement has been approved by the Board of Directors
and the shareholders of Seller, and no other corporate proceedings are
necessary to authorize Seller's execution and delivery of this Agreement or
Seller's consummation of the transactions contemplated hereby. Seller has
delivered, or prior to the shareholders' vote to approve the transactions
contemplated hereby will deliver, to its shareholders copies of the
Prospectus (as defined in Section 3.30 below), and Seller believes it has
provided adequate information to its shareholders, with which its
shareholders can make an informed decision regarding the approval of the
transactions contemplated hereby.
3.5 TITLE TO ASSETS. Seller has good and marketable title to, or a
valid leasehold interest in, the properties and assets used by it, located
on its premises, or shown on the Ending Balance Sheet or acquired after the
date thereof, free and clear of all liens, claims, security interests,
encumbrances or rights of others, except for the Permitted Encumbrances.
3.6 FINANCIAL STATEMENTS. Seller and Shareholders have provided or
shall provide prior to Closing copies of the following financial statements
(collectively, the "Financial Statements"): (i) unaudited financial
statements for the fiscal years ended December 31, 1996 and 1997 and for the
ten (10) months ended October 31, 1998; (ii) accounts payable and accounts
receivable current within two (2) business days of Closing; and (iii) the
Ending Balance Sheet. The Financial Statements have been prepared using the
accrual method of accounting and accurately reflect the financial condition
and operating results of Seller throughout the periods covered thereby.
3.7 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 Seller. Without
limiting the generality of the foregoing since that date:
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(a) Seller 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) Seller 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) Seller 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 Seller
is a party or by which it is bound;
(d) Seller has not imposed any security interest upon any of its
assets, tangible or intangible;
(e) Seller has not made any capital expenditure (or series of
related capital expenditures) having either an individual cost in excess of
$2,500, or an aggregate cost in excess of $10,000 or outside the ordinary
course of business;
(f) Seller 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) Seller 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) Seller has not delayed or postponed the payment of accounts
payable and other liabilities outside the ordinary course of business;
(i) Seller has not canceled, compromised, waived, or released any
right or claim (or series of related rights and claims);
(j) Seller has not granted any license or sublicense of any rights
under or with respect to any intellectual property;
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(k) there has been no change made or authorized in the Articles of
Incorporation or bylaws of Seller;
(l) Seller 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) Seller 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) Seller has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to its property;
(o) Seller 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) Seller 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) Seller has not granted any increase in the base compensation
of any of its directors, officers, and employees outside the ordinary course
of business;
(r) Seller 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 (iii)
Employee Welfare Benefit Plan (as such term is defined in ERISA Section 3(l))
or material fringe benefit plan or program (each an "Employee Benefit Plan");
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(s) Seller has not made any other change in employment terms for
any of its directors, officers, and employees outside the ordinary course of
business;
(t) Seller 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 Seller; and
(v) Seller has not committed to any of the foregoing.
3.8 UNDISCLOSED LIABILITIES. Seller has no liability (and there is no
basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against Seller giving or
that could give rise to any liability), except for (i) liabilities set forth
on the face of the July 31, 1998 balance sheet (rather than in any notes
thereto) and (ii) liabilities which have arisen after the July 31, 1998
balance sheet 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).
3.9 LEGAL COMPLIANCE. Seller, 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
Seller alleging any failure so to comply other than where the failure to
comply would not have a material adverse effect.
3.10 TAX MATTERS. Except as set forth on SCHEDULE 3.10 :
(a) Seller has filed all tax returns that it was required to file.
All such tax returns were true, correct and complete in all respects. All
taxes owed by Seller (whether or not shown on any tax return) have been paid.
Seller currently is not the beneficiary of any extension of time within
which to file any tax return. No claim has ever been made by an authority in
a jurisdiction where Seller does not file tax returns that it is or may be
subject to taxation by
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that jurisdiction. There are no security interests on any of the assets of
Seller that arose in connection with any failure (or alleged failure) to pay
any tax.
(b) Seller has withheld and paid all taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.
(c) Neither Shareholders nor any director or officer (or employee
responsible for tax matters) of Seller expects any authority to assess any
additional taxes for any period for which tax returns have been filed. There
is no dispute or claim concerning any tax liability of Seller either (i)
claimed or raised by any authority in writing or (ii) as to which the
Shareholders, directors and officers (and employees responsible for tax
matters) of Seller has knowledge based upon personal contact with any agent
of such authority. SCHEDULE 3.10 lists all federal, state, and local income
tax returns filed with respect to Seller for taxable periods ended on or
after December 31, 1995, indicates those tax returns that have been audited,
and indicates those tax returns that currently are the subject of audit.
Shareholders have delivered to Purchaser correct and complete copies of all
federal and state income tax returns, examination reports, and statements of
deficiencies assessed against or agreed to by Seller since December 31, 1995.
(d) Seller has not waived any statute of limitations in respect of
taxes or agreed to any extension of time with respect to a tax assessment or
deficiency.
(e) Seller has not made any payments, is not obligated to make any
payments, or is not a party to any agreement that under certain circumstances
could obligate it to make any payments that will not be deductible under Code
Section 280G. Seller has disclosed on its federal income tax returns all
positions taken therein that could give rise to a substantial understatement
of federal income tax within the meaning of Code Section 6662. Seller is not
a party to any tax allocation or sharing agreement. Seller (i) has not been
a member of an affiliated group filing a consolidated federal income tax
return or (ii) has no liability for the taxes of any person under Reg.
Section 1.1502-6 (or any similar provision of state or local law), as a
transferee or successor, by contract, or otherwise.
(f) The unpaid taxes of Seller (i) did not, as of the Ending Balance
Sheet, exceed the reserve for tax liability (rather than any reserve for
deferred taxes established to reflect timing differences between book and tax
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income) set forth on the face of the Ending Balance Sheet (rather than in any
notes thereto) and (ii) do not exceed that reserve as adjusted for the
passage of time through the Closing Date in accordance with the past custom
and practice of Seller in filing its tax return.
3.11 REAL PROPERTY AND PERSONAL PROPERTY. SCHEDULE 3.11 sets forth a
list containing a description of all interests in Real Property (including,
without limitation, leasehold interests) and Personal Property owned or
leased by Seller and utilized in the conduct of the Business. Seller has good
and marketable title to (or leasehold interests in) and rightful possession
of all of its Real and Personal Property, tangible and intangible, including
those reflected in the Ending Balance Sheet and all assets acquired by Seller
since the date of the Ending Balance Sheet. Such Real and Personal Property
are owned by Seller free and clear of any liens, encumbrances, security
interests, claims or rights of another (including any rights of a subsidiary
or other affiliate). Seller's systems are fully operational; and outdated or
defunct equipment constitute an immaterial part of the Purchased Assets. The
Purchased Assets reflected in the Ending Balance Sheet, and any
fully-depreciated assets, acquired since the date of the Ending Balance
Sheet, constitute all the assets of Seller and constitute all the assets and
properties that are necessary to permit Purchaser to continue to conduct the
Business after the Closing in the same manner in which the Business is
presently being conducted. No covenants, easements, rights-of-way, or
regulations of record impair the uses of the respective properties of Seller
for the purposes for which they are now operated. The leases identified on
SCHEDULE 3.11 are in full force and effect and have not been breached or
terminated, modified, amended or superseded by any agreement, contract or
commitment not identified therein.
3.12 INTELLECTUAL PROPERTY.
(a) Seller owns or has the rights to use pursuant to license,
sublicense, agreement, or permission all intellectual property necessary for
the operation of the Business of Seller as presently conducted. Each item of
intellectual property owned or used by Seller immediately prior to the
Closing hereunder, as set forth on SCHEDULE 3.12, except for certain assets
expressly excluded from this representation on SCHEDULE 3.12, will be owned
or available for use by Purchaser on identical terms and conditions
immediately subsequent to the Closing hereunder. Seller has taken all
necessary actions to maintain and protect each item of intellectual property
that it owns or uses.
(b) Seller has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any intellectual
property rights of third parties, and Shareholders, directors and officers
(and employees with responsibility for intellectual property matters) of
Seller have not received any charge, complaint, claim, demand, or notice
alleging any such interference,
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infringement, misappropriation, or violation (including any claim that Seller
must license or refrain from using any intellectual property rights of any
third party). To the knowledge of the Shareholders, directors and officers
(and employees with responsibility for intellectual property matters) of
Seller, no third party has interfered with, infringed upon, misappropriated,
or otherwise come into conflict with any intellectual property rights of
Seller.
(c) SCHEDULE 3.12 identifies each patent or registration which has
been issued to Seller with respect to any of its intellectual property,
identifies each pending patent application or application for registration
which Seller has made with respect to any of its intellectual property, and
identifies each license, agreement, or other permission which Seller has
granted to any third party with respect to any of its intellectual property
(together with any exceptions). Seller and Shareholders have delivered to
Purchaser true, correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as
amended to date) and have made available to Purchaser true, correct and
complete copies of all other written documentation evidencing ownership and
prosecution (if applicable) of each such item. SCHEDULE 3.12 also identifies
each trade name or unregistered trademark used by Seller in connection with
its Business. With respect to each item of intellectual property required to
be identified on SCHEDULE 3.12:
(i) Seller possesses all right, title, and interest in and
to the item, free and clear of any security interest, license, or other
restriction;
(ii) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the knowledge of the
Shareholders, directors and officers (and employees with responsibility for
intellectual property matters) of Seller, is threatened which challenges the
legality, validity, enforceability, use, or ownership of the item; and
(iv) Seller has not agreed to indemnify any person for or
against any interference, infringement, misappropriation, or other conflict
with respect to the item.
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(d) SCHEDULE 3.12 identifies each item of intellectual property
that any third party owns and that Seller uses pursuant to license,
sublicense, agreement, or permission. The Seller and Shareholders have
delivered to Purchaser true, correct and complete copies of all such
licenses, sublicenses, agreements, and permissions (as amended to date).
With respect to each item of intellectual property required to be identified
on SCHEDULE 3.12, except for certain assets expressly excluded from this
representation on SCHEDULE 3.12:
(i) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and in full force
and effect;
(ii) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby;
(iii) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(iv) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(v) with respect to each sublicense, the representations and
warranties set forth in subsections (i) through (iv) above are true and
correct with respect to the underlying license;
(vi) the underlying item of intellectual property is not
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge;
(vii) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the knowledge of the
Shareholders, directors and officers (and employees with responsibility for
intellectual property matters) of Seller, is threatened which challenges the
legality, validity, or enforceability of the underlying item of intellectual
property; and
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(viii) Seller has not granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission.
(e) Except as set forth on SCHEDULE 3.12, Seller has no patents or
registrations which have been issued to or applied for by Seller with respect
to any of its intellectual property. Seller has not granted any licenses,
agreements, or permission to any third party with respect to any of its
intellectual property. SCHEDULE 3.12 identifies each domain name, IP
address, trade name or unregistered trademark used by Seller in connection
with any of its Business.
(f) Seller will not interfere with, infringe upon, misappropriate,
or otherwise come into conflict with, any intellectual property rights of
third parties as a result of the continued operation of its Business as
presently conducted.
3.13 TANGIBLE ASSETS. Seller owns or leases all buildings, machinery,
equipment, and other tangible assets necessary for the conduct of its
Business as presently conducted. To the best knowledge of Seller and
Shareholders, except for certain immaterial assets, each such tangible asset
is free from defects (patent and latent), has been maintained in accordance
with normal industry practice, is in good operating condition and repair, and
is suitable for the purposes for which it presently is used, all subject to
normal wear and tear.
3.14 INVENTORY. The inventory of Seller consists of supplies,
manufactured and purchased parts, and finished goods, all of which are
merchantable and fit for the purpose for which it was procured or
manufactured.
3.15 CONTRACTS. SCHEDULE 3.15 lists the following contracts and all
other material agreements related to the Business to which Seller is a party:
(a) any agreement (or group of related agreements) for the lease
of personal property to or from any person providing for lease payments in
excess of $10,000 per annum;
(b) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of more than one year, result
in a loss to Seller, or involve consideration in excess of $10,000;
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(c) any agreement concerning a partnership or joint venture;
(d) 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;
(e) any agreement concerning confidentiality or noncompetition;
(f) any agreement with Shareholders or their affiliates (other than
Seller);
(g) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or arrangement for
the benefit of Seller's current or former directors, officers, and employees;
(h) any collective bargaining agreement;
(i) any agreement under which it has advanced or loaned any amount to
any of Seller's directors, officers, and employees outside the ordinary course
of business;
(j) 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 Seller; or
(k) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $10,000.
Shareholders have delivered to Purchaser a true, correct and complete copy of
each written agreement listed on SCHEDULE 3.15 (as amended to date) and a
written summary setting forth the terms and conditions of each oral agreement
referred to on SCHEDULE 3.15. 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
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the agreement; and (iv) no party has repudiated any provision of the
agreement.
3.16 NOTES AND ACCOUNTS RECEIVABLE. All loans, notes and accounts
receivable of Seller are reflected properly on the books and records, are valid
receivables subject to no setoffs or counterclaims, are current and collectible,
and will be collected in accordance with their terms at their recorded amounts,
less an allowance for doubtful accounts of two percent (2%) of total accounts
receivable on an annualized basis, and, except as set forth on SCHEDULE 1.3, are
free and clear of any security interest, lien, encumbrance or other charge.
3.17 POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of Seller.
3.18 INSURANCE. SCHEDULE 3.18 sets forth the following, information with
respect to each insurance policy (including policies providing property,
casualty, liability, and workers' compensation coverage and bond and surety
arrangements) to which Seller has been a party, a named insured, or otherwise
the beneficiary of coverage at any time within the past two (2) years:
(a) the name, address, and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(c) the policy number and the period of coverage;
(d) the scope and amount of coverage; and
(e) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (i) the policy is legal, valid,
binding, enforceable, and in full force and effect; (ii) unless expressly
excluded on SCHEDULE 3.18, 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 Seller
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
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the policy has repudiated any provision thereof. SCHEDULE 3.18 describes any
self-insurance arrangements affecting Seller.
3.19 LITIGATION. SCHEDULE 3.19 sets forth each instance in which Seller
(i) is subject to any outstanding injunction, judgment, order, decree, ruling,
or charge or (ii) is a party or, to the knowledge of Shareholders, directors and
officers (and employees with responsibility for litigation matters) of Seller,
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 3.19 could result in a material adverse change in the business,
financial condition, operations, results of operations, or future prospects of
Seller. None of the Shareholders, directors and officers (and employees with
responsibility for litigation matters) of Seller has any reason to believe that
any such action, suit, proceeding, hearing, or investigation may be brought or
threatened against Seller.
3.20 PRODUCT WARRANTY. To the knowledge of Shareholders and the
directors, officers and management personnel of Seller, each product
manufactured, sold, leased, or delivered by Seller has been in conformity
with all applicable contractual commitments and all express and implied
warranties, and Seller has no liability (and there is no basis for any
present or to the knowledge of Shareholders and the directors, officers and
management, future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against Seller giving rise to any liability) for
replacement or repair thereof or other damages in connection therewith. No
product manufactured, sold, leased, or delivered by Seller is subject to any
guaranty, warranty, or other indemnity beyond the applicable standard terms
and conditions of sale or lease. SCHEDULE 3.20 includes copies of the
standard terms and conditions of sale or lease for Seller (containing
applicable guaranty, warranty, and indemnity provisions).
3.21 PRODUCT LIABILITY. To the knowledge of Shareholders and the
directors, officers and management personnel of Seller, Seller has no liability
(and there is no basis for any present or to the knowledge of Shareholders, its
directors, officers and management future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against Seller giving, rise
to any liability) arising out of any injury to individuals or property as a
result of the ownership, possession, or use of any product manufactured, sold,
leased, or delivered by Seller.
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3.22 EMPLOYEES. To the knowledge of the Shareholders, directors and
officers (and employees with responsibility for employment matters) of Seller,
no executive, key employee, or group of employees has any plans to terminate
employment with Seller. Seller is not a party to or bound by any collective
bargaining agreement, nor has Seller experienced any strikes, grievances, claims
of unfair labor practices, or other collective bargaining disputes. Seller has
not committed any unfair labor practice. None of the Shareholders, directors
and officers (and employees with responsibility for employment matters) of
Seller 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
Seller.
3.23 EMPLOYEE BENEFITS.
(a) SCHEDULE 3.23 lists each Employee Benefit Plan that Seller
maintains or to which Seller contributes.
(i) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in form and in operation
in all material respects with the applicable requirements of ERISA,
the Code, and other applicable laws.
(ii) All required reports and descriptions (including Form
5500 Annual Reports, Summary Annual Reports, PBGC-l's, and Summary
Plan Descriptions) have been filed or distributed appropriately with
respect to each such Employee Benefit Plan. The requirements of Part
6 of Subtitle B of Title I of ERISA and of Code Section 4980B have
been met with respect to each such Employee Benefit Plan which is an
Employee Welfare Benefit Plan.
(iii) All contributions (including all employer
contributions and employee salary reduction contributions) which are
due have been paid to each such Employee Benefit Plan which is an
Employee Pension Benefit Plan and all contributions for any period
ending on or before the Closing Date which are not yet due have been
paid to each such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of Seller. All premiums
or other payments for all periods ending on or before the Closing Date
have been paid with respect to each such Employee Benefit Plan which
is an Employee Welfare Benefit Plan.
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(iv) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan meets the requirements of a "qualified plan"
under Code Section 401(a) and Seller has received, within the last two
(2) years, a favorable determination letter from the Internal Revenue
Service, and since such date no terms or provisions of such Employee
Benefit Plans have been modified, revoked or terminated in a manner
that is inconsistent with the qualified plan status of such Plan. To
the knowledge of Shareholders, directors and officers and employees
responsible for Employee Benefit Plans are not aware of any facts that
would result in disqualification of any Employee Benefit Plan.
(v) Seller has no Employee Benefit Plan which is a defined
benefit Employee Pension Benefit Plan.
(vi) Shareholders have delivered to Purchaser correct and
complete copies of the plan documents and summary plan descriptions,
the most recent determination letter received from the Internal
Revenue Service, the most recent Form 5500 Annual Report, and all
related trust agreements, insurance contracts, and other funding
agreements which implement each such Employee Benefit Plan.
(b) With respect to each Employee Benefit Plan that Seller maintains
or ever has maintained or to which it contributes, ever has contributed, or ever
has been required to contribute there have been no Prohibited Transactions (as
such term is defined in ERISA Section 406 and Code Section 4975) with respect
to any such Employee Benefit Plan. To the knowledge of Shareholders, its
directors, officers and employees responsible for employee benefits, no
Fiduciary has any liability for breach of fiduciary duty or any other failure to
act or comply in connection with the administration or investment of the assets
of any such Employee Benefit Plan. No action, suit, proceeding, hearing, or
investigation with respect to the administration or the investment of the assets
of any such Employee Benefit Plan (other than routine claims for benefits) is
pending or, to the knowledge of Shareholders, directors and officers (and
employees with responsibility for employee benefits matters) of Seller,
threatened. None of the Shareholders, directors and officers (and employees
with responsibility for employee benefits matters) of Seller has any knowledge
of any basis for any such action, suit, proceeding, hearing, or investigation.
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(c) Seller does not contribute to, never has contributed to, or never
has been required to contribute to any Multiemployer Plan or has any liability
(including withdrawal liability) under any Multiemployer Plan.
(d) Seller does not maintain or has never maintained or contributes,
ever has contributed, or ever has been required to contribute to any Employee
Welfare Benefit Plan providing medical, health, or life insurance or other
welfare-type benefits for current or future retired or terminated employees,
their spouses, or their dependents (other than in accordance with Code Section
4980B).
3.24 GUARANTIES. Except as set forth on SCHEDULE 3.24 attached hereto,
Seller is not a guarantor, nor is it otherwise liable for any liability or
obligation (including indebtedness) of any other person.
3.25 ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS. Except as set forth on
SCHEDULE 3.25:
(a) Seller and its affiliates have complied and are in compliance
with all federal, state, local and foreign statutes, regulations, ordinances and
other provisions having the force or effect of law, all judicial and
administrative orders and determinations, all contractual obligations and all
common law concerning public health and safety, worker health and safety, and
pollution or protection of the environment, including without limitation all
those relating to the presence, use, production, operation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of any
hazardous materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise or radiation, each as
amended and as now or hereafter in effect ("Environmental, Health, and Safety
Requirements").
(b) Without limiting the generality of the foregoing, Seller and its
affiliates have obtained and complied with, and are in compliance with, all
permits, licenses and other authorizations that are required pursuant to
Environmental, Health, and Safety Requirements for the occupation of its
facilities and the operation of its Business. SCHEDULE 3.25 lists all such
permits, licenses and other authorizations.
(c) Neither Seller nor its affiliates have received any written or
oral notice, report or other information regarding any actual or alleged
violation
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of Environmental, Health, and Safety Requirements, or any liabilities or
potential liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise), including any investigatory, remedial or corrective obligations,
relating to any of them or its facilities arising under Environmental,
Health, and Safety Requirements.
(d) None of the following exists at any property or facility owned or
operated by Seller: (1) underground storage tanks, (2) asbestos-containing
material in any form or condition, (3) materials or equipment containing
polychlorinated biphenyls, or (4) landfills, surface impoundments, or disposal
areas.
(e) None of Seller or its affiliates have treated, stored, disposed
of, arranged for or permitted the disposal of, transported, handled, or released
any substance, including without limitation any hazardous substance, or owned or
operated any property or facility (and no such property or facility is
contaminated by any such substance) in a manner that has given or would give
rise to liabilities, including any liability for response costs, corrective
action costs, personal injury, property drainage, natural resources damages or
attorney fees, pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), the Solid Waste
Disposal Act, as amended ("SWDA") or any other Environmental, Health, and Safety
Requirements.
(f) Neither this Agreement nor the consummation of the transaction
that is the subject of this Agreement will result in any obligations for site
investigation or cleanup, or notification to or consent of government agencies
or third parties, pursuant to any of the so-called "transaction-triggered" or
"responsible property transfer" Environmental, Health, and Safety Requirements.
(g) Neither Seller nor its affiliates have, either expressly or by
operation of law, assumed or undertaken any liability, including without
rotation any obligation for corrective or remedial action, of any other person
relating to Environmental, Health, and Safety Requirements.
(h) No facts, events or conditions relating to the past or present
facilities, properties or operations of Seller or its affiliates will prevent,
hinder or limit continued compliance with Environmental, Health, and Safety
Requirements, give rise to any investigatory, remedial or corrective obligations
pursuant to Environmental, Health, and Safety Requirements, or give rise to
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any other liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise) pursuant to Environmental, Health, and Safety Requirements, including
without limitation any relating to onsite or offsite releases or threatened
releases of hazardous materials, substances or wastes, personal injury, property
damage or natural resources drainage.
3.26 CERTAIN BUSINESS RELATIONSHIPS WITH SELLER. Except as set forth on
SCHEDULE 3.26, Shareholders and their affiliates have not been involved in any
business arrangement or relationship with Seller within the past twelve (12)
months, and Shareholders and its affiliates do not own any asset, tangible or
intangible, which is used in the Business of Seller.
3.27 RELATIONSHIPS WITH SUPPLIERS AND CARRIERS. Except as set forth on
SCHEDULE 3.27, Seller has good relationships with its suppliers and network
carriers and is not involved in any disputes, disagreements or proceedings
involving any supplier or carrier.
3.28 CUSTOMERS. SCHEDULE 3.28 sets forth a list of customers as of the
date of the Ending Balance Sheet. Seller is not involved in any disputes,
disagreements or proceedings involving any of such customers and, to Seller's
and Shareholders' best knowledge, monthly attrition of customers will not exceed
2.1%.
3.29 LEGAL, ACCOUNTING AND OTHER FEES AND EXPENSES. All of Seller's
legal, accounting and other fees, costs and expenses associated with this
transaction shall be borne by Seller; provided, however, Purchaser and Seller
shall share equally the costs associated with the Escrow Agreement. Seller
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.
3.30 RECEIPT OF DISCLOSURE DOCUMENTS. Seller has received and carefully
reviewed, and understands the information contained in, the documents identified
below (including the risk factors contained therein) and all other documents
Seller has requested from Purchaser (collectively, the "Disclosure Documents").
In evaluating the suitability of the Acquisition and the resulting acquisition
of the Purchaser Shares and all other rights, whether contingent or fixed, to
receive Purchaser Shares (collectively the "Securities") (the Acquisition and
resulting acquisition of the Securities hereinafter referred to as the
"investment in the Securities"), Seller has not relied upon any representations
or other information (whether oral or written) from Purchaser,
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its officers, directors, or employees or from any other person other than as
set forth herein and in the Disclosure Documents.
The Disclosure Documents shall include, but not be limited to, the
following: (i) Purchaser's Annual Report on Form 10-KSB for the year ended
December 31, 1997, (ii) Purchaser's Proxy Statement for its annual meeting held
on March 12, 1998, (iii) Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1998 and June 30, 1998, and Amendment to the Quarterly Report on Form
10-QSB/A-1 for the quarter ended March 31, 1998, (iv) a prospectus dated
November 19, 1998 with respect to the Purchaser Shares to be issued pursuant to
the terms of this Agreement (the "Prospectus"), (v) 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
Purchaser on or about October 14, 1998 with respect to claims asserted by ICC.
3.31 DISCLOSURE. The representations and warranties contained in this
Article III 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 III not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller and Shareholders that the
statements contained in this Article IV 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 IV).
4.1 ORGANIZATION. Purchaser is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation.
4.2 AUTHORIZATION OF TRANSACTION. Purchaser 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
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obligation of Purchaser, enforceable in accordance with its terms and
conditions.
4.3 NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Purchaser is subject or any provision of
its charter or bylaws.
4.4 BROKERS' FEES. Purchaser has no liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Seller or Shareholders
could become liable or obligated.
4.5 PURCHASER COMMON STOCK. When delivered to Seller at Closing, the
Purchaser Common Stock will be duly and validly authorized and issued, fully
paid and nonassessable, free from all stamp taxes, liens and charges and will
have been issued in compliance with applicable federal and state securities
laws.
ARTICLE V
COVENANTS
5.1 PRE-CLOSING COVENANTS. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) GENERAL. Each of the Parties will use his 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, but not waiver, of the closing conditions set
forth in Article VI below).
(b) NOTICES AND CONSENTS. Seller will, and Shareholders will cause
Seller to, give any notices to third parties, and Seller will, and Shareholders
will cause Seller to, use its best efforts to obtain any third party consents,
that are required or that Purchaser may request in connection with this
transaction. Each of the Parties will (and Shareholders will cause Seller 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.
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(c) OPERATION OF BUSINESS. After the date hereof, Seller 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 Purchaser.
Without limiting the generality of the foregoing:
(i) Seller will not authorize or effect any change in its
Articles of Incorporation or bylaws;
(ii) Seller 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) Seller 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) Seller 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 Seller other than liabilities arising
in the ordinary course of business;
(v) Seller 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) Seller will not make any capital investment in, make any
loan to, or acquire the securities or assets of any other person;
(vii) Seller will not make any change in employment terms for
any of its directors, officers, and employees;
(viii) Seller 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.
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(d) PRESERVATION OF BUSINESS. Seller will, and Shareholders will
cause Seller to, keep its Business, properties and goodwill substantially
intact, including its present operations, physical facilities, working
conditions, and relationships with lessors, licensors, suppliers, customers, and
employees.
(e) FULL ACCESS. Seller will permit, and Shareholders will cause
Seller to permit, representatives of Purchaser 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
Seller. Seller will cause its independent accountants to make available their
work papers with respect to Seller and to otherwise provide such assistance as
is reasonably requested by Purchaser.
(f) NOTICE OF DEVELOPMENTS. Seller and Shareholders will give prompt
written notice to Purchaser of any adverse development causing a breach or a
potential breach of any of the representations and warranties in Articles II and
III above. No disclosure by Shareholders or Seller or discovery by Purchaser
shall be deemed to amend or supplement any Schedule hereto or to prevent or cure
any misrepresentation, breach of warranty, or breach of covenant.
(g) EXCLUSIVITY. Seller will not, and Shareholders will not cause or
permit Seller 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
Seller (including, any acquisition structured as a merger, consolidation, or
share exchange) or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any person to do or seek
any of the foregoing. Shareholders will not vote the shares of capital stock
they own of the Seller in favor of any such acquisition structured as a merger,
consolidation, or share exchange other than for this transaction. Seller and
Shareholders will notify Purchaser immediately if any person makes any proposal,
offer, inquiry, or contact with respect to any of the foregoing.
(h) REPAYMENT. At or before Closing, Shareholders and any of their
affiliates shall repay all advances from and notes and receivables owing to
Seller from such person.
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(i) FINANCIAL STATEMENTS. At Closing, Seller and Shareholders shall
deliver Financial Statements certified by each of the Seller and Shareholders as
true, correct and complete, and consistent with the books and records of Seller
(which books and records are true, correct and complete).
(j) INSURANCE POLICIES. At or before Closing, Seller shall have
Purchaser named as an additional insured on all insurance policies covering the
Purchased Assets.
5.2 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
Section 13 below). Shareholders and Seller acknowledge and agree that from and
after Closing Purchaser will be entitled to possession of all documents, books,
records (including tax records), agreements, and financial data of any sort
relating to the Business, with the exception of the corporate charter and minute
books of Seller; provided, however, that all such documents, books and records
shall for a period of three (3) years after the Closing be available to Seller
and Seller's representatives, upon reasonable notice and at all reasonable
times, for inspection, audit and examination for tax and accounting purposes.
(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 Seller, 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 VII below).
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(c) TRANSITION. Seller and 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 Seller from maintaining the same business relationships with Seller
after Closing as it maintained with Seller prior to the Closing. Shareholders
will refer all customer inquiries relating to the Business of Seller to
Purchaser from and after the Closing.
(d) CONFIDENTIALITY. Each of the Shareholders and Seller will treat
and hold as confidential all of the confidential information of Purchaser (the
"Confidential Information"), refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to
Purchaser or destroy, at the request and option of Purchaser, all tangible
embodiments (and all copies) of the Confidential Information which are in his or
its possession. In the event that Seller or any 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, Seller or such Shareholder
will notify Purchaser promptly of the request or requirement so that Purchaser
may seek an appropriate protective order or waive compliance with the provisions
of this Section 5.2(d). If, in the absence of a protective order or the receipt
of a waiver hereunder, Seller or such Shareholder is, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal or else stand
liable for contempt, Seller or such Shareholder may disclose such Confidential
Information to the tribunal; PROVIDED, HOWEVER, that Seller or such Shareholder
shall use his/its best efforts to obtain, at the request of Purchaser, an order
or other assurance that confidential treatment will be accorded to such portion
of the Confidential Information required to be disclosed as Purchaser 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.
Seller and each of the 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. Seller and each of the
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. Seller and
each of the Shareholders hereby agree that all Confidential
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Information, whether furnished before or after the date of this Agreement,
shall be treated confidentially.
(e) NON-SOLICITATION. Seller and each of the Shareholders agree
that, for a period of two (2) years after the Closing, he/she/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 Seller, Purchaser or an affiliate company
thereof, other than the Shareholders, to terminate his, her or its employment,
agency or contractor relationship with Purchaser or an affiliate company
thereof, or (ii) hire or attempt to hire any employee, agent or contractor of
Purchaser or an affiliate company thereof, other than the Shareholders.
Seller and each of the Shareholders agree that, for a period of two (2)
years after the Closing, he/she/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 Seller and/or Purchaser without the prior written consent
of Purchaser, which consent shall not be unreasonably withheld, following
written notice by Seller or Shareholder to Purchaser detailing the name of the
customer and the nature of the proposed relationship. It shall not be
unreasonable for Purchaser to withhold consent if such relationship could cause
or result in any adverse or detrimental impact to Purchaser. The term
"customer" includes, but is not limited to, persons or entities located within
the Geographical Market (as defined below) who are customers of Seller or
Purchaser, as the case may be.
For purposes of this Agreement "Geographical Market" shall mean the United
States, Mexico and Canada. Seller and each Shareholder hereby acknowledge that
Purchaser 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. Seller and each
Shareholder further acknowledge that Purchaser plans expansions into the
international market, including Mexico and Canada, and continued growth both
within and outside the United States. Seller and each Shareholder further
acknowledge that Purchaser's acquisition of the Purchased Assets as contemplated
by this
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Agreement evidences Purchaser's intent to integrate the Business and its
operations as an integral part of Purchaser's plans for growth and expansion.
(f) COVENANT NOT TO COMPETE. Seller and each Shareholder agree that,
for a period of two (2) years following Closing, he/she/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 headquartered in the State of Colorado
that is substantially similar to the type of business conducted by Purchaser or
any affiliate thereof; PROVIDED, HOWEVER, the foregoing shall not preclude Todd
Keener from performing network management and/or system integration services for
a company which is not a competitor of Purchaser or any of its affiliates.
Notwithstanding the foregoing, Seller and each Shareholder shall be entitled to
own stock in publicly traded companies whose products and/or services compete
with those offered by Purchaser, so long as said ownership does not exceed two
percent (2%) of any said publicly traded company.
Seller and each Shareholder agree that the covenants he/she/it has made in
this Section 5.2 are reasonable with respect to their duration, geographical
area and proscription. Seller and each Shareholder further agree that the
covenants he/she/it has made in this Section 5.2 shall be construed as an
agreement independent of any other provision of this Agreement. Hence, the
covenants made in this Section 5.2 shall survive the termination of this
Agreement. Moreover, the existence of any claim or cause of action of Seller
and/or Shareholders against Purchaser, whether or not predicated upon the terms
of this Agreement, shall not constitute a defense to the enforcement by
Purchaser of these covenants.
(g) RELEASE OF LIENS. As soon as practicable upon Closing, Seller
and Shareholders shall obtain releases of all liens on the Purchased Assets, as
set forth on SCHEDULE 1.3 attached hereto, except for any that are Assumed
Liabilities, and shall provide Purchaser with evidence of such releases
satisfactory to Purchaser.
(h) PUBLIC INFORMATION REQUIREMENT. Purchaser shall use its best
efforts to comply with the current public information requirement of Rule 144(c)
of the General Rules and Regulations promulgated under the Securities Act for
two (2) years from the date of issuance of the Purchaser Shares.
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ARTICLE VI
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
6.1 CONDITIONS TO OBLIGATION OF PURCHASER. The obligation of Purchaser 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 Acquisition shall have received the
requisite approval of the shareholders of Seller;
(b) Seller shall have procured all third party consents as set forth
on SCHEDULE 3.3;
(c) Seller shall have procured all necessary governmental consents;
(d) all of the representations and warranties set forth in Articles
II and III above shall be true and correct in all respects at and as of the
Closing Date and Purchaser shall have received a certificate of Seller and the
Shareholders in the form of EXHIBIT B hereto to that effect;
(e) Shareholders and Seller shall have performed and complied with
all of its covenants hereunder in all material respects through the Closing;
(f) Purchaser shall have received a network schedule listing all
lines, carriers, rates, and all other pertinent information concerning Seller's
network as of the date of the Ending Balance Sheet;
(g) 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, (ii)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation or (iii) affect adversely the right of Purchaser to own
the Purchased Assets, (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);
(h) Seller shall deliver to Purchaser, a Certificate of the Secretary
of Seller dated as of Closing certifying that the following are true, correct
and complete copies and the originals thereof: Articles of Incorporation of
Seller, as amended, and certified by the Colorado Secretary of State, bylaws
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(as amended to date), resolutions of the board of directors recommending
approval of the Acquisition and all transactions contemplated by this
Agreement to the Shareholders and resolutions approving the Acquisition and
all transactions contemplated by this Agreement;
(i) Shareholders and Seller shall have delivered to Purchaser a
certificate to the effect that each of the conditions specified above in this
Section 6.1 have been satisfied in all respects, in the form attached hereto as
EXHIBIT B;
(j) Todd Keener shall have delivered to Purchaser an Employment
Agreement by and between him and Purchaser, substantially in the form attached
hereto as EXHIBIT C;
(k) Danette Keener shall have delivered to Purchaser an Employment
Agreement by and between her and Purchaser, substantially in the form attached
hereto as EXHIBIT D;
(l) Purchaser shall have received from counsel to Seller an opinion
in substantially the form attached hereto as EXHIBIT E addressed to Purchaser;
(m) Seller shall have terminated all of its employees;
(n) Purchaser shall have procured the approval of its Boards of
Directors of the Acquisition as contemplated by this Agreement;
(o) Seller shall have at Closing at least 1,500 non-dedicated
accounts and at least 9 dedicated access accounts delivering monthly revenues of
at least $35,250, with recurring monthly revenues of at least $32,250;
(p) Purchaser shall have received unaudited financial statements of
Seller for the periods reasonably requested by Purchaser;
(q) all actions to be taken by Shareholders and Seller in connection
with consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be satisfactory in form and substance to Purchaser; and
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(r there shall have been no material adverse change in the business,
financial condition, operations, results of operations or future prospects of
Seller since July 31, 1998.
Purchaser may waive any condition specified in this Section 6.1 only if it
executes a writing so stating, at or prior to the Closing. Purchaser's
knowledge of a breach of a representation, warranty or covenant shall not be
considered as a waiver of any of the above conditions.
6.2 CONDITIONS TO OBLIGATION OF SHAREHOLDERS AND SELLER. The obligation
of Shareholders and Seller 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
IV above shall be true and correct in all material respects at and as of the
Closing Date;
(b) Purchaser shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing; and
(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).
Shareholders and Seller may waive any condition specified in this Section 6.2 if
they execute a writing so stating at or prior to the Closing.
ARTICLE VII
REMEDIES FOR BREACH
7.1 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 or covenant at the time of
Closing) and continue in full force and effect until three (3) years from the
date of Closing.
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7.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF PURCHASER. Seller and
Shareholders shall indemnify, defend and hold harmless Purchaser and its
officers, directors, employees, partners, shareholders, agents and affiliates
and the officers, directors, employees, partners, shareholders and agents of
such affiliates (collectively, the "Purchaser Indemnified Parties") 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
("Adverse Consequences") the Purchaser Indemnified Parties 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) Shareholders' or Seller's breach (or the allegation by any third
party of facts that, if true, would mean either has breached) of any of the
representations, warranties, and covenants contained in this Agreement; (ii)
except as expressly provided herein to the contrary, any liability or obligation
of any nature, accruing prior to the Closing Date; (iii) any claim by any
shareholder or Seller with respect to the transactions contemplated by this
Agreement, except for any claim arising out of a breach by Purchaser of its
representations, warranties or obligations hereunder; and (iv) any actions,
judgments, costs and expenses (including reasonable attorney fees and all other
reasonable expenses incurred in investigating, preparing or defending any
litigation or proceeding, commenced or threatened) incident to any of the
foregoing; PROVIDED, HOWEVER, that Seller and Shareholders shall not have any
obligation to indemnify the Purchaser Indemnified Parties from and against any
such Adverse Consequences until such Adverse Consequences in aggregate exceed
$1,000 (at which point Seller and Shareholders will be obligated to indemnify
the Purchaser Indemnified Parties from and against all such claims for
indemnification relating back to the first dollar). Each Purchaser Indemnified
Party will give prompt notice to Seller of any claim or condition to which the
foregoing indemnification covenant relates.
7.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF SELLER AND SHAREHOLDERS. In
the event Purchaser breaches (or in the event any third party alleges facts
that, if true, would mean either has breached) any of its representations,
warranties, and covenants contained herein, then Purchaser shall indemnify
Seller and Shareholders (collectively, the "Seller Indemnified Parties") from
and against the entirety of any Adverse Consequences the Seller Indemnified
Parties may suffer through and after the date of the claim for
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indemnification (including any Adverse Consequences the Seller Indemnified
Parties may suffer after the end of any applicable survival period)
resulting, from, arising, out of, relating to, in the nature of, or caused by
the breach (or the alleged breach); PROVIDED; HOWEVER, that Purchaser shall
not have any obligation to indemnify the Seller Indemnified Parties from and
against any such Adverse Consequences until such Adverse Consequences in
aggregate exceed $1,000 (at which point Purchaser will be obligated to
indemnify the Seller Indemnified Parties from and against all such claims for
indemnification relating back to the first dollar). Each Seller Indemnified
Party will give prompt notice to Purchaser of any claim or condition to which
the foregoing indemnification covenant relates.
7.4 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 VII, then the Indemnified 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 15 days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim, (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
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<PAGE>
Party will not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party (not to be withheld unreasonably).
(c) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 7.4(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 7.4(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 VII.
7.5 REMEDIES. The foregoing indemnification provisions are in addition
to, and not in derogation of, any statutory, equitable, or common law remedy
(including without limitation any such remedy arising under Environmental,
Health, and Safety Requirements) any Party may have with respect to Seller, or
the transactions contemplated by this Agreement. Without limiting the
generality of the foregoing, Purchaser shall be entitled, but not required, to
setoff any amounts due either pursuant to this Article VII against any and all
amounts payable to Seller and Shareholders under this Agreement or otherwise.
7.6 ARBITRATION. If the Parties are unable to resolve any dispute arising
under this Article VII, then such dispute shall be settled by arbitration by a
panel of three (3) arbitrators, all of whom shall be persons with at least ten
(10) years' experience in significant corporate, business or accounting matters
and familiar with the purchase and sale of business concerns, in accordance with
the rules of the American Arbitration Association. The expenses of the
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prevailing party, including attorneys' fees and arbitration expenses, shall be
paid by the losing party. If each party prevails in part, the arbitrators will
determine the appropriate allocation of expenses among the parties. Judgment
upon the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. The parties may pursue all other remedies with respect to
any claim not subject to arbitration.
ARTICLE VIII
TERMINATION
8.1 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) Purchaser may terminate this Agreement by giving written notice
to Seller at any time prior to the Closing Date (i) in the event Seller or
Shareholders has breached any representation, warranty, or covenant contained in
this Agreement or (ii) if the Closing shall not have occurred on or before
December 31, 1998, by reason of the failure of any condition precedent under
Section 6.1 hereof (unless the failure results primarily from a breach by
Purchaser of any representation, warranty, or covenant contained in this
Agreement). Purchaser's knowledge of the existence of a condition that would
entitle Purchaser 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.
8.2 EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 8.1(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach), except that the
provisions contained in Section 5.2 above shall survive termination.
ARTICLE IX
MISCELLANEOUS
9.1 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. Seller shall not issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of Purchaser both before and
after Closing.
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9.2 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.
9.3 ENTIRE AGREEMENT. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
9.4 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
or its rights, interests, or obligations hereunder without the prior written
approval of Purchaser and Seller.
9.5 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.
9.6 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.
9.7 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be deemed duly given, if
addressed to the intended recipient as set forth below, (i) two (2) business
days after it is sent, if sent by registered or certified mail, return receipt
requested, postage prepaid, (ii) upon delivery, if personally delivered, (iii)
upon confirmation of transmission, if sent via facsimile, or (iv) one (1) day
after it is sent, if sent via overnight courier:
If to Purchaser: Rocky Mountain Internet, Inc.
1099 18th Street, 30th Floor
Denver, Colorado 80202
Attn: Douglas H. Hanson, President, CEO
and Chairman
Facsimile: (303) 313-0698
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<PAGE>
Copy to: Jacobs Chase Frick Kleinkopf & Kelley LLC
1050 17th Street, Suite 1500
Denver, Colorado 80265
Attn: Matthew R. Perkins, Esq.
Facsimile: (303) 685-4869
If to Shareholders or Seller: Stonehenge Business Systems Corporation
7340 South Alton Way, Unit F
Englewood, Colorado 80112
Attn: Todd and Danette Keener
Facsimile: (303) 267-0441
Copy to: Julian M. Izbiky, Esq.
7400 East Caley Avenue, Suite 300
Englewood, Colorado 80111
Facsimile: (303) 850-7081
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.
9.8 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.
9.9 AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing, and signed by
Purchaser, the Shareholders and Seller. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant
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hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
9.10 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.
9.11 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.
9.12 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
9.13 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
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the manner provided for the giving of notices in Section 9.7 above. Nothing
in this Section 9.13, 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.
9.14 EXPENSES. Each of the Parties acknowledges that all costs and
expenses (including legal fees and expenses) incurred by such Party in
connection with this Agreement and the transactions contemplated hereby are the
sole responsibility of such Party and shall be paid by such Party.
9.15 TRANSFER TAXES. The Purchaser shall pay any state sales, use or
transfer tax incurred in connection with the sale of the Purchased Assets to the
Purchaser.
* * * * * *
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
ROCKY MOUNTAIN INTERNET,
INC., a Delaware corporation
By: /s/ Douglas H. Hanson
-------------------------
Douglas H. Hanson,
President, CEO,
and Chairman
STONEHENGE BUSINESS
SYSTEMS CORPORATION, a
Colorado corporation
By: /s/ Todd Keener
-------------------------
Name: Todd Keener
-----------------------
Title: President
----------------------
SHAREHOLDERS
/s/ Todd Keener
----------------------------
Todd Keener
/s/ Danette Keener
----------------------------
Danette Keener
<PAGE>
[LOGO]
FOR IMMEDIATE RELEASE
CONTACTS:
Chad Morris or Barbara Archer Shiloh Kelly
Metzger Associates Director of Communications
[email protected] Rocky Mountain Internet Inc.
[email protected] [email protected]
(303) 786-7000 (303) 672-0732
ROCKY MOUNTAIN INTERNET ACQUIRES ARIZONA-BASED ISP
COMPANY EXPANDS REACH AND CUSTOMER BASE FOR STOCK
DENVER - November 23, 1998 - Rocky Mountain Internet Inc. (NASDAQ SmallCap
Market-RMII, RMIIW) announced today it has completed the acquisition of
InternetNow! (http://www.doitnow.com), an Arizona-based Internet Service
Provider, in a stock transaction of 171,250 shares. The 1998 revenue run rate
for InternetNow! is $1.4 million.
"This acquisition will bring us new customers and extend our reach into the
lucrative southwestern United States," said Douglas H. Hanson, president, CEO
and chairman of Rocky Mountain Internet (http://www.rmi.net). "It will be a
valuable addition to our company as we drive to become a premier national
communications company."
As a result of the acquisition, RMI will take immediate control of
InternetNow!'s network operations, facilities and customers. InternetNow!
currently offers a variety of Internet-based services including dial-up and
dedicated Internet access, web hosting and design, and online classified
advertising and chat rooms. InternetNow! serves customers in California, Arizona
and Nevada.
ABOUT ROCKY MOUNTAIN INTERNET
Rocky Mountain Internet (http://www.rmi.net) is a full-service, national
telecommunications company providing a wide range of voice and data
communication services to businesses and consumers. Services include dedicated,
dial-up and wireless Internet access, Web development, hosting and marketing,
electronic commerce (e-SELL) and banner advertising management software
applications (INFOHIWAY), network management, system integration, co-location
services, paging, voice mail, local and long distance phone service, 800 service
and IP Telephony.
(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, 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.)
# # #
<PAGE>
[LOGO]
FOR IMMEDIATE RELEASE
CONTACTS:
Chad Morris or Barbara Archer Shiloh Kelly
Metzger Associates Director of Communications
[email protected] Rocky Mountain Internet Inc.
[email protected] [email protected]
(303) 786-7000 (303) 672-0732
ROCKY MOUNTAIN INTERNET EXPANDS ITS REACH INTO KANSAS
RMI ADDS REVENUE AND CUSTOMER BASE THROUGH ACQUISITION OF UNICOM COMMUNICATIONS
DENVER, November 25, 1998 -- Rocky Mountain Internet Inc. (NASDAQ SmallCap
Market-RMII, RMIIW) announced today it has completed the acquisition of Overland
Park, Kansas-based Unicom Communications' Internet access and hosting business
(http://www.unicom.net), in a stock transaction valued at $1.7 million. For
1998, Unicom is experiencing a revenue run rate in excess of $1 million.
"This acquisition, along with InternetNow!, which closed earlier this week, is
keeping pace with our rapid expansion plans of becoming a national
communications company," said Douglas H. Hanson, president, CEO and chairman of
Rocky Mountain Internet (http://www.rmi.net). "As we move forward as a leading
Web Solutions and e-commerce provider, Unicom's resources will be an
unbelievable asset to our team."
As a result of the acquisition, Rocky Mountain Internet will take immediate
control of Unicom's network operations, facilities and customers. Founded in
1995, Unicom Communications is an Overland Park, Kan.-based ISP with 3,500
subscribers. In addition to Internet access, the company also provides Web
hosting and e-commerce solutions. Among the company's primarily business
subscribers are Kansas City Power and Light, Data Supply Outlet, Universal
Underwriters Group and Integrated Medical Resources.
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 dedicated, dial-up and wireless Internet access, Web
development, hosting and marketing, electronic commerce (e-SELL) and banner
advertising management software applications (INFOHIWAY), network management,
system integration, co-location services, paging, voice mail, local and long
distance phone service, 800 service and IP Telephony.
(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, 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.)
# # #
<PAGE>
[LOGO]
FOR IMMEDIATE RELEASE
CONTACTS:
Chad Morris or Robyn Phipps Todd Keener
Metzger Associates President
(303) 786-7000 Stonehenge Internet Communications Corp.
[email protected] (303) 267-0424
[email protected]
Shiloh Kelly
Director of Communications
Rocky Mountain Internet Inc.
(303) 672-0732
[email protected]
ROCKY MOUNTAIN INTERNET EXPANDS LOCAL CUSTOMER BASE
RMI COMPLETES ACQUISITION OF STONEHENGE INTERNET COMMUNICATIONS CORP.
DENVER, December 1, 1998 -- Rocky Mountain Internet Inc. (NASDAQ SmallCap
Market-RMII, RMIIW) announced today it has completed the acquisition of
Denver-based Stonehenge Internet Communications Corp. in a stock transaction
valued at $450,000.
According to Douglas H. Hanson, president, CEO and chairman of Rocky Mountain
Internet, "This is an exciting acquisition because it is in our own backyard,
and we can easily integrate this company. Completing this acquisition will not
only strengthen our local customer base, it will help solidify our position as
Colorado's leading Internet Solutions Provider."
Founded in 1992, Stonehenge is a Colorado-based ISP with 2,200 subscribers. Run
rate revenues for 1998 amount to $650,000. In addition to Internet access, the
company also provides network consulting and cabling. As a result of the
acquisition, RMI will obtain control of Stonehenge's network operations,
facilities and customers. Todd Keener, president and founder, and other
employees will join the RMI team.
"We are excited about the opportunity to be a part of Rocky Mountain Internet,
clearly a company on the move," commented Todd Keener, president and founder of
Stonehenge. "Doug Hanson is a big reason why we are here."
-more-
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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); a
browser-based banner advertising management software package
(www.infohiway.com/adcafe/), and long distance IP-Telephony (www.ic-ephone.net).
Other RMI services consist of dedicated, DSL, dial-up and wireless Internet
access, network management, system integration, co-location, paging, voice mail,
local and long distance phone service, 800 service and IP Telephony.
(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, 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.)
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