<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 11, 1999
---------------------
Rocky Mountain Internet, Inc.
----------------------------------------------------------------------
(Exact name of Registrant as specified in charter)
Delaware
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(State or other jurisdiction of incorporation)
001-12063 84-1322326
------------------------ ---------------------------------
(Commission File Number) (IRS Employee Identification No.)
999 Eighteenth Street, Suite 2201 80202
----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 672-0700
------------------
Not Applicable
----------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 28, 1999, the registrant filed a Current Report on Form 8-K
(the "IdealDial Initial Report") describing the merger of IdealDial
Corporation with and into the Company. This Current Report on Form 8-K/A (the
"Form 8-K/A") amends the IdealDial Initial Report by including with this Form
8-K/A the Agreement and Plan of Merger by and among Rocky Mountain Internet,
Inc. d/b/a RMI.NET, Inc. and IdealDial Corporation and Michael Payne dated as
of June 11, 1999, as required pursuant to Item 7.
ITEM 5. OTHER EVENTS.
In the IdealDial Initial Report, the registrant also described the
acquisition of Internet Connect, Inc. This Current Report on Form 8-K/A (the
"Form 8-K/A") amends the IdealDial Initial Report by including with this Form
8-K/A the Agreement and Plan of Merger by and among Rocky Mountain Internet,
Inc. d/b/a RMI.NET, Inc. and Internet Connect Internet Connect, Inc.,
Interweb Design and Hosting, Inc., Jay W. Mason, M.D., Dax J.C. Kelson, David
S. Jennings, David L. Alderson, Jr., and Timothy H. Crawford, M.D. dated as
of June 10, 1999, as required pursuant to Item 7.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
List below the financial statements, pro forma financial information
and exhibits, if any, filed as a part of this report.
(a) Financial Statements of Businesses Acquired:
Not required.
(b) Pro Forma Financial Information:
Not required.
(c) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
------------- ---------------------------------------------------
<S> <C>
10.1 Agreement and Plan of Merger by and among
Rocky Mountain Internet, Inc. d/b/a RMI.NET,
Inc. and IdealDial Corporation and Michael Payne
dated as of June 11, 1999
10.2 Rocky Mountain Internet, Inc. d/b/a RMI.NET,
Inc. and Internet Connect Internet Connect,
Inc., Interweb Design and Hosting, Inc., Jay W.
Mason, M.D., Dax J.C. Kelson, David
</TABLE>
<PAGE>
<TABLE>
<S> <C>
S. Jennings, David L. Alderson, Jr., and
Timothy H. Crawford, M..D. dated as of
June 10, 1999
20.1 News Release dated June 14, 1999 announcing the
IdealDial Merger. *
20.2 News Release dated June 15, 1999 announcing the
Internet Connect Merger. *
</TABLE>
* Previously filed.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Rocky Mountain Internet, Inc.
-----------------------------------
(Registrant)
Date: July 1, 1999 By: /s/ CHRISTOPHER J. MELCHER
--------------------------------
Christopher J. Melcher
Vice President, General Counsel
and Corporate Secretary
<PAGE>
Exhibit 10.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ROCKY MOUNTAIN INTERNET, INC.
D/B/A RMI.NET
AND
IDEALDIAL CORPORATION
AND
MICHAEL PAYNE
JUNE 11, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Definitions
2. Basic Transaction
(a) The Merger
(b) The Closing
(c) Actions at the Closing
(d) Effect of Merger
(e) Procedure for Payment
(f) Closing of Transfer Records
3. Representations and Warranties of the Company and the Shareholder
(a) Organization, Qualification, and Corporate Power
(b) Capitalization
(c) Subsidiaries
(d) Authorization of Transaction
(e) Noncontravention
(f) Financial Statements
(g) Events Subsequent to Most Recent Fiscal Year End
(h) Undisclosed Liabilities
(i) Legal Compliance
(j) Finder Fees
(k) Continuity of Interest
(l) Title to Assets
(m) Real Property
(n) Intellectual Property
(o) Tangible Assets
(p) Inventory
(q) Contracts
(r) Notes and Accounts Receivable
(s) Powers of Attorney
(t) Insurance
(u) Litigation
(v) Warranties
(w) Employees
(x) Employee Benefits
(y) Tax Matters
(z) Guaranties
(aa) Environment, Health, and Safety Matters
(bb) State PUC Authorizations and FCC Authorizations
(cc) Certain Business Relationships with the Company
(dd) Investment
(ee) Year 2000 Compliant
(ff) Company Shares
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(gg) Disclosure
4. Representations and Warranties of the Buyer
(a) Organization
(b) Capitalization
(c) Authorization of Transaction
(d) Noncontravention
(e) Brokers' Fees
(f) Continuity of Business Enterprise
(g) Disclosure
(h) SEC Documents
5. Covenants
(a) General
(b) Notices and Consents
(c) Regulatory Matters and Approvals
(d) Operation of Business
(e) Full Access
(f) Notice of Developments
(g) Exclusivity
(h) Continuity of Business Enterprise
(i) Legend
(j) Registration Rights Agreement
6. Conditions to Obligation to Close
(a) Conditions to Obligation of the Buyer
(b) Conditions to Obligation of the Company
7. Termination
(a) Termination of Agreement
(b) Effect of Termination
8. Post-Closing Covenants
(a) General
(b) Litigation Support
(c) Transition
(d) Confidentiality
(e) Covenant Not to Compete
(f) Survival of Representations and Warranties
(g) Indemnification Provisions for Benefit of the Buyer
(h) Indemnification Provisions for Benefit of the Shareholder
(i) Matters Involving Third Parties
(j) Other Indemnification Provisions
9. Additional Agreements
(a) Escrow Fund
(b) Liquidation of the Company
10. Miscellaneous
(a) Press Releases and Public Announcements
(b) No Third Party Beneficiaries
(c) Entire Agreement
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(d) Succession and Assignment
(e) Counterparts
(f) Headings
(g) Notices
(h) Governing Law
(i) Dispute Resolution
(j) Amendments and Waivers
(k) Severability
(l) Expenses
(m) Construction
(n) Incorporation of Exhibits and Schedules
Exhibit A--Certificate of Merger
Exhibit B--Articles of Merger
Exhibit C--Third-Parties
Exhibit D--Lock-Up Agreement
Exhibit E--Permitted Transferees
Exhibit F--Financial Statements
Exhibit G--Registration Rights Agreement
Exhibit H--Form of Opinion of Counsel to the Company
Exhibit I--Shareholder Personal Guarantees
Exhibit J--Form of Opinion of Counsel to the Buyer
Exhibit K--Form of Escrow Agreement
Exhibit L--Accounts Receivable
Exhibit M--Litigation
Exhibit N--Pre-Closing Transactions
Disclosure Schedule--Exceptions to Representations and Warranties
</TABLE>
4
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into
as of this 11th day of June, 1999 by and among ROCKY MOUNTAIN INTERNET, INC.,
a Delaware corporation d/b/a RMI.NET (the "Buyer"), IDEALDIAL CORPORATION, a
Colorado corporation (the "Company"), and Michael Payne ("Shareholder"). The
Buyer, the Company and the Shareholder are referred to collectively herein as
the "Parties".
This Agreement contemplates a tax-free merger of the Company with
and into the Buyer in a reorganization pursuant to Code Section 368(a)(1)(A).
The Shareholder will receive capital stock in the Buyer in exchange for the
capital stock of the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations,
warranties, and covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"ACCREDITED INVESTOR" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"ACCOUNTS RECEIVABLE" has the meaning set forth in Section 9(b)(i)
below.
"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, and fees, including court costs and reasonable attorney's fees and
expenses.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"AFFILIATED GROUP" means any affiliated group within the meaning of
Code Section 1504(a) or any similar group defined under a similar provision
of state, local, or foreign law.
"AGREEMENT" has the mean set forth in the preface above.
"ARTICLES OF MERGER" has the meaning set forth in Section 2(c) below.
"ASSUMED LIABILITIES" has the meaning set forth in Section 3(h)
below.
"BUYER" has the meaning set forth in the preface above.
"BUYER SEC FILINGS" has the meaning set forth in Section 3(dd) below.
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<PAGE>
"BUYER SHARE" means any share of the common stock, $0.001 par value
per share, of the Buyer.
"CERTIFICATE OF MERGER" has the meaning set forth in Section 2(c)
below.
"CLOSING" has the meaning set forth in Section 2(b) below.
"CLOSING DATE" has the meaning set forth in Section 2(b) below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLORADO BUSINESS CORPORATION ACT" means the Business Corporation
Act of the State of Colorado, as amended.
"COMPANY" has the meaning set forth in the preface above.
"COMPANY SHARE" means any share of the Common Stock, $.01 par value
per share, of the Company.
"CONFIDENTIAL INFORMATION" means any information concerning the
businesses and affairs of the Parties that is not already generally available
to the public.
"CONVERSION RATIO" has the meaning set forth in Section 2(d)(v)
below.
"CURRENT ASSETS" means cash, investments, inventory, current
accounts receivable for customer accounts (with balances of ninety (90) days
or less), and prepaid expenses generated in the Ordinary Course of Business,
as reflected on the balance sheet of the Most Recent Financial Statements.
"CURRENT LIABILITIES" means accounts payable, accrued expenses,
accrued but unpaid taxes, deferred revenues, unearned income, and other
current Liabilities (except the current portion of any bank debt) incurred in
the Ordinary Course of Business, as reflected on the balance sheet of the
Most Recent Financial Statements.
"DEFERRED INTERCOMPANY TRANSACTION" has the meaning set forth in
Reg. Section 1.1502-13.
"DELAWARE GENERAL CORPORATION LAW" means the General Corporation Law
of the State of Delaware, as amended.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 3 below.
"EFFECTIVE TIME" has the meaning set forth in Section 2(d)(i) below.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred
compensation or retirement plan or arrangement, (b) qualified defined
contribution retirement plan or arrangement which is an
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<PAGE>
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan
or arrangement which is an Employee Pension Benefit Plan (including
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit or other retirement, bonus, or incentive 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.
"ESCROW AGENT" has the meaning set forth in Section 2(d)(viii) below.
"ESCROW AGREEMENT" has the meaning set forth in Section 9(a) below.
"ESCROW FUND" has the meaning set forth in Section 9(a) below.
"ESCROW SHARES" has the meaning set forth in Section 2(d)(viii)
below.
"ESCROW TERM" has the meaning set forth in Section (d)(viii) below.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"EXCHANGE AGENT" has the meaning set forth in Section 2(e) below.
"FCC AUTHORIZATIONS" means all approvals, consents, permits,
licenses, certificates, and authorizations given by the Federal
Communications Commission or similar federal governmental agency to provide
the telecommunications services currently provided by the Company and to
conduct its business as it is currently conducted.
"FINANCIAL STATEMENTS" have the meaning set forth in Section 3(f)
below.
"GAAP" means United States generally accepted accounting principles
as in effect from time to time.
"INDEMNIFIED PARTY" has the meaning set forth in Section 8(i)(i)
below.
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<PAGE>
"INDEMNIFYING PARTY" has the meaning set forth in Section 8(i)(i)
below.
"INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof, (b) all trademarks,
service marks, trade dress, logos, trade names, and corporate names, together
with all translations, adaptations, derivations, and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all mask works and all applications, registrations,
and renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing
plans and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"IRS" means the Internal Revenue Service.
"KNOWLEDGE" means actual knowledge after reasonable investigation.
"LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"LITIGATION" has the meaning set forth in Section 9(b)(ii) below.
"LOCK-UP AGREEMENT" has the meaning set forth in Section 2(d)(ix).
"LOCK-UP PERIOD" has the meaning set forth in Section 2(d)(ix).
"LOCK-UP SHARES" has the meaning set forth in Section 2(d)(ix).
"LONG-TERM LIABILITIES" means any term loans (bank debt, lines of
credit, and other Liabilities, including any current portion thereof),
capital leases, operating leases and other Liabilities, regardless of whether
reflected on the balance sheet of the Most Recent Financial Statements.
"MERGER" has the meaning set forth in Section 2(a) below.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth in
Section 3(f) below.
"MOST RECENT FISCAL MONTH END" has the meaning set forth in Section
3(f) below.
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"MOST RECENT FISCAL YEAR END" has the meaning set forth in Section
3(f) below.
"MULTIEMPLOYEE PLAN" has the meaning set forth in ERISA Section
3(37).
"NET WORKING CAPITAL" means the difference between the Company's
Current Assets and its Current Liabilities.
"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).
"PRE-CLOSING TRANSACTIONS" has the meaning set forth in Section
9(b)(iii) below.
"PURCHASE PRICE" has the meaning set forth in Section 2(d)(v) below.
"RECURRING REVENUE RATE" means the recurring revenue rate of the
Company for the Most Recent Fiscal Month End, as determined by accrual based
accounting procedures in accordance with GAAP.
"REGISTRATION RIGHTS AGREEMENT" has the meaning set forth in Section
5(k) below.
"REQUISITE COMPANY'S SHAREHOLDER APPROVAL" means the affirmative
vote of the Shareholder in favor of this Agreement and the Merger.
"SEC" means the Securities and Exchange Commission.
"SEC DOCUMENTS" has the meaning set forth in Section 4(g) below.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, OTHER THAN (a) mechanic's, materialmen's,
and similar liens, (b) liens for taxes not yet due and payable or for taxes
that the taxpayer is contesting in good faith through appropriate
proceedings, (c) purchase money liens and liens securing rental payments
under capital lease arrangements, and (d) other liens arising in the Ordinary
Course of Business and not incurred in connection with the borrowing of money.
"SHAREHOLDER" has the meaning set forth in the preface above.
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"SHAREHOLDER PERSONAL GUARANTEES" has the meaning set forth in
Section 6(a)(xi) below.
"SUBSIDIARY" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has
the power to vote or direct the voting of sufficient securities to elect a
majority of the directors.
"STATE PUC AUTHORIZATIONS" means all approvals, consents, permits,
licenses, certificates, and authorizations given by any state or local
regulatory authority to provide the telecommunications services currently
provided by the Company and to conduct its business as it is currently
conducted.
"SURVIVING CORPORATION" has the meaning set forth in Section 2(a)
below.
"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 returns 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 8(i)(i)
below.
2. BASIC TRANSACTION.
(a) THE MERGER. On and subject to the terms and conditions of this
Agreement, the Company will merge with and into the Buyer (the "Merger") at
the Effective Time. The Buyer shall be the corporation surviving the Merger
(the "Surviving Corporation").
(b) THE CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Rocky
Mountain Internet, Inc., 999 18th Street, North Tower, 22nd Floor, Denver,
Colorado 80202, commencing at 10:00 a.m. local time on the earlier of (i) the
second business day following the satisfaction or waiver of all conditions to
the obligations of the Parties to consummate the transactions contemplated
hereby (other than conditions with respect to actions the respective Parties
will take at the Closing itself) or (ii) June 11, 1999 (the "Closing Date");
PROVIDED, HOWEVER, that such Closing Date may be further extended upon mutual
agreement of the Parties.
(c) ACTIONS AT THE CLOSING. At the Closing, (i) the Company and the
Shareholder will deliver to the Buyer the various certificates, instruments, and
documents referred to in Section 6(a) below,
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(ii) the Buyer will deliver to the Company and the Shareholder the various
certificates, instruments, and documents referred to in Section 6(b) below,
(iii) the Buyer and the Company will file with the (A) Secretary of State of
the State of Delaware a Certificate of Merger in the form attached hereto as
Exhibit A (the "Certificate of Merger"), and (B) file with the Secretary of
State of the State of Colorado Articles of Merger in the form attached hereto
as Exhibit B (the "Articles of Merger") and (iv) the Buyer will deliver to
the Exchange Agent in the manner provided below in this Section 2 the
certificates evidencing the Buyer Shares issued in the Merger.
(d) EFFECT OF MERGER.
(i) GENERAL. The Merger shall become effective at the time
(the "Effective Time") the Buyer and the Company file (a) the
Certificate of Merger with the Secretary of State of the State of
Delaware, and (b) the Articles of Merger with the Secretary of State of
the State of Colorado. The Merger shall have the effect set forth in
the Delaware General Corporation Law and the Colorado Business
Corporations Act. 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 the Buyer or the Company
in order to carry out and effectuate the transactions contemplated by
this Agreement.
(ii) CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of the Buyer in effect at and as of the Effective Time
will remain the Certificate of Incorporation of the Surviving
Corporation without any modification or amendment in the Merger.
(iii) BYLAWS. The Bylaws of the Buyer in effect at and as of
the Effective Time will remain the Bylaws of the Surviving Corporation
without any modification or amendment in the Merger.
(iv) DIRECTORS AND OFFICERS. The directors and officers of the
Buyer in office at and as of the Effective Time will remain the
directors and officers of the Surviving Corporation (retaining their
respective positions and terms of office).
(v) CONVERSION OF COMPANY SHARES. At the Closing, each Company
Share shall be converted into the right to receive the number of the
Buyer Shares equal to two million, eight hundred thousand and no/100ths
dollars ($2,800,000) (the "Purchase Price") divided by the average
closing price per share of the Buyer Shares for the ten (10) day period
ending on the day prior to the Closing Date (the "Closing Market
Price") divided by the number of the Company Shares outstanding (the
ratio of Buyer Shares to Company Shares is referred to herein as the
"Conversion Ratio"); PROVIDED, HOWEVER, that the Conversion Ratio shall
be subject to adjustment in the event of any adjustment in the Purchase
Price as contemplated under Section 2(d)(vi) below, or any stock split,
stock dividend, reverse stock split, or other change in the number of
Company Shares outstanding. No Company Share shall be deemed to be
outstanding or to have any rights other than those set forth above in
this Section 2(d)(v) after the Effective Time.
(vi) ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price set
forth in Section 2(d)(v)
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above is based upon a Recurring Revenue Rate of seven hundred thousand
and no/100ths dollars ($700,000.00) and the status of the Company's Net
Working Capital and Long Term Liabilities. The Purchase Price is
subject to adjustment as follows:
(A) In the event that the Recurring Revenue Rate
exceeds or is less than seven hundred thousand and no/100ths
dollars ($700,000.00), the Purchase Price shall be increased
or reduced, whichever may be the case, by four dollars ($4.00)
for each dollar that the Recurring Revenue Rate exceeds or is
less than such amount;
(B) In the event that the Company's Net Working
Capital is positive or negative, whichever may be the case,
[subject to a $350,000 Net Working Capital allowance], the
Purchase Price shall be increased or reduced dollar for dollar
in an amount equal to the positive or negative Net Working
Capital; and
(C) The Purchase Price shall be reduced dollar for
dollar by the amount equal to the difference of any Long Term
Liabilities assumed by the Buyer at the Closing less reserves
held by the third-parties listed on Exhibit C attached hereto.
In the event of any adjustment to the Purchase Price, under
this Section 2(d)(vi), the Conversion Ratio shall be adjusted
accordingly.
(vii) BUYER SHARES. Each Buyer Share issued and outstanding at
and as of the Effective Time will remain issued and outstanding. Fifty
percent (50%) of the Buyer's Shares to be issued in connection with the
Merger will be unregistered under the Securities Act and state
securities laws and "restricted securities", as defined in Rule 144 of
the Securities Act, when issued. Such Buyer Shares shall be registered
under the Securities Act by the Buyer within the time frames delineated
in Section 2(d)(viii) and 2(d)(ix) below.
(viii) ESCROW OF BUYER SHARES. At and as of the Effective
Time, to secure its obligations under Section 8 below, and as more
fully described in Section 9 below, the Company shall deposit with an
escrow agent (the "Escrow Agent") that number of the Buyer Shares equal
to fifteen percent (15%) of the Buyer Shares payable to the Company
hereunder (the "Escrow Shares"), which Escrow Shares shall be held by
the Escrow for eighteen (18) months after the Effective Time (the
"Escrow Term"). The Escrow Shares shall be registered under the
Securities Act on or prior to the expiration of the Escrow Term
pursuant to the Registration Rights Agreement. Such Escrow Shares shall
be included in the Buyer Shares described in Section 2(d)(vii) above.
(ix) LOCK-UP OF BUYER SHARES. That number of the Buyer Shares
equal to thirty-five percent (35%) of the Buyer Shares payable to the
Company hereunder (the "Lock-Up Shares") shall be subject to a lock-up
agreement, in the form attached hereto as Exhibit D (the "Lock-Up
Agreement"), prohibiting the sale or other disposition of such Buyer
Shares for twelve (12) months after the Effective Time (the "Lock-Up
Period"); PROVIDED, HOWEVER, that the Shareholder may transfer a
portion of the Buyer Shares to the persons set
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forth on Exhibit E attached hereto if such persons agree to execute the
Lock-Up Agreement. The Lock-Up Shares shall be registered under the
Securities Act by the Buyer on or prior to expiration of the Lock-Up
Period. Such Lock-Up Shares shall be included in the Buyer Shares
described in Section 2(d)(vii) above.
(e) PROCEDURE FOR PAYMENT.
(i) Subject to Section (d) above, immediately after the
Effective Time, (A) the Buyer will furnish to American Securities
Transfer & Trust, Inc. (the "Exchange Agent") a stock certificate
(issued in the name of the Exchange Agent or its nominee) representing
that number of Buyer Shares equal to the product of (I) the Conversion
Ratio times (II) the number of outstanding Company Shares and (B) the
Buyer will cause the Exchange Agent to mail a letter of transmittal
(with instructions for its use) to each record holder of outstanding
Company Shares for the holder to use in surrendering the certificates
which represented his/her or its Company Shares in exchange for a
certificate representing the number of Buyer Shares to which he/she or
it is entitled.
(ii) The Buyer will not pay any dividend or make any
distribution on Buyer Shares (with a record date at or after the
Effective Time) to any record holder of outstanding Company Shares
until the holder surrenders for exchange his/her or its certificates
which represented Company Shares. The Buyer instead will pay the
dividend or make the distribution to the Exchange Agent in trust for
the benefit of the holder pending surrender and exchange. The Buyer
will cause the Exchange Agent to make prompt payment of any cash the
Exchange Agent receives from the Buyer as a dividend or distribution to
the holders of outstanding Company Shares as necessary. In no event,
however, will any holder of outstanding Company Shares be entitled to
any interest or earnings on any dividend or distribution pending
receipt of the Buyer Shares.
(iii) The Buyer may cause the Exchange Agent to return any
Buyer Shares and any dividends and distributions thereon remaining
unclaimed one hundred and eighty (180) days after the Effective Time,
and thereafter each remaining record holder of outstanding Company
Shares shall be entitled to look to the Buyer (subject to abandoned
property, escheat and other similar laws) as a general creditor thereof
with respect to the Buyer Shares and dividends and distributions
thereon to which he/she or it is entitled upon surrender of his/her or
its certificates.
(iv) The Buyer and the Company shall bear all charges and
expenses of the Exchange Agent equally.
(f) CLOSING OF TRANSFER RECORDS. After the close of business on the
Closing Date, transfers of Company Shares outstanding prior to the Effective
Time shall not be made on the stock transfer books of the Surviving Corporation.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDER.
Each of the Company and the Shareholder represents and warrants to the Buyer
that the statements contained in
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this Section 3 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and
as though the Closing Date were substituted for the date of this Agreement
throughout this Section 3), except as set forth in the disclosure schedule
accompanying this Agreement and initialed by the Parties (the "Disclosure
Schedule"). The Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this
Section 3.
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Company is
a corporation duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation. The Company is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required except where the lack of
such qualification would not have a material adverse effect on the financial
condition of the Company taken as a whole or on the ability of the Parties to
consummate the transactions contemplated by this Agreement. The Company has
full corporate power and authority to carry on the businesses in which it is
engaged and to own and use the properties owned and used by it.
(b) CAPITALIZATION. The entire authorized capital stock of the
Company consists of 14,000,000 Company Shares, of which 12,467,000 Company
Shares are issued and outstanding and no Company Shares are held in treasury.
All of the issued and outstanding Company Shares have been duly authorized
and are validly issued, fully paid, and nonassessable. There are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require the Company to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights
with respect to the Company.
(c) SUBSIDIARIES. The Company does not now have, nor has it ever
had, any Subsidiaries.
(d) AUTHORIZATION OF TRANSACTION. The Company has full corporate
power and authority, and the Shareholder has full individual power and
authority, to execute and deliver this Agreement and to perform their
respective obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of each of the Company and of the Shareholder,
enforceable in accordance with its terms and conditions, except: (a) as may
be limited by bankruptcy, reorganization, insolvency and similar laws of
general application relating to or affecting the enforcement of creditors'
rights or the relief of debtors; and (b) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(e) 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 either the Company or the
Shareholder is subject, or any provision of the charter or bylaws of the
Company or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease,
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license, instrument or other arrangement to which either the Company or the
Shareholder is a party or by which it or they are bound or to which any of
its or their assets is subject (or result in the imposition of any Security
Interest upon any of its assets), except where such conflict, breach,
default, acceleration, termination, modification, cancellation, or failure to
give notice would not have a material adverse effect on the financial
condition of the Company or on the ability of the Parties to consummate the
transactions contemplated by this Agreement. Other than in connection with
the provisions of the Delaware General Corporation Law, the Colorado Business
Corporation Act, the Securities Exchange Act, the Securities Act, and the
state securities laws, neither the Company nor the Shareholder need to give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement, other than
notices or filings that have been made, authorizations, consents or approvals
that have been obtained, or where the failure to give notice, to file, or to
obtain any authorization, consent or approval would not have a material
adverse effect on the financial condition of the Company or on the ability of
the Parties to consummate the transactions contemplated by this Agreement.
(f) FINANCIAL STATEMENTS. Attached hereto as Exhibit F are the
following financial statements (collectively the "Financial Statements") of
the Company: (i) audited balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal years ended
December 31, 1997 and 1998 (the "Most Recent Fiscal Year End") for the
Company; and (ii) unaudited balance sheets and statements of income, changes
in stockholders' equity, and cash flow as of and for the month ended April
30, 1999 (the "Most Recent Fiscal Month End") for the Company (collectively,
the "Most Recent Financial Statements"). The Financial Statements (including
the notes thereto) have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, present fairly the
financial condition of the Company as of such dates and the results of
operations of the Company for such periods, are correct and complete, and are
consistent with the books and records of the Company (which books and records
are correct and complete); PROVIDED, HOWEVER, that the Most Recent Financial
Statements are subject to normal year-end adjustments (which will not be
material individually or in the aggregate) and lack footnotes and other
presentation items.
(g) EVENTS SUBSEQUENT TO MOST RECENT FISCAL MONTH END. Since the
Most Recent Fiscal Month End, there has not been any material adverse change
in the business, financial condition, operations, results of operations, or
future prospects of the Company taken as a whole.
(h) UNDISCLOSED LIABILITIES. The Company has no Liability except for
(i) Liabilities set forth on the face of the balance sheet dated as of the
Most Recent Financial Statements, or (ii) Liabilities which have arisen after
the date of the Most Recent Fiscal Month End in the Ordinary Course of
Business (none of which results from, arises out of, relates to, is in the
nature of, or was caused by any breach of contract, breach of warranty, tort,
infringement, or violation of law) (collectively the "Assumed Liabilities").
(i) LEGAL COMPLIANCE. The Company, and 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, local, and foreign governments
(and all
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agencies thereof), and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced
against any of them alleging any failure so to comply, except where failure
to comply would not have a material adverse effect upon the financial
condition of the Company.
(j) FINDER FEES. The Company has employed Paul Davis as a finder in
connection with the transactions contemplated by this Agreement. The Buyer
shall be responsible for the payment of any fees or commissions to such
finder pursuant to an agreement previously executed with such finder.
(k) CONTINUITY OF INTEREST. The Shareholder has no present plan,
intention, or arrangement to dispose of any of the Buyer Shares received in
the Merger to persons related to Buyer (as defined in paragraph (e)(3) of
Reg. Section 1:368-1).
(l) TITLE TO ASSETS. Except as reflected otherwise on the Most
Recent Financial Statements, the Company 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 Most Recent Financial Statements or acquired
after the date thereof, free and clear of all Security Interests, except for
properties and assets disposed of in the Ordinary Course of Business since
the date of the Most Recent Financial Statements.
(m) REAL PROPERTY. The Company does not own any interest in any real
property. Section 3(m) of the Disclosure Schedule lists and describes briefly
all real property leased or subleased to the Company. The Company has
delivered to the Buyer correct and complete copies of the leases and
subleases listed in Section 3(m) of the Disclosure Schedule (as amended to
date). With respect to each lease and sublease listed in Section 3(m) of the
Disclosure Schedule:
(i) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect, except where the
illegality, invalidity, non-binding nature, unenforceability
or ineffectiveness would not have a material adverse effect on
the financial condition of the Company;
(ii) 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, except where the illegality, invalidity,
non-binding nature, unenforceability or ineffectiveness would
not have a material adverse effect on the financial condition
of the Company;
(iii) 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;
(iv) no party to the lease or sublease has repudiated
any provision thereof;
(v) there are no disputes, oral agreements, or
forbearance programs in effect
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as to the lease or sublease;
(vi) with respect to each sublease, the
representations and warranties set forth in subsections (A)
through (E) above are true and correct with respect to the
underlying lease;
(vii) the Company has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any
interest in the leasehold or subleasehold;
(viii) 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; and
(ix) all facilities leased or subleased thereunder
are supplied with utilities and other services necessary for
the operation of said facilities.
(n) INTELLECTUAL PROPERTY.
(i) The Company owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property
necessary or currently used in the operation of the business of the
Company as presently conducted. Each item of Intellectual Property
owned or used by the Company immediately prior to the Closing hereunder
will be owned or available for use by the Buyer on identical terms and
conditions immediately subsequent to the Closing hereunder. The Company
has taken all necessary and desirable action to maintain and protect
each item of Intellectual Property that it owns or uses.
(ii) The Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties. The Company has never received any
charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including
any claim that any of the Company must license or refrain from using
any Intellectual Property rights of any third party). To the Knowledge
of the Company and the Shareholder, no third party has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with
any Intellectual Property rights of the Company.
(iii) Section 3(n)(iii) of the Disclosure Schedule identifies
each patent, trademark, tradename, service mark, or other registration
which has been issued to the Company with respect to any of its
Intellectual Property, identifies each pending application or
application for registration which the Company has made with respect to
any of its Intellectual Property, and identifies each license,
agreement, or other permission which the Company has granted to any
third party with respect to any of its Intellectual Property (together
with any exceptions). The Company has delivered to the Buyer correct
and complete copies of all such patents, trademarks, tradenames,
services marks, and other registrations, applications, licenses,
agreements, and permissions (as amended to date) and has made
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available to the Buyer correct and complete copies of all other written
documentation evidencing ownership and prosecution (if applicable) of
each such item. With respect to each item of Intellectual Property
required to be identified in Section 3(n)(iii) of the Disclosure
Schedule:
(A) the Company possesses 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;
(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) the Company has not agreed to indemnify any
Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(iv) Section 3(n)(iv) of the Disclosure Schedule identifies
each item of Intellectual Property that any third party owns and that
the Company uses pursuant to license, sublicense, agreement, or
permission. The Company has delivered to the Buyer 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 3(n)(iv) of the
Disclosure Schedule.
(A) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and
in full force and effect;
(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) no party to the license, sublicense, agreement,
or permission has repudiated any provision thereof;
(E) with respect to each sublicense, the
representations and warranties set forth in subsections (A)
through (D) above are true and correct with respect to the
underlying license;
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(F) the underlying item of Intellectual Property is
not subject to any outstanding injunction, judgment, order,
decree, ruling, or charge;
(G) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or is threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual
Property; and
(H) the Company has not granted any sublicense or
similar right with respect to the license, sublicense,
agreement, or permission.
(v) The Company 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.
(o) TANGIBLE ASSETS. The Company owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the conduct of
its business as presently conducted. Each such tangible asset is free from
defects (patent and latent), has been maintained in accordance with normal
industry practice, is in good operating condition and repair (subject to
normal wear and tear), and is suitable for the purposes for which it
presently is used.
(p) INVENTORY. The inventory of the Company consists of equipment,
raw materials, supplies, parts, and goods, all of which is merchantable and
fit for the purpose for which it was procured or manufactured, and a material
portion of which is neither obsolete, damaged, or defective, subject only to
the reserve for inventory writedown set forth on the face of the Most Recent
Financial Statements (rather than in any notes thereto) as adjusted for the
passage of time through the Closing Date in accordance with the past custom
and practice of the Company.
(q) CONTRACTS. Section 3(q) of the Disclosure Schedule lists the
following contracts and other agreements to which the Company is a party:
(i) 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 annually;
(ii) any agreement (or group of related agreements) for the
purchase or sale of equipment, raw materials, supplies, products, or
other personal property, or for the furnishing or receipt of services,
the performance of which will extend over a period of more than one
year, result in a material loss to the Company, or involve
consideration in excess of $10,000;
(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, in excess of
$10,000 or under which it has imposed a Security Interest on any of its
assets, tangible or intangible;
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(v) any agreement concerning confidentiality or
noncompetition;
(vi) any agreement involving the Shareholder;
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan
or arrangement for the benefit of its current or former directors,
officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing severance
benefits;
(x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xi) 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 the Company; or
(xii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $10,000.
The Company has delivered to the Buyer a correct and complete copy of
each written agreement listed in Section 3(q) of the Disclosure Schedule and a
written summary setting forth the terms and conditions of each oral agreement
referred to in Section 3(q) of the Disclosure Schedule. With respect to each
such agreement: (A) the agreement is legal, valid, binding, enforceable, and in
full force and effect; (B) the agreement will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms following
the consummation of the transactions contemplated hereby; (C) 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, except where the illegality, invalidity, non-binding nature,
unenforceability, failure to be in full force and effect, breach, default,
termination, modification, acceleration or repudiation would not have a material
adverse effect on the financial condition of the Company.
(r) NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts receivable of
the Company are reflected properly on their books and records, are valid
receivables subject to no setoffs or counterclaims, are current and collectible,
and to the Knowledge of the Company and the Shareholders, will be collected in
accordance with their terms at their recorded amounts, subject only to the
reserve for bad debts set forth on the face of the Most Recent Financial
Statements (rather than in any notes thereto) as adjusted for the passage of
time through the Closing Date in accordance with the past custom and practice of
the Company.
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(s) POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of the Company.
(t) INSURANCE. Section 3(t) 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 the Company has been a party, a named
insured, or otherwise the beneficiary of coverage at any time since Company's
incorporation:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder,
and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are calculated
and operate) of coverage; and
(v) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal,
valid, binding, enforceable, and in full force and effect; (B) the policy will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; (C) neither the Company nor any other party to the policy is in breach
or default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination, modification,
or acceleration, under the policy; and (D) no party to the policy has repudiated
any provision thereof. The Company has been covered during the past five (5)
years by insurance in scope and amount customary and reasonable for the business
in which it has engaged during the aforementioned period. Section 3(t) of the
Disclosure Schedule describes any self-insurance arrangements affecting any of
the Company.
(u) LITIGATION. Except as set forth in Section 3(u) of the Disclosure
Statement, the Company is not subject to any outstanding injunction, judgment,
order, decree, ruling, or charge, nor is it a party or, to the Knowledge of the
Company and the Shareholder, is threatened to be made a party to any action,
suit, proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. The Company and the Shareholder do not
have any reason to believe that any such action, suit, proceeding, hearing, or
investigation may be brought or threatened against the Company.
(v) WARRANTIES. Each product or service, sold, leased, or delivered by
the Company has been in conformity with all applicable contractual commitments
and all express and implied
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warranties, and the Company has no Liability (and there is no basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against any of them giving rise to any Liability)
for replacement or repair thereof or other damages in connection therewith,
subject only to the reserve for warranty claims set forth on the face of the
Most Recent Financial Statements (rather than in any notes thereto) as
adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of the Company. No product or service, sold,
leased, or delivered by the Company is subject to any guaranty, warranty, or
other indemnity beyond the applicable standard terms and conditions of sale
or lease. Section 3(v) of the Disclosure Schedule includes copies of the
standard terms and conditions of sale or lease for the (containing applicable
guaranty, warranty, and indemnity provisions).
(w) EMPLOYEES. To the Knowledge of the Company and the Shareholder,
no executive, key employee, or group of employees, has any plans to terminate
employment with the Company. The Company is not a party to or bound by any
collective bargaining agreement, nor has it experienced any strikes,
grievances, claims of unfair labor practices, or other collective bargaining
disputes. The Company has not committed any unfair labor practice. The
Company and the Shareholder have no Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of the Company.
(x) EMPLOYEE BENEFITS. The Company has no Employee Benefit Plan that
it maintains or to which it contributes, nor does it have any obligation to
contribute to any Employee Benefit Plan.
(y) TAX MATTERS.
(i) The Company has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all
respects. All Taxes owed by the Company (whether or not shown on any
Tax Return) have been paid. The Company 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 the Company 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 the Company that arose in connection
with any failure (or alleged failure) to pay any Tax.
(ii) The Company has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to
any employee, independent contractor, creditor, member, or other third
party.
(iii) The Company does not expect 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 the
Company either (A) claimed or raised by any authority in writing or (B)
as to which the Company or the Shareholder have Knowledge based upon
personal contact with any agent of such authority. The Company has
delivered to the Buyer correct and complete copies of all federal
income Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by the Company covering calendar years
1995, 1996, 1997, and 1998.
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(iv) The Company 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.
(v) The unpaid Taxes of the Company (A) did not, as of the
Most Recent Fiscal Month End, exceed the reserve for Tax Liability
(rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the face
of the balance sheet of the Most Recent Fiscal Month End (rather than
in any notes thereto) and (B) do not exceed that reserve as adjusted
for the passage of time through the Closing Date in accordance with the
past custom and practice of the Company in filing their Tax Returns.
(vi) The Company has not filed a consent under Code Section
341(f). None of the Assumed Liabilities is an obligation to make a
payment that will not be deductible under Code Section 280G. The
Company 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. The Company
is not a party to any Tax allocation or sharing agreement. The Company
(A) has not been a member of an Affiliated Group filing a consolidated
federal income Tax Return at any time during its existence, and (B)
does not have Liability for the Taxes of any Person (other than any of
the Company) under Reg. Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
(vii) Section 3(j) of the Disclosure Schedule sets forth the
following information with respect to each of the Company as of the
most recent practicable date (as well as on an estimated pro forma
basis as of the Closing giving effect to the consummation of the
transactions contemplated hereby): (A) the basis of the Company in its
assets; (B) the amount of any net operating loss, net capital loss,
unused investment or other credit, unused foreign tax, or excess
charitable contribution allocable to the Company; and (C) the amount of
any deferred gain or loss allocable to the Company arising out of any
Deferred Intercompany Transaction.
(z) GUARANTIES. The Company is not a guarantor or otherwise is
liable for any Liability or obligation (including indebtedness) of any other
Person.
(aa) ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS. The Company, and its
predecessors and Affiliates, have complied and is in compliance with all
Environmental, Health, and Safety Requirements, except where the failure to
comply would not have a material adverse effect on the financial condition of
the Company.
(bb) STATE PUC AUTHORIZATIONS AND FCC AUTHORIZATIONS. The Company
has all State PUC Authorizations and FCC Authorizations necessary and
advisable for the conduct of its business as it is presently conducted, and
as it is presently contemplated to be conducted after the Closing Date by the
Buyer.
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(cc) CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY. Neither the
Shareholder, nor his Affiliates, has been involved in any material business
arrangement or relationship with the Company and within the past twelve (12)
months, and neither the Shareholder, nor his Affiliates, owns any material
asset, tangible or intangible, which is used in the business of any of the
Company, except as described in Section 3(cc) of the Disclosure Schedule.
(dd) INVESTMENT. Each of the Company and the Shareholder understands
that (i) certain of the Buyer Shares have not been registered, and will not
be registered, under the Securities Act, or under any state securities laws,
prior to the Closing Date, and are being offered and sold in reliance upon
federal and state exemptions for transactions not involving any public
offering; (ii) the Company is acquiring the Buyer Shares solely for its own
account for investment purposes, and not with a view to the distribution
thereof (except to the Shareholder); (iii) the Company and the Shareholder
are sophisticated investors with knowledge and experience in business and
financial matters; (iv) the Company and the Shareholder have received and
reviewed the Buyer's most recent (A) annual report on Form 10-K, dated March
31, 1999, and (B) quarterly report on Form 10-Q, dated April 28, 1999 (the
"Buyer SEC Filings") have had the opportunity to obtain such additional
information as desired in order to evaluate the merits and the risks inherent
in holding the Buyer Shares; (v) the Company and the Shareholder are able to
bear the economic risk and lack of liquidity inherent in holding the Buyer
Shares; (vi) the Company and the Shareholder, together with their legal, tax
and financial advisors have investigated the Buyer, and its business, and
have negotiated the transactions contemplated herein, and have independently
determined to enter into such transactions; and (vii) the Company and the
Shareholder are Accredited Investors.
(ee) YEAR 2000 COMPLIANT. The Company's products and internal
systems, including hardware, software, firmware, telecommunications systems,
management information systems and other systems, are year 2000 compliant so
that such products and systems accurately process Date Data (including, but
not limited to, calculating, comparing and sequencing) for, into, and between
the twentieth and twenty-first centuries, and the years 1999 and 2000,
including leap-year calculations. The term "Date Data" shall mean any data or
input that includes an indication of or reference to date and that is stored
information and internal to functionality.
(ff) COMPANY SHARES. The Shareholder holds of record, is the sole
beneficial owner of, and has good and marketable title to, the Company Shares
delivered by the Shareholder to the Buyer pursuant to this Agreement, free
and clear of any restrictions on transfer, Taxes, Security Interests,
Liabilities, options, warrants, purchase rights, preemptive rights,
contracts, commitments, equities, claims and demands. The Shareholder is not
a party to any option, warrant, purchase right or other contract or
commitment that could require him to sell, transfer or otherwise dispose of
any capital stock of the Company (other than this Agreement). The 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 the Company.
(gg) DISCLOSURE. This Agreement and the Exhibits and Schedules
hereto do not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they will be made, not
misleading.
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4. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents
and warrants to the Company and the Shareholder that the statements contained
in this Section 4 are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 4), except as set forth in the Disclosure
Schedule. The Disclosure Schedule will be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this
Section 4.
(a) ORGANIZATION. The Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation.
(b) CAPITALIZATION. The entire authorized capital stock of the Buyer
consists of 25,000,000 Buyer Shares, of which _______________ Buyer Shares
are issued and outstanding and __________ Buyer Shares are held in treasury.
All of the Buyer Shares to be issued in the Merger have been duly authorized
and, upon consummation of the Merger, will be validly issued, fully paid, and
nonassessable.
(c) AUTHORIZATION OF TRANSACTION. The Buyer has full power and
authority (including 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 the Buyer,
enforceable in accordance with its terms and conditions, except: (a) as may
be limited by bankruptcy, reorganization, insolvency and similar laws of
general application relating to or affecting the enforcement of creditors'
rights or the relief of debtors; and (b) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(d) NONCONTRAVENTION. To the Knowledge of the Buyer, neither the
execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or
other restriction of any government, governmental agency, or court to which
the Buyer is subject or any provision of the charter or bylaws of the Buyer
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 the Buyer
is a party or by which it is bound or to which any of its assets is subject,
except where the violation, conflict, breach, default, acceleration,
termination, modification, cancellation, or failure to give notice would not
have a material adverse effect on the financial condition of the Buyer or on
the ability of the Parties to consummate the transactions contemplated by
this Agreement. To the Knowledge of the Buyer, and other than in connection
with the provisions of the Delaware General Corporation Law, the Colorado
Business Corporation Act, the Securities Exchange Act, the Securities Act,
and the state securities laws, the Buyer does not need to give any notice to,
make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order for the Parties to consummate
the transactions contemplated by this Agreement, except where the failure to
give notice, to file, or to obtain any authorization, consent, or approval
would not have a material
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adverse effect on the ability of the Parties to consummate the transactions
contemplated by this Agreement, other than notices or filings that have been
made, authorizations, consents or approvals that have been obtained or where
the failure to give notice, to file, or to obtain any authorization, consent
or approval would not have a material adverse effect on the financial
condition of the Buyer or on the ability of the Parties to consummate the
transactions contemplated by this Agreement.
(e) BROKERS' FEES. Except as set forth in Section 3(j) above, the
Buyer 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 any of the Company and its
Subsidiaries could become liable or obligated.
(f) CONTINUITY OF BUSINESS ENTERPRISE. It is the present intention
of the Buyer to continue at least one significant historic business line of
the Company, or to use at least a significant portion of the Company's
historic business assets in a business, in each case within the meaning of
Reg. Section 1.368-1(d).
(g) SEC DOCUMENTS. The Buyer has filed all required reports,
schedules, forms, statements and other documents with the SEC since January
1, 1998 (the "SEC Documents"). As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Securities Exchange Act, as the case may be, the rules
and regulations of the SEC promulgated thereunder applicable to such SEC
Documents, and none of the SEC Documents when filed contained any untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(h) DISCLOSURE. This Agreement and the Exhibits and Schedules hereto
do no contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they will be made, not misleading.
5. COVENANTS. The Parties agree as follows with respect to the
period from and after the execution of this Agreement.
(a) GENERAL. Each of the Parties will use 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 Section 6 below).
(b) NOTICES AND CONSENTS. The Company will give any notices to third
parties, and will use its reasonable best efforts to obtain any third party
consents, that the Buyer reasonably may request in connection with the
matters referred to in Section 3(e) above.
(c) REGULATORY MATTERS AND APPROVALS. Each of the Parties will give
any notices to, make any filings with, and use its reasonable best efforts to
obtain any authorizations, consents, and
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approvals of governments and governmental agencies in connection with the
matters referred to in Section 3(e), Section 3(bb), and Section 4(d) above.
Without limiting the generality of the foregoing, the Company will take the
steps necessary to adopt this Agreement and approve the Merger in accordance
with the Delaware General Corporation Law and the Colorado Business
Corporation Act.
(d) OPERATION OF BUSINESS. The Company will not engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business. Without limiting the generality of the foregoing:
(i) the Company will not authorize or effect any change in
its articles of incorporation or bylaws;
(ii) the Company will not grant any options, warrants, or
other rights to purchase or obtain any of its capital stock or issue,
sell, or otherwise dispose of any of its capital stock (except upon the
conversion or exercise of options, warrants, and other rights currently
outstanding);
(iii) the Company will not declare, set aside, or pay any
dividend or distribution with respect to its capital stock (whether in
cash or in kind), or redeem, repurchase, or otherwise acquire any of
its capital stock;
(iv) the Company will not issue any note, bond, or other debt
security or create, incur, assume, or guarantee any indebtedness for
borrowed money or capitalized lease obligation outside the Ordinary
Course of Business;
(v) the Company will not impose any Security Interest upon any
of its assets outside the Ordinary Course of Business;
(vi) the Company will not make any capital investment in, make
any loan to, or acquire the securities or assets of any other Person
outside the Ordinary Course of Business;
(vii) the Company will not make any change in employment terms
for any of its directors, officers, and employees outside the Ordinary
Course of Business; and
(viii) the Company will not commit to do any of the foregoing.
(e) FULL ACCESS. The Company and the Shareholder will permit
representatives of the Buyer to have full access at all reasonable times, and
in a manner so as not to interfere with the normal business operations of the
Company, to all premises, properties, personnel, books, records (including
tax records), contracts, and documents of or pertaining to the Company.
(f) NOTICE OF DEVELOPMENTS. Each Party will give prompt written
notice to the other of any material adverse development causing a breach of
any of its own representations and warranties in Section 3 and Section 4
above. No disclosure by any Party pursuant to this Section 5(f), however,
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shall be deemed to amend or supplement the Disclosure Schedule or to prevent
or cure any misrepresentation, breach of warranty, or breach of covenant.
(g) EXCLUSIVITY. The Company will not solicit, initiate, or
encourage the submission of any proposal or offer from any Person relating to
the Buyer of all or substantially all of the capital stock or assets of the
Company (including any Buyer structured as a merger, consolidation, or share
exchange); PROVIDED, HOWEVER, that the Company, and its directors and
officers will remain free to 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 to the extent their fiduciary duties may
require. The Company shall notify the Buyer immediately if any Person makes
any proposal, offer, inquiry, or contact with respect to any of the foregoing.
(h) CONTINUITY OF BUSINESS ENTERPRISE. The Buyer will continue at
least one significant historic business line of the Company, or use at least
a significant portion of the Company's historic business assets in a
business, in each case within the meaning of Reg. Section 1.368-1(d).
(i) LEGEND. The Company and the Shareholder covenant and agree that
fifty percent (50%) of the Buyer Shares will bear the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF,
BY ACCEPTING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE ISSUER THAT SUCH
SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE
ISSUER, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS, (C)
IN ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT AND IN COMPLIANCE WITH
ANY APPLICABLE STATE SECURITIES LAWS, OR (D) IN ACCORDANCE WITH ANY OTHER
EXEMPTION UNDER THE SECURITIES ACT AND IN COMPLIANCE WITH ANY APPLICABLE
STATE SECURITIES LAWS UPON THE DELIVERY OF A LEGAL OPINION, REASONABLY
SATISFACTORY TO THE ISSUER, TO THE FOREGOING EFFECT. THE TRANSFER OF THE
SECURITIES IS ALSO RESTRICTED UNDER THE TERMS OF A REGISTRATION RIGHTS
AGREEMENT, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICES OF ROCKY
MOUNTAIN INTERNET, INC. D/B/A RMI.NET.
In addition, those Buyer Shares deposited in the Escrow Fund
pursuant to Section 2(d)(viii) above and Section 9(a) below, shall also bear
the following legend during the Escrow Period:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER AS SET FORTH IN THAT AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 11, 1999 BY AND AMONG ROCKY MOUNTAIN INTERNET, INC.,
IDEALDIAL CORPORATION, AND MICHAEL PAYNE.
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(j) REGISTRATION RIGHTS AGREEMENT. The Company shall agree, and upon
any distribution of the Buyer Shares to the Shareholder, the Shareholder
shall agree, to become a party to and be bound by a Registration Rights
Agreement in the form attached hereto as Exhibit G (the "Registration Rights
Agreement"), setting forth the terms of ownership of the Buyer Shares;
PROVIDED, HOWEVER, that the Shareholder receiving the Buyer Shares shall not
be entitled to any demand registration rights.
6. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) this Agreement and the Merger shall have received the
Requisite Company's Shareholder Approval;
(ii) the Company and the Shareholder shall have procured all
of the third party consents specified in Section 5(b) above;
(iii) the representations and warranties set forth in Section
3 above shall be true and correct in all material respects at and as of
the Closing Date;
(iv) the Company and the Shareholder shall have performed and
complied with all of its covenants hereunder in all material respects
through the Closing;
(v) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, or (C) affect adversely the right of the Surviving
Corporation to own the former assets, and to operate the former
businesses of the Company, (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(vi) the Company shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified above
in Sections 6(a)(i)-(v) is satisfied in all respects;
(vii) this Agreement and the Merger shall have received the
requisite Buyer board of director approval;
(viii) the Parties shall have received all authorizations,
consents, and approvals of governments and governmental agencies
referred to in Section 5(c);
(ix) the Buyer shall have received from counsel to the Company
an opinion in form
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and substance as set forth in Exhibit H attached hereto, addressed to
the Buyer, and dated as of the Closing Date;
(x) the Buyer shall have received the resignations, effective
as of the Closing, of each director and officer of the Company other
than those whom the Buyer shall have specified in writing to the
Company at least five (5) business days prior to the Closing;
(xi) the Buyer and the Seller shall have used their respective
best efforts to obtain the release of the personal guarantees (or
obligations as a co-maker) provided by the Shareholder relating to the
Company's line of credit, equipment leases, and merchant accounts, as
set forth in Exhibit I hereof (the "Shareholder Personal Guarantees");
and
(xii) all actions to be taken by the Company in connection
with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this Section 6(a) if
it executes a writing so stating at or prior to the Closing. It is agreed
that if the Buyer is informed in writing by the Shareholder or the Company at
or before the time of Closing of any breach or non-fulfillment of any
warranty, representation or covenant by the Shareholder or the Company or
non-fulfillment of any condition, and the Buyer does not elect to terminate
this Agreement and proceeds to consummate Closing hereunder, then the Buyer
shall be deemed to have waived its rights with respect to the applicable
warranty, representation, covenant, or condition.
(b) CONDITIONS TO OBLIGATION OF THE COMPANY AND THE SHAREHOLDER. The
obligation of the Company and the Shareholder to consummate the transactions
to be performed by it in connection with the Closing is subject to
satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 4
above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) the Buyer shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, or (C) affect adversely the right of the Surviving
Corporation to own the former assets and to operate the former
businesses, (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);
(iv) the Buyer shall have delivered to the Company and the
Shareholder a certificate
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to the effect that each of the conditions specified above in Sections
6(b)(i)-(iii) is satisfied in all respects;
(v) this Agreement and the Merger shall have received the
Requisite Company's Shareholder Approval;
(vi) the Parties shall have received all authorizations,
consents, and approvals of governments and governmental agencies
referred to in Section 5(c) above;
(vii) the Company shall have received from counsel to the
Buyer an opinion in form and substance as set forth in Exhibit J
attached hereto, addressed to the Company and the Shareholder, and
dated as of the Closing Date;
(viii) the Buyer and the Seller shall have used their
respective best efforts to obtain the release of the Shareholder
Personal Guarantees as set forth in Exhibit I hereof; and
(ix) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Company.
The Company and the Shareholder may waive any condition specified in
this Section 6(b) if it executes a writing so stating at or prior to the
Closing. It is agreed that if either the Shareholder or the Company is
informed in writing by the Buyer at or before the time of Closing of any
breach or non-fulfillment of any warranty, representation or covenant by the
Buyer or non-fulfillment of any condition, and the Shareholder and the
Company do not elect to terminate this Agreement and proceeds to consummate
Closing hereunder, then the Shareholder and the Company shall be deemed to
have waived its rights with respect to the applicable warranty,
representation, covenant or condition.
7. TERMINATION.
(a) TERMINATION OF AGREEMENT. Either of the Parties may terminate
this Agreement with the prior authorization of its board of directors as
provided below:
(i) the Buyer may terminate this Agreement by giving written
notice to the Company at any time prior to the Effective Time (A) in
the event the Company or the Shareholder have breached any material
representation, warranty, or covenant contained in this Agreement in
any material respect, the Buyer has notified the Company of the breach,
and the breach has continued without cure for a period of thirty (30)
days after the notice of breach or (B) if the Closing shall not have
occurred on or before June 11, 1999 (or such later date as agreed upon
by the Parties pursuant to Section 2(b) above), by reason of the
failure of any condition precedent under Section 6(a) hereof (unless
the failure results primarily from the Buyer breaching any
representation, warranty, or covenant contained in this Agreement);
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(ii) the Company and the Shareholder may terminate this
Agreement by giving written notice to the Buyer at any time prior to
the Effective Time (A) in the event the Buyer has breached any material
representation, warranty, or covenant contained in this Agreement in
any material respect, the Company has notified the Buyer of the breach,
and the breach has continued without cure for a period of thirty (30)
days after the notice of breach or (B) if the Closing shall not have
occurred on or before June 11, 1999 (or such later date as agreed upon
by the Parties pursuant to Section 2(b) above), by reason of the
failure of any condition precedent under Section 6(b) hereof (unless
the failure results primarily from the Company breaching any
representation, warranty, or covenant contained in this Agreement);
(iii) any Party may terminate this Agreement by giving written
notice to the other Party at any time in the event this Agreement and
the Merger fail to receive either the requisite Buyer board of director
approval or the Requisite Company's Shareholder approval.
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 7(a) above, the liability of any Party then in breach
shall be agreed to be the amount of $125,000; PROVIDED, HOWEVER, that the
confidentiality provisions contained in Section 8(d) below shall survive any
such termination.
8. 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 8(g) or Section (8)(h) below). The Shareholder acknowledges and
agrees that, from and after the Closing, the Buyer will be entitled to
possession of all documents, books, records (including Tax records),
agreements, and financial data of any sort relating to the Company.
(b) LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection
with (i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or
prior to the Closing Date involving the Company, each of the other Parties
will cooperate with the contesting or defending Party and his or its counsel
in the contest or defense, make available his or its personnel, and provide
such testimony and access to his or its 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 8(g) or
Section 8(h) below).
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(c) TRANSITION. The Shareholder will not take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of the Company from
maintaining the same business relationships with the Buyer after the Closing
as it maintained with the Company prior to the Closing. The Shareholder will
refer to the Buyer all customer inquiries relating to the businesses of the
Buyer from and after the Closing.
(d) CONFIDENTIALITY. The Shareholder will treat and hold as such all
of the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to
the Buyer or destroy, at the request and option of the Buyer, all tangible
embodiments (and all copies) of the Confidential Information which are in
his/her or its possession. In the event that the Shareholder is requested or
required (by oral question or request for information or documents in any
legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, the Shareholder
will notify the Buyer promptly of the request or requirement so that the
Buyer may seek an appropriate protective order or waive compliance with the
provisions of this Section 8(d). If, in the absence of a protective order or
the receipt of a waiver hereunder, the Shareholder is, on the advice of
counsel, compelled to disclose any Confidential Information to any tribunal
or else stand liable for contempt, the Shareholder may disclose the
Confidential Information to the tribunal; PROVIDED, HOWEVER, that the
Shareholder shall use his reasonable best efforts to obtain, at the
reasonable request of the Buyer, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the Buyer shall designate.
(e) COVENANT NOT TO COMPETE. For a period of two (2) years from and
after the Closing Date, the Shareholder will not (i) engage directly or
indirectly in any business that the Company conducts as of the Closing Date
in any geographic area in which the Company conducts that business as of the
Closing Date, or (ii) solicit any employees of the Company retained by the
Buyer after the Closing Date; PROVIDED, HOWEVER, [that the Shareholder shall
not be prohibited from participating in the business of Universal
Communications Network, Inc.; PROVIDED FURTHER, that the Parties acknowledge
that Mike Scata is leaving his employment with the Company and will be
participating in the business of Universal Communications Network, Inc.]; and
PROVIDED, FURTHER, that no owner of less than 1% 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 8(e) 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.
(f) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Parties contained in this Agreement
shall survive the Closing (even if the damaged Party knew or had reason to
know of any misrepresentation or breach of warranty at the time of Closing)
and continue in full force and effect for a period of two (2) years
thereafter (subject to any applicable statutes of limitations).
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(g) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.
(ii) In the event the Shareholder breaches (or in the event
any third party alleges facts that, if true, would mean the Shareholder
has breached) any of his representations, warranties, and covenants
contained in this Agreement, and, if there is an applicable survival
period pursuant to Section 8(f) above, provided that the Buyer makes a
written claim for indemnification against the Shareholder within such
survival period, then the Shareholder agree to indemnify the Buyer from
and against the entirety of any Adverse Consequences the Buyer may
suffer through and after the date of the claim for indemnification
resulting from, arising out of, relating to, in the nature of, or
caused by the breach (or the alleged breach).
(iii) The Shareholder agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences the Buyer may suffer
resulting from, arising out of, relating to, in the nature of, or
caused by any Liability of the Company which is not reflected on the
Most Recent Financial Statements (including any Liability of the
Company that becomes a Liability of the Buyer under any bulk transfer
law of any jurisdiction, under any Environmental, Health, and Safety
Requirements, for unpaid Taxes, or otherwise by operation of law);
(iv) The Shareholder agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences the Buyer may suffer
resulting from, arising out of, relating to, in the nature of, or
caused by any Liability of the Company for Taxes of the Company with
respect to any Tax year or portion thereof ending on or before 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 Most Recent Financial Statements (rather than
in any notes thereto), as such reserve is adjusted for the passage of
time through the Closing Date in accordance with the past custom and
practice of the Company in filing its Tax Returns and (b) for the
unpaid Taxes of any Person (other than the Company) under Reg.
ss.1.1502-6 (or any similar provision of state, local, or foreign law),
as a transferee or successor, by contract, or otherwise.
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(h) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SHAREHOLDER.
(i) In the event the Buyer breaches (or in the event any third
party alleges facts that, if true, would mean the Buyer has breached)
any of its representations, warranties, and covenants contained in this
Agreement, and, if there is an applicable survival period pursuant to
Section 8(f) above, provided that the Shareholder makes a written claim
for indemnification against the Buyer within such survival period, then
the Buyer agrees to indemnify the Shareholder from and against the
entirety of any Adverse Consequences the Shareholder may suffer through
and after the date of the claim for indemnification resulting from,
arising out of, relating to, in the nature of, or caused by the breach
(or the alleged breach).
(ii) The Buyer agrees to indemnify the Shareholder from and
against the entirety of any Adverse Consequences the Shareholder may
suffer resulting from, arising out of, relating to, in the nature of,
or caused by any Liability assumed by the Buyer pursuant to the Merger
reflected on the Most Recent Financial Statements and the Shareholder
Personal Guarantees.
(i) 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 8, 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) after the Indemnified Party has given notice of the Third
Party Claim that the Indemnifying Party will indemnify the Indemnified
Party from and against the entirety of any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating
to, in the nature of, or caused by the Third Party Claim, (B) the
Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third
Party Claim and fulfill its indemnification obligations hereunder, (C)
the Third Party Claim involves only money damages and does not seek an
injunction or other equitable relief, (D) settlement of, or an adverse
judgment with respect to, the Third Party Claim is not, in the good
faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice materially adverse to the continuing
business interests of the Indemnified Party, and (E) the Indemnifying
Party conducts the defense of the Third Party Claim actively and
diligently.
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<PAGE>
(iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 8(i)(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, (B) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party (not
to be withheld unreasonably), and (C) the Indemnifying Party will not
consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of
the Indemnified Party (not to be withheld unreasonably).
(iv) In the event any of the conditions in Section 8(i)(ii)
above is or becomes unsatisfied, however, (A) the Indemnified Party may
defend against, and consent to the entry of any judgment or enter into
any settlement with respect to, the Third Party Claim in any manner it
reasonably may deem appropriate (and the Indemnified Party need not
consult with, or obtain any consent from, any Indemnifying Party in
connection therewith), (B) the Indemnifying Party will reimburse the
Indemnified Party promptly and periodically for the costs of defending
against the Third Party Claim (including reasonable attorneys' fees and
expenses), and (C) the Indemnifying Party will remain responsible for
any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Section 8(i).
(j) OTHER INDEMNIFICATION PROVISIONS. The indemnification provisions
set forth in Section 8(g), Section 8(h) and Section 8(i) above 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 the Company, or the transactions contemplated by this Agreement.
The Shareholder hereby agrees that he will not make any claim for
indemnification against any of the Buyer and its Subsidiaries by reason of
the fact that he was a director, officer, employee, or agent of the Company
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 the Buyer against the Shareholder (whether such action, suit, proceeding,
complaint, claim, or demand is pursuant to this Agreement, applicable law, or
otherwise).
(k) LIMITATIONS ON INDEMNIFICATION OBLIGATIONS. Notwithstanding the
provisions of Section 8(g) through 8(j) above, neither Party shall be
obligated to indemnify the other Party or Parties, as the case may be, from
and against any Adverse Consequences (A) until such Party or Parties have
suffered Adverse Consequences in excess of $10,000 in the aggregate (after
which point, the Indemnifying Party or Parties will be obligated only to
indemnify the indemnified Party or Parties from and against further Adverse
Consequences) or (B) to the extent that such Adverse Consequences exceeds the
Purchase Price; PROVIDED, HOWEVER, that any claims brought by a Party against
another Party or Parties for fraud shall not be subject to the foregoing
limitations.
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9. ADDITIONAL AGREEMENTS.
(a) ESCROW FUND. As security for the indemnity of the Buyer by the
Company and the Shareholder provided for in Section 8 above, the Escrow
Shares shall be registered in the name of the Shareholder, and deposited
(with an executed assignment in blank) with Norwest Bank, N.A. as Escrow
Agent such deposit to constitute an escrow fund (the "Escrow Fund") to be
governed by the terms set forth herein and in the escrow agreement to be
signed by all parties thereto (the "Escrow Agreement"). In the event of any
conflict between the terms of this Agreement and the Escrow Agreement, the
terms of the Escrow Agreement shall govern. All costs and fees of the Escrow
Agent for establishing and administering the Escrow Fund shall be borne
equally by the Parties. Upon compliance with the terms hereof, the Buyer
shall be entitled to obtain indemnity first from the Escrow Fund for all
Adverse Consequences covered by the indemnity provided for in Section 8
above. If the Escrow Fund is not sufficient to cover any such Adverse
Consequences covered by Section 8 above, then the Buyer shall be entitled to
seek payment from the Shareholder. The form of the Escrow Agreement is
attached hereto as Exhibit K.
(b) POSSIBLE BENEFITS TO SHAREHOLDER. The Shareholder shall be
entitled to the following:
(i) Following the Closing, the Shareholder shall be entitled
to receive, and Buyer shall pay to the Shareholder, any revenue
collected with respect to accounts receivable of the Company that are
ninety (90) or more days old as of the Closing Date, as more
particularly described on Exhibit L attached hereto (the "Accounts
Receivable"). In connection herewith, the Shareholder shall have the
right to make reasonable attempts to collect such Accounts Receivable,
and shall have reasonable access to all files and records relating
thereto.
(ii) The Shareholder shall be entitled to any and all monetary
judgments awarded to the Company with respect to two (2) lawsuits
currently pending to which the Company is a party, more particularly
described on Exhibit M attached hereto (the "Litigation"). Other than
as provided for in this subsection, the Buyer shall in no way have any
Liability, obligation, or other responsibility with respect to the
Litigation, whether to the Shareholder or to any of the parties to the
Litigation.
(iii) Notwithstanding Section 5(e) hereof, the Shareholder may
conclude certain transactions on behalf of the Company, as approved in
writing by the Buyer, prior to the Closing Date (the "Pre-Closing
Transactions"). A list of the Pre-Closing Transactions is set forth in
Exhibit N hereto. In consideration therefor, the Buyer shall pay an
amount equal to fifty percent (50%) of the average revenue rate for the
Pre-Closing Transactions in April and May, 2000, multiplied by four
(4). Such payment shall be made at the end of the twelve (12) month
period following the Closing Date, and shall consist of registered
shares of common stock of the Buyer based on the closing price per
share of the Buyer's common stock for the ten (10) day period ending on
the day prior to
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the first anniversary following the Closing Date.
10. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue
any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of the other
Party; PROVIDED, HOWEVER, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or
trading agreement concerning its publicly-traded securities (in which case
the disclosing Party will use its reasonable best efforts to advise the other
Party prior to making the disclosure).
(b) NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns; PROVIDED, HOWEVER, that (i) the
provisions in Section 2 above concerning issuance of the Buyer Shares are
intended for the benefit of the Shareholder and (ii) the provisions in
Section 8 above concerning insurance and indemnification are intended for the
benefit of the individuals specified therein and their respective legal
representatives.
(c) ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between 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 its rights, interests, or obligations hereunder without the prior
written approval of the other Party.
(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.
(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 if (and
then 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 THE COMPANY:
IdealDial Corp.
910 15th Street, Fifth Floor
Denver, Colorado 80202
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<PAGE>
Attention: Mr. Michael Payne
COPY TO:
Otten, Johnson, Robinson, Neff & Ragonetti, P.C.
950 17th Street, Suite 1600
Denver, Colorado 80202
Attention: Mr. Douglas R. Wright, Esq.
IF TO THE SHAREHOLDER:
Michael Payne
5601 South Steele Street
Littleton, Colorado 80121
COPY TO:
Otten, Johnson, Robinson, Neff & Ragonetti, P.C.
950 17th Street, Suite 1600
Denver, Colorado 80202
Attention: Mr. Douglas R. Wright, Esq.
IF TO THE BUYER:
Rocky Mountain Internet, Inc.
999 18th Street, North Tower, 22nd Floor
Denver, Colorado 80202
Attention: Mr. Douglas H. Hanson
COPIES TO:
Rocky Mountain Internet, Inc.
999 18th Street, North Tower, 22nd Floor
Denver, Colorado 80202
Attention: Mr. Chris J. Melcher
Holland & Hart LLP
215 South State Street, Suite 500
Salt Lake City, Utah 84111-2317
Attention: Mr. David R. Rudd
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
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<PAGE>
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 Party 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) DISPUTE RESOLUTION. The Parties hereby covenant and agree that,
except as otherwise set forth in this Agreement, any suit, dispute, claim,
demand, controversy or cause of action of every kind and nature whatsoever,
known or unknown, fixed or contingent, that the Parties may now have or at
any time in the future claim to have based in whole or in part, or arising
from or that in any way is related to the negotiations, execution,
interpretation or enforcement of this Agreement (collectively, the
"Disputes") shall be completely and finally settled by submission of any such
Disputes to arbitration under the Commercial Rules of Arbitration of the
American Arbitration Association ("AAA") then in effect. If the parties to
the Dispute are unable to agree on a single arbitrator, then such binding
arbitration shall be conducted before a panel of three (3) arbitrators that
shall be comprised of one (1) arbitrator designated by each party to the
Dispute and a third arbitrator designated by the two (2) arbitrators selected
by the parties to the Dispute. Unless the parties to the Dispute agree
otherwise, the arbitration proceedings shall take place in Denver, Colorado
and the arbitrator(s) shall apply the law of the State of Colorado, USA, to
all issues in dispute, in accordance with Section 10(i) above. The findings
of the arbitrator(s) shall be final and binding on the parties to the
Dispute. Judgment on such award may be entered in any court of appropriate
jurisdiction, or application may be made to that court for a judicial
acceptance of the award and an order of enforcement, as the Party seeking to
enforce that award may elect. Notwithstanding any applicable rules of
arbitration, all arbitral awards shall be in writing and shall set forth in
particularity the findings of fact and conclusions of law of the arbitrator
or arbitrators.
(j) AMENDMENTS AND WAIVERS. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time with the
prior authorization of their respective boards of directors; PROVIDED,
HOWEVER, that any amendment effected subsequent to Shareholder approval will
be subject to the restrictions contained in the Delaware General Corporation
Law and the Colorado Business Corporation Act. No amendment of any provision
of this Agreement shall be valid unless the same shall be in writing and
signed by both of the Parties. 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.
(k) 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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(l) EXPENSES. Each of the Parties will bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
(m) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
otherwise requires. The word "including" shall mean including without
limitation. Nothing in the Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity
and describes the relevant facts in reasonable detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception
to a representation or warranty made herein (unless the representation or
warranty has to do with the existence of the document or other item itself).
The 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.
(n) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
*****
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IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
ROCKY MOUNTAIN INTERNET, INC.
D/B/A RMI.NET
By:
---------------------------
Its: Douglas H. Hanson
Chairman and Chief Executive Officer
IDEALDIAL CORPORATION
By:
---------------------------
Its:
---------------------------
Title:
-------------------------
SHAREHOLDER:
-------------------------------------
MICHAEL PAYNE
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Exhibit 10.2
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ROCKY MOUNTAIN INTERNET, INC.
D/B/A RMI.NET
AND
INTERNET CONNECT, INC., INTERWEB DESIGN AND HOSTING, INC.,
JAY W. MASON, M.D., DAX J.C. KELSON, DAVID S. JENNINGS,
DAVID L. ALDERSON, JR., AND TIMOTHY H. CRAWFORD, M.D.
JUNE 10, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Definitions
2. Basic Transaction
(a) The Merger
(b) The Closing
(c) Actions at the Closing
(d) Effect of Merger
(e) Procedure for Payment
(f) Closing of Transfer Records
3. Representations and Warranties of the Companies and the Sellers
(a) Status of Sellers
(b) Authorization of Transaction
(c) Noncontravention
(d) Brokers' Fees
(e) Seller Shares
(f) Organization, Qualification, and Corporate Power of the Companies
(g) Capitalization
(h) Subsidiaries
(i) Financial Statements
(j) Events Subsequent to Most Recent Fiscal Year End
(k) Undisclosed Liabilities
(l) Legal Compliance
(m) Title to Assets
(n) Real Property
(o) Intellectual Property
(p) Tangible Assets
(q) Inventory
(r) Contracts
(s) Notes and Accounts Receivable
(t) Power of Attorney
(u) Insurance
(v) Litigation
(w) Warranties
(x) Employees
(y) Employee Benefits
(z) Tax Matters
(aa) Guaranties
(bb) Environmental, Health, and Safety Matters
(cc) State PUC Authorizations and FCC Authorizations
(dd) Certain Business Relationships with the Sellers
(ee) Investment
(ff) Licenses and Permits
(gg) Accounts Payable
</TABLE>
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<TABLE>
<S> <C>
(hh) Prepaid Customer Fees
(ii) Capital Lease Obligations
(jj) Continuity of Interest
(kk) Disclosure
4. Representations and Warranties of the Buyer
(a) Organization
(b) Capitalization
(c) Authorization of Transaction
(d) Noncontravention
(e) Brokers' Fees
(f) Continuity of Business Enterprise
(g) Status of Buyer Shares
(h) Disclosure
5. Covenants
(a) General
(b) Notices and Consents
(c) Regulatory Matters and Approvals
(d) Operation of Business
(e) Full Access
(f) Notice of Developments
(g) Exclusivity
(h) Continuity of Business Enterprise
(i) Legend
6. Conditions to Obligation to Close
(a) Conditions to Obligation of the Buyer
(b) Conditions to Obligation of the Sellers
7. Termination
(a) Termination of Agreement
(b) Effect of Termination
8. Post-Closing Covenants
(a) General
(b) Litigation Support
(c) Transition
(d) Confidentiality
(e) Covenant Not to Compete
(f) Survival of Representations and Warranties
(g) Indemnification Provisions for Benefit of the Buyer
(h) Indemnification Provisions for Benefit of the Sellers
(i) Matters Involving Third Parties
(j) Other Indemnification Provisions
(k) Limitations on Indemnification Obligations
(l) Employment of Dax J.C. Kelson
9. Escrow Fund
10. Miscellaneous
(a) Press Releases and Public Announcements
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
(b) No Third Party Beneficiaries
(c) Entire Agreement
(d) Succession and Assignment
(e) Counterparts
(f) Headings
(g) Notices
(h) Sellers' Representative
(i) Governing Law
(j) Dispute Resolution
(k) Amendments and Waivers
(l) Severability
(m) Expenses
(n) Construction
(o) Incorporation of Exhibits and Schedules
Exhibit A--Certificate of Merger
Exhibit B--Articles of Merger
Exhibit C--Lockup Agreement
Exhibit D--Financial Statements
Exhibit E--Form of Opinion of Counsel to the Sellers
Exhibit F--Form of Opinion of Counsel to the Buyer
Exhibit G--Form of Escrow Agreement
Disclosure Schedule--Exceptions to Representations and Warranties
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is entered into as
of this 10TH day of June, 1999 by and among ROCKY MOUNTAIN INTERNET, INC., a
Delaware corporation d/b/a RMI.NET (the "Buyer"), and INTERNET CONNECT, INC.,
a Utah corporation ("ICI"), and ICI's wholly owned subsidiary, INTERWEB
DESIGN AND HOSTING, INC., a Utah corporation ("IWDH"), and Jay W. Mason,
M.D., Dax J.C. Kelson, David S. Jennings, David L. Alderson, Jr., and Timothy
H. Crawford, M.D. (collectively, the "Sellers"). The Buyer, ICI, IWDH, and
the Sellers are referred to collectively herein as the "Parties".
RECITALS:
A. The Sellers have all right, title and interest in and to 1,427.56
shares of the issued and outstanding common stock, no par value per share, of
ICI, representing all of the issued and outstanding shares of stock of ICI
(the "Seller Shares"), and ICI has all right, title and interest in and to
800 shares of the issued and outstanding common stock, no par value per
share, of IWDH, representing all of the issued and outstanding shares of
stock of IWDH.
B. The Buyer wishes to acquire the Seller Shares, and the Sellers
are willing to sell the Seller Shares to the Buyer pursuant to the terms and
conditions of this Agreement.
C. This Agreement contemplates a tax-free merger of ICI with and
into the Buyer in a reorganization pursuant to Code Section 368(a)(1)(A) (the
"Merger").
D. Either prior to, or concurrently with, the Merger, ICI and the
Sellers shall merge IWDH with and into ICI, with ICI as the surviving
corporation (hereinafter referred to as the "Company").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the Parties agree as follows:
AGREEMENT:
1. DEFINITIONS.
"ACQUISITION PROPOSAL" means any proposal, other than the
transactions contemplated by this Agreement, for (i) any merger or other
business combination, including any transaction structured as a consolidation
or share exchange, involving the Companies or the Sellers, (ii) the
acquisition of the Companies or a material equity interest in or a material
portion of the assets or properties of the Companies or (iii) the dissolution
or liquidation of the Companies.
"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,
5
<PAGE>
expenses, and fees, including court costs and reasonable attorney's fees and
expenses.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"AFFILIATED GROUP" means any affiliated group within the meaning of
Code Section 1504(a) or any similar group defined under a similar provision
of state, local, or foreign law.
"AGREEMENT" has the meaning set forth in the preface above.
"ARTICLES OF MERGER" have the meaning set forth in Section 2(c)
below.
"BUYER" has the meaning set forth in the preface above.
"BUYER COMFORT LETTER" has the meaning set forth in Section 5(d)
below.
"BUYER'S SEC FILINGS" has the meaning set forth in Section 3(ee)
below.
"BUYER SHARE" means any share of the common stock, $0.001 par value
per share, of the Buyer.
"CERTIFICATE OF MERGER" has the meaning set forth in Section 2(d)
below.
"CLOSING" has the meaning set forth in Section 2(b) below.
"CLOSING BUYER SHARES" has the meaning set forth in Section 2(d)(x)
below.
"CLOSING DATE" has the meaning set forth in Section 2(b) below.
"CLOSING PRICE" has the meaning set forth in Section 2(d)(v) below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" means ICI, and its wholly-owned subsidiary, IWDH, which
will be merged with and into ICI prior to, or concurrently with, the Merger.
"COMPANIES" has the meaning set forth in Section 3 below.
"CONFIDENTIAL INFORMATION" means any information concerning the
businesses and affairs of the parties and their respective Affiliates that is
not already generally available to the public.
"CONTINGENT LIABILITIES" has the meaning set forth in Section 3(k)
below.
"CURRENT ASSETS" means cash, accounts receivable for customer
accounts with balances of forty-five (45) days or less incurred in the
ordinary course of the Companies' business, prepaid
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<PAGE>
expenses and other current assets (which have value to the business after the
Closing Date) reflected on the consolidated balance sheets of the Companies
dated as of the Most Recent Fiscal Month End and prepared in accordance with
GAAP.
"CURRENT LIABILITIES" means accounts payable and accrued expenses,
all accrued but unpaid taxes, all deferred revenues and any other current
liability (except the current portion of any bank debt or line of credit)
reflected on the monthly consolidated balance sheets of the Companies dated
as of the Most Recent Fiscal Month End and prepared in accordance with GAAP.
"DEFERRED INTERCOMPANY TRANSACTION" has the meaning set forth in
Reg. Section 1.1502-13.
"DELAWARE GENERAL CORPORATION LAW" means the General Corporation
Law of the State of Delaware, as amended.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 3 below.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred
compensation or retirement plan or arrangement, (b) qualified defined
contribution retirement plan or arrangement which is an Employee Pension
Benefit Plan, (c) qualified defined benefit retirement plan or arrangement
which is an Employee Pension Benefit Plan (including Multiemployer Plan), or
(d) Employee Welfare Benefit Plan or material fringe benefit or other
retirement, bonus, or incentive 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.
"ESCROW AGENT" has the meaning set forth in Section 2(e)(i) below.
"ESCROW AGREEMENT" has the meaning set forth in Section 9 below.
"ESCROW FUND" has the meaning set forth in Section 9 below.
"ESCROW SHARES" has the meaning set forth in Section 2(e)(i) below.
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<PAGE>
"ESCROW TERM" has the meaning set forth in Section 2(e)(i) below.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"FCC AUTHORIZATIONS" means all approvals, consents, permits,
licenses, certificates, and authorizations given by the Federal
Communications Commission or similar federal governmental agency to provide
the telecommunications services currently provided by the Companies and to
conduct their businesses as currently conducted.
"FINANCIAL STATEMENTS" have the meaning set forth in Section 3(i)
below.
"GAAP" means United States generally accepted accounting principles
as in effect from time to time.
"INDEMNIFIED PARTY" has the meaning set forth in Section 8(i)(i)
below.
"INDEMNIFYING PARTY" has the meaning set forth in Section 8(i)(i)
below.
"INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof, (b) all trademarks,
service marks, trade dress, logos, trade names, and corporate names, together
with all translations, adaptations, derivations, and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all mask works and all applications, registrations,
and renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing
plans and proposals), (g) all other proprietary rights, and (h) all copies
and tangible embodiments thereof (in whatever form or medium).
"IRS" means the Internal Revenue Service.
"KNOWLEDGE" means actual knowledge after reasonable investigation.
"LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"LOCK-UP AGREEMENT" has the meaning set forth in Section 2(d)(ix)
below.
"LONG-TERM LIABILITIES" means any term loans (bank debt, lines of
credit, and other forms of debt, including the current portion thereof),
capital leases, operating leases, whether or not stated
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on the consolidated balance sheets, and other liabilities, whether or not
identified on the Companies' consolidated balance sheets.
"MERGER" has the meaning set forth in Recital C above.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth in
Section 3(i) below.
"MOST RECENT FISCAL MONTH END" has the meaning set forth in Section
3(i) below.
"MOST RECENT FISCAL YEAR END" has the meaning set forth in Section
3(i) below.
"MULTIEMPLOYEE PLAN" has the meaning set forth in ERISA Section
3(37).
"NET WORKING CAPITAL" means the difference between the Companies'
Current Assets and their Current Liabilities.
"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.
"PERMITS" has the meaning set forth in Section 3(ff) below.
"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).
"PURCHASE PRICE" has the meaning set forth in Section 2(d)(v) below.
"RECURRING REVENUE RATE" has the meaning set forth in Section
2(d)(vi) below.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, OTHER THAN (a) mechanic's, materialmen's,
and similar liens, (b) liens for taxes not yet due and payable or for taxes
that the taxpayer is contesting in good faith through appropriate
proceedings, (c) purchase money liens and liens securing rental payments
under capital lease arrangements, and (d) other liens arising in the Ordinary
Course of Business and not incurred in connection with the borrowing of money.
"SELLER SHARES" has the meaning set forth in the Recitals above.
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"SELLERS" has the meaning set forth in the preface above.
"SELLERS' REPRESENTATIVE" has the meaning set forth in Section
10(h) below.
"SUBSIDIARY" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the common
stock or has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors.
"STATE PUC AUTHORIZATIONS" means all approvals, consents, permits,
licenses, certificates, and authorizations given by any state or local
regulatory authority to provide the telecommunications services currently
provided by the Companies and to conduct their businesses as currently
conducted.
"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 returns 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 8(i)(i)
below.
2. BASIC TRANSACTION.
(a) THE MERGER. On and subject to the terms and conditions of this
Agreement, the Company will merge with and into the Buyer (the "Merger") at
the Effective Time. The Buyer shall be the corporation surviving the Merger
(the "Surviving Corporation").
(b) THE CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Holland &
Hart, LLP, 215 South State Street, Suite 500, Salt Lake City, Utah, 84111,
commencing at 5:00 p.m. local time on the earlier of (i) the second business
day following the satisfaction or waiver of all conditions to the obligations
of the Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective Parties will take at the
Closing itself) or (ii) June 9, 1999 (the "Closing Date"); PROVIDED, HOWEVER,
that if the Closing does not occur by June 9, 1999, then the Closing Date
will be automatically extended until June 22, 1999, and such Closing Date may
be further extended only upon mutual agreement of the Parties.
(c) ACTIONS AT THE CLOSING. At the Closing, (i) the Sellers and the
Company shall deliver
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to the Buyer the various certificates, instruments, and documents referred to
in Section 6(a) below, (ii) the Buyer shall deliver to the Sellers and the
Company the various certificates, instruments, and documents referred to in
Section 6(b) below, (iii) each of the Sellers shall deliver to the Buyer
stock certificates representing all of his or her Shares, endorsed in blank
or accompanied by duly executed assignment documents, (iv) the Buyer and the
Sellers shall file with the (A) Secretary of State of the State of Delaware a
Certificate of Merger in the form attached hereto as Exhibit A (the
"Certificate of Merger"), and (B) Utah Department of Commerce, Division of
Corporations and Commercial Code, the Articles of Merger attached hereto as
Exhibit B (the "Articles of Merger") and (v) the Buyer shall deliver to the
Exchange Agent in the manner provided below in this Section 2 the
certificates evidencing the Buyer Shares issued pursuant to this Agreement.
(d) EFFECT OF MERGER.
(i) GENERAL. The Merger shall become effective at the time
the Buyer and the Sellers file the Certificate of Merger with the
Secretary of State of the State of Delaware and the Articles of Merger
with the Utah Department of Commerce, Division of Corporations and
Commercial Code, which the Buyers and the Sellers undertake to file no
later than three (3) business days after the Closing Date (the
"Effective Time"). The Merger shall have the effect set forth in the
Delaware General Corporation Law. 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 the Buyer
or the Sellers in order to carry out and effectuate the transactions
contemplated by this Agreement.
(ii) CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of the Buyer in effect at and as of the Effective Time
shall remain the Certificate of Incorporation of the Surviving
Corporation without any modification or amendment in the Merger.
(iii) BYLAWS. The Bylaws of the Buyer in effect at and as of
the Effective Time shall remain the Bylaws of the Surviving Corporation
without any modification or amendment in the Merger.
(iv) DIRECTORS AND OFFICERS. The directors and officers of
the Buyer 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).
(v) CONVERSION OF SELLER SHARES. At the Closing, each Seller
Share shall be converted into the right to receive the number of the
Buyer Shares equal to one million five hundred thousand and no/100ths
dollars ($1,500,000), divided by the average closing price per share of
the Buyer Shares for the five (5) day period ending on the day prior to
the Closing Date (the "Closing Price"), divided by the number of all
Seller Shares outstanding (the "Purchase Price") (the ratio of the
Buyer Shares to the Seller Shares is referred to herein as the
"Conversion Ratio"), and PROVIDED, HOWEVER, that the Conversion Ratio
shall be subject to adjustment in the event of any adjustment in the
Purchase Price as contemplated under Section 2(d)(vi) below, or any
stock split, stock dividend, reverse stock split, or other change in
the number of the Seller Shares outstanding. No Seller Share shall
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be deemed to be outstanding or to have any rights other than those set
forth above in this Section 2(d)(v) after the Effective Time.
(vi) ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price set
forth in Section 2(d)(v) above is based upon a combined monthly
Recurring Revenue Rate of the Company for the Most Recent Fiscal Month
End of ninety five thousand and no/100ths dollars ($95,000.00), and the
status of the Company's Net Working Capital and Long Term Liabilities
as of the Closing Date, as more fully described below. The Purchase
Price is subject to adjustment as of the Closing as follows:
(A) In the event that the Recurring Revenue Rate
exceeds or is less than ninety five thousand and no/100ths
dollars ($95,000.00), the Purchase Price shall be increased or
reduced, whichever may be the case, by fifteen dollars and
79/100 ($15.79) for each dollar that the Recurring Revenue
Rate exceeds or is less than such amount;
(B) In the event that the Company's Net Working
Capital is positive or negative, whichever may be the case,
the Purchase Price shall be increased or reduced dollar for
dollar in an amount equal to the positive or negative Net
Working Capital, as applicable; and
(C) The Purchase Price shall be reduced dollar for
dollar by the amount of any Long Term Liabilities of the
Company assumed by the Buyer.
(vii) BUYER SHARES. Each Buyer Share issued and outstanding
at and as of the Closing Date shall remain issued and outstanding. The
Buyer Shares to be issued pursuant to this Agreement shall be
registered in accordance with Sections 2(d)(viii), 2(d)(ix) and 2
(d)(x) below.
(viii) ESCROW OF BUYER SHARES. At and as of the Effective
Time, to secure its obligations under Section 8 below and such other
obligations as the Buyer shall reasonably determine to be necessary,
and as more fully described in Section 9 below, the Sellers will
deposit with an escrow agent (the "Escrow Agent"), that number of Buyer
Shares equal to ten percent (10%) of the Buyer Shares payable to
Sellers hereunder (the "Escrow Shares"), which Escrow Shares shall be
held by the Escrow Agent until the first anniversary of the Closing
Date (the "Escrow Term"). The Escrow Shares shall be registered under
the Securities Act by the Buyer prior to the expiration of the Escrow
Term.
(ix) LOCKUP OF BUYER SHARES. At and as of the Effective
Time, sixty percent (60%) of the Buyer Shares to be issued to the
Sellers pursuant to this Section 2 shall be subject to a Lockup
Agreement, in the form attached hereto as Exhibit C (the "Lockup
Agreement"), which will, except as provided therein, prohibit any
transfer, sale or other disposition of such Buyer Shares for a period
of nine (9) months following the Closing Date. The Buyer may, at its
option, deliver the Lock-Up Shares to the Sellers in the form of either
registered or unregistered Buyer Shares; PROVIDED, HOWEVER; the Buyer
hereby agrees
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<PAGE>
to register such unregistered Lock-Up Shares or to deliver to the
Sellers registered Buyer Shares in exchange therefor, prior to the
expiration of the Lock-Up Period.
(x) TRADING AND TRANSFER OF BUYER SHARES. At and as of the
Effective Time, thirty percent (30%) of the Buyer Shares to be issued
to the Sellers pursuant to this Section 2 will not be registered under
the Securities Act (the "Closing Buyer Shares"). The Buyer shall,
within one (1) business day following receipt by the Buyer of written
notice of the effectiveness of the Buyer's pending registration
statement on Form S-4, deliver to the Sellers registered Buyer Shares;
PROVIDED, HOWEVER, that if the market price for the Closing Buyer
Shares on the day prior to such delivery is less than the Closing Price
established pursuant to Section 2(d)(v) above, the Buyer shall deliver
additional registered Buyer Shares to the Sellers so that the total
value of the registered Buyer Shares delivered to the Sellers hereunder
shall be equal to the total value of the Closing Buyer Shares at and as
of the Closing Date; and PROVIDED, FURTHER, that the Buyer shall pay to
the Sellers interest (in the form of cash or other form of immediately
available funds) at the rate of twelve percent (12%) per annum on the
value of the Closing Buyer Shares, as determined by the Closing Price
established pursuant to Section 2(d)(v) above, from and after the
Effective Time until such registered Buyer Shares are delivered to the
Sellers. After the Effective Time, the Sellers will be allowed to sell,
trade and otherwise transfer up to thirty percent (30%) of the Buyer
Shares to be issued to the Sellers pursuant to this Section 2;
PROVIDED, HOWEVER, that, for a period of six (6) months from and after
the Effective Time, the Sellers may not sell, trade or otherwise
transfer more than 4,000 Buyer Shares in any one trading day.
(e) PROCEDURE FOR PAYMENT.
(i) Subject to Section (d) above, immediately after the
Effective Time, the Buyer shall furnish to American Securities Transfer
and Trust, Inc., (the "Exchange Agent") a stock certificate (issued in
the name of the Exchange Agent or its nominee) representing that number
of Buyer Shares equal to the product of (I) the Conversion Ratio TIMES
(II) the number of outstanding Seller Shares.
(ii) The Buyer shall direct the Exchange Agent to immediately
issue the thirty percent (30%) of the Buyer Shares referred to in
Section 2(d)(x) above to the Sellers by transferring such shares via
the electronic transfer procedure known as "DWAC" to a brokerage
account specified by each of the Sellers. The remaining seventy percent
(70%) of the Buyer shares shall be issued by the Exchange Agent to the
Escrow Agent and the Sellers pursuant to the provisions of Section
2(d)(viii) and 2(d)(ix) above.
(iii) The Buyer shall not pay any dividend or make any
distribution on the Buyer Shares (with a record date at or after the
Effective Time) to any record holder of outstanding Seller Shares until
the holder surrenders for exchange his/her or its certificates which
represented the Seller Shares. The Buyer shall instead pay the dividend
or make the distribution to the Exchange Agent in trust for the benefit
of the holder pending surrender and exchange. The Buyer shall cause the
Exchange Agent to make prompt payment of any cash the Exchange Agent
receives from the Buyer as a dividend or distribution to the
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holders of outstanding Seller Shares as necessary. In no event,
however, will any holder of outstanding Seller Shares be entitled to
any interest or earnings on any dividend or distribution pending
receipt of the Buyer Shares.
(iv) The Buyer may cause the Exchange Agent to return any
Buyer Shares and any dividends and distributions thereon remaining
unclaimed one hundred and eighty (180) days after the Effective Time,
and thereafter each remaining record holder of outstanding Seller
Shares shall be entitled to look to the Buyer (subject to abandoned
property, escheat and other similar laws) as a general creditor thereof
with respect to the Buyer Shares and dividends and distributions
thereon to which he/she or it is entitled upon surrender of his/her or
its certificates.
(v) The Parties shall bear all charges and expenses of the
Exchange Agent equally.
(f) CLOSING OF TRANSFER RECORDS. After the close of business on the
Closing Date, transfers of Seller Shares outstanding prior to the Effective
Time shall not be made on the stock transfer books of the Surviving
Corporation.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS.
Each of the ICI and IWDH (collectively, the "Companies"), and the Sellers,
jointly and severally, represents and warrants to the Buyer that the
statements contained in this Section 3, relating to both the Companies and
the Sellers, are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and
as though the Closing Date were substituted for the date of this Agreement
throughout this Section 3), except as set forth in the disclosure schedule
accompanying this Agreement and initialed by the Parties (the "Disclosure
Schedule"). The Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this
Section 3.
(a) STATUS OF SELLERS. Each Seller, other than ICI, is a natural
person.
(b) AUTHORIZATION OF TRANSACTION. Except as set forth in Section
3(b) of the Disclosure Schedule, each of the Companies and the Sellers has
full right, power and authority to execute and deliver this Agreement and the
Exhibits hereto to which the Companies and the Sellers are signatory, to
perform its, his or her obligations hereunder and thereunder and to transfer
and convey his or her Seller Shares to the Buyer. This Agreement and the
Exhibits hereto to which the Company and the Sellers are signatory,
constitute the valid and legally binding obligations of each of the Companies
and the Sellers, enforceable in accordance with their respective terms and
conditions, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and general equitable principles
regardless of whether such enforceability is considered in a proceeding at
law or in equity. Neither the Companies nor any of the Sellers need to give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any third person or party, including, without limitation, any
government or governmental agency, in order to consummate the transactions
contemplated by this Agreement.
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(c) NONCONTRAVENTION. Except as set forth in Section 3(c) of the
Disclosure Schedule, to the Sellers' 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 the
Companies or any of the Sellers is subject, or any provision of the articles
of incorporation or bylaws of the Companies 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 the Companies or any of the Sellers is a party
or by which it, he or she is bound or to which any of its, his or her assets
is subject (or result in the imposition of any Security Interest upon any of
such assets). Neither the Companies, nor any of the Sellers, need to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement, except where the
failure to give notice to, make any filing with, or obtain any authorization,
consent, or approval, would not have a material adverse effect on the ability
of the Parties to consummate the transactions contemplated by this Agreement.
(d) BROKERS' FEES. Except as set forth in Section 3(d) of the
Disclosure Schedule, neither the Companies, nor any of the Sellers, 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.
(e) SELLER SHARES. Except as described in Section 3(e) of Disclosure
Schedule, each of the Sellers holds of record, is the sole beneficial owner
of, and has good and marketable title to, the Seller Shares delivered by such
Seller to the Buyer pursuant to this Agreement, free and clear of any
restrictions on transfer, Taxes, Security Interests, Liabilities, options,
warrants, purchase rights, preemptive rights, contracts, commitments,
equities, claims and demands. No Seller is a party to any option, warrant,
purchase right or other contract or commitment that could require such Seller
to sell, transfer or otherwise dispose of any capital stock of the Companies
(other than this Agreement). None of the Sellers is a party to any voting
trust, proxy or other agreement or understanding with respect to the voting
of any capital stock of the Companies.
(f) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER OF THE
COMPANIES. The Companies are corporations duly organized, validly existing,
and in good standing under the laws of the jurisdiction of their
incorporation. The Companies are duly authorized to conduct business and are
in good standing under the laws of each jurisdiction where such qualification
is required except where the lack of such qualification would not have a
material adverse effect on the financial condition of the Companies taken as
a whole or on the ability of the Parties to consummate the transactions
contemplated by this Agreement. The Companies have full corporate power and
authority to carry on the businesses in which they are engaged and to own and
use the properties owned and used by them.
(g) CAPITALIZATION. The entire authorized capital stock of the
Companies consists of 5,000 ICI Shares, of which 1,427.56 Shares are issued
and outstanding, and 50,000 IWDH Shares,
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of which 800 Shares are issued and outstanding. All of the issued and
outstanding Shares have been duly authorized and are validly issued, fully
paid, and nonassessable, and are held of record by the respective Sellers in
the amounts set forth in Section 3(g) of the Disclosure Schedule, and to the
Sellers Knowledge, were not issued in violation of any federal or state
securities laws. There are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments that could require the Companies to issue,
sell, or otherwise cause to become outstanding any of their capital stock.
There are no outstanding or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to the Companies.
(h) SUBSIDIARIES. IWDH is the sole Subsidiary of ICI.
(i) FINANCIAL STATEMENTS. Attached hereto as Exhibit D are the
following consolidated financial statements (collectively the "Financial
Statements"): (i) audited consolidated balance sheets and statements of
income, changes in stockholders' equity, and cash flow as of and for the
fiscal years ended January 31, 1998 and 1999 (the "Most Recent Fiscal Year
End") for the Companies; and (ii) unaudited consolidated balance sheets and
statements of income, changes in stockholders' equity, and cash flow (the
"Most Recent Financial Statements") as of and for the month ended April 30,
1999 (the "Most Recent Fiscal Month End") for the Companies. The Financial
Statements (including the notes thereto) have been prepared in accordance
with GAAP applied on a consistent basis throughout the periods covered
thereby, present fairly the financial condition of the Companies as of such
dates and the results of operations of the Companies for such periods, are
correct and complete, and are consistent with the books and records of the
Companies (which books and records are correct and complete); PROVIDED,
HOWEVER, that the Most Recent Financial Statements are subject to normal
year-end adjustments (which will not be material individually or in the
aggregate) and lack footnotes and other presentation items.
(j) EVENTS SUBSEQUENT TO MOST RECENT FISCAL MONTH END. Since the
Most Recent Fiscal Month End, there has not been any material adverse change
in the businesses, financial conditions, operations, results of operations,
or future prospects of the Companies taken as a whole.
(k) UNDISCLOSED LIABILITIES. The Companies have no Liabilities
except for (i) Liabilities set forth on the face of the consolidated balance
sheet dated as of the Most Recent Financial Statements, (ii) Liabilities
which have arisen after the date of the Most Recent Fiscal Month End in the
Ordinary Course of Business (none of which results from, arises out of,
relates to, is in the nature of, or was caused by any breach of contract,
breach of warranty, tort, infringement, or violation of law), and (iii) the
contingent Liabilities (the "Contingent Liabilities") set forth in Section
3(k) of the Disclosure Schedule.
(l) LEGAL COMPLIANCE. The Companies, and their 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, local, and foreign governments
(and all agencies thereof), and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed or
commenced against the Companies alleging any failure so to comply.
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(m) TITLE TO ASSETS. Except as reflected otherwise on the Most
Recent Financial Statements, and except as set forth in Section 3(m) of the
Disclosure Schedule, the Companies have good and marketable title to, or a
valid leasehold interest in, the properties and assets used by them, located
on their premises, or shown on the Most Recent Financial Statements, or
acquired after the date thereof, free and clear of all Security Interests and
Liabilities, except for properties and assets disposed of in the Ordinary
Course of Business since the date of the Most Recent Financial Statements.
(n) REAL PROPERTY. The Companies do not own any real property.
Section 3(n) of the Disclosure Schedule lists and describes briefly all real
property leased or subleased to the Companies. The Sellers have delivered to
the Buyer correct and complete copies of the leases and subleases listed in
Section 3(n) of the Disclosure Schedule (as amended to date). With respect to
each lease and sublease listed in Section 3(n) of the Disclosure Schedule:
(i) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(ii) 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;
(iii) to the Sellers' Knowledge, 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;
(iv) no party to the lease or sublease has repudiated any
provision thereof;
(v) to the Sellers' Knowledge there are no disputes, oral
agreements, or forbearance programs in effect as to the lease or
sublease;
(vi) with respect to each sublease, the representations
and warranties set forth in subsections (i) through (v) above and, as
set forth in Section 3(n) of the Disclosure Schedule, are true and
correct in all material respects with respect to the underlying lease;
(vii) The Companies have not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest in
the leasehold or subleasehold;
(viii) 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; and
(ix) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the operation
of said facilities.
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(o) INTELLECTUAL PROPERTY. Except as disclosed on Section 3(o) of
the Disclosure Schedule:
(i) The Companies own or have the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property
necessary for the operation of the business of the Companies as
presently conducted. The Companies have taken all necessary action to
maintain and protect each item of Intellectual Property that they own
or use.
(ii) The Companies have not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and the Companies have never received
any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including
any claim that the Companies must license or refrain from using any
Intellectual Property rights of any third party). To the Knowledge of
the Sellers, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of the Companies.
(iii) Section 3(o)(iii) of the Disclosure Schedule identifies
each patent, trademark, tradename, service mark, or other registration
which has been adopted by or issued to the Companies with respect to
any of their Intellectual Property, identifies each pending application
or application for registration which the Companies have made with
respect to any of their Intellectual Property, and identifies each
license, agreement, or other permission which has granted to any third
party with respect to any of their Intellectual Property (together with
any exceptions). The Sellers have delivered to the Buyer correct and
complete copies of all such patents, trademarks, tradenames, services
marks, and other registrations, applications, licenses, agreements, and
permissions (as amended to date) and have made available to the Buyer
correct and complete copies of all other written documentation
evidencing ownership and prosecution (if applicable) of each such item.
With respect to each item of Intellectual Property required to be
identified in Section 3(o)(iii) of the Disclosure Schedule:
(A) The Companies 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;
(C) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or, to the Sellers' Knowledge, is threatened which challenges
the legality, validity, enforceability, use, or ownership of
the item; and
(D) The Companies have not agreed to indemnify any
Person for or against any interference, infringement,
misappropriation, or other conflict with
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respect to the item.
(iv) Section 3(o)(iv) of the Disclosure Schedule identifies
each item of Intellectual Property that any third party owns and that
the Companies use pursuant to license, sublicense, agreement, or
permission. The Sellers have delivered to the Buyer 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 3(o)(iv) of
the Disclosure Schedule:
(A) to the Sellers' Knowledge, the license,
sublicense, agreement, or permission covering the item is
legal, valid, binding, enforceable, and in full force and
effect;
(B) to the Sellers' Knowledge, 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) to the Sellers' Knowledge, 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) no party to the license, sublicense, agreement,
or permission has repudiated any provision thereof;
(E) with respect to each sublicense, the
representations and warranties set forth in subsections (A)
through (D) above are true and correct in all material
respects with respect to the underlying license;
(F) the underlying item of Intellectual Property is
not subject to any outstanding injunction, judgment, order,
decree, ruling, or charge;
(G) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or, to the Sellers' Knowledge, is threatened which challenges
the legality, validity, or enforceability of the underlying
item of Intellectual Property; and
(H) The Companies have not granted any sublicense or
similar right with respect to the license, sublicense,
agreement, or permission.
(v) The Companies 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.
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(p) TANGIBLE ASSETS. The Companies own or lease all buildings,
machinery, equipment, and other tangible assets necessary for the conduct of
their businesses as presently conducted. Each such tangible asset is free
from defects (patent and latent), has been maintained in accordance with
normal industry practice, is in good operating condition and repair (subject
to normal wear and tear), and is suitable for the purposes for which it
presently is used.
(q) INVENTORY. The inventory of the Companies consist of equipment,
materials, supplies, parts, and goods, all of which is merchantable and fit
for the purpose for which it was procured or manufactured, and a material
portion of which is neither obsolete, damaged, nor defective, subject only to
the reserve for inventory writedown set forth on the face of the Most Recent
Financial Statements (rather than in any notes thereto) as adjusted for the
passage of time through the Closing Date in accordance with the past custom
and practice of the Companies.
(r) CONTRACTS. Section 3(r) of the Disclosure Schedule lists the
following contracts and other agreements to which the Companies are a party:
(i) any agreement (or group of related agreements)
for the lease of personal property to or from any Person providing
for lease payments;
(ii) any agreement (or group of related agreements) for the
purchase or sale of equipment, raw materials, supplies, products, or
other personal property, or for the furnishing or receipt of services,
the performance of which will extend over a period of more than one
year, result in a material loss to the Companies, or involve
consideration in excess of $10,000;
(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, in excess of
$10,000 or under which it has imposed a Security Interest on any of its
assets, tangible or intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any agreement involving any of the Sellers;
(vii) any profit sharing, stock option, stock purchase,
stock appreciation, deferred compensation, severance, or other
material plan or arrangement for the benefit of its current or former
directors, officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on
a full-time, part-time, consulting, or other basis providing severance
benefits;
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(x) any agreement under which it has advanced or loaned
any amount to any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xi) 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 the Companies; or
(xii) any other agreement (or group of related agreements)
the performance of which involves consideration in excess of $10,000.
The Sellers have delivered to the Buyer a correct and complete copy
of each written agreement listed in Section 3(r) of the Disclosure Schedule
and a written summary setting forth the terms and conditions of each oral
agreement referred to in Section 3(r) of the Disclosure Schedule. With
respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect; (B) the agreement will continue to
be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby; (C) 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; except as to the
foregoing where the same would not have a material adverse effect on the
financial condition of the Companies or the ability of the Parties to
consummate the transactions contemplated by this Agreement.
(s) NOTES AND ACCOUNTS RECEIVABLE. Except as set forth in Section
3(s) of the Disclosure Schedule, all notes and accounts receivable of the
Companies are reflected properly on their books and records, are valid
receivables subject to no setoffs or counterclaims, are current and
collectible, and will be collected in accordance with their terms at their
recorded amounts, subject only to the reserve for bad debts set forth on the
face of the Most Recent Financial Statements (rather than in any notes
thereto), as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Companies.
(t) POWERS OF ATTORNEY. Except as set forth in Section 3(t) of the
Disclosure Schedule, there are no outstanding powers of attorney executed on
behalf of the Companies.
(u) INSURANCE. Section 3(u) 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 the Companies have been a
party, a named insured, or otherwise the beneficiary of coverage at any time
since the Companies' incorporation:
(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; and
(v) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal,
valid, binding, enforceable, and in full force and effect; (B) the policy
will continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (C) neither the Companies 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 (D)
no party to the policy has repudiated any provision thereof; except as to the
foregoing where the same would not have a material adverse effect on the
financial condition of the Companies or the ability of the Parties to
consummate the transactions contemplated by this Agreement. The Companies
have been covered during the past five (5) years by insurance in scope and
amount customary and reasonable for the business in which it has engaged
during the aforementioned period. Section 3(u) of the Disclosure Schedule
describes any self-insurance arrangements affecting any of the Companies.
(v) LITIGATION. Except as set forth in Section 3(v) of the
Disclosure Schedule, the Companies are not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge, nor is it a party or,
to the Knowledge of the Sellers, is threatened to be made a party to any
action, suit, proceeding, hearing, or investigation of, in, or before any
court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator. The Sellers do not
have any reason to believe that any such action, suit, proceeding, hearing,
or investigation may be brought or threatened against the Companies.
(w) WARRANTIES. Each product or service, sold, leased, or delivered
by the Companies has been in conformity with all applicable contractual
commitments and all express and implied warranties, and the Companies have no
Liability (and there is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
against any of them giving rise to any Liability) for replacement or repair
thereof or other damages in connection therewith, subject only to the reserve
for warranty claims set forth on the face of the Most Recent Financial
Statements (rather than in any notes thereto) as adjusted for the passage of
time through the Closing Date in accordance with the past custom and practice
of the Companies. No product or service, sold, leased, or delivered by the
Companies is subject to any guaranty, warranty, or other indemnity beyond the
applicable standard terms and conditions of sale or lease. Section 3(w) of
the Disclosure Schedule includes copies of the standard terms and conditions
of sale or lease containing applicable guaranty, warranty, and indemnity
provisions.
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(x) EMPLOYEES. Except as described in Section 3(x) of the Disclosure
Schedule, to the Knowledge of the Companies or the Sellers, no executive, key
employee, or group of employees has any plans to terminate employment with
the Companies. The Companies are not a party to or bound by any collective
bargaining agreement, nor have they experienced any strikes, grievances,
claims of unfair labor practices, or other collective bargaining disputes.
The Companies have not committed any unfair labor practice. The Companies
have no knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees of
the Companies.
(y) EMPLOYEE BENEFITS. The Companies or the Sellers have no Employee
Benefit Plan that they maintain, or to which they contribute, or have any
obligation to contribute.
(z) TAX MATTERS.
(i) The Companies have filed all Tax Returns that they were
required to file. All such Tax Returns were correct and complete in all
material respects. All Taxes owed by the Companies (whether or not
shown on any Tax Return) have been paid. The Companies currently are
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 the Companies do 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 the Companies that arose in
connection with any failure (or alleged failure) to pay any Tax.
(ii) The Companies have 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, member, or other
third party.
(iii) The Companies do not expect 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 the
Companies either (A) claimed or raised by any authority in writing or
(B) as to which the Companies or any of the Sellers have Knowledge
based upon personal contact with any agent of such authority. The
Sellers have delivered to the Buyer correct and complete copies of all
federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by the Companies covering
fiscal years 1996, 1997, and 1998.
(iv) The Companies have 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.
(v) The unpaid Taxes of the Companies (A) did not, as of the
Most Recent Fiscal Month End, exceed the reserve for Tax Liability
(rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the face
of the balance sheets of the Most Recent Fiscal Month End (rather than
in any notes thereto) and (B) do not exceed that reserve as adjusted
for the passage of time through the Closing Date in accordance with the
past custom and practice of the Sellers in filing their
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Tax Returns.
(vi) The Companies have not filed a consent under Code Section
341(f). The Companies have disclosed on their 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.
(vii) Section 3(z) of the Disclosure Schedule sets forth the
following information with respect to the Companies as of the most
recent practicable date (as well as on an estimated pro forma basis as
of the Closing giving effect to the consummation of the transactions
contemplated hereby): (A) the basis of the Companies in their assets;
(B) the amount of any net operating loss, net capital loss, unused
investment or other credit, unused foreign tax, or excess charitable
contribution allocable to the Companies; and (C) the amount of any
deferred gain or loss allocable to the Companies arising out of any
Deferred Intercompany Transaction.
(aa) GUARANTIES. The Companies are not a guarantor or otherwise are
liable for any Liability or obligation (including indebtedness) of any other
Person.
(bb) ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS. Each of the
Companies, and their respective predecessors and Affiliates, have, to the
Seller's Knowledge, complied, and are in compliance, with all Environmental,
Health, and Safety Requirements.
(cc) STATE PUC AUTHORIZATIONS AND FCC AUTHORIZATIONS. The Companies
have all State PUC Authorizations or FCC Authorizations necessary and
advisable for the conduct of its businesses as presently conducted and as
presently contemplated to be conducted after the Closing Date.
(dd) CERTAIN BUSINESS RELATIONSHIPS WITH THE SELLERS. Except as set
forth in Section 3(dd) of the Disclosure Schedule, none of the Sellers or
their respective Affiliates has been involved in any business arrangement or
relationship with the Companies within the past twelve (12) months, and none
of the Sellers and their respective Affiliates owns any asset, tangible or
intangible, which is used in the business of any of the Companies.
(ee) INVESTMENT. Each of the Sellers understands and acknowledges
that (i) certain of the Buyer Shares have not been registered, and will not
be registered, under the Securities Act, or under any state securities laws,
prior to the Closing Date, and are being offered and sold in reliance upon
federal and state exemptions for transactions not involving any public
offering; (ii) each of the Sellers is acquiring the Buyer Shares solely for
its own account for investment purposes, and not with a view to the
distribution thereof; (iii) each of the Sellers is a sophisticated investor
with knowledge and experience in business and financial maters; (iv) each of
the Sellers has received and reviewed the Buyer's most recent (A) annual
report on Form 10-K, dated March 31, 1999 and (B) quarterly report on Form
10-Q dated May 14, 1999 (the "Buyer's SEC Filings"), and has had the
opportunity to obtain additional information as desired in order to evaluate
the merits and risks inherent in holding the Buyer Shares; and (v) each of
the Sellers, together with its respective legal,
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tax, and financial advisors have investigated the Buyer, and its business,
and has negotiated the transactions contemplated herein, and has
independently determined to enter into such transactions.
(ff) LICENSES AND PERMITS. The Sellers have delivered to the Buyer
copies of, and Section 3(ff) of the Disclosure Schedule correctly and
completely lists, every license, permit, registration and governmental
approval, agreement and consent applied for, pending by, issued or given to
the Companies, and every agreement with governmental authorities (federal,
state, local or foreign) entered into by the Companies, which is in effect or
has been applied for or is pending (the "Permits"), which copies are true,
correct, and complete in all material respects. Such Permits constitute all
licenses, permits, registrations, approvals, agreements and consents which
are required in order for the Companies to conduct their businesses as
presently conducted, are valid and enforceable and remain in full force and
effect.
(gg) ACCOUNTS PAYABLE. Section 3(gg) of the Disclosure Schedule
lists each account payable of the Companies as of the date of the Most Recent
Fiscal Month End, and will list each account payable of the Companies as of
the Closing. With respect to each account payable: (A) the account payable
arose from a bona fide transaction completed in accordance with the terms of
any documents or agreements pertaining to such transaction; (B) the account
payable is not evidenced by a judgment and there is no material dispute
respecting it; (C) the account payable arose in the Ordinary Course of
Business of the Companies; and (D) each account payable is correct in amount
and relates solely to the businesses of the Companies.
(hh) PREPAID CUSTOMER FEES. Section 3(hh) of the Disclosure
Schedule correctly and accurately sets forth the combined dollar value of the
Company's prepaid customer fees as of the Most Recent Fiscal Month End.
(ii) CAPITAL LEASE OBLIGATIONS. Section 3(ii) of the Disclosure
Schedule correctly and accurately sets forth all of the Company's capital
lease obligations for the Most Recent Fiscal Month End.
(jj) CONTINUITY OF INTEREST. The Sellers have no present plan,
intention, or arrangement to dispose of any of the Buyer Shares received in
the Merger in a manner that would cause the Merger to violate the continuity
of interest requirement set forth in Reg. Section 1.368-1.
(kk) DISCLOSURE. This Agreement and the Exhibits and Schedules
hereto do not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they will be made, not
misleading.
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents
and warrants to the Sellers that the statements contained in this Section 4
are correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
Section 4), except as set forth in the Disclosure Schedule. The Disclosure
Schedule will be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Section 4.
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(a) ORGANIZATION. The Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation. The Buyer is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction where such qualification is
required, except where the lack of such qualification would not have a
material adverse affect on the financial condition of the Buyer taken as a
whole or on the ability of he Parties to consummate the transactions
contemplated by the Agreement.
(b) CAPITALIZATION. The entire authorized capital stock of the Buyer
consists of 25,000,000 Buyer Shares, of which 11,200,000 Buyer Shares are
issued and outstanding and 20,000 Buyer Shares are held in treasury. All of
the Buyer Shares to be issued pursuant to this Agreement have been duly
authorized and, upon consummation of the transactions contemplated herein,
will be validly issued, fully paid, and nonassessable.
(c) AUTHORIZATION OF TRANSACTION. The Buyer has full power and
authority (including full corporate power and authority) to execute and
deliver this Agreement and the Exhibits hereto, and to perform its
obligations hereunder. This Agreement and the Exhibits hereto which the Buyer
is signatory constitute the valid and legally binding obligation of the
Buyer, enforceable in accordance with their respective terms and conditions,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles regardless of
whether such enforceability is considered in a proceeding at law or in
equity. Other than in connection with the provisions of the Securities
Exchange Act, the Securities Act, the state securities laws, the Secretary of
State of Delaware, and the Utah Department of Commerce Division of
Corporations and Commercial Code, the Buyer does not need to give any notice
to, make any filing with, or obtain any authorization, consent, or approval
of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement, except where the
failure to give notice, to file, or to obtain any authorization, consent, or
approval would not have a material adverse effect on the ability of the
Parties to consummate the transactions contemplated by this Agreement.
(d) NONCONTRAVENTION. To the Knowledge of the Buyer, neither the
execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or
other restriction of any government, governmental agency, or court to which
the Buyer is subject or any provision of the charter or bylaws of the Buyer
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 the Buyer
is a party or by which it is bound or to which any of its assets is subject,
except where the violation, conflict, breach, default, acceleration,
termination, modification, cancellation, or failure to give notice would not
have a material adverse effect on the ability of the Parties to consummate
the transactions contemplated by this Agreement.
(e) BROKERS' FEES. The Buyer 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
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Agreement for which any of the Sellers and its Subsidiaries could become
liable or obligated.
(f) CONTINUITY OF BUSINESS ENTERPRISE. It is the present intention
of the Buyer to continue at least one significant historic business line of
the Seller, or to use at least a significant portion of the Seller's historic
business assets in a business, in each case within the meaning of Reg.
Section 1.368-1(d).
(g) STATUS OF THE BUYER SHARES. The Buyer Shares, when issued and
delivered to the Sellers, will be either, as applicable, registered under the
Securities Act or issued pursuant to an exemption from registration under
federal and state securities laws.
(h) DISCLOSURE. This Agreement and the Exhibits and Schedules hereto
do not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they will be made, not misleading.
5. COVENANTS. The Parties agree as follows with respect to the
period from and after the execution of this Agreement.
(a) GENERAL. Each of the Parties will use 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 Section 6 below). The Sellers will not
cause or permit the Companies to take any action that could reasonably be
expected to adversely affect the transactions contemplated by this Agreement
or the assets, businesses or financial conditions or prospects of the
Companies.
(b) NOTICES AND CONSENTS. The Sellers will give any notices to third
parties, and will use their reasonable best efforts to obtain any third party
consents, that the Buyer reasonably may request in connection with the
matters referred to in Section 3 above.
(c) REGULATORY MATTERS AND OTHER APPROVALS. Each of the Parties will
give any notices to, make any filings with, and use its reasonable best
efforts to obtain any authorizations, consents, and approvals of governments
and governmental agencies in connection with the matters referred to in
Section 3 and Section 4 above. Without limiting the generality of the
foregoing, the Companies will call a special meeting of its stockholders (the
"Special Seller Meeting") as soon as reasonably practicable in order that
their stockholders may consider and vote upon the adoption of this Agreement
and the approval of the Merger in accordance with the Delaware General
Corporation Law.
(d) OPERATION OF BUSINESS. The Sellers and the Companies will use
their best efforts to not allow the Companies to engage in any practice, take
any action, or enter into any transaction outside the Ordinary Course of
Business. Except as required in the Ordinary Course of Business, the Sellers
will not cause or permit the Companies to acquire or accrue any capital
assets having an individual cost in excess of $2,500, or an aggregate cost in
excess of $10,000, or incur any liability in excess of $10,000, without the
prior written consent of the Buyer.
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(e) FULL ACCESS. The Sellers and the Companies will permit
representatives of the Buyer to have full access at all reasonable times, and
in a manner so as not to interfere with the normal business operations of the
Companies, to all premises, properties, personnel, books, records (including
tax records), contracts, and documents of or pertaining to the Companies.
(f) NOTICE OF DEVELOPMENTS. Each Party will give prompt written
notice to the other of any material adverse development causing a breach of
any of its own representations and warranties in Section 3 and Section 4
above. No disclosure by any Party pursuant to this Section 5(g), however,
shall be deemed to amend or supplement the Disclosure Schedule or to prevent
or cure any misrepresentation, breach of warranty, or breach of covenant.
(g) EXCLUSIVITY. The Sellers and the Companies will not solicit,
initiate, or encourage the submission of any proposal or offer from any
Person relating to an Acquisition Proposal, supply any non-public information
concerning the Companies' businesses, properties or assets to anyone who may
be contemplating an Acquisition Proposal, or disclose to any Person, other
than legal or accounting representatives who agree to be bound by this
provision, the existence or terms of this Agreement; PROVIDED, HOWEVER, that
the Sellers will remain free to 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 to the extent their fiduciary
duties may require. The Sellers shall notify the Buyer immediately if any
Person makes any Acquisition Proposal.
(h) CONTINUITY OF BUSINESS ENTERPRISE. The Buyer will continue at
least one significant historic business line of the Seller, or use at least a
significant portion of the Seller's historic business assets in a business,
in each case within the meaning of Reg. Section 1.368-1(d).
(i) LEGEND. Those Buyer Shares deposited in the Escrow Fund pursuant
to Section 9 below, shall bear the following legend during the Escrow Period:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER AS SET FORTH IN THAT AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 9, 1999 BY AND AMONG ROCKY MOUNTAIN INTERNET, INC. D/B/A
RMI.NET AND INTERNET CONNECT, INC., INTERWEB DESIGN AND HOSTING, INC., JAY W.
MASON, M.D., DAX J.C. KELSON, DAVID S. JENNINGS, DAVID L. ALDERSON, JR., AND
TIMOTHY H. CRAWFORD, M.D.
6. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
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(i) The Companies and the Sellers shall have procured all
of the third party consents specified in Section 5(b) above;
(ii) the representations and warranties set forth in
Section 3 above shall be true and correct in all material respects at
and as of the Closing Date;
(iii) the Companies and the Sellers shall have performed and
complied with all of their covenants hereunder in all material respects
through the Closing;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);
(v) the Parties shall have received all other
authorizations, consents, and approvals of governments and governmental
agencies referred to in Section 5(c);
(vi) the Companies and the Sellers shall have delivered to
the Buyer a certificate to the effect that each of the conditions
specified above in Section 6(a)(i)-(v) is satisfied in all respects;
(vii) this Agreement shall have received the requisite
Buyer approval;
(viii) the Buyer shall have received from counsel to the
Sellers an opinion in form and substance as set forth in Exhibit E
attached hereto, addressed to the Buyer, and dated as of the Closing
Date;
(ix) the Buyer shall have received the resignations,
effective as of the Closing, of each director and officer of the
Companies, other than those whom the Buyer shall have specified in
writing at least five (5) business days prior to the Closing;
(x) the Buyer shall have entered into an employment
letters, in a form and substance reasonably satisfactory to the
parties thereto, with Dax J.C. Kelson and Bryan Webster; and
(xi) ICI and the Sellers, shall have taken all actions
necessary to merger IWDH with and into ICI, with ICI as the surviving
corporation, prior to, or concurrently with, the Closing;
(xii) all actions to be taken by the Sellers in connection
with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
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satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this Section 6(a) if
it executes a writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATION OF THE SELLERS. The obligation of the
Companies and the Sellers to consummate the transactions to be performed by
it in connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in
Section 4 above shall be true and correct in all material respects at
and as of the Closing Date;
(ii) the Buyer shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);
(iv) the Parties shall have received all authorizations,
consents, and approvals of governments and governmental agencies
referred to in Section 5(c) above;
(v) the Buyer shall have delivered to the Sellers a
certificate to the effect that each of the conditions specified above
in Section 6(b)(i)-(iv) is satisfied in all respects;
(vi) the Buyer shall have entered into an employment
letters, in form and substance reasonably satisfactory to the parties
thereto, with Dax J.C. Kelson and Bryan Webster; and
(vii) the Companies and the Sellers shall have received from
counsel to the Buyer an opinion in form and substance as set forth in
Exhibit F attached hereto, addressed to the Companies and the Sellers,
and dated as of the Closing Date; and
(vii) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Companies and the Sellers.
The Companies and the Sellers may waive any condition specified in
this Section 6(b) if it executes a writing so stating at or prior to the
Closing.
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7. TERMINATION.
(a) TERMINATION OF AGREEMENT. The Parties may terminate this
Agreement as provided below:
(i) the Buyer may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing Date (A) in the
event any of the Companies and the Sellers has breached any material
representation, warranty, or covenant contained in this Agreement in
any material respect, the Buyer has notified the Companies and the
Sellers of the breach, and the breach has continued without cure for a
period of thirty (30) days after the notice of breach, or (B) if the
Closing shall not have occurred on or before June 9, 1999, by reason of
the failure of any condition precedent under Section 6(a) hereof
(unless the failure results primarily from the Buyer breaching any
representation, warranty, or covenant contained in this Agreement);
(ii) the Companies and the Sellers may terminate this
Agreement by giving written notice to the Buyer at any time prior to
the Closing Date (A) in the event the Buyer has breached any material
representation, warranty, or covenant contained in this Agreement in
any material respect, the Sellers have notified the Buyer of the
breach, and the breach has continued without cure for a period of
thirty (30) days after the notice of breach, or (B) if the Closing
shall not have occurred on or before June 9, 1999 by reason of the
failure of any condition precedent under Section 6(b) hereof (unless
the failure results primarily from the Companies and the Sellers
breaching any representation, warranty, or covenant contained in this
Agreement);
(iii) the Buyer may terminate this Agreement by giving written
notice to the other Party at any time prior to the Closing Date in the
event this Agreement fails to receive the requisite Buyer board of
director approval.
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 7(a) (i) and (ii) above, the liability of any Party then
in breach shall be agreed to be an amount equal to $125,000; PROVIDED,
HOWEVER, that the confidentiality provisions contained in Section 8(d) below
shall survive any such termination.
8. 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 8(g) or Section (8)(h) below).
(b) LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting
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or defending against any action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand in connection with (i) any transaction
contemplated under this Agreement or (ii) any fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing Date
involving the Sellers, each of the other Parties will cooperate with the
contesting or defending Party and his or its counsel in the contest or
defense, make available his or its personnel, and provide such testimony and
access to his or its 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 8(g) or Section 8(h)
below).
(c) TRANSITION. None of the Companies or the Sellers will take any
action that is designed or intended to have the effect of discouraging any
lessor, licensor, customer, supplier, or other business associate of the
Sellers or the Companies from maintaining the same business relationships
with the Companies after the Closing as it maintained with the Companies
prior to the Closing.
(d) CONFIDENTIALITY. Each of the Parties will treat and hold as such
all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and
deliver promptly or destroy, at the request and option of the Party who
provided such Confidential Information, all tangible embodiments (and all
copies) of the Confidential Information which are in his/her or its
possession. In the event that any of the Parties 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, that such Party will
notify the other Parties promptly of the request or requirement so that the
Party who provided such confidential Information may seek an appropriate
protective order or waive compliance with the provisions of this Section
8(d). If, in the absence of a protective order or the receipt of a waiver
hereunder, any Party is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for contempt,
that Party may disclose the Confidential Information to the tribunal;
PROVIDED, HOWEVER, that the disclosing Party shall use his, her, or its
reasonable best efforts to obtain, at the reasonable request of the other
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.
(e) COVENANT NOT TO COMPETE. For a period of two (2) years from and
after the Closing Date, none of the Sellers will engage directly or
indirectly in any business similar to, or competitive with, the businesses
that the Companies conduct as of the Closing Date in any geographic area in
which the Companies conduct their businesses as of the Closing Date;
PROVIDED, HOWEVER, that (i) for one (1) year after the Closing Date, and
subject to the provisions of Section 8(l) below, Dax J.C. Kelson may be
employed in any capacity, including as a computer consultant, by any entity
which has revenues attributable to internet connectivity in an amount less
than five thousand dollars ($5,000) per month, and for two (2) years after
the Closing Date, Mr. Kelson may not be an officer, director, shareholder,
manager, member, partner or other owner or equity participant of, any entity
which engages in any business similar to, or competitive with, the businesses
that the Companies conduct as of the Closing Date in any geographic area in
which the Companies conduct their
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businesses as of the Closing Date; and (ii) no owner of less than 1% of the
outstanding stock of any publicly traded corporation shall be deemed to
engage in a business similar to, or competitive with, the businesses of the
Companies 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 8(e) 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.
(f) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Parties contained in this Agreement
shall survive the Closing (even if the damaged Party knew or had reason to
know of any misrepresentation or breach of warranty at the time of Closing)
and continue in full force and effect for a period of two (2) years
thereafter (subject to any applicable statutes of limitations).
(g) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.
(i) In the event any of the Companies or the Sellers breaches
(or in the event any third party alleges facts that, if true, would
mean any of the Companies or the Sellers has breached) any of his/her
or its representations, warranties, and covenants contained in this
Agreement, and, if there is an applicable survival period pursuant to
Section 8(f) above, provided that the Buyer makes a written claim for
indemnification against the Companies or the Sellers within such
survival period, then the Sellers agree to indemnify the Buyer from and
against the entirety of any Adverse Consequences the Buyer may suffer
through and after the date of the claim for indemnification resulting
from, arising out of, relating to, in the nature of, or caused by the
breach (or the alleged breach).
(ii) Each of the Companies and each of the Sellers agrees to
indemnify the Buyer from and against the entirety of any Adverse
Consequences the Buyer may suffer resulting from, arising out of,
relating to, in the nature of, or caused by any Liability of the
Companies which is not reflected on the Most Recent Financial
Statements (including any Liability of the Companies that becomes a
Liability of the Buyer under any Environmental, Health, and Safety
Requirements, for unpaid Taxes, or otherwise by operation of law).
(iii) Each of the Companies and each of the Sellers agrees to
indemnify the Buyer from and against any Adverse Consequences the Buyer
may suffer resulting from, arising out of, relating to, in the nature
of, or caused by any of the Contingent Liabilities.
(iv) Each of the Companies and each of the Sellers agrees to
indemnify the Buyer from and against the entirety of any Adverse
Consequences the Buyer may suffer resulting from, arising out of,
relating to, in the nature of, or caused by (a) any Liability of the
Companies for Taxes of the Companies with respect to any Tax year or
portion thereof
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ending on or before 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 Most Recent Financial
Statements (rather than in any notes thereto), as such reserve is
adjusted for the passage of time through the Closing Date in accordance
with the past custom and practice of the Companies in filing their Tax
Returns and (b) for the unpaid Taxes of any Person (other than the
Sellers) under Reg. ss.1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or
otherwise.
(h) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLERS.
(i) In the event the Buyer breaches (or in the event any third
party alleges facts that, if true, would mean the Buyer has breached)
any of its representations, warranties, and covenants contained in this
Agreement, and, if there is an applicable survival period pursuant to
Section 8(f) above, provided that the Sellers make a written claim for
indemnification against the Buyer within such survival period, then the
Buyer agrees to indemnify each of the Companies and each of the Sellers
from and against the entirety of any Adverse Consequences the Sellers
may suffer through and after the date of the claim for indemnification
resulting from, arising out of, relating to, in the nature of, or
caused by the breach (or the alleged breach).
(ii) The Buyer agrees to indemnify each of the Sellers from
and against the entirety of any Adverse Consequences the Sellers may
suffer resulting from, arising out of, relating to, in the nature of,
or caused by any Liability reflected on the Most Recent Financial
Statements or related to any personal guarantees of the Sellers under
any long term contracts with lessors, vendors, and suppliers as set
forth in Section 8(h)(ii) of the Disclosure Schedule.
(i) 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 8, 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) 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
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Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third
Party Claim and fulfill its indemnification obligations hereunder, (C)
the Third Party Claim involves only money damages and does not seek an
injunction or other equitable relief, (D) settlement of, or an adverse
judgment with respect to, the Third Party Claim is not, in the good
faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice materially adverse to the continuing
business interests of the Indemnified Party, and (E) the Indemnifying
Party conducts the defense of the Third Party Claim actively and
diligently.
(iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 8(i)(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, (B) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party (not
to be withheld unreasonably), and (C) the Indemnifying Party will not
consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of
the Indemnified Party (not to be withheld unreasonably).
(iv) In the event any of the conditions in Section 8(i)(ii)
above is or becomes unsatisfied, however, (A) the Indemnified Party may
defend against, and consent to the entry of any judgment or enter into
any settlement with respect to, the Third Party Claim in any manner it
reasonably may deem appropriate (and the Indemnified Party need not
consult with, or obtain any consent from, any Indemnifying Party in
connection therewith), (B) the Indemnifying Party will reimburse the
Indemnified Party promptly and periodically for the costs of defending
against the Third Party Claim (including reasonable attorneys' fees and
expenses), and (C) the Indemnifying Party will remain responsible for
any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Section 8(i).
(j) OTHER INDEMNIFICATION PROVISIONS. The indemnification provisions
set forth in Section 8(g), Section 8(h) and Section 8(i) above 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 the Sellers, or the transactions contemplated by this Agreement.
Each of the Sellers hereby agrees that he/she or it will not make any claim
for indemnification against any of the Buyer and its Subsidiaries by reason
of the fact that he/she or it was a director, officer, employee, or agent of
the Companies 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 the Buyer against such Sellers (whether such action, suit,
proceeding, complaint, claim, or demand is pursuant to this Agreement,
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applicable law, or otherwise).
(k) LIMITATIONS ON INDEMNIFICATION OBLIGATIONS. Notwithstanding the
provisions of Section 8(g) through 8(j) above, neither Party shall be
obligated to indemnify the other Party or Parties, as the case may be, from
and against any Adverse Consequences (A) until such Party or Parties have
suffered Adverse Consequences in excess of $10,000 in the aggregate
(excluding Adverse Consequences related to the Contingent Liabilities, to
which such $10,000 amount shall not apply) (after which point, the
Indemnifying Party or Parties will be obligated only to indemnify the
indemnified Party or Parties from and against further Adverse Consequences),
or (B) to the extent that such Adverse Consequences exceeds the Purchase
Price as adjusted pursuant to Section 2(d)(vi); PROVIDED, HOWEVER, that any
claims brought by a Party against another Party or Parties for fraud or
willful misconduct shall not be subject to the foregoing limitations.
(l) EMPLOYMENT OF DAX J.C. KELSON. As an inducement for the Buyer to
enter into this Agreement, Dax J.C. Kelson hereby agrees to be employed by
the Buyer until at least August 15, 1999.
9. ESCROW FUND. As security for the indemnity of the Buyer by the
Sellers provided for in Section 8 above, the Escrow Shares shall be
registered in the name of the Sellers, and deposited (with an executed
assignment in blank) with Norwest Bank, N.A., as Escrow Agent such deposit to
constitute an escrow fund (the "Escrow Fund") to be governed by the terms set
forth herein and in the escrow agreement to be signed by all parties thereto
(the "Escrow Agreement"). In the event of any conflict between the terms of
this Agreement and the Escrow Agreement, the terms of the Escrow Agreement
shall govern. All costs and fees of the Escrow Agent for establishing and
administering the Escrow Fund shall be borne equally by the Parties. Upon
compliance with the terms hereof, the Buyer shall be entitled to obtain
indemnity first from the Escrow Fund for all Adverse Consequences covered by
the indemnity provided for in Section 8 above. If the Escrow Fund is not
sufficient to cover any such Adverse Consequences covered by Section 8 above,
then the Buyer shall be entitled to seek payment from the Sellers personally.
The form of the Escrow Agreement is attached hereto as Exhibit G.
10. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue
any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of the other
Party; PROVIDED, HOWEVER, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or
trading agreement concerning its publicly-traded securities (in which case
the disclosing Party will use its reasonable best efforts to advise the other
Party prior to making the disclosure).
(b) NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns; PROVIDED, HOWEVER, that the
provisions in Section 8 above concerning insurance and indemnification are
intended for the benefit of the individuals specified therein and their
respective legal representatives.
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(c) ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between 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 its rights, interests, or obligations hereunder without the prior
written approval of the other Party.
(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.
(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 if
delivered personally or if (and then two business days after) it is sent by a
reputable overnight courier (such as Federal Express, DHL, etc.) or by
registered or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
IF TO THE COMPANIES AND THE SELLER'S REPRESENTATIVES:
Internet Connect, Inc.
InterWeb Design and Hosting, Inc.
2152 Island Drive
Lexington, Kentucky 40502
Attention: Jay W. Mason, M.D.
Telecopier: (606) 269-3525
COPY TO:
Mr. Douglas K. Cummings
Callister, Nebeker & McCullough
10 East South Temple #900
Salt Lake City, Utah 84133
IF TO THE BUYER:
Rocky Mountain Internet, Inc.
999 18th Street, 22nd Floor
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Denver, Colorado 80202
Attention: Mr. Douglas H. Hanson
COPIES TO:
Rocky Mountain Internet, Inc.
999 18th Street, 22nd Floor
Denver, Colorado 80202
Attention: Mr. Chris J. Melcher
Holland & Hart LLP
215 South State Street, Suite 500
Salt Lake City, Utah 84111-2317
Attention: Mr. David R. Rudd
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 Party notice in the manner herein set forth.
(h) SELLERS' REPRESENTATIVE. The Sellers hereby select as their
representative Mr. Douglas K. Cummings (the "Sellers' Representative") who
shall be authorized by the Sellers to receive all notices and certificates
provided for in this Agreement, and shall be authorized to communicate with
the Escrow Agent and the Buyer on behalf of the Sellers.
(i) 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.
(j) DISPUTE RESOLUTION. The Parties hereby covenant and agree that,
except as otherwise set forth in this Agreement, any suit, dispute, claim,
demand, controversy or cause of action of every kind and nature whatsoever,
known or unknown, fixed or contingent, that the Parties may now have or at
any time in the future claim to have based in whole or in part, or arising
from or that in any way is related to the negotiations, execution,
interpretation or enforcement of this Agreement (collectively, the
"Disputes") shall be completely and finally settled by submission of any such
Disputes to arbitration under the Commercial Rules of Arbitration of the
American Arbitration Association ("AAA") then in effect. If the parties to
the Dispute are unable to agree on a single arbitrator, then such binding
arbitration shall be conducted before a panel of three (3) arbitrators that
shall be comprised of one (1) arbitrator designated by each party to the
Dispute and a third arbitrator designated by the two (2) arbitrators selected
by the parties to the Dispute. Unless the parties to the Dispute agree
otherwise, the
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arbitration proceedings shall take place in Denver, Colorado and the
arbitrator(s) shall apply the law of the State of Colorado, USA, to all
issues in dispute, in accordance with Section 10(i) above. The findings of
the arbitrator(s) shall be final and binding on the parties to the Dispute.
Judgment on such award may be entered in any court of appropriate
jurisdiction, or application may be made to that court for a judicial
acceptance of the award and an order of enforcement, as the Party seeking to
enforce that award may elect. Notwithstanding any applicable rules of
arbitration, all arbitral awards shall be in writing and shall set forth in
particularity the findings of fact and conclusions of law of the arbitrator
or arbitrators.
(k) AMENDMENTS AND WAIVERS. The Parties may mutually amend any
provision of this Agreement at any time prior to the Closing Date. No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by both of the Parties. No waiver by any Party
of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior
or subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
(l) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
(m) EXPENSES. Each of the Parties will bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
(n) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
otherwise requires. The word "including" shall mean including without
limitation. Nothing in the Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity
and describes the relevant facts in reasonable detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception
to a representation or warranty made herein (unless the representation or
warranty has to do with the existence of the document or other item itself).
The 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.
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(o) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
*****
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IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
ROCKY MOUNTAIN INTERNET, INC.
By:
---------------------------
Douglas H. Hanson
Chairman and Chief Executive Officer
INTERNET CONNECT, INC.
By:
---------------------------
Jay W. Mason, M.D.
Its:
---------------------------
INTERWEB DESIGN AND HOSTING, INC.
By:
---------------------------
Jay W. Mason, M.D.
Its:
---------------------------
SELLERS
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Jay W. Mason, M.D.
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Dax J.C. Kelson
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David S. Jennings
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David L. Alderson, Jr.
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Timothy H. Crawford, M.D.
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