<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) December 23, 1999
-------------------------------
RMI.NET, Inc.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in charter)
Delaware
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation)
001-12063 84-1322326
- ---------------------------- ----------------------------------------
(Commission File Number) (IRS Employer Identification No.)
999 Eighteenth Street, Suite 2201, Denver, Colorado 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 5. OTHER EVENTS.
On December 23, 1999, the Registrant entered into an Asset Purchase Agreement
with AIS Network Corporation, pursuant to which the Registrant acquired the
assets related to AIS Network Corporation's Internet communications and
web-hosting services business. The purchase price of the assets acquired was
approximately $3,650,000, payable in the form of 425,967 shares of the
Registrant's common stock. The consideration that the Registrant agreed to
pay was determined through arm's length negotiation. There was no material
relationship between the Registrant and AIS Network Corporation or its
affiliates prior to the transaction. AIS Network Corporation is an Illinois
corporation headquartered in Schaumburg, Illinois. AIS Network Corporation is
a business-to-business full-service solutions company, including dedicated
and dialup Internet access, web design and web hosting, e-commerce and
network integration. The Registrant intends to utilize the assets acquired in
the same manner that AIS Network Corporation utilized the assets prior to
their acquisition by the Registrant. A copy of the Registrant's press release
is attached hereto as Exhibit 20.1.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) AIS Network Corporation - Financial Statements:
Report of Independent Auditors - Crowe, Chezek and
Company, LLP
Balance Sheets as of December 31, 1998 and September 30,
1999
Statements of Income for the Year Ended December 31,
1998 and for the Nine Months ended September 30, 1998
and 1999
Statements of Stockholders' Equity for the Year Ended
December 31, 1998 and for the Nine Months ended
September 30, 1998 and 1999
Statements of Cash Flows for the Year Ended December 31,
1998 and for the Nine Months ended September 30, 1998
and 1999
Notes to Financial Statements
(b) Pro Forma Financial Information:
Pro Forma Condensed Combined Balance Sheet as of
September 30, 1999
Pro Forma Condensed Combined Statement of Operations for
the Year Ended December 31, 1998
Pro Forma Condensed Combined Statement of Operations for
the Nine Months Ended September 30, 1999
(c) Exhibits:
<TABLE>
<CAPTION>
Exhibit Number Description
------------------- ---------------------------------------
<S> <C>
10.1 Asset Purchase Agreement by and among
RMI.NET, Inc., and AIS Network
Corporation.
20.1 News Release dated December 28, 1999
announcing the AIS Network Corporation
asset acquisition.
</TABLE>
<PAGE>
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.
RMI.NET, Inc.
------------------------------------
(Registrant)
Date: January 6, 2000 By: /s/ CHRISTOPHER J. MELCHER
-----------------------------------
Christopher J. Melcher
Vice President, General Counsel and
Corporate Secretary
<PAGE>
REPORT OF INDEPENDENT AUDITORS
AIS Network Corporation
Schaumburg, Illinois
We have audited the accompanying balance sheet of AIS Network Corporation as
of December 31, 1998 and the related statements of income, stockholders'
equity, and cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AIS Network Corporation as
of December 31, 1998 and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting
principles.
Crowe, Chizek and Company LLP
Oak Brook, Illinois
December 10, 1999
1
<PAGE>
AIS NETWORK CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
December 31, September 30,
1998 1999
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 119,531 $ 284,504
Trade accounts receivable 189,487 75,366
Prepaid expenses -- 1,000
------------ ------------
Total current assets 309,018 360,870
Property and equipment 293,004 426,407
Accumulated depreciation (103,372) (150,813)
------------ ------------
Net property and equipment 189,632 275,594
------------ ------------
$ 498,650 $ 636,464
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 7,234 $ 57,279
Payroll and other taxes payable 7,593 19,570
Other 2,457 --
------------ ------------
Total current liabilities 17,284 76,849
Stockholders' equity
Common stock, $1 par value, authorized 1,000 shares;
1,000 shares issued and outstanding 1,000 1,000
Additional paid-in capital 19,400 36,000
Retained earnings and accumulated
proprietor's equity 460,966 522,615
------------ ------------
481,366 559,615
------------ ------------
$ 498,650 $ 636,464
============ ============
- ----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
AIS NETWORK CORPORATION
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Year Ended Nine Months Ended
---------- -----------------
December 31, September 30, September 30,
1998 1998 1999
------------ -------------- -------------
(Unaudited)
<S> <C> <C> <C>
Sales $ 1,125,281 $ 792,545 $ 1,172,263
Cost of sales 231,523 209,297 285,608
---------------- --------------- ---------------
GROSS PROFIT 893,758 583,248 886,655
Operating expenses 618,606 378,097 769,315
---------------- --------------- ---------------
OPERATING INCOME 275,152 205,151 117,340
Other income
Interest income 6,705 3,622 10,809
---------------- --------------- ---------------
NET INCOME $ 281,857 $ 208,773 $ 128,149
================ =============== ===============
Basic and diluted net income per share $ 281.86 $ 208.77 $ 128.15
================ =============== ===============
Weighted average number of common
shares outstanding 1,000 1,000 1,000
================ =============== ===============
Dividends per share $ -- $ -- $ 66.50
================ =============== ===============
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
AIS NETWORK CORPORATION
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Retained
Additional Earnings and
Common Stock Paid-in Accumulated
------------ ---------- Proprietor's
Shares Amount Capital Equity
------ ------ ------- ------------
<S> <C> <C> <C> <C>
Balance, January 1, 1998 1,000 $ 1,000 $ -- $ 179,109
Net income -- -- -- 281,857
Compensation resulting from
principal stockholder's
transfer of stock to employee 14,400 --
Contributed capital -- -- 5,000 --
------- ------- -------- -----------
Balance, December 31, 1998 1,000 1,000 19,400 460,966
Net income -- -- -- 128,149
Compensation resulting from
principal stockholder's
transfer of stock to employee 9,600 --
Contributed capital -- -- 7,000 --
Dividends -- -- -- (66,500)
------- ------- -------- -----------
Balance, September 30, 1999
(unaudited) 1,000 $ 1,000 $ 36,000 $ 522,615
======= ======= ======== ===========
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
AIS NETWORK CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Year Ended Nine Months Ended
---------- -----------------
December 31, September 30, September 30,
1998 1998 1999
------------ ------------- -------------
(Unaudited)
<S> <C> <C> <C>
CASH FROM OPERATING ACTIVITIES
Net income $ 281,857 $ 208,773 $ 128,149
Adjustments to reconcile net income
to net cash from operating activities
Depreciation 54,960 27,053 47,440
Stock issued for compensation 14,400 14,400 9,600
Changes in operating assets and liabilities
Accounts receivable (119,270) (932) 114,121
Prepaid expenses and other 1,933 49,585 (1,000)
Accounts payable 4,173 6,100 50,044
Accrued expenses 1,563 -- 10,415
Unearned revenues 894 -- (894)
--------- --------- ----------
Net cash from operating activities 240,510 304,979 357,875
CASH FROM INVESTING ACTIVITIES
Purchase of property and equipment (136,819) (60,050) (133,402)
--------- --------- ----------
Cash from investing activities (136,819) (60,050) (133,402)
CASH FROM FINANCING ACTIVITIES
Dividends paid -- -- (66,500)
Contributed capital 5,000 -- 7,000
--------- --------- ----------
Cash from investing activities 5,000 -- (59,500)
Net increase in cash 108,691 244,929 164,973
Cash and cash equivalents at beginning of period 10,840 10,840 119,531
--------- --------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 119,531 $ 255,769 $ 284,504
========= ========= ==========
Supplemental schedule of noncash
Investing and financing activities
Stock issued for compensation $ 14,400 $ 14,400 $ 9,600
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
AIS NETWORK CORPORATION
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
NOTE 1 -- DESCRIPTION OF BUSINESS
AIS Network Corporation (the Company) provides business Internet services
which include Internet access, website development, Internet commerce,
website hosting and marketing, and network integration. These services are
provided to both individuals and companies. The Company was incorporated on
October 15, 1997. Prior to that date, the operations were in a sole
proprietorship. On October 15, 1997, the stockholder of the Company had
contributed the business of the sole proprietorship into the Company. This
transaction was accounted for in a manner similar to a pooling of interest.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires the Company to make
estimates and assumptions that affect certain reported amounts and
disclosures, and actual results may differ from these estimates.
REVENUE RECOGNITION: The Company charges customers (subscribers) monthly
access fees to the Internet and recognizes the revenue in the month the
access is provided. For certain subscribers billed in advance, the Company
recognizes the revenue over the period the billing covers. Revenue for other
services provided, including web site development, west site hosting, and
other services, are recognized as the service is performed.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The carrying value of the Company's
financial instruments which include cash and receivables, approximates fair
value due to the short maturities of those instruments.
CASH AND CASH EQUIVALENTS: The Company considers all highly liquid debt
instruments with maturities of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT: Property and equipment are recorded at cost.
Improvements and betterments are capitalized; maintenance and repairs are
charged to operations as incurred. Depreciation is provided for financial
reporting and income tax purposes using straight-line and accelerated
methods, respectively, over the estimated useful asset lives.
SEGMENT REPORTING: Effective January 1, 1997, the Company adopted Statement
of Financial Accounting Standards No. 131, "Disclosures About Segment of
Enterprise and Related Information" (FAS 131). FAS 131 changes the way
companies report financial and descriptive information about reportable
segments in annual financial statements and interim financial reports issued
to stockholders. The Company operates in one market segment, the providing of
Internet services. The Company operates in one geographical segment, the
United States of America. All of the Company's sales are made to customers in
the United States of America.
- -----------------------------------------------------------------------------
(Continued)
6
<PAGE>
AIS NETWORK CORPORATION
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
EARNINGS PER COMMON SHARE: Basic and diluted earnings per common share is net
income divided by the weighted average number of common shares outstanding
during the period.
ADVERTISING COSTS: Advertising costs, expensed as incurred, were $6,373 in
1998.
INTERIM FINANCIAL INFORMATION: The financial information as of September 30,
1999 and for the nine months ended September 30, 1998 and 1999 is unaudited
but, in the opinion of management, includes all adjustments, consisting of
only normal recurring adjustments, that the Company considers necessary for a
fair presentation of the financial position, operating results, and cash
flows for such periods. Results for the nine months ended September 30, 1999
are not necessarily indicative of results for the full year or any future
period.
RECENTLY ISSUED ACCOUNTING STANDARDS: In June 1998, the Financial Accounting
Standards Board issued FAS 133, "Accounting for Derivative Instruments and
Hedging Activities." The Company is required to adopt FAS 133 for the year
ending December 31, 2001. FAS 133 establishes methods of accounting for
derivative financial instruments and hedging activities related to those
instruments as well as other hedging activities. Because the Company holds no
derivative financial instruments and does not currently engage in hedging
activities, adoption of FAS 133 is expected to have no material impact on the
Company's financial position or results of operations.
NOTE 3 -- PROVISION FOR INCOME TAXES
The Company has elected to have its income taxed under Section 1362 of the
Internal Revenue Code which provides that, in lieu of corporate income tax,
the Company's taxable income is taxed at the stockholder's level. Therefore,
the statement of income does not include any provision for federal income
taxes.
- -----------------------------------------------------------------------------
(Continued)
7
<PAGE>
AIS NETWORK CORPORATION
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
NOTE 4 -- PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<S> <C>
Furniture and equipment $ 43,992
Computer equipment 25,049
Computer servers 80,642
Computer workstations 25,500
Networking equipment 117,821
-----------
293,004
Less accumulated depreciation 103,372
-----------
$ 189,632
===========
</TABLE>
NOTE 5 -- RELATED PARTY TRANSACTIONS
During 1998, the Company paid an entity which is related through common
ownership $217,139 for operating expenses and property and equipment which
the related entity paid on the Company's behalf. These costs are comprised of
the following:
<TABLE>
<S> <C>
Repairs $ 3,863
Telephone 4,099
Insurance 26,999
Utilities 7,010
Cost of sales 15,204
Rent 31,315
Vehicle expenses 2,844
Office expense 3,485
Property and equipment purchases 111,269
Internet fees 3,830
Other 7,221
-----------
$ 217,139
===========
</TABLE>
At December 31, 1998 there were no amounts due to this entity.
In addition, the Company received $40,000 for Internet services provided to
the entity described above. At December 31, 1998, there were no amounts due
from this entity.
The Company's office facilities are leased from the above entity on a
month-to-month basis.
- -----------------------------------------------------------------------------
(Continued)
8
<PAGE>
AIS NETWORK CORPORATION
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
NOTE 6 -- STOCKHOLDERS' EQUITY
In accordance with Staff Accounting Bulletin Topic 1-B, the Company recorded
compensation expense of $14,400 and $9,600 (unaudited) during 1998 and 1999,
respectively, resulting from transfers of the principal stockholder's stock
(10 shares of common stock) to certain employees.
NOTE 7 -- SUBSEQUENT EVENT
Subsequent to September 30, 1999, the Company's stockholders entered into
negotiations to sell the assets of the Company.
- -----------------------------------------------------------------------------
9
<PAGE>
AIS NETWORK CORPORATION
Schaumburg, Illinois
FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
REPORT OF INDEPENDENT AUDITORS.......................................... 1
FINANCIAL STATEMENTS
BALANCE SHEETS..................................................... 2
STATEMENTS OF INCOME............................................... 3
STATEMENTS OF STOCKHOLDERS' EQUITY................................. 4
STATEMENTS OF CASH FLOWS........................................... 5
NOTES TO FINANCIAL STATEMENTS...................................... 6
</TABLE>
<PAGE>
AIS NETWORK CORPORATION
Schaumburg, Illinois
FINANCIAL STATEMENTS
<PAGE>
SELECTIVE UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following selected unaudited pro forma combined financial information
presented below has been derived from the unaudited or audited historical
financial statements of the Company, AIS Network Corporation, Wolfe Internet
Access L.L.C., ACES Research, Inc., Triad Resources L.L.C. (d/b/a WebZone),
IdealDial Corporation and August 5th Corporation (d/b/a Dave's World) and
reflects management's present estimate of pro forma adjustments, including a
preliminary estimate of the purchase price allocations, which ultimately may
be different.
The acquisition is being accounted for using the purchase method of
accounting. Accordingly, assets acquired and liabilities assumed are recorded
at their estimated fair values, which are subject to further adjustment based
upon appraisals and other analysis, with appropriate recognition given to the
effect of the Company's borrowing rates and income tax rates.
The unaudited pro forma combined statements of operations for the nine
months ended September 30, 1999 and the year ended December 31, 1998 give
effect to the acquisitions as if they had been consummated at the beginning
of such period. These pro forma statements of operations combines the
historical consolidated statements of operations for the periods reported for
the Company, AIS Network Corporation, Wolfe Internet Access L.L.C., ACES
Research, Inc., Triad Resources L.L.C. (d/b/a WebZone), IdealDial Corporation
and August 5th Corporation (d/b/a Dave's World).
The unaudited pro forma condensed combined balance sheet as of September
30, 1999 gives effect to the acquisitions as if they had been consummated on
that date. This pro forma balance sheet combines the historical consolidated
balance sheet at that date for the Company, and AIS Network Corporation.
The unaudited pro forma condensed combined financial statements may not
be indicative of the results that actually would have occurred if the
transaction described above had been completed and in effect for the periods
indicated or the results that may be obtained in the future. The unaudited
pro forma condensed combined financial data presented below should be read in
conjunction with the audited and unaudited historical financial statements
and related notes thereto of the Company.
<PAGE>
Pro Forma Condensed Combined Balance Sheet
As of September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
AIS Network Pro Forma Pro Forma Pro Forma
RMI.NET, Inc. Corporation Subtotal Adjustments (B) Combined
-----------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $6,213 $285 $6,498 $0 $6,498
Trade receivables less allowance
for doubtful accounts 4,681 75 4,756 - 4,756
Inventories 223 - 223 - 223
Other 1,123 1 1,124 - 1,124
--------------------------------------------------------------------
Total Current Assets 12,240 361 12,601 - 12,601
--------------------------------------------------------------------
PROPERTY AND EQUIPMENT, net 9,881 275 10,156 - 10,156
Goodwill, net 35,451 - 35,451 3,091 (1) 38,542
Other 548 - 548 - 548
--------------------------------------------------------------------
Total Assets $58,120 $636 $58,756 $3,091 $61,847
====================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $3,480 $ 57 $3,537 $0 $3,537
Current maturities of long term debt and
capital lease obligations 2,465 - 2,465 - 2,465
Deferred revenue 2,184 - 2,184 - 2,184
Accrued payroll & related taxes 657 20 677 - 677
Accrued expenses & other 1,931 - 1,931 - 1,931
---------------------------------------------------------------------
Total Current Liabilites 10,717 77 10,794 - 10,794
---------------------------------------------------------------------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 2,742 - 2,742 - 2,742
---------------------------------------------------------------------
Total liabilites 13,459 77 13,536 - 13,536
-
REDEEMABLE CONVERTIBLE PREFERRED STOCK 1,928 - 1,928 - 1,928
Stockholders' Equity
Common Stock 18 1 19 (1) (2) 18
Additional paid in capital 73,048 36 73,084 (36) (2) 73,048
3,650 (1) 3,650
Accumulated deficit (30,333) 522 (29,811) (522) (2) (30,333)
Unearned compensation - - - - -
---------------------------------------------------------------------
42,733 559 43,292 3,091 46,383
---------------------------------------------------------------------
$58,120 $636 $58,756 $3,091 $61,847
=====================================================================
</TABLE>
<PAGE>
Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Historical
-----------------------------------------------------------------------------------
Previously
Reported AIS Network Pro Forma Pro Forma Pro Forma
RMI.NET, Inc. Acquisitions (A) Corporation Subtotal Adjustments (B) Combined
-----------------------------------------------------------------------------------
(Amount in Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C> <C>
Revenue
Communication Services $ 7,974 $17,645 $1,125 $26,744 $0 $26,744
Web Solutions 2,113 0 2,113 0 2,113
---------------------------------------------------------------------------------
10,087 17,645 1,125 28,857 0 28,857
---------------------------------------------------------------------------------
Cost of revenue earned
Communication Services 3,471 11,314 232 15,017 0 15,017
Web Solutions 50 0 50 0 50
---------------------------------------------------------------------------------
3,521 11,314 232 15,067 0 15,067
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Gross profit 6,566 6,331 893 13,790 0 13,790
---------------------------------------------------------------------------------
General, selling and
administrative expenses 9,184 6,594 574 16,352 0 16,352
Cost related to unsuccessful
merger attempt 6,071 0 0 6,071 0 6,071
Depreciation and amortization 1,789 3,037 44 4,870 4,320 (3) 9,190
---------------------------------------------------------------------------------
Operating income (loss) (10,478) (3,300) 275 (13,503) (4,320) (17,823)
---------------------------------------------------------------------------------
Other income (expense)
Interest expense (320) (157) 0 (477) 0 (477)
Interest Income 51 7 58 0 58
Other income (expense), net 78 212 0 290 0 290
----------------------------------------------------------------------------------
(191) 55 7 (129) 0 (129)
----------------------------------------------------------------------------------
Net loss ($10,669) ($3,245) $282 ($13,632) ($4,320) ($17,952)
==================================================================================
Preferred stock dividends $33 $33
Net loss applicable to common
Stockholders ($10,702) ($17,985)
============ ============
Basic and Diluted loss per share from
continuing operations (4) ($1.39) ($1.81)
============ ============
Average number of common shares
outstanding (4) 7,690 1,797 426 9,913
========================================= ============
</TABLE>
<PAGE>
Pro Forma Condensed Combined Statement of Operations
For the Nine Months Ended September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Historical
-----------------------------------------------------------------------------------
Previously
Reported AIS Network Pro Forma Pro Forma Pro Forma
RMI.NET, Inc. Acquisitions (A) Corporation Subtotal Adjustments (B) Combined
-----------------------------------------------------------------------------------
(Amount in Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C> <C>
Revenue
Communication Services $17,859 $6,912 $1,172 $25,943 $0 $25,943
Web Solutions 2,924 0 2,924 0 2,924
----------------------------------------------------------------------------------
20,783 6,912 1,172 28,867 0 28,867
----------------------------------------------------------------------------------
Cost of revenue earned
Communication Services 9,969 4,050 286 14,305 0 14,305
Web Solutions 873 0 873 0 873
---------------------------------------------------------------------------------
10,842 4,050 286 15,178 0 15,178
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Gross profit 9,941 2,862 886 13,689 0 13,689
---------------------------------------------------------------------------------
General, selling and
administrative expenses 17,497 2,639 721 20,857 0 20,857
Depreciation and amortization 4,880 1,139 48 6,067 1,700 (3) 7,767
---------------------------------------------------------------------------------
Operating income (loss) (12,436) (916) 117 (13,235) (1,700) (14,935)
---------------------------------------------------------------------------------
Other income (expense)
Interest expense (369) (46) 0 (415) 0 (415)
Interest Income 121 2 11 134 0 134
Other income (expense), net 0 58 0 58 0 58
---------------------------------------------------------------------------------
(248) 14 11 (223) 0 (223)
---------------------------------------------------------------------------------
Net loss ($12,684) ($902) $128 ($13,458) ($1,700) ($15,158)
==================================================================================
Preferred stock dividends $199 $199
Net loss applicable to common
Stockholders ($12,883) ($15,357)
========= ========
Basic and Diluted loss per share from
continuing operations (4) ($1.09) ($1.08)
========= ========
Average number of common shares
outstanding (4) 11,806 1,797 426 14,029
======================================== ========
</TABLE>
<PAGE>
NOTES TO THE PRO FORMA CONSENSED
COMBINED FINANCIAL DATA
(UNAUDITED)
BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed combined balance sheet is
presented as of September 30, 1999. The accompanying unaudited pro forma
condensed combined statements of operations are presented for the nine
months ended September 30, 1999 and the year ended December 31, 1998.
(A) PREVIOUSLY REPORTED ACQUISITIONS: The accompanying unaudited pro forma
condensed combined statements of operations presented for the nine months
ended September 30, 1999 and the year ended December 31, 1998 included the
condensed statements of operations for the respective periods ended for
Wolfe Internet Access L.L.C., ACES Research, Inc., Triad Resources L.L.C.
(d/b/a WebZone), IdealDial Corporation and August 5th Corporation (d/b/a
Dave's World).
(B) PRO FORMA ADJUSTMENTS: The following pro forma adjustments have been made
to the unaudited condensed combined balance sheet as of September 30, 1999
and the unaudited condensed combined statements of operations for the nine
months ended September 30, 1999 and the year ended December 31, 1998.
(1) To reflect the 425,967 shares of RMI stock valued at $3.7 million,
which is the number of shares issued in connection with the acquisition of
AIS Network Corporation. The excess purchase price over the fair value of
the assets acquired has been allocated to goodwill. The pro forma
adjustment reflects the incremental goodwill in the amount of $3.1 million.
Shares of Common Stock issued for the acquisition were recorded at fair
market value as based on the current market price of RMI's publicly traded
stock. The final allocation of the purchase price will be made after the
appropriate appraisals or analyses are performed. Upon completion of the
appraisals and in accordance with the terms thereof, the excess purchase
price currently allocated to goodwill will be allocated to the appropriate
asset classifications, including customer list and goodwill. While goodwill
will be amortized over a period of five years, customer list or other
identified intangibles may be amortized over shorter periods, which would
therefore increase amortization expense.
(2) To eliminate the equity accounts of the acquisition.
(3) To adjust amortization expense due to increase in the carrying value of
goodwill, using a life of five years, as if such acquisitions had been
completed as of the beginning of such periods.
(4) The Basic and Diluted loss per share from continuing operations and the
average number of common shares outstanding for the pro forma combined
amounts gives effect to the results as if AIS Network Corporation, Wolfe
Internet Access L.L.C., ACES Research, Inc., Triad Resources L.L.C. (d/b/a
WebZone), IdealDial Corporation and August 5th Corporation (d/b/a Dave's
World) had been completed at the beginning of such periods.
<PAGE>
Exhibit 10.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
RMI.NET, INC.
AND
AIS NETWORK CORPORATION
AND
THE INDIVIDUALS WHOSE NAMES ARE
ON THE SIGNATURE PAGE HERETO
DECEMBER 23, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEFINITIONS ..................................................................................................1
2. BASIC TRANSACTION ............................................................................................6
(a) Purchase and Sale of Acquired Assets .....................................................................6
(b) Assumption of Liabilities ................................................................................6
(c) Purchase Price ...........................................................................................6
(d) Adjustment to Purchase Price .............................................................................8
(e) The Closing ..............................................................................................9
(f) Deliveries at the Closing ................................................................................9
(g) Allocation ..............................................................................................10
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER ................................................................10
(a) Organization of the Seller ..............................................................................10
(b) Authorization of Transaction ............................................................................10
(c) Noncontravention ........................................................................................10
(d) Brokers' Fees ...........................................................................................11
(e) Title to Acquired Assets ................................................................................11
(f) Financial Statements ....................................................................................11
(g) Events Subsequent to Most Recent Month End ..............................................................11
(h) Undisclosed Liabilities .................................................................................11
(i) Legal Compliance ........................................................................................12
(j) Tax Matters .............................................................................................12
(k) Real Property ...........................................................................................12
(l) Intellectual Property ...................................................................................13
(m) Tangible Assets .........................................................................................13
(n) Contracts ...............................................................................................13
(o) Insurance ...............................................................................................14
(p) Litigation ..............................................................................................14
(q) Warranties ..............................................................................................14
(r) Guaranties ..............................................................................................14
(s) State PUC Authorizations and FCC Authorizations .........................................................14
(t) Employees ...............................................................................................14
(u) Employee Benefits .......................................................................................15
</TABLE>
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(v) Environmental, Health, and Safety Matters ...............................................................15
(w) Disclosure ..............................................................................................15
(x) Disclaimer of Other Representations and Warranties ......................................................15
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER .................................................................15
(a) Organization of the Buyer ...............................................................................15
(b) Authorization of Transaction ............................................................................15
(c) Noncontravention ........................................................................................15
(d) SEC Filings .............................................................................................16
(e) Buyer Shares ............................................................................................16
(f) Brokers' Fees ...........................................................................................16
(g) Disclosure ..............................................................................................16
5. PRE-CLOSING COVENANTS .......................................................................................17
(a) General .................................................................................................17
(b) Notices and Consents ....................................................................................17
(c) Operation of the Acquired Assets ........................................................................17
(d) Preservation of Business ................................................................................17
(e) Full Access .............................................................................................17
(f) Notice of Developments ..................................................................................17
(g) Exclusivity .............................................................................................17
(h) Legend ..................................................................................................18
(i) Registration Rights Agreement ...........................................................................18
6. CONDITIONS TO OBLIGATION TO CLOSE ...........................................................................18
(a) Conditions to Obligation of the Buyer ...................................................................19
(b) Conditions to Obligation of the Seller ..................................................................20
7. TERMINATION .................................................................................................21
(a) Termination of Agreement ................................................................................21
(b) Effect of Termination ...................................................................................22
8. POST-CLOSING COVENANTS ......................................................................................22
(a) General .................................................................................................22
(b) Litigation Support ......................................................................................22
(c) Transition ..............................................................................................22
(d) Confidentiality .........................................................................................23
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(e) Covenant Not to Compete .................................................................................23
(f) Survival of Representations and Warranties ..............................................................24
(g) Third Party Consents ....................................................................................24
(h) Indemnification Provisions for Benefit of the Buyer .....................................................24
(i) Indemnification Provisions for Benefit of the Seller ....................................................25
(j) Matters Involving Third Parties .........................................................................26
(k) Limitations on Indemnification Obligations ..............................................................27
9. ADDITIONAL AGREEMENT .........................................................................................27
(a) Escrow Agreement ........................................................................................27
(b) Tax-Free Reorganization .................................................................................28
(c) Liquidation of the Seller ...............................................................................28
10. MISCELLANEOUS ...............................................................................................28
(a) Press Releases and Public Announcements .................................................................28
(b) No Third-Party Beneficiaries ............................................................................28
(c) Entire Agreement ........................................................................................28
(d) Succession and Assignment ...............................................................................28
(e) Counterparts ............................................................................................29
(f) Headings ................................................................................................29
(g) Notices .................................................................................................29
(h) Governing Law ...........................................................................................30
(i) Arbitration .............................................................................................30
(j) Amendments and Waivers ..................................................................................31
(k) Severability ............................................................................................31
(l) Expenses ................................................................................................31
(m) Representative ..........................................................................................31
(n) Construction ............................................................................................31
(o) Incorporation of Exhibits and Schedules .................................................................32
(p) Specific Performance; Indemnification Sole Remedy for Damages ...........................................32
</TABLE>
Exhibit A -- Acquired Assets
Exhibit A-1 -- Customer Contracts and Customer List
Exhibit A-2 -- Supplier Contracts and Supplier List
Exhibit A-3 -- Tangible Assets
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Exhibit A-4 -- Inventory
Exhibit A-5 -- Accounts Receivable
Exhibit B -- Lockup Agreement
Exhibit C -- Bill of Sale
Exhibit D -- Assignment and Assumption of Contracts
Exhibit E -- Financial Statements
Exhibit F -- PUC and FCC Authorizations
Exhibit G -- Registration Rights Agreement
Exhibit H -- Opinion of Counsel to Seller
Exhibit I -- Opinion of Counsel to Buyer
Exhibit J -- Escrow Agreement
Disclosure Schedules
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is entered into as of this 23rd day of
December, 1999, by and among RMI.NET, INC., a Delaware corporation (the "Buyer")
and AIS NETWORK CORPORATION, an Illinois corporation and the shareholders whose
names are on the signature page hereto (collectively, the "Seller"). The Buyer
and Seller are sometimes referred to collectively herein as the "Parties".
This Agreement contemplates a transaction in which the Buyer will
purchase certain of the assets of the Seller in return for the consideration
hereinafter set forth.
The Parties intend that the transaction contemplated by this Agreement
constitute a tax-free reorganization pursuant to Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended.
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.
"ACQUIRED ASSETS" means all right, title, and interest in and to the
assets of the Sellers set forth on Exhibit A hereto.
"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
involving or relating to the Acquired Assets.
"ASSIGNMENT AND ASSUMPTION OF CONTRACTS" is attached hereto as
Exhibit D.
"ASSUMED LIABILITIES" means (a) all obligations of the Seller under
the agreements, contracts, leases, licenses, and other arrangements referred
to in the definition of Acquired Assets, and (b) all other Liabilities and
obligations of the Seller set forth in an appendix to the Disclosure Schedule
under an express statement (that the Buyer has initialed) to the effect that
the definition of Assumed Liabilities will include the Liabilities and
obligations so disclosed; PROVIDED, HOWEVER, that the Assumed Liabilities
shall not include (i) any Liability of the Seller for Taxes (except for
transfer taxes, if any, in connection with the sale of the Acquired Assets),
(ii) any Liability of the Seller for the unpaid Taxes of any Person (other
than of the Seller) 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, (iii) any obligations of the Seller to indemnify any Person
(including any of the Seller's stockholders) by reason of the fact that such
Person
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was a director, officer, employee, or agent of the Seller or was serving at
the request of any such entity as a partner, trustee, director, officer,
employee, or agent of another entity (whether such indemnification is for
judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses, expenses, or otherwise and whether such indemnification is pursuant
to any statue, charter document, bylaw, agreement, or otherwise), (iv) any
Liability of the Seller for costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby, or (v) any Liability
or obligation of the Seller under this Agreement (or under any side agreement
between the Seller on the one hand and the Buyer on the other hand entered
into on or after the date of this Agreement).
"BILL OF SALE" means the Bill of Sale attached hereto as Exhibit C.
"BUYER" has the meaning set forth in the preface above.
"BUYER SHARE" means any share of the common stock, $0.001 par value per
share, of the Buyer.
"CASH" means cash and cash equivalents (including marketable securities
and short term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.
"CLOSING" has the meaning set forth in Section 2(e) below.
"CLOSING DATE" has the meaning set forth in Section 2(e) below.
"CONFIDENTIAL INFORMATION" means any information concerning the
businesses and affairs of the Parties that is not (i) already generally
available to the public, (ii) available to the other Party on a non-confidential
basis from a source which is not bound by a confidentiality obligation, or (iii)
already known by the other Party.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 3 below.
"DISTRIBUTEES" has the meaning set forth in Section 2(c)(iv) 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 any Multiemployer Plan), or (d)
Employee Welfare Benefit Plan or material fringe benefit or other retirement,
bonus, or incentive plan or program.
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"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 present
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.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means each entity which is treated as a single
employer with Sellers for purposes of ERISA Section 414.
"ESCROW AGENT" has the meaning set forth in Section 2(c)(iii) below.
"ESCROW AGREEMENT" has the meaning set forth in Section 9 below.
"ESCROW FUND" has the meaning set forth in Section 9 below.
"ESCROW PERIOD" has the meaning set forth in Section 2(c)(iii) below.
"ESCROW SHARES" has the meaning set forth in Section 2(c)(iii) 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 Seller and to conduct its business as it is
currently conducted.
"FINAL DISBURSEMENT" has the meaning set forth in Section 2(c)(ii)
below.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 3(f) below.
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"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"INITIAL DISBURSEMENT" has the meaning set forth in Section 2(c)(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).
"KNOWLEDGE" means actual knowledge after reasonable investigation.
"LIABILITY" OR "LIABILITIES" means any liability (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due or to
become due), including any liability for Taxes.
"MOST RECENT 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.
"MOST RECENT FISCAL YEAR END" has the meaning set forth in Section 3(f)
below.
"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.
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"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 REVENUE" has the meaning set forth in Section 2(d) below.
"POST-CLOSING REVENUE" has the meaning set forth in Section 2(d) below.
"PURCHASE PRICE" has the meaning set forth in Section 2(c) below.
"RECURRING REVENUE RATE" has the meaning set forth in Section 2(d)
below.
"REGISTERED SHARES" has the meaning set forth in Section 2(c)(v) below.
"SEC" means the United States Securities and Exchange Commission.
"SEC FILINGS" has the meaning set forth in set forth in Section 4(d)
below.
"SECURITIES ACT" means the Securities Act of 1933, 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, (c) purchase money liens
and liens securing rental payments under capital lease arrangements, and (d)
other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
"SELLER" has the meaning set forth in the preface above.
"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 Seller and to conduct its business as it is currently conducted.
"TANGIBLE ASSETS" has the meaning set forth in Section 3(m) 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.
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"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
2. BASIC TRANSACTION.
(a) PURCHASE AND SALE OF ACQUIRED ASSETS. On and subject to
the terms and conditions of this Agreement, the Buyer agrees to
purchase from the Seller, and the Seller agrees to sell, transfer,
convey, and deliver to the Buyer, all of the Acquired Assets at the
Closing, for the consideration specified below in this Section 2.
(b) ASSUMPTION OF LIABILITIES. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to assume and become
responsible for the Assumed Liabilities at the Closing. The Buyer will
not assume or have any responsibility, however, with respect to any
other obligation or Liability of the Seller not included within the
definition of Assumed Liabilities.
(c) PURCHASE PRICE. In exchange for the Acquired Assets, the
Buyer agrees to pay to the Seller $3,780,000 (the "Purchase Price"),
subject to adjustment in accordance with Sections 2(d)(i) and 2(d)(ii)
below:
i. At the Closing, Buyer will issue to the Seller
that number of the Buyer Shares equal to eighty percent (80%)
of the Purchase Price (the "Initial Disbursement") 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"). The Initial Disbursement set forth
herein is subject to adjustment in accordance with Section
2(d)(i) below and a lock-up agreement in accordance with
Section 2(c)(vi) below.
ii. On the first anniversary of the Closing, the
Buyer will issue to the Seller that number of the Buyer Shares
equal to ten percent (10%) of the Purchase Price (the "Final
Disbursement") divided by the Closing Price. The Final
Disbursement set forth herein is subject to adjustment in
accordance with Sections 2(d)(i) and 2(d)(ii) below.
iii. At and as of the Closing Date, to secure the
obligations under Section 8 below, and as more fully described
in Section 9 below, the Buyer shall deposit with an escrow
agent (the "Escrow Agent") the Buyer Shares equal to ten
percent (10%) of the Purchase Price divided by the Closing
Price (the "Escrow Shares"), which Escrow Shares shall be held
by the Escrow Agent for eighteen (18) months following the
Closing Date (the "Escrow Period"). The Escrow Shares shall be
registered under the
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Securities Act ninety (90) days prior to the expiration of the
Escrow Period.
iv. The number of shares of Buyer Shares to be issued
pursuant to Sections 2(c)(i) and 2(c)(ii) above shall be
allocated among and distributed by the Seller to itself and
its shareholders, officers and directors (the "Distributees")
as determined by the Seller in its sole and absolute
discretion.
v. Forty percent (40%) of the Buyer's Shares
issued pursuant to Section 2(c)(i) and the Buyer's Shares
issued pursuant to Section 2(c)(ii) above will be
registered under the Securities Act (the "Registered
Shares") pursuant to an effective registration statement
under the Securities Act (the "Registration Statement").
Subject to the provisions of Rule 145 of the Securities Act
("Rule 145") of 1933, as amended, the Distributees shall be
allowed to sell, trade and otherwise transfer the
Registered Shares; PROVIDED, HOWEVER, that the Distributees
may not sell, trade or otherwise transfer more than 4,000
of such Registered Shares in any one trading day, and the
Distributees may not sell, trade or otherwise transfer any
such Registered Shares during the first 30 minutes and the
final 30 minutes of any trading day. With respect to the
Registered Shares, Buyer shall: (A) make available "current
public information" about itself within the meaning of
subsection (c)(1) of Rule 144 ("Rule 144") promulgated by
the SEC under the Securities Act to the extent necessary to
facilitate resales of the Registered Shares pursuant to
Rule 145(d) or any successor rule; (B) remove stop transfer
instructions on and restrictive legends, it any, from
certificates representing the Registered Shares to the
extent that either (i) the Registered Shares are sold in
accordance herewith and Rule 145, or (ii) the Distributees
are eligible to sell the Buyer's Shares pursuant to Rule
144 or any successor rule; (C) to the extent required by
law, prepare as soon as reasonably practicable after the
Closing a prospectus supplement, current report of Form 8-K
and amendments, or post-effective amendment to the
Acquisition Shelf Registration Statement that would permit
the offer and resale of the Registered Shares from time to
time by the Distributees; (D) use its commercially
reasonable efforts to list the Registered Shares for
trading on the NASDAQ -- National Market System; (E)
furnish to the Distributees a reasonable number of
prospectuses under the registration statement to enable the
Distributees to comply with any prospectus under the
registration statement to enable the Distributees to comply
with any prospectus delivery requirements under the
Securities Act; and (F) pay all expenses, including legal
and accounting fees, in connection with the preparation,
filing and maintenance of the Registration Statement,
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including amendments thereto, the issuance of certificates
representing the Registered Shares, and other expenses
incurred by Buyer in meeting its obligations set forth in
this Section 2(c); provided that the Seller will pay all
expenses and fees incurred by its own counsel and
consultants.
vi. The number of Buyer's Shares issued pursuant to
Section 2(c)(i) above equal to forty percent (40%) of the
Purchase Price divided by the Closing Price will be subject to
a lockup agreement (collectively, the "Lockup Shares") in the
form attached hereto as Exhibit B attached hereto (the "Lockup
Agreement") for a period of twelve (12) months from the date
of issuance. The Lockup Shares shall be registered under the
Security Act on or prior o the date of the expiration of the
Lockup Period.
(d) ADJUSTMENT TO PURCHASE PRICE. The Purchase Price set forth
in Section 2(c) above is based upon an monthly recurring revenue rate
directly derived from the Acquired Assets of $175,000, which revenue
has been determined, for purposes of this Agreement, through accrual
based accounting in accordance with GAAP for revenues that (i) recur
each month on a customer-specific and plan-type basis; (ii) have been
properly recognized during that month for network integration and web
development services; and (iii) that do not include such non-recurring
items as hardware and software sales, setup fees or other one-time
service charges, or overages (the "Recurring Revenue Rate").
i. In the event that the monthly revenue rate
directly derived from the Acquired Assets for the one (1)
month period immediately preceding the Closing (the
"Pre-Closing Revenue") is less or more than the Recurring
Revenue Rate, the Purchase Price shall be reduced or increased
by $21.60 for each dollar that the Pre-Closing Revenue is less
or more than the Recurring Revenue Rate.
ii. In the event that the average monthly revenue
rate directly derived from the Acquired Assets for the six (6)
month period from June 1, 2000 to November 30, 2000 (the
"Post-Closing Revenue") is less than the Recurring Revenue
Rate, the Final Disbursement shall be reduced by $21.60 for
each dollar that the Post-Closing Revenue is less than the
Recurring Revenue Rate; provided, however, that the amount of
such reduction shall not exceed the aggregate value of the
Final Disbursement, i.e. ten percent (10%) of the Purchase
Price.
iii. No later than thirty (30) days following the
first anniversary of the Closing, the Buyer will prepare and
deliver to the Seller a computation of the Post-Closing
Revenue (the "Post-Closing Revenue Statement"), all in
accordance with the same principles utilized in
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determining the Recurring Revenue Rate. If within twenty (20)
days following delivery of the Post-Closing Revenue Statement,
the Seller has not given the Buyer notice of the Seller's
objection to the computation of the Post-Closing Revenue as
set forth in the Post-Closing Revenue Statement (such notice
to contain a statement in reasonable detail of the nature of
the Seller's objection), then the Post-Closing Revenue
reflected in the Post-Closing Revenue Statement will be deemed
mutually agreed by the Buyer and the Seller. If the Seller
shall have given such notice of objection in a timely manner,
then the parties agree to negotiate in good faith for ten (10)
days in order to resolve any dispute regarding the computation
of the Post-Closing Revenue. At the end of this ten-day
period, if the matter has still not been resolved, then the
issues in dispute will be submitted to a "Big Five" accounting
firm mutually acceptable to the Buyer and the Seller (the
"Accountants") for resolution. If issues in dispute are
submitted to the Accountants for resolution: (A) each party
will furnish to the Accountants such work papers and other
documents and information relating to the disputed issues as
the Accountants may request and are available to the party or
its subsidiaries (or its independent public accountants), and
will be afforded the opportunity to present to the Accountants
any material relating to the determination and to discuss the
determination with the Accountants; (B) the Accountants will
be instructed to determine the Post-Closing Revenue based upon
their resolution of the issues in dispute; (C) such
determination by the Accountants of the Post-Closing Revenue,
as set forth in a notice delivered to both parties by the
Accountants, will be binding and conclusive on the parties;
and (D) the Buyer and the Seller shall each bear 50% of the
fees and expenses of the Accountants for such determination.
(e) THE CLOSING. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place by in presence or by
telephone conference call, or at the corporate headquarters of the
Buyer, 999 18th Street, North Tower, 22nd Floor, Denver, Colorado
80202, commencing at a mutually convenient 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)
December 30, 1999 (the "Closing Date"); PROVIDED, HOWEVER, that the
Closing Date may be extended upon mutual written agreement of the
Parties.
(f) DELIVERIES AT THE CLOSING. At the Closing: (i) the Buyer
will deliver to the Seller (A) the various certificates, instruments,
and documents referred to in Section 6 below, (B) the Purchase Price
specified in Sections 2(c)(i) through 2(c)(iii), and (C) a mutually
acceptable employment agreement for Mr. Daniel
9
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Lundahl; (ii) the Seller will deliver to the Buyer (A) the various
certificates, instruments, and documents referred to in Section 6
below, (B) the Bill of Sale in the form attached hereto as Exhibit C,
and (C) the Assignment and Assumption of Contracts in the form
attached hereto as Exhibit D; and (iii) each Party shall deliver such
other instruments of sale, transfer, conveyance, and assignment as the
other Party and its counsel reasonably may request.
(g) ALLOCATION. The Parties agree, to the extent permitted by
or not otherwise in violation of applicable law, that the Buyer may
allocate the Purchase Price (and all other capitalizable costs) among
the Acquired Assets for all purposes (including financial accounting
and tax purposes) in the most tax-efficient manner available to the
Buyer.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller represents
and warrants to the Buyer that the statements contained in this Section 3 are
correct and complete in all material respects as of the date of this Agreement
and will be correct and complete in all material respects 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 OF THE SELLER. The Seller is a corporation
duly organized, validly existing, and in good standing under the laws
of the State of Illinois.
(b) AUTHORIZATION OF TRANSACTION. The Seller has full power
and authority (including full corporate power and authority) to execute
and deliver this Agreement and to perform its obligations hereunder.
Without limiting the generality of the foregoing, all individuals who
are signatories to this Agreement have been duly authorized to execute,
deliver, and cause the Seller to perform this Agreement. This Agreement
constitutes the valid and legally binding obligation of the Seller,
enforceable in accordance with its terms and conditions.
(c) NONCONTRAVENTION. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby (including the assignments and assumptions referred
to in Section 2 above), 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 Seller is subject, or any provision of the articles of
incorporation or bylaws of the Seller or (ii) conflict with, result in
a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or
cancel, or require any notice under any
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agreement, contract, lease, license, instrument, or other arrangement
to which the Seller is a party or by which it is bound or to which any
of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets). The Seller 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.
(d) BROKERS' FEES. The Seller has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which
the Buyer could become liable or obligated, and the Buyer shall have no
Liability whatsoever to any such broker.
(e) TITLE TO ACQUIRED ASSETS. As of the date of Closing, the
Seller shall provide to the Buyer good and marketable title to all of
the Acquired Assets, free and clear of any Liabilities, including all
debts, obligations, claims, limitations, liens, Security Interests,
restrictions on transfer, and/or any other encumbrances whatsoever. The
Acquired Assets comprise all assets of the Seller relating to the
Seller's Internet and web-related businesses.
(f) FINANCIAL STATEMENTS. Attached hereto as Exhibit E are the
following financial statements of the Seller (collectively, the
"Financial Statements"): (i) audited balance sheets and statements of
income, changes in stockholders' equity, and cash flow relating to the
Acquired Assets as of and for the calendar years ended December 31,
1998 (the "Most Recent Fiscal Year End"); (ii) unaudited consolidated
balance sheet and statements of income, changes in shareholders'
equity, and cash flow relating to the Acquired Assets as of and for the
periods ended September 30, 1999 and September 30, 1998; and unaudited
balance sheet and statement of income for the one-month period ended
November 30, 1999 (the "Most Recent Month End") (collectively, the
"Most Recent Financial Statements"). The Most Recent Financial
Statements (without any notes thereto) have been prepared in accordance
with GAAP on a consistent basis throughout the periods covered thereby,
and fairly represent the financial condition and results of operations
of the Seller for the periods covered thereby.
(g) EVENTS SUBSEQUENT TO MOST RECENT MONTH END. Since the Most
Recent Month End, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or
future prospects of the Acquired Assets of the Seller.
(h) UNDISCLOSED LIABILITIES. The Seller has no Liability with
respect to (i) the Acquired Assets (and, to the Knowledge of the
Seller, there is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge,
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complaint, claim, or demand against any of them giving rise to any
Liability), except for Liabilities set forth on the face of the Most
Recent Financial Statements (rather than in any notes thereto) and
(ii) Liabilities related to the Acquired Assets which have arisen
after the Most Recent 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).
(i) LEGAL COMPLIANCE. The Seller has 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), with respect to the Acquired Assets, including all
State PUC Authorizations and the FCC Authorizations, 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.
(j) TAX MATTERS. The Seller has timely filed all Tax Returns
with respect to the ownership and operation of the Acquired Assets and
paid all Taxes due thereunder, and no Liability exists for any unpaid
Taxes relative to the Acquired Assets prior to the Closing.
(k) REAL PROPERTY. The Seller does not own any interest in any
real property related to the Acquired Assets. Section 3(k) of the
Disclosure Schedule lists and describes briefly all real property
leased or subleased to the Seller related to the Acquired Assets. The
Seller has delivered to the Buyer correct and complete copies of the
leases and subleases listed in Section 3(k) of the Disclosure Schedule
(as amended to date). Other than such leases or subleases, the Acquired
Assets do not include any real property or any interest therein. With
respect to each lease and sublease listed in Section 3(k) 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;
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iii. the Seller is not and, to the Knowledge of the
Seller, no other party to the lease or sublease is in breach
or default, and no event has occurred which, with notice or
lapse of time, would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
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 as to the lease or sublease;
vi. with respect to each sublease, the
representations and warranties set forth in subsections (i)
through (v) 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. to the Knowledge of the Seller, 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.
(l) INTELLECTUAL PROPERTY. The Seller owns or has the right to
use pursuant to license, sublicense, agreement, or permission all
Intellectual Property necessary for the operation of the Acquired
Assets as presently operated, free and clear of any Security Interests,
Liabilities or other restrictions.
(m) TANGIBLE ASSETS. The Seller owns all tangible assets set
forth in Exhibit A-3 (the "Tangible Assets"). Each such Tangible Asset
is free from material 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.
(n) CONTRACTS. Except as set forth in Section 3(n) of the
Disclosure Schedule, no material contracts or other agreements exist
relating to the Acquired Assets to which the Seller is a party
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(o) INSURANCE. The Acquired Assets have been, and will be
until the Closing Date, covered by an insurance policy (providing
property, casualty, and liability coverage) adequately insuring the
Acquired Assets.
(p) LITIGATION. The Seller (i) is not subject to any
outstanding injunction, judgment, order, decree, ruling, or charge,
relative to the Acquired Assets, nor (ii) is it a party or, to the
Knowledge of the Seller, is threatened to be made a party to any
action, suit, proceeding, hearing, or investigation of, in, or before
any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator with
respect to the Acquired Assets. The Seller does not have any reason to
believe that any such action, suit, proceeding, hearing, or
investigation may be brought or threatened against the Seller relative
to the Acquired Assets.
(q) WARRANTIES. No product or service sold, leased, or
delivered by the Seller with respect to the Acquired Assets is subject
to any guaranty, warranty, or other indemnity.
(r) GUARANTIES. Nether the Seller nor its Predecessors is not
a guarantor or otherwise is liable for any Liability or other
obligation (including indebtedness) of any other Person with respect to
the Acquired Assets.
(s) STATE PUC AUTHORIZATIONS AND FCC AUTHORIZATIONS. Exhibit H
hereto identifies each of the State PUC Authorizations and the FCC
Authorizations which has been issued to the Seller with respect to the
Acquired Assets. None of the State PUC Authorizations or the FCC
Authorizations has been modified, amended, or otherwise altered, and
each remains legal, valid, binding, in full force and effect, and
unaffected by the transactions contemplated by this Agreement.
(t) EMPLOYEES. Section 3(t) of the Seller Disclosure Schedule
sets forth all executive, key employee, and groups of employees, that
the Seller is aware have plans to terminate employment with the Seller.
Neither the Seller nor its Predecessors is a party to or bound by any
collective bargaining agreement, nor has any of them experienced any
strikes, grievances, claims of unfair labor practices, or other
collective bargaining disputes. Neither the Seller nor its Predecessors
has committed any unfair labor practice. The Seller has 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 Seller. The
Seller and its Predecessors have complied in all material respects to
all applicable federal, state and local laws, statutes, rules,
ordinances and regulations regarding their respective employees.
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(u) EMPLOYEE BENEFITS. Except as provided in Section 3(u) of
the Seller Disclosure Schedule, the Seller has no Employee Benefit Plan
that it maintains, or to which it contributes, or has any obligation to
contribute.
(v) ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS. The Seller has
complied, and is in compliance, with all Environmental, Health, and
Safety Requirements.
(w) DISCLOSURE. The representations and warranties contained
in this Section 3 do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements and information contained in this Section 3 not misleading.
(x) DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES. The
Buyer acknowledges that the Seller does not make, and has not made, any
representations or warranties relating to the Seller, or the business
of the Seller, or otherwise in connection with the transactions
contemplated hereby, other than those representations and warranties
expressly set forth in this Article 3 and in the Disclosure Schedule.
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents
and warrants to the Seller 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).
(a) ORGANIZATION OF THE BUYER. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(b) 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.
(c) NONCONTRAVENTION. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby (including the assignments and assumptions referred
to in Section 2 above), 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 its charter or bylaws
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 the Buyer is a party
or by which it is bound or to which any of its assets is subject. 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 (including the
assignments and assumptions referred to in Section 2 above).
(d) SEC FILINGS. The Buyer has filed all required reports,
schedules, forms, statement and other documents with the SEC since
January 1, 1998 (the "SEC Filings"). As of their respective dates, the
SEC Filings 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 Filings , and none of the SEC Filings 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. The consolidated financial statements of the
Buyer as presented and included in all SEC Documents filed since
January 1, 1999 comply as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles (except, in
the case of unaudited consolidated financial statements, as permitted
by Form 10-Q of the SEC), applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and
fairly present in accordance with generally accepted accounting
principles the consolidated financial position of the Buyer (and its
subsidiaries) as of the date thereof and the consolidated results of
its operations and cash flows for the periods then ended (subject, in
the case of unaudited quarterly statements, to normal year-end audit
adjustments).
(e) BUYER SHARES. The Buyer Shares will be, when issued, duly
issued, authorized and validly existing, free and clear of any
Liabilities and other encumbrances and restrictions, except as set
forth herein.
(f) BROKERS' FEES. The Buyer has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which
the Seller could become liable or obligated.
(g) DISCLOSURE. The representations and warranties contained
in this Section 4 do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements and information contained in this Section 4 not misleading.
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5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) GENERAL. Each of the Parties will use 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 Seller will give any notices to
third parties, and the Seller 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 above, and
shall otherwise comply with any applicable bulk sales laws. 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 Sections 3 and 4 above. Without limiting the
generality of the foregoing, each of the Parties will make any further
filings that may be necessary, proper, or advisable in connection
therewith.
(c) OPERATION OF THE ACQUIRED ASSETS. The Seller will not
engage in any practice, take any action, or enter into any transaction
outside the Ordinary Course of Business, with respect to the Acquired
Assets.
(d) PRESERVATION OF BUSINESS. The Seller will keep the
Acquired Assets substantially intact, including its present use and
operation thereof, and its relationships with licensors, suppliers,
customers, and employees related to the Acquired Assets.
(e) FULL ACCESS. The Seller 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 Seller,
to all of the Seller's premises, properties, personnel, books, records
(including Tax records), contracts, and documents of, or pertaining to,
the Acquired Assets.
(f) NOTICE OF DEVELOPMENTS. Each Party will give prompt
written notice to the other Party of any material adverse development
causing a breach of any of its own representations and warranties in
Sections 3 and 4 above. No disclosure by any Party pursuant to this
Section 5(f), however, shall be deemed to amend or supplement this
Agreement or the Exhibits hereto or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
(g) EXCLUSIVITY. Until ninety days after the Closing Date, as
it may be extended pursuant to Section 2(e) above, the Seller will not
(i) solicit, initiate, or
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encourage the submission of any proposal or offer from any Person
relating to the acquisition of any capital stock or other voting
securities, or any substantial portion of the assets, of the Seller
(including any acquisition structured as a merger, consolidation, or
share exchange) or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt
by any Person to do or seek any of the foregoing. The Seller will
notify the Buyer immediately if any Person makes any proposal, offer,
inquiry, or contact with respect to any of the foregoing.
(h) LEGEND. The Buyer and the Seller covenant and agree that
sixty percent (60%) of the Buyer Shares will bear the following legend
until the Buyer Shares are registered pursuant to Sections 2(c)(iii)
and 2(c)(v) hereof and the Registration Rights Agreement (as defined
below):
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 RMI.NET, INC.
(i) REGISTRATION RIGHTS AGREEMENT. The Buyer shall agree, and
upon any distribution of the Buyer Shares to the Seller the Seller
shall agree, to become a party to and be bound by a Registration Rights
Agreement in the form attached hereto as Exhibit I (the "Registration
Rights Agreement"), setting forth the terms of ownership of the Buyer
Shares; PROVIDED, HOWEVER, that except as provided in Sections
2(c)(iii) and 2(c)(v) hereof the Seller receiving the Buyer Shares
shall not be entitled to any demand registration rights.
6. CONDITIONS TO OBLIGATION TO CLOSE.
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(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. 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;
ii. the Seller 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
before any court or quasi-judicial or administrative agency of
any federal, state, local, or foreign jurisdiction 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 Buyer to own the Acquired Assets, to operate the
Acquired Assets (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
iv. the Seller shall have entered into the Assignment
and Assumption of Contracts;
v. the Seller shall have delivered to the Buyer the
Bill of Sale;
vi. the Seller and the Buyer shall have received all
other authorizations, consents, and approvals of governments
and governmental agencies referred to in Sections 3 and 4
above;
vii. the Seller shall have delivered to the Buyer a
certificate to the effect that each of the conditions
specified above in Section 6(a)(i)-(iii) is satisfied in all
respects;
viii. the Buyer shall have received from counsel to
the Seller an opinion in form and substance as set forth in
Exhibit H attached hereto, addressed to the Buyer, and dated
as of the Closing Date;
ix. the Buyer's board of directors shall have
approved this Agreement; and
x. all actions to be taken by the Seller in
connection with consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other
documents required to effect the
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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.
(b) CONDITIONS TO OBLIGATION OF THE SELLER. The obligation of
the Seller to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
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 (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect), or (C)
adversely affect the right of the Seller to own and dispose of
the Buyer Shares as contemplated by this Agreement and the
other agreements contemplated hereby;
iv. the Buyer shall have delivered to the Seller
evidence of the instructions to the Buyer's transfer agent to
transfer (A) to the Seller, a number of the Buyer Shares equal
to eighty percent (80%) of the Purchase Price divided by the
Closing Price, and (B) to the Escrow Agent, the Escrow Shares
and confirmation by the transfer agent satisfactory to the
Seller that the transfer agent has complied or will comply
with such instructions;
v. the Buyer shall have entered into the Assignment
and Assumption of Contracts;
vi. the Buyer shall have delivered to the Seller a
certificate to the effect that each of the conditions
specified above in Section 6(b)(i)-(iii) is satisfied in all
respects;
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vii. the Seller and the Buyer shall have received all
other authorizations, consents, and approvals of governments
and governmental agencies referred to in Sections 3 and 4
above;
viii. the Seller shall have received from counsel to
the Buyer an opinion in form and substance as set forth in
Exhibit I attached hereto, addressed to the Seller, and dated
as of the Closing Date;
ix. the Seller's board of directors shall have
approved this Agreement; and
x. 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
Seller.
The Seller may waive any condition specified in this Section 6(b) if it
executes a writing so stating at or prior to the Closing.
7. TERMINATION.
(a) TERMINATION OF AGREEMENT. Either of the Parties may
terminate this Agreement as provided below:
i. the Buyer may terminate this Agreement by giving
written notice to the Seller at any time prior to the Closing
(A) in the event the Seller has breached any material
representation, warranty, or covenant contained in this
Agreement in any material respect, the Buyer has notified the
Seller of the breach, and the breach has continued without
cure for a period of fifteen (15) days after the notice of
breach; (B) if the Closing shall not have occurred on or
before December 30, 1999 (or such later date, if extended
pursuant to Section 2), by reason of the failure of any
condition precedent under Section 6(a) hereof (unless the
failure results primarily from the Buyer itself breaching any
representation, warranty, or covenant contained in this
Agreement); and
ii. the Seller may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing
(A) in the event the Buyer has breached any material
representation, warranty, or covenant contained in this
Agreement in any material respect, the Seller has notified the
Buyer of the breach, and the breach has continued without cure
for a period of fifteen (15) days after the notice of breach,
or (B) if the Closing shall not have occurred on or before
December 30, 1999 (or such later
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date, if extended pursuant to Section 2), by reason of the
failure of any condition precedent under Section 6(b) hereof
(unless the failure results primarily from the Seller itself
breaching any representation, warranty, or covenant contained
in this Agreement).
(b) EFFECT OF TERMINATION. Upon termination of this Agreement,
all liabilities and obligations of the parties shall terminate except
for (i) confidentiality obligations under Section 8(d) below and (ii)
any liability of any party hereto for breach pre-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
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. The Seller acknowledges and agrees
that, from and after the Closing, the Buyer will be entitled to
possession of all documents, books, records (excluding Tax records,
provided that the Seller provides true and correct copies of Tax
records for the years 1996, 1997 and 1998), agreements, directly
relating to the Acquired Assets; PROVIDED, HOWEVER, that the Buyer
shall provide the Seller and its shareholders with reasonable access to
such documents, books, records, agreements, and financial data as
necessary.
(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
Acquired Assets, each of the other Parties will reasonably 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 Sections 8(h), 8(i), or 8(j) below).
(c) TRANSITION. For a period of two (2) years from and after
the Closing Date, none of the Seller or the Seller's shareholders will
take any action that is designed or intended to have the effect of
discouraging any carrier, supplier, lessor, licenser, customer, or
other business associate of the Seller from maintaining the same
business relationships with the Buyer after the Closing as it
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maintained with the Seller prior to the Closing. Each of the Seller and
the Seller's shareholders will refer all customer inquiries relating to
the Acquired Assets to the Buyer from and after the Closing. In
addition, each of the Seller and the Seller's shareholders shall
recommend the Internet access and web-hosting services of the Buyer to
any and all future customers of the Seller who request such a
recommendation.
(d) CONFIDENTIALITY. Each Party shall 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 other Party or destroy, at the request and
option of the other Party, all tangible embodiments (and all copies) of
the Confidential Information which are in his/her or its possession. In
the event that either Party or any of that Party's shareholders 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, then that Party will notify the other Party promptly of
the request or requirement so that such a Party 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, a Party or its shareholders are, on the advice
of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, such a Party or its
shareholders (as the case may be) may disclose the Confidential
Information to the tribunal; PROVIDED, HOWEVER, that a Party and its
shareholders shall use their 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 the non-disclosing
Party shall designate.
(e) COVENANT NOT TO COMPETE. For a period of two (2) years
from and after the Closing Date, the Seller, the Seller's shareholders
and their respective Affiliates, agree not to engage directly or
indirectly in any business that offers dial-up internet access,
dedicated internet access and web-hosting to third parties in any
geographic area in which the Seller conducts that business as of the
Closing Date; PROVIDED, HOWEVER, that
i. no owner of less than three percent (3%) of the
outstanding stock of any publicly traded corporation shall be
deemed to be engaged solely by reason thereof in any business
activity in contravention hereof; and
ii. 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,
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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 or in any agreement, instrument or certificate delivered in
connection herewith shall survive the Closing and shall continue in
full force and effect for a period of two (2) years thereafter.
(g) THIRD PARTY CONSENTS. The Seller and the Buyer shall use
their best reasonable efforts to procure, and assist each other in
procuring, the consent of any third party whose consent is required in
connection with the transactions contemplated by this Agreement.
(h) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER
i. In the event the Seller breaches any of its
representations, warranties, and covenants contained in this
Agreement or in any agreement, instrument or certificate
delivered in connection herewith, 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 Seller within such survival
period, then the Seller agrees 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); PROVIDED, HOWEVER, that in the event such a breach
results in an adjustment to the Purchase Price pursuant to
Section 2(d)(ii) above, then the Seller's liability for such a
breach under this Section 8(h) shall not include that portion
of the Post-Closing Revenue whose loss is determined by the
Buyer to be caused by such a breach, provided that the Buyer
shall be entitled to be indemnified for any other 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 such a breach.
ii. The Seller agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences the Buyer and
its shareholders may suffer resulting from, arising out of,
relating to, in the nature of, or caused by any Liability
(other than the Assumed Liabilities) or the Seller's operation
of the Acquired Assets prior to the Closing.
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iii. The Seller 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 Seller other than
the Assumed Liabilities.
iv. The Seller 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 Seller for Taxes
of the Seller related to the Acquired Assets prior to the
Closing Date.
v. The Seller 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 Seller in
relation to the termination of any of the Seller's employees
who are not employed by the Buyer.
vi. The Seller shall not have any liability to the
Buyer for any Adverse Consequences set forth in this Section
8(h) to the extent that such Adverse Consequences are covered
by insurance of the Buyer.
vii. Notwithstanding anything contained herein to the
contrary, the Seller shall have no liability to the Buyer as a
result of any breach of any representation, warranty or
covenant, to the extent that the Buyer knew that such
representation, warranty or covenant was incorrect prior to
the Closing Date, except when such breach is the result of
fraud or willful misconduct.
(i) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLER.
i. In the event the Buyer breaches any of its
representations, warranties, and covenants contained in this
Agreement or in any agreement, instrument or certificate
delivered in connection herewith, and, if there is an
applicable survival period pursuant to Section 8(f) above,
provided that the Seller makes a written claim for
indemnification against the Buyer within such survival period,
then the Buyer agrees to indemnify the Seller from and against
the entirety of any Adverse Consequences the Seller may suffer
through and after the date of the claim for indemnification
resulting from, arising out of, relating to, in the nature of,
or caused by the breach.
ii. The Buyer agrees to indemnify the Seller from and
against the entirety of any Adverse Consequences the Seller
and its shareholders may suffer resulting from, arising out
of, relating to, in the nature of, or
25
<PAGE>
caused by the Assumed Liabilities or the Buyer's operation of
the Acquired Assets after the Closing or any transfer taxes
related to the Acquired Assets as a result of the transactions
contemplated by this Agreement.
iii. The Buyer shall not have any Liability to the
Seller for any Adverse Consequences set forth in this Section
8(i) to the extent that such Adverse Consequences are covered
by insurance of the Seller.
iv. Notwithstanding anything contained herein to the
contrary, the Buyer shall have no liability to the Seller as a
result of any breach of any representation, warranty or
covenant, to the extent that the Seller knew that such
representation, warranty or covenant was incorrect prior to
the Closing Date, except where such breach is the result of
fraud or willful misconduct.
(j) 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)
days after the Indemnified Party has given notice of the Third
Party Claim that the Indemnifying Party will indemnify the
Indemnified Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by
the Third Party Claim, (B) the Indemnifying Party provides the
Indemnified Party with evidence reasonably acceptable to the
Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim
and fulfill its indemnification obligations hereunder, (C) the
Third Party Claim involves only money damages and does not
seek an injunction or other equitable relief, (D) settlement
of, or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the Indemnified
Party,
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<PAGE>
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).
(k) LIMITATIONS ON INDEMNIFICATION OBLIGATIONS.
Notwithstanding the provisions of Section 8(h), through 8(j) above,
none of the Parties shall be obligated to indemnify or pay damages to
any other Party or Parties, as the case may be, from and against any
Adverse Consequences arising from or related to this Agreement to the
extent that such Adverse Consequences arising from or related to this
Agreement exceed the Purchase Price; PROVIDED, HOWEVER, that the Seller
shall have no indemnification obligations under this Section 8 of this
Agreement until the aggregate amount of all such claims exceeds Ten
Thousand Dollars (US$10,000) (the "Basket"), in which case the
Seller's indemnification obligations shall only be for the amount of
such claims in excess of the Basket; AND PROVIDED FURTHER 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.
9. ADDITIONAL AGREEMENTS.
(a) ESCROW AGREEMENT. As security for the indemnity of the
Buyer by the Seller provided for in Section 8 above, the Escrow Shares
shall be registered in the name of the Seller, 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
27
<PAGE>
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 directly from the Seller and, if the Seller
cannot or will not cover such Adverse Consequences, then the Buyer
shall be entitled to seek payment directly from the Seller's
shareholders pro-rata to the ownership of the Seller. The form of
the Escrow Agreement is attached hereto as Exhibit J.
(b) TAX-FREE REORGANIZATION. The Parties intend that the
transaction contemplated by this Agreement constitute a tax-free
reorganization pursuant to Section 368(a)(1)(C) of the Code; provided,
however, that the Parties acknowledge and agree that neither Party has
represented to the other Party or Parties that such transaction will be
treated as such by the Internal Revenue Service.
(c) LIQUIDATION OF THE SELLER. The Seller Principals agree
that, as expeditiously as possible following the Closing Date, they
will liquidate the Seller.
10. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall
issue any press release or make any public announcement relating to the
subject matter of this Agreement prior to the Closing without the prior
written approval of the 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.
(c) ENTIRE AGREEMENT. This Agreement and the Exhibits and
Schedules hereto (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
28
<PAGE>
approval of the other Party; PROVIDED, HOWEVER, that the Buyer may
(i) assign any or all of its rights and interests hereunder to one or
more of its Affiliates and (ii) designate one or more of its
Affiliates to perform its obligations hereunder (in any or all of
which cases the Buyer nonetheless shall remain responsible for the
performance of all of its obligations hereunder).
(e) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument. This
Agreement may be executed by facsimile, provided that the original
counterpart is delivered within five (5) days of such execution.
(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 SELLER:
AIS NETWORK CORPORATION
1171 Tower Road
Schaumberg, Illinois 60173
Attention: Daniel Lundahl
COPY TO:
Parker, Poe, Adams & Bersnstein, L.L.P.
2500 Charlotte Plaza
201 S. College St.
Charlotte, NC 28244
Attn. Edward W. Wellman or John E. Russ
IF TO THE BUYER:
RMI.NET, Inc.
999 18th Street, 22nd Floor
Denver, Colorado 80202
Attention: Mr. Douglas H. Hanson, Chairman & CEO
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<PAGE>
E-Mail: [email protected]
COPY TO:
RMI.NET, Inc.
999 18th Street, 22nd Floor
Denver, Colorado 80202
Attention: Mr. Chris J. Melcher, General Counsel
E-Mail: [email protected]
Holland & Hart LLP
215 South State Street, Suite 500
Salt Lake City, Utah 84111-23117
Attention: Mr. David R. Rudd
E-Mail: [email protected]
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) 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) ARBITRATION. 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 Rules of Arbitration and Conciliation of the American Arbitration
Association 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
30
<PAGE>
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(h). 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. If either Party makes any claim and such claim is not
found by the arbitrator(s) to be valid or proven, the claiming Party
shall pay the costs of the other Party or its shareholders incurred in
connection with such arbitration proceeding (including reasonable
attorneys fees).
(j) AMENDMENTS AND WAIVERS. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and
signed by the Buyer and the Seller. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty
or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
(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.
(l) EXPENSES. Each of the Buyer and the Seller will bear its
own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated
hereby.
(m) REPRESENTATIVE. The individual shareholders set forth on
the signature page hereto hereby appoint Daniel Lundahl to act as their
representative to receive notices and to act on their behalves with
respect to this Agreement and the Exhibits and Schedules hereto.
(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
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this Agreement. Any reference to any federal, state, local, or foreign
statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires
otherwise. The word "including" shall mean including without
limitation. 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.
(o) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(p) SPECIFIC PERFORMANCE; INDEMNIFICATION SOLE REMEDY FOR
DAMAGES. Each of the Parties acknowledges and agrees that the other
Party would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Party shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and
to enforce specifically this Agreement and the terms and provisions
hereof in any action instituted in any court of the United States or
any state thereof having jurisdiction over the Parties and the matter
(subject to the provisions set forth in Section 10(i) above), in
addition to any other remedy to which it may be entitled, at law or in
equity. Notwithstanding the foregoing, the Buyer's sole remedy for
damages after the Closing shall be pursuant to the indemnification
provisions in Section 8 above.
* * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
RMI.NET, INC.
By: __________________________________________
Douglas H. Hanson
Title: Chairman and CEO
AIS NETWORK CORPORATION
By: ___________________________________________
Title: _________________________________________
________________________________________________
Daniel Lundahl
________________________________________________
Jeff Schneider
________________________________________________
Ted Berger
________________________________________________
Trent Olson
________________________________________________
Rick Dwyer
33
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EXHIBIT A
ACQUIRED ASSETS
"Acquired Assets" means all right, title, and interest in and to all of the
assets of the Seller relating to the Seller's Internet and web-related
businesses, including: (a) all assets listed on the Balance Sheet dated November
30, 1999 and all other assets relating to the Seller's Internet and web-related
businesses acquired by the Seller after November 30, 1999, (b) those real
property leases, improvements, fixtures, and fittings thereon, and easements,
rights-of-way, and other appurtenants thereto (such as appurtenant rights in and
to public streets) listed in the Disclosure Schedule, (c) tangible personal
property (such as machinery, equipment, inventories, and supplies, parts,
furniture, and vehicles) listed in Exhibit A-3, as well as any software residing
on such personal property, and the licenses and modifications thereto, (d)
agreements, contracts, Security Interests, guaranties, other similar
arrangements, and rights thereunder, and customer and supplier lists, as listed
in Exhibits A-1 and A-2, (d) inventory, as listed in Exhibit A-4, (e) accounts
and other receivables, as listed in Exhibit A-5, (f) all books, records,
ledgers, files, documents, correspondence relating to the foregoing, and (g) all
Intellectual Property related to the foregoing, goodwill associated therewith,
licenses and sublicenses granted and obtained with respect thereto, and rights
thereunder, remedies against infringement thereof, and rights to protection of
interests therein under the laws of all jurisdictions.
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EXHIBIT B
LOCKUP AGREEMENT
35
<PAGE>
EXHIBIT C
BILL OF SALE
36
<PAGE>
EXHIBIT D
ASSIGNMENT AND ASSUMPTION OF CONTRACTS
37
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EXHIBIT E
FINANCIAL STATEMENTS
38
<PAGE>
EXHIBIT F
PUC AND FCC AUTHORIZATIONS
None.
39
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EXHIBIT G
REGISTRATION RIGHTS AGREEMENT
40
<PAGE>
EXHIBIT H
OPINION OF COUNSEL TO SELLER
41
<PAGE>
EXHIBIT I
OPINION OF COUNSEL TO BUYER
42
<PAGE>
EXHIBIT J
ESCROW AGREEMENT
43
<PAGE>
Exhibit 20.1
COMMERCE SOLUTIONS PROVIDER ACQUIRES ASSETS OF CHICAGO-BASED AIS NETWORK
DENVER, Dec. 28 /PRNewswire/ -- RMI.NET, Inc. (Nasdaq: RMII), a national
e-business and convergent communications company, announced today that it has
acquired the assets of Chicago-based AIS Network Corp., a premier network
integrator and web site development company exclusively for business customers.
(Photo: http://www.newscom.com/cgi-bin/prnh/19990628/RMILOGO)
AIS Network, a privately held company, was acquired for $3.65 million and has an
annualized revenue run rate of approximately $2.0 million. It provides dedicated
Internet access; web site development and hosting; e-commerce solutions;
application hosting; and Internet marketing and consulting. AIS Network has
nearly 700 strategic business customers in Chicagoland and nationwide.
"AIS Network fits perfectly with our core business and strengthens our position
in the Greater Chicago area and throughout Illinois," said Douglas H. Hanson,
chairman and chief executive officer for RMI.NET. "One of the additional
benefits to AIS is that it is profitable and will immediately contribute to our
goal to be cash flow positive by the fourth quarter of next year."
RMI.NET gives us the ability to grow with a premier national commerce solutions
provider and take our operations to a new level," said Dan Lundahl, president
for AIS Network. "Our combined expertise and customer-focus efforts will
distinguish us from the competition, and will give us the ability to offer
additional products and services in Chicago and nationwide."
Lundahl will continue in his role at AIS and will become RMI.NET's manager for
the Greater Chicago market. AIS Network, founded in 1993, has developed
strategic alliances with such companies as the Microsoft Corp., Cisco Systems
and others, which has allowed it to deliver premier Internet solutions
nationwide.
For RMI.NET, the acquisition marks the 16th company acquired in 1999. With the
addition of AIS Network, acquired through a common stock transaction, RMI.NET
now has more than 107,000 customers and an annualized revenue run rate of
approximately $50 million.
Denver-based RMI.NET, Inc., formerly Rocky Mountain Internet, is a national
commerce solutions provider focusing on e-commerce and convergent
communications. The company specializes in e-business applications; web
solutions, including design, hosting and marketing; and high-speed Internet
access, including digital subscriber line (DSL). The company wholly owns a
proprietary portal site and search engine, Infohiway, at www.infohiway.com. For
more information on RMI.NET, call (800) 864-4327, or visit the company's web
site at WWW.RMI.NET.
This press release might contain forward-looking statements. These
forward-looking statements are subject to risks and uncertainties. Actual
results may differ materially from such forward-looking statements as a result
of risks and uncertainties, which are described in the cautionary statements
section of the company's 10K dated December 31, 1998, and may include other
risks described in all Securities and Exchange Commission filings submitted as
of this date.
/CONTACT: Mark Stutz, Manager, Media Relations, 303-313-0672,
[email protected], or Steven P. Eschbach, CFA, Vice President, Investor
Relations, 303-308-2272, [email protected], both of RMI.NET, Inc./
