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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 21, 2000
REGISTRATION NO. ______________________
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SECURITIES AND EXCHANGE COMMISSION
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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RMI.NET, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3153858
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
CHRISTOPHER J. MELCHER
RMI.NET, INC.
999 EIGHTEENTH STREET, SUITE 2201
DENVER, COLORADO
(303) 672-0700
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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COPY TO:
JEFFREY M. KNETSCH
BROWNSTEIN HYATT & FARBER, P.C.
410 SEVENTEENTH STREET, 22ND FLOOR
DENVER, COLORADO 80202
(303) 223-1100
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Approximate date of commencement of proposed sale to public: as soon as
practicable after the registration statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earliest effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Amount to be Offering Price per Aggregate Offering Registration Fee
Securities to be Registered Registered (1) Unit (2) Price (1)
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<S> <C> <C> <C> <C>
Common Stock, $0.001 par value 761,610 (3) $13.13007 $10,000,000.00 $2,640.00
Common Stock, $0.001 par value 182,786 (4) $9.8476 $1,800,003.40 $475.20
Common Stock, $0.001 par value 2,828,693 (5) $0.01 $28,286.93 $7.47
=====================================================================================================================
</TABLE>
(1) Pursuant to Rule 416, RMI.NET, Inc. is also registering such
indeterminate number of additional shares of Common Stock as may be
issuable upon the exercise of the Common Stock Purchase Warrants
described herein to prevent dilution resulting from stock dividends,
stock splits, or similar transactions.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c).
(3) Includes 761,610 shares of Common Stock issued in a December 1999
private placement.
(4) Includes up to 182,786 shares of Common Stock that may be issued
pursuant to Class A Warrants. The Class A Warrants were issued in a
December 1999 private placement.
(5) Includes up to 2,828,693 shares of Common Stock, the maximum number
that currently may be issued to pursuant to Class B Warrants without
obtaining stockholder approval under the Nasdaq Marketplace Rules. The
Class B Warrants were issued in a December 1999 private placement.
<PAGE> 2
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
will thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a) may determine.
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The information in this prospectus is not complete and may be changed. The
selling stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
PROSPECTUS
SUBJECT TO COMPLETION. DATED JANUARY 21, 2000.
RMI.NET, INC.
UP TO 3,773,089 SHARES OF COMMON STOCK
The selling stockholders listed on page 13 are offering up to 761,610
shares of common stock that were issued to the selling stockholders in a
December 1999 private placement, together with up to 3,011,479 shares of common
stock which may be issued over time upon exercise of Class A and Class B
Warrants. The Class A and Class B Warrants were issued to the selling
stockholders in a December 1999 private placement. If the selling stockholders
exercise their warrants and receive common stock, they may use this prospectus
to resell the underlying common stock.
RMI.NET will not receive any proceeds from the sale of common stock by
the selling stockholders. We will, however, receive proceeds if the selling
stockholders pay cash to exercise their warrants.
Our common stock is traded on the Nasdaq National Market under the
symbol "RMII." On January ___, 2000, the last reported sale was $___ per share.
The common stock may be sold on the Nasdaq National Market at
prevailing market prices, in negotiated transactions, or otherwise. See "Plan of
Distribution."
See "Risk Factors" beginning on page 2 to read about factors you should
consider before buying shares of the common stock.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this prospectus is January ___, 2000.
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RISK FACTORS
You should carefully consider the risks described below before making
an investment decision.
WE HAVE A SHORT OPERATING HISTORY, HAVE INCURRED NET LOSSES SINCE OUR INCEPTION
AND EXPECT FUTURE LOSSES
We started our business in 1993 and began offering Internet access
services in 1994. We have incurred operating losses in every year of our
existence. We incurred net losses of $2.3 million for the year ended December
31, 1996, $4.2 million for the year ended December 31, 1997, and $10.7 million
for year ended December 31, 1998. In the first nine months of 1999, we incurred
a net loss of $12.7 million. As of September 30, 1999, we have an accumulated
deficit of $30.3 million. We may never be profitable.
In 1998, a proposed merger transaction with Internet Communications
Corporation and related financing transactions were terminated. As a result, we
recorded costs, expenses and related fees of approximately $6.1 million. Of this
amount, approximately $4.2 million relates to warrants that we issued. Although
we are attempting to agree on a schedule for the payment of these expenses that
is satisfactory to all parties, we cannot assure that we will be able to reach
an agreement with all parties. If we are unsuccessful, we do not currently have
the ability to pay all of these expenses.
IF WE ARE UNABLE TO RAISE FUNDS TO FINANCE OUR GROWTH, YOUR INVESTMENT COULD BE
ADVERSELY AFFECTED
We intend to expand or open new access sites or make other capital
investments as dictated by subscriber demand and strategic considerations. To
open new dial-up access sites, known in our industry as points of presence or
POPs, we must spend significant amounts of money for new equipment as well as
for leased telecommunications facilities and advertising. In addition, to expand
our subscriber base nationwide, we will have to spend significant amounts of
money on additional equipment to maintain the high speed and reliability of our
Internet access services. We may also need to spend significant amounts of cash
to:
* fund growth, operating losses, and increased expenses;
* implement our acquisition strategy;
* take advantage of unanticipated opportunities, such as major
strategic alliances or other special marketing opportunities,
acquisitions of complementary businesses or assets, or the
development of new products; and
* respond to unanticipated developments or competitive
pressures.
We will require additional funds through equity, debt, or other external
financing in order to fund our current operations and to achieve our business
plan. We cannot assure that any additional capital resources will be available
to us, or, if available, will be on terms that will be acceptable to us. Any
additional equity financing will dilute the equity interests of existing
security holders. If adequate funds are not available or are not available on
acceptable terms, our ability to execute our business plan and our business
could be materially and adversely affected.
COMPETITION IN OUR INDUSTRY IS INTENSE AND IS LIKELY TO INCREASE
We operate in the Internet services market, which is extremely
competitive. Our current and prospective competitors include many large
companies that have substantially greater market presence, financial, technical,
marketing, and other resources than we have. We compete directly or indirectly
with the following categories of companies:
* established online services, such as America Online, the
Microsoft Network, CompuServe, and Prodigy;
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* local, regional, and national Internet service providers, such
as MindSpring, Earthlink, Network, Inc., Internet America, and
PSINet;
* national telecommunications companies, such as AT&T Corp., MCI
WorldCom, Inc., Sprint, and GTE;
* regional Bell operating companies, such as BellSouth and SBC
Communications;
* computer hardware and software companies, such as
International Business Machines and Microsoft Corporation; and
* online cable services, such as At Home and Roadrunner.
Our competition is likely to increase. We believe this will probably happen as
large diversified telecommunications and media companies acquire Internet
service providers and as Internet service providers consolidate into larger,
more competitive companies. Diversified competitors may bundle other services
and products with Internet connectivity services, potentially placing us at a
significant competitive disadvantage. In addition, competitors may charge less
than we do for Internet services, causing us to reduce or preventing us from
raising our fees. As a result, our business may suffer.
WE MAY NOT BE ABLE TO COMPETE IN THE LOCAL EXCHANGE AND LONG-DISTANCE TELEPHONE
MARKET
In 1998, we entered the long distance telephone market. We will compete
directly with inter-exchange carriers and long distance carriers and other long
distance resellers and providers, including large carriers such as AT&T, MCI
WorldCom, Sprint, and new entrants to the long distance market. Many of our
competitors are significantly larger and have substantially greater market
presence and financial, technical, operational, marketing, and other resources.
We will face stiff price competition and may not be able to compete.
Moreover, the local exchange telephone services market in most states
was only recently opened to competition due to the passage of the 1996
Telecommunications Act and related regulatory rulings. Numerous operating
complexities are associated with providing these services. We will be required
to develop new products, services, and systems and will need to develop new
marketing initiatives to sell these services. Our inability to overcome any of
these operating complexities could have a material adverse effect on us.
WE MUST KEEP PACE WITH TECHNOLOGICAL CHANGE AND EVOLVING INDUSTRY STANDARDS TO
REMAIN COMPETITIVE
The Internet services market is characterized by rapidly changing
technology, evolving industry standards, changes in member needs, and frequent
new service and product introductions. Our future success depends, in part, on
our ability to:
* use leading technologies to develop our technical expertise;
* enhance our existing services; and
* develop new services that meet changing member needs on a
timely and cost-effective basis.
In particular, we must provide subscribers with the appropriate products,
services, and guidance to best take advantage of the rapidly evolving Internet.
Our failure to respond in a timely and effective manner to new and evolving
technologies could have a negative impact on our business. Our ability to
compete will also depend upon the continued compatibility of our services with
products offered by various vendors. Although we intend to support emerging
standards in the market for Internet access, industry standards may not be
established. Moreover, if industry standards are established, we may not be able
to conform to these new standards in a timely fashion. Our competitors may
develop services and technologies that will render our services or technology
noncompetitive or obsolete.
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We are also at risk to fundamental changes in the way customers access
the Internet. Currently, most customers access Internet services through
computers connected by telephone lines. However, several companies have
developed cable television modems and other "broadband technologies" that
transmit data at substantially faster speeds than the modems that our
subscribers and we use. We must develop new technology or modify our existing
technology to accommodate new and faster sources of Internet access, including
cable television modems, screen-based telephones, wireless products,
televisions, and other consumer electronic devices. We may not succeed in
adapting our Internet access business to new and faster access devices.
ANY DECLINE IN OUR MEMBER RETENTION LEVELS OR OUR PRICES WILL ADVERSELY AFFECT
US
Our new member acquisition costs are substantial relative to the
monthly fees we charge. Accordingly, our long-term success largely depends on
our retention of existing members. While we continue to invest significant
resources in our infrastructure and technical and member support capabilities,
it is relatively easy for Internet users to switch to competing providers.
Consequently, our investments may not help member retention. Any significant
loss of members will substantially decrease our revenue and cause our business
to suffer.
As a result of competitive pricing pressures in the market for Internet
services, we reduced the prices we charge our Internet customers during 1995,
1997, and 1998. We expect that continued price pressures may cause us to reduce
prices further in order to remain competitive, and we expect that such further
price reductions could adversely effect our results of operations, unless we can
lower our costs commensurate with such price decreases.
OUR BUSINESS DEPENDS ON CONTINUED GROWTH OF THE INTERNET
Our future success substantially depends on continued growth in the use
of the Internet. Although we believe that Internet usage and popularity will
continue to grow as it has in the past, we cannot be certain that this growth
will continue or that it will continue in its present form. If Internet usage
declines or evolves away from our business, our growth will slow or stop and our
financial results will suffer.
IF WE FAIL TO EFFECTIVELY MANAGE OUR GROWTH, OUR BUSINESS WILL SUFFER
Our rapid growth has and will place a significant strain on our
managerial, operational, financial, and information systems resources. To
accommodate our increasing size and manage our growth, we must continue to
implement and improve these systems and attract, train, manage, and retain
qualified employees. These demands will require us to add new management
personnel and develop new expertise. In order to successfully integrate newly
acquired assets and continue to implement a nationwide strategy and network, we
must:
* closely monitor service quality, particularly through third
party "POPs";
* acquire and install necessary equipment and telecommunications
facilities;
* create and implement marketing strategies in new and existing
markets;
* employ qualified personnel to provide technical and marketing
support for new sites; and
* continue to expand our managerial, operational, and financial
resources to support expansion.
Although we are taking steps to manage our growth effectively, we may not
succeed. If we fail to successfully manage our growth, our ability to maintain
and increase our member base will be impaired and our business will suffer.
WE ARE SUBJECT TO RISKS ASSOCIATED WITH ACQUISITIONS
Since January 1999, we have acquired the stock or assets of 17
companies and may acquire a number of other companies in the next few months. As
part of our long-term business strategy, we continually evaluate
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strategic acquisitions of businesses and subscriber accounts. Acquisitions often
involve a number of special risks, including the following:
* we may experience difficulty integrating acquired operations
and personnel;
* we may be unable to retain acquired subscribers;
* the acquisition may disrupt our ongoing business;
* we may not be able to successfully incorporate acquired
technology and rights into our service offerings and maintain
uniform standards, controls, procedures, and policies;
* the businesses we acquire may fail to achieve the revenues and
earnings we anticipated;
* we may ultimately be liable for contingent and other
liabilities, not previously disclosed to us, of the companies
that we acquire; and
* our resources may be diverted in asserting and defending our
legal rights.
We may not successfully overcome problems encountered in connection with
potential future acquisitions. In addition, an acquisition could materially
adversely affect our operating results by:
* diluting your ownership interest;
* causing us to incur additional debt; and
* increasing amortization expenses related to goodwill and other
intangible assets.
Any of these factors could have a material adverse effect on our business.
IF WE DO NOT SUCCEED IN OBTAINING SUFFICIENT NETWORK CAPACITY FROM OUR INTERNAL
AND LEASED NETWORK, WE MAY LOSE CUSTOMERS
Our success depends, in part, on the capacity, reliability, and
security of our network. Our network includes computers, servers, routers,
modems, broadband fiber systems, access to third party broadband systems, and
other related hardware and software. Network capacity constraints have occurred
in the past and may occur in the future, in connection with:
* particular dial-up POPs affecting only members attempting to
use that particular point of presence; and
* system wide services, such as e-mail and news services, which
can affect all members.
These capacity constraints result in slowdowns, delays, or inaccessibility when
members try to use a particular service. Poor network performance could cause
members to terminate their membership with us. To reduce the probability of such
problems, we will be required to expand and improve our network. Such expansion
and improvement will be very costly and time consuming. We may not be able to
expand or adapt our network to meet additional demand or changing subscriber
requirements on a timely basis or at a commercially reasonable cost.
In order to provide Internet access and other on-line services to our
customers, we lease long distance fiber optic telecommunications lines from
multiple national telecommunications service providers. We are dependent upon
these providers of data communications facilities. In addition, we have a
wholesale usage agreement with PSINet, which allows us to provide dial-up and
"switched" network access to our customers through PSINet's 235 POPs throughout
the United States. We also have other agreements with service providers on whom
we rely to deliver our product and service offerings. Moreover, PSINet provides
network access to some of our competitors.
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PSINet could choose to grant these competitors preferential network access,
potentially limiting our members' ability to access the Internet. Even without
such preferential treatment, increased usage of PSINet's POPs by other Internet
service providers and online service providers may negatively affect access
system performance.
SYSTEM FAILURES CAUSED BY NATURAL DISASTERS COULD HAVE AN ADVERSE EFFECT ON OUR
BUSINESS
We must protect our infrastructure against fire, earthquakes, power
loss, telecommunications failure, computer viruses, security breaches, and
similar events. We do not currently maintain a redundant or backup network hub
for all of our customers. Moreover, because we lease our lines from long
distance telecommunications companies and regional Bell operating companies, we
are dependent upon these companies for physical repair and maintenance of the
leased lines. We maintain multiple carrier agreements to reduce the risk of loss
of operations from damage, power failures, telecommunications failures, and
similar events. However, the occurrence of a natural disaster or other
unanticipated problems at our network operations center or any of our POPs may
cause interruptions in the services we provide. In addition, failure of our
telecommunications providers to provide the data communications capacity we
require as a result of a natural disaster, operational disruption, or for any
other reason could cause interruptions in the services we provide. Any damage or
failure that causes interruptions in our operations could have a material
adverse effect on us.
OUR NETWORK IS SUBJECT TO SECURITY RISKS AND INAPPROPRIATE USE BY INTERNET USERS
THAT COULD INTERRUPT OUR SERVICE
The future success of our business will depend on the security of our
network and the networks of third parties over which we have no control. Despite
implementation of security measures, we remain vulnerable to computer viruses,
sabotage, break-ins, and similar disruptive problems caused by subscribers or
other Internet users. Any breach of our network security or other inappropriate
use of our network, such as the sending of excessive volumes of unsolicited bulk
e-mail or "spam," could lead to interruptions, delays, or cessation of services
to our subscribers. Our subscribers, in turn, could terminate their membership
or assert claims against us. Third parties could also potentially jeopardize the
security of confidential information stored in our computer systems or our
subscribers' computer systems by their inappropriate use of the Internet, which
could cause losses to our subscribers or us or deter potential customers from
subscribing to our services. Inappropriate use of the Internet includes
attempting to gain unauthorized access to information or systems, commonly known
as "cracking" or "hacking." Although we intend to continue to implement security
measures, "hackers" have circumvented such measures in the past, and others may
be able to circumvent our security measures or the security measures of our
third-party network providers in the future.
To fix problems caused by computer viruses or other inappropriate uses
or security breaches, we may have to interrupt, delay, or cease service to our
subscribers, which could have a material adverse effect on our business. In
addition, we expect that our subscribers will increasingly use the Internet for
commercial transactions in the future. Any network malfunction or security
breach could cause these transactions to be delayed, not completed at all, or
completed with compromised security. As a result, subscribers or others may
assert claims of liability against us. Further, until more comprehensive
security technologies are developed, the security and privacy concerns of
existing and potential subscribers may inhibit the growth of the Internet
service industry in general and our subscriber base and revenue in particular.
WE ARE DEPENDENT ON TELECOMMUNICATIONS CARRIERS AND OTHER SUPPLIERS
We rely on traditional telecommunications carriers to transmit our
traffic over local and long distance networks. These networks may experience
disruptions and capacity constraints that are not easily remedied. We may have
no means of replacing these services. In addition, local phone service is
sometimes available only from one company. The benefits of competition and
alternative sources of supply are not present in these markets.
We also depend on certain suppliers of hardware and software
components. We acquire a majority of our networking service components,
including terminal servers and high-performance routers, from Cisco Systems,
Inc., Bay Networks, Inc., and Lucent Technologies, Inc. The expansion of our
network places a significant demand on our suppliers, some of which have limited
production capacity. In the past, we have experienced delays in delivery
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of new telephone lines, modems, terminal servers, and other equipment. If delays
are severe, all incoming modem lines may become full during peak times,
resulting in busy signals for subscribers who are trying to connect to RMI.NET.
If our suppliers cannot meet increased demand and we are not able to develop
alternative sources of supply, we could experience delays and increased costs in
expanding our network, difficulty in providing our services, and the loss of
dissatisfied customers.
WE MAY NOT SUCCESSFULLY PROTECT OUR PROPRIETARY RIGHTS OR AVOID CLAIMS THAT WE
INFRINGE THE PROPRIETARY RIGHTS OF OTHERS
Our success is dependent in part on our technology and other
proprietary rights. To protect our rights, we rely on a combination of
copyright, trademark, patent and trade secret laws, and contractual
restrictions. We cannot be sure that these steps will be adequate to prevent
misappropriation or infringement of our intellectual property. Nor can we be
sure that competitors will not independently develop technologies that are
substantially equivalent or superior to our proprietary property and technology.
In our industry, competitors often assert intellectual property claims
against one another. The success of our business depends on our ability to
assert and defend our intellectual property rights. Future litigation may have
an adverse impact on our financial condition. These claims could result in
substantial costs and diversion of resources, even if the claim is ultimately
decided in our favor. If a claim is asserted alleging that we infringed the
proprietary technology or information of a third party, we may be required to
seek licenses for such intellectual property. We cannot be sure that such
licenses would be offered or obtained on commercially reasonable terms, if at
all. The failure to obtain the necessary licenses or other rights could have a
material adverse affect on our business.
MR. HANSON HAS A CONTROLLING INTEREST IN RMI.NET, INC. WHICH MAY PREVENT YOU
FROM REALIZING A PREMIUM RETURN
Our chief executive officer, Douglas Hanson has a controlling interest
in RMI.NET, Inc. through his direct ownership of common stock, ability to
exercise outstanding warrants and options, and voting rights agreements. As a
result, Mr. Hanson has voting control of RMI.NET, Inc. and can influence all
matters that require stockholder approval. Mr. Hanson may designate the members
of our Board of Directors and can decide our operations and business strategy.
You may disagree with Mr. Hanson's management decisions.
As a controlling stockholder, Mr. Hanson also has the power to approve
or reject significant corporate matters, such as mergers, acquisitions and other
change-in-control transactions. Mr. Hanson's controlling interest could make it
more difficult for a third party to acquire us, even if the acquisition would be
beneficial to you. You may not realize the premium return that stockholders may
realize in conjunction with corporate takeovers.
MARKET PRICE OF OUR SECURITIES MAY FALL IF OTHER SECURITY HOLDERS SELL THEIR
STOCK
As of the date of this offering, we have 20,028,231 shares of common
stock outstanding. However, we have reserved approximately 6,700,000 additional
shares for issuance upon exercise of warrants and stock options, various
anti-dilution provisions contained in the warrants and stock options, and prior
acquisitions. If our stockholders sell substantial amounts of our common stock
in the public market following this offering, the market price of our common
stock and our publicly traded warrants could fall. Such sales also might make it
more difficult for us to sell equity or equity-related securities in the future
at a price we deem appropriate. We have issued and plan to issue additional
convertible equity and debt securities in the future. If these securities are
exercised or converted, you may experience significant dilution in the market
value of your stock. Our stock price is highly volatile.
OUR STOCK PRICE IS HIGHLY VOLATILE
In the past, our common stock and publicly traded warrants have traded
at volatile prices. We believe that the market prices will continue to be
subject to significant fluctuations due to various factors and events that may
or may not be related to our performance. If the market value of our common
stock decreased substantially, we could be delisted from the Nasdaq National
Market. Consequently, you could find it difficult or impossible to sell your
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stock or to determine the value of your stock. In addition, the stock market has
from time to time experienced significant price and volume fluctuations, which
have particularly affected the market prices of the stocks of Internet-sector
companies and which may be unrelated to the operating performance of such
companies. Furthermore, our operating results and prospects from time to time
may be below the expectations of public market analysts and investors. Any such
event could result in a material decline in the price of your stock.
FACTORS OUTSIDE OF OUR CONTROL MAY AFFECT OUR OPERATING RESULTS AND CAUSE OUR
QUARTERLY RESULTS TO FLUCTUATE
Our financial results may fluctuate significantly because of several
factors, many of which are beyond our control. These factors include:
* costs associated with gaining and retaining customers and
capital expenditures for upgrading our systems and
infrastructure;
* timing and market acceptance of new and upgraded Internet
service introductions, technologies, and services by us and
our competitors;
* loss of subscribers, seasonal fluctuations in demand for our
services;
* downward pressure on prices due to increased competition;
* changes in our operating expenses, including
telecommunications costs; and
* the effect of potential acquisitions.
Fluctuations caused by these and other factors could cause our business to
suffer.
WE HAVE NO INTENTION TO PAY DIVIDENDS
We have never paid any cash dividends on our common stock. We currently
intend to retain all future earnings, if any, for use in our business and do not
expect to pay any dividends in the foreseeable future.
WE MAY BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATION
We provide Internet services through data transmissions over public
telephone lines and cable networks. The Federal Communications Commission
governs these transmissions and establishes charges and terms for
communications. As an Internet access provider, we are not subject to direct
regulation by the Federal Communications Commission or any other governmental
agency, other than the regulations applicable to businesses generally. However,
we could become subject to the Federal Communications Commission or other
regulatory agency regulation especially as Internet services and
telecommunication services converge. Changes in the regulatory environment could
decrease our revenue and increase our costs. For example, the Federal
Communications Commission may decide that Internet-based telephone services
should be subject to pay carrier access charges on the same basis as traditional
telecommunications companies.
The Federal Telecommunications Act of 1996 imposed fines on Internet
service providers, in part, for providing access to indecent and obscene
services. The United States Supreme Court found this part of the Federal
Telecommunications Act of 1996 unconstitutional in June of 1997. However, on
March 12, 1998, the Senate Commerce Committee approved two bills that attempt to
reconstruct these unconstitutional provisions. Although it is too early to
determine the ultimate course of these bills, and to evaluate the
constitutionality of the proposals, these provisions, if enacted and upheld,
could expose ISPs such as RMI.NET, Inc. to liabilities.
Additional laws and regulations may be adopted with respect to the
Internet, covering issues such as Universal Service Fund support payments,
content, user privacy, pricing, libel, obscene material, indecency, gambling,
intellectual property protection and infringement, technology export, and other
controls. Other federal
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Internet-related legislation has been introduced which may limit commerce and
discourse on the Internet. The Federal Communications Commission currently is
considering:
* whether Internet service providers are regulated
telecommunications providers;
* whether Internet service providers are required to contribute
to the Universal Service Fund; and
* how various companies in the Internet and telecommunications
industries should be classified.
IF WE ARE UNABLE TO RETAIN KEY EXECUTIVES, OUR BUSINESS WILL BE ADVERSELY
AFFECTED
Our success greatly depends on our ability to attract and retain key
technical, sales, marketing, information systems, financial, and executive
personnel. We are especially dependent on the continued services of our senior
management team, particularly Douglas H. Hanson, our Chief Executive Officer,
President and Chairman of the Board of Directors. The loss of Mr. Hanson or
other senior managers could have a materially detrimental effect on us. All
members of our senior management team can terminate their employment at any
time. We do not maintain key person life insurance on any of our personnel. If
we fail to attract, hire, or retain the necessary personnel, or if we lose the
services of any member of our senior management team, our business could be
adversely affected.
OUR FAILURE TO ENSURE THAT OUR SYSTEMS OR OUR CUSTOMERS AND SUPPLIERS SYSTEMS
ARE YEAR 2000 COMPLIANT COULD LEAD TO A MAJOR SYSTEM FAILURE THAT COULD
ADVERSELY AFFECT OUR BUSINESS
The Year 2000 problem is the result of computer programs that use two
digits rather than four to define the applicable year. Computer equipment and
programs that have time-sensitive software may not be able to distinguish
whether "00" means 1900 or 2000. Incompatible date coding could cause a major
system failure or could create erroneous results. We may also be vulnerable to
other companies' Year 2000 issues.
Our failure, or the failure of third parties on which we rely, to
address Year 2000 readiness issues could result in an interruption, or a
failure, of normal business activities or operations. Although we did not
experience any system failures on January 1, 2000, we remain concerned about the
potential for problems throughout the year. We believe that the primary risks
that we face with regard to the Year 2000 are those arising from third party
services or products. In particular, we depend heavily on a significant number
of third party vendors to provide both network services and equipment. A
significant Year 2000-related disruption of these network services or equipment
could cause our customers to consider seeking alternate providers or cause an
unmanageable burden on customer service and technical support. This in turn
could materially and adversely affect business.
Furthermore, our business depends on the continued operation of, and
widespread access to, the Internet. To the extent that the normal operation of
the Internet is disrupted by the Year 2000 issue, or if a large portion of our
customers are unable to access the Internet due to Year-2000 related issues in
connection with their own systems, our business could be materially and
adversely affected.
We also face Year 2000 risks related to the acquisitions we make. If we
fail to identify and address Year 2000 issues in connection with our
acquisitions, our business could be materially and adversely affected.
We have established a program to coordinate appropriate activity to be
taken to address the Year 2000 issue. We have incurred approximately $200,000 of
expenses to implement our Year 2000 readiness program. However, we may have to
incur additional costs to address Year 2000 problems that surface throughout the
year, including problems associated with companies, systems and products that we
may acquire. Acquisitions may cause actual costs of addressing the Year 2000
problem to significantly exceed our estimates and our business may be adversely
affected.
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
This prospectus and the information incorporated by reference may
include "forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. We intend the
9
<PAGE> 12
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements in these sections. All statements regarding our
expected financial position and operating results, our business strategy, our
financing plans and the outcome of any contingencies are forward-looking
statements. These statements can sometimes be identified by our use of
forward-looking words such as "may," "believe," "plan," "will," "anticipate,"
"estimate," "expect," "intend" and other phrases of similar meaning. Known and
unknown risks, uncertainties and other factors could cause the actual results to
differ materially from those contemplated by the statements. The forward-looking
information is based on various factors and was derived using numerous
assumptions.
Although we believe that our expectations that are expressed in these
forward-looking statements are reasonable, we cannot promise that our
expectations will turn out to be correct. Our actual results could be materially
different from our expectations, including the following:
o we may lose subscribers or fail to grow our subscriber base;
o we may not successfully integrate new subscribers or assets
obtained through acquisitions;
o we may fail to compete with existing and new competitors;
o we may not be able to sustain our current growth;
o we may not adequately respond to technological developments
impacting the Internet;
o we may fail to identify and correct a significant Year 2000
compliance problem and experience a major system failure;
o we may fail to settle outstanding litigation; and
o we may not be able to find needed financing.
This list is intended to identify some of the principal factors that could cause
actual results to differ materially from those described in the forward-looking
statements included elsewhere in this report. These factors are not intended to
represent a complete list of all risks and uncertainties inherent in our
business, and should be read in conjunction with the more detailed cautionary
statements included in this prospectus under the caption "Risk Factors."
With regard to Year 2000 issues, any reference to a Year 2000 issue
contained in this prospectus is a "Year 2000 Statement" and a "Year 2000
Readiness Disclosure," as defined in the Year 2000 Information and Readiness
Disclosure Act, signed into law by President Clinton on October 19, 1998 (Pub.
L. 105-271, 112 Stat. 2386).
DESCRIPTION OF SECURITIES
In December 1999, we issued common stock and Class A and Class B
Warrants to purchase common stock to Advantage Fund II Ltd. and Koch Investment
Group Limited pursuant to separate subscription agreements with each selling
stockholder. Both the Class A and Class B Warrants are subject to anti-dilution
clauses in the event of stock dividends, stock splits, or other transactions. A
more detailed description of our common stock and the Class A and Class B
Warrants follows.
COMMON STOCK
The description of our common stock, $0.001 par value, is included in
our Registration Statement on Form 8-A, which was filed with the Securities and
Exchange Commission on August 14, 1996. We have incorporated our Registration
Statement on Form 8-A by reference. As of January 20, 2000, we have 20,028,231
shares of common stock issued and outstanding. Pursuant to the subscription
agreements, we issued 761,610 shares to the selling
10
<PAGE> 13
stockholders on December 7, 1999. This prospectus covers the 761,610 shares
offered for resale by the selling stockholders.
WARRANTS
Class A Warrants. The Class A Warrants were issued pursuant to the
December 1999 subscription agreements and are presently exercisable. They expire
on December 7, 2004 and have an exercise price of $9.8476 per share. This
prospectus covers the resale by the selling stockholders of 182,786 shares of
our common stock issuable upon exercise of the Class A Warrants. RMI.NET, Inc.
has the right to require the selling stockholders to exercise their Class A
Warrants upon notice of at least 20 trading days if the closing bid price of our
common stock exceeds $14.7714 for 20 consecutive trading days on the Nasdaq
National Market and certain other conditions are met.
Class B Warrants. The Class B Warrants were issued pursuant to the
December 1999 subscription agreements. The Class B Warrants will not be
exercisable until June 4, 2000. The Class B Warrants expire on December 5, 2002
and have an exercise price of $0.01 per share. This prospectus covers the resale
by the selling stockholders of up to 2,828,693 shares of our common stock, the
maximum number of shares currently issuable upon exercise of the Class B
Warrants without obtaining stockholder approval under the Nasdaq Marketplace
Rules. The number of shares of common stock issuable upon exercise of the Class
B Warrants will increase or decrease over a two and one-half year period
beginning on June 4, 2000 and occurring every 90th day thereafter through
November 20, 2002, based on the market price of the common stock.
The Initial Adjustment. On the first adjustment date, June 4, 2000, the
Class B Warrants will become exercisable for a specified number of shares for
which the Class B Warrants are then exercisable will be adjusted by an amount
equal to the sum of:
(1) the quotient obtained by dividing:
(a) the product of (i) number of shares of common stock
originally issued in the December 1999 private placement
that continue to be held by Class B Warrant holders on
June 4, 2000 (up to 761,610 shares), (ii) the $13.1301
(the initial purchase price), and (iii) 1.03 (the initial
adjustment factor) by
(b) the initial "adjustment price," which is defined as the
lesser of (i) $9.8476 or (ii) the average market price of
the common stock, which is defined as the average of the
closing bid prices for the 20 trading days out of the 30
immediately preceding trading days on which the lowest
closing bid prices occurred.
(2) less the number of number of shares of common stock originally
issued in the December 1999 private placement that continue to be
held by the Class B Warrant holders on June 4, 2000 (up to 761,610
shares).
The Second Adjustment. On the second adjustment date, September 2,
2000, the specified number of shares reserved for which the Class B Warrants are
then exercisable will be adjusted by an amount equal to the sum of:
(1) the quotient obtained by dividing:
(a) the product of (i) number of shares of common stock
originally issued in the December 1999 private placement
that continue to be held by Class B Warrant holders on the
second day of adjustment (September 2, 2000), plus shares
issued or issuable upon exercise of Class B Warrants and
then held by Class B Warrant holders, (ii) the initial
adjustment price on the immediately preceding adjustment
date (June 4, 2000), and (iii) 1.015 (the adjustment
factor) by
11
<PAGE> 14
(b) the "adjustment price," which is defined as the lesser of
(i) $9.8476 or (ii) the average market price of the common
stock, which is defined as the average of the closing bid
prices for the 15 trading days out of the 30 immediately
preceding trading days on which the lowest closing bid
prices occurred.
(2) less the number of shares of common stock originally issued in the
December 1999 private placement that continue to be held by Class
B Warrant holders on the second day of adjustment (September 2,
2000), plus shares issued or issuable upon exercise of Class B
Warrants and then held by Class B Warrant holders.
If the amount of the adjustment is positive, then the number of shares issuable
upon exercise of Class B Warrants on the first adjustment date will be increased
by the amount of the adjustment. If the amount is negative, then the number of
shares issuable upon exercise of Class B Warrants on the first adjustment date
will be decreased by the amount of the adjustment (but not less than zero).
Subsequent Adjustments. We will be required to make similar adjustments
(increases or decreases) to the number of shares issuable upon exercise of Class
B Warrants every 90 days after the second adjustment date (September 2, 2000)
until November 20, 2002. The amount of each adjustment will equal the sum of:
(1) the quotient obtained by dividing:
(a) the product of (i) number of shares of common stock
originally issued in the December 1999 private placement
that continue to be held by Class B Warrant holders on the
day of adjustment, plus shares issued or issuable upon
exercise of Class B Warrants and then held by Class B
Warrant holders, (ii) the adjustment price on the
immediately preceding adjustment date, and (iii) 1.015
(the adjustment factor) by
(b) the current adjustment price, which is defined as the
lesser of (i) $9.8476 or (ii) the average market price of
the common stock, which is defined as the average of the
closing bid prices for the 10 trading days out of the 30
immediately preceding trading days on which the lowest
closing bid prices occurred.
(2) less the number of shares of common stock originally issued in the
December 1999 private placement that continue to be held by Class
B Warrant holders on the day of adjustment, plus shares issued or
issuable upon exercise of Class B Warrants and then held by Class
B Warrant holders.
Notwithstanding the above, if the "average market price" of our common
stock exceeds $20.00 per share on any adjustment date, the "adjustment price"
used in the formulas shall be increased by 50% of the excess of the "average
market price" over $20.00.
On the second and each subsequent adjustment date, the number of shares
for which each Class B Warrant is then exercisable is further reduced by the
number of shares for which the Class B Warrant is exercised during the preceding
90-day period.
The Class B Warrants may not be exercised until the holder shall have
first sold all of the shares of common stock initially purchased by the Class B
Warrant holder in the December 1999 private placement. In addition, until
December 1, 2000, each selling stockholder may not exercise its Class B Warrant
to the extent the sum of the number of initial shares purchased in the December
1999 private placement plus the number of shares issued or issuable upon the
exercise of the Class B Warrant would exceed 1,000,000 shares.
Under certain circumstances described in the subscription agreements
and the Class B Warrants, we have the right to repurchase the shares of common
stock and the Class B Warrants held by the selling stockholders.
12
<PAGE> 15
SELLING STOCKHOLDERS
The following table sets forth information regarding the ownership of
our common stock by the selling stockholders and the maximum number of shares
that may be sold pursuant to this prospectus. The selling stockholders listed
below may use this prospectus to sell their common stock and the common stock to
be issued upon exercise of their warrants.
Under the terms of the Class A and B Warrants, no selling stockholder
may exercise warrants to the extent that the exercise would cause the selling
stockholder's beneficial ownership of our common stock (excluding shares
underlying unexercised warrants) to exceed 4.9% of the number of shares issued
and outstanding.
<TABLE>
<CAPTION>
Shares Which Shares Owned After Offering
Number of Shares May be Sold (1)
Owned Before the Pursuant to this ----------------------------
Selling Stockholder Offering Prospectus Number Percentage
- ------------------------------------- -------------------- ------------------- ---------- -------------
<S> <C> <C> <C> <C>
Advantage Fund II Ltd. 569,073 (2) 1,886,544 (4) 96,875 *
Koch Investment Group Limited 530,323 (3) 1,886,544 (5) 58,125 *
* Less than one percent.
</TABLE>
(1) Assumes all shares offered are sold.
(2) Consists of (a) the initial 380,805 shares issued to the selling stockholder
in the December 1999 private placement; (b) 91,393 shares issuable upon
exercise of the Class A Warrant; and (c) 96,875 shares issuable upon
exercise of warrants issued in December 1998. The December 1998 warrants are
subject to the same 4.9% limitation on beneficial ownership applicable to
the Class A and Class B Warrants.
(3) Consists of (a) the initial 380,805 shares issued to the selling stockholder
in the December 1999 private placement; (b) 91,393 shares issuable upon
exercise of the Class A Warrant; and (c) 58,125 shares issuable upon
exercise of warrants issued in December 1998. The December 1998 warrants are
subject to the same 4.9% limitation on beneficial ownership applicable to
the Class A and Class B Warrants.
(4) Consists of (a) the initial 380,805 shares issued to Advantage Fund II, Ltd.
in the December 1999 private placement; (b) 91,393 shares issuable upon
exercise of the Class A Warrants; and (c) up to 1,414,346 shares which may
be issuable upon exercise of the Class B Warrants. Genesee International,
Inc., the investment manager of Advantage Fund II, may be deemed to
beneficially own the shares offered by Advantage Fund II through its shared
dispositive and voting power over such shares. Mr. Donald R. Morken, the
controlling stockholder of Genesee International, may be deemed to control
the exercise by Genesee International of shared dispositive and voting power
over the shares.
(5) Consists of (a) the initial 380,805 shares issued to Koch Investment Group
Limited in the December 1999 private placement; (b) 91,393 shares issuable
upon exercise of the Class A Warrants; and (c) up to 1,414,346 shares
issuable upon exercise of the Class B Warrants. Koch Industries, Inc. the
indirect parent company of Koch Investment Group, may be deemed to
beneficially own the shares offered by Koch Investment Group through its
shared dispositive and voting power over the shares. Messrs. Charles Koch
and David Koch, the majority stockholders of Koch Industries, may be deemed
to control the exercise by Koch Industries of shared dispositive and voting
power over the shares.
None of the selling stockholders, nor their officers, directors and
major shareholders, has held any material relationship with RMI.NET or any of
its affiliates within the past three years other than as an owner of RMI.NET's
securities.
USE OF PROCEEDS
We have reserved up to 3,011,479 shares of common stock for issuance
upon the exercise of outstanding Class A and Class B warrants, without giving
effect to additional shares that may be issued pursuant to anti-dilution
13
<PAGE> 16
provisions. We cannot be sure that warrant holders will exercise any of the
warrants that are currently outstanding and thus, we may not receive any
proceeds. However, if all Class A and Class B Warrants are exercised for the
full number of shares offered for resale pursuant to this prospectus upon the
exercise of the warrants, we will receive net proceeds of approximately
$1,828,000.
If we do receive proceeds from the exercise of warrants, we plan to use
the net proceeds for general corporate purposes, including:
o repaying our obligations as they become due;
o financing capital expenditures; and
o working capital.
Pending use of the net proceeds for any of these purposes, we may invest the net
proceeds in short-term investment grade instruments, interest-bearing bank
accounts, certificates of deposit, money market securities, U.S. government
securities, or mortgage-backed securities guaranteed by federal agencies.
PLAN OF DISTRIBUTION
The common stock covered by this prospectus may be offered and sold
from time to time by the selling stockholders or by their pledgees, donees,
transferees or other successors in interest, including in one or more of the
following transactions:
o on the Nasdaq National Market;
o in the over-the-counter market;
o in transactions other than on the Nasdaq National Market or in
the over-the-counter market;
o through brokers or dealers, or in direct transactions with
purchasers;
o in connection with short sales;
o by pledge to secure debts and other obligations;
o in connection with the writing of options, in hedge
transactions, and in settlement of other transactions in
standardized or over-the-counter options; or
o in a combination of any of the above transactions.
The selling stockholders may sell their shares at prevailing market
prices, at prices related to prevailing market prices, at negotiated prices, or
at fixed prices. There is no assurance that the selling stockholders will sell
any or all of their common stock. Brokers and dealers that are used will either
receive discounts or commissions from the selling stockholders, or will receive
commissions from the purchasers.
The selling stockholders may also elect to sell their shares pursuant
to Rule 144 under the Securities Act of 1933.
The selling stockholders may choose not to exercise any of their common
stock purchase warrants. However, if the selling stockholders do exercise their
warrants, we will issue an appropriate amount of common stock and cancel the
underlying warrants upon payment of the exercise price.
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<PAGE> 17
We have agreed to indemnify the selling stockholders against certain
liabilities, including liabilities arising under the Securities Act of 1933.
LEGAL OPINION
For the purposes of this offering, Christopher J. Melcher, Vice
President and General Counsel of RMI.NET, Inc., has given his opinion as to the
validity of the shares offered by the selling stockholders. As of January 20,
2000, Mr. Melcher beneficially owns 159,450 shares of RMI.NET common stock.
EXPERTS
Ernst & Young, LLP, independent auditors, have audited our consolidated
financial statements and schedule as of and for the year ended December 31, 1998
included in our Annual Report on Form 10-K for the year ended December 31, 1998,
as set forth in their report, which is incorporated by reference in this
prospectus and elsewhere in the registration statement. Baird, Kurtz and Dobson,
independent accountants, have audited our consolidated financial statements and
schedule as of December 31, 1997 and for each of the two years in the period
then ended included in our Annual Report on Form 10-K for the year ended
December 31, 1998, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements and schedule are incorporated by reference in reliance on
Ernst & Young LLP's and Baird, Kurtz & Dobson's reports, given on their
authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements, and
other information with the SEC. Our SEC filings are available to the public over
the Internet at the SEC's web site at www.sec.gov. You may also read and copy
any document we file at the SEC's Public Reference Rooms in Washington, D.C.,
New York, New York and Chicago, Illinois. The Public Reference Room in
Washington, D.C. is located at 450 Fifth Street, N.W. Please call the SEC at
1-800-SEC-0330 for further information on the Public Reference Rooms.
Our common stock is listed on the Nasdaq National Market. Reports,
proxy statements, and other information concerning RMI.NET can be reviewed at
the offices of Nasdaq Operations, 1735 "K" Street, N.W., Washington, D.C. 20006.
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934
until we sell all of the common stock:
o Annual Report on Form 10-K for the year ended December 31,
1998;
o 1999 Definitive Revised Proxy Statement;
o Quarterly Reports on Form 10-Q for the quarters ended March
31, June 30, and September 30, 1999;
o Current Reports on Form 8-K (and amendments) originally filed
January 8, February 17, June 28, July 1, 8 and 19, and, August
26 and 30, September 14, 15, and 27, December 6 and 9, 1999
and January 7, 2000; and
15
<PAGE> 18
o the description of our common stock contained in our
registration statement on Form 8-A, filed August 14, 1996.
We have also filed a registration statement on Form S-3 with the SEC under the
Securities Act of 1933. This prospectus does not contain all of the information
set forth in the registration statement. You should read the registration
statement for further information about our company and the common stock. You
may request a copy of these filings at no cost. Please direct your requests to:
Christopher J. Melcher
Vice President and General Counsel
RMI.NET, Inc.
999 Eighteenth Street, Suite 2201
Denver, Colorado 80202
(303) 672-0700
You may also want to refer to our web site at www.rmi.net. However, our web site
is not a part of this prospectus.
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of the common stock in any state where the offer is not permitted. You
should not assume that the information in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front page of
those documents.
16
<PAGE> 19
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Risk Factors .......................................... 2
Cautionary Note About Forward-Looking Statements ...... 9
Description of Securities ............................. 10
Selling Stockholders .................................. 13
Use of Proceeds ....................................... 13
Plan of Distribution .................................. 14
Legal Opinion ......................................... 15
Experts ............................................... 15
Where You Can Find More Information ................... 15
</TABLE>
COMMON STOCK
$0.001 PAR VALUE
RMI.NET, INC.
PROSPECTUS
JANUARY , 2000
<PAGE> 20
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following expenses incurred in connection with the sale of the securities
being registered will be borne by the Registrant. Other than the SEC
registration fee and Nasdaq filing fee, the amounts stated are estimates.
<TABLE>
<S> <C>
SEC Registration Fee $ 3,123.00
Nasdaq Filing Fee 15,232.00
Printing and Engraving 1,000.00
Legal Fees and Expenses 10,000.00
Accounting Fees and Expenses 10,000.00
Miscellaneous 3,000.00
---------------
TOTAL $ 42,355.00
===============
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 8 of the Registrant's Certificate of Incorporation, as amended,
provides:
"No director of the corporation shall be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except as to liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for violations of Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived any
improper personal benefit. If the Delaware General Corporation Law hereafter is
amended to eliminate or limit further the liability of a director, then, in
addition to the elimination and limitation of liability provided by the
preceding sentence, the liability of each director shall be eliminated or
limited to the fullest extent provided or permitted by the amended Delaware
General Corporation Law. Any repeal or modification of this Article 8 shall not
adversely affect any right or protection of a director under this Article 8 as
in effect immediately prior to such repeal or modification with respect to any
liability that would have accrued, but for this Article 8, prior to such repeal
or modification."
Section 5.1 of the Registrant's bylaws provides, in general, that the
Registrant shall, to the fullest extent permitted by the DGCL, as now or
hereafter in effect, indemnify any person who was or is threatened to be made a
party to any threatened, pending, or completed action, suit, or proceeding,
whether criminal, civil, administrative, or investigative (a "Proceeding"), by
reason of the fact that he is or was a director or officer of the Registrant,
or, by reason of the fact that such officer or director is or was serving at the
request of the Registrant as a director, office, employee, or agent of another
corporation, partnership, joint venture, trust, association, or other
enterprise, against all liability and loss suffered and expenses (including
attorneys' fees), judgments, fines, ERISA excise taxes or penalties, and amounts
paid in settlement reasonably incurred by him in connection with such
Proceeding, including any Proceeding by or on behalf of the Registrant and will
advance all reasonable expenses incurred by or on behalf of any such person in
connection with any Proceeding, whether prior to or after final disposition of
such Proceeding. Section 5.8 of the bylaws also provides that the Registrant may
also indemnify and advance expenses to employees or agents who are not officers
or directors of the Registrant.
The Registrant has purchased a directors' and officers' liability insurance
contract that provides, within stated limits, reimbursement either to a director
or officer whose actions in his capacity result in liability, or to the
Registrant, in the event it has indemnified the director or officer.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the
Registrant, the Registrant has been informed that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable. No dealer, salesman or any other
person has been authorized in connection with this Offering to give any
information or to make any representations other than those contained in this
prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Registrant. This prospectus does
not
II-1
<PAGE> 21
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction in which such offer or
solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so or to any person to whom it is unlawful
to make such an offer or solicitation. Neither the delivery of this prospectus
nor any sale made hereunder shall, under any circumstances, create an
implication that there has been no change in the circumstances of the Registrant
or the facts herein set forth since the date hereof.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
<S> <C>
2.01 Agreement and Plan of Reorganization and Liquidation by and Among
Rocky Mountain Internet, Inc., DataXchange Network, Inc., and Certain
of the Shareholders of DataXchange Network, Inc., dated as of December
8, 1998 (13)
3.01 Amended and Restated Certificate of Incorporation (19)
3.02 Bylaws of Rocky Mountain Internet, Inc. (1)
3.03 Certificate of Amendment of Certificate of Incorporation of Rocky
Mountain Internet, Inc. (16)
3.04 Certificate of Designations of Series B Convertible Preferred Stock
(16)
4.01 Form of Warrant Agreement dated September 5,1996 between Rocky
Mountain Internet, Inc. and American Securities Transfer, Inc. (1)
4.02 Form of Subordinated Convertible Promissory Note (1)
4.03 Form of Lock-Up Agreement for Shareholders (1)
4.04 Form of Lock-Up Agreement for Preferred Stockholders (1)
4.05 Form of Lock-Up Agreement for Debenture Holders (1)
4.06 Form of Stock Certificate (1)
4.07 Form of Warrant Certificate (1)
4.08 Warrant Agreement between Rocky Mountain Internet, Inc. and Douglas H.
Hanson dated October 1, 1997 (8)
4.09 1996 Employees' Stock Option Plan (6)
4.10 1996 Non-Employee Directors' Stock Option Plan (6)
4.11 Rocky Mountain Internet Inc. 1997 Non-Qualified Stock Option Plan (7)
4.12 1997 Stock Option Plan (9)
4.12.1 First Amendment to Non-Qualified Stock Option Agreement pursuant to
the Rocky Mountain Internet, Inc. 1997 Stock Option Plan (16)
4.12.2 First Amendment to Incentive Stock Option Agreement pursuant to the
Rocky Mountain Internet, Inc. 1997 Stock Option Plan) (16)
4.13 Rocky Mountain Internet, Inc. 1998 Employees' Stock Option Plan (10)
4.14 Rocky Mountain Internet, Inc. 1998 Non-Employee Directors' Stock
Option Plan (11)
4.15 Subscription Agreement, dated as of December 10, 1998, by and between
Rocky Mountain Internet, Inc. and Koch Industries, Inc. (15)
4.16 Subscription Agreement, dated as of December 10, 1998, by and between
Rocky Mountain Internet, Inc. and Advantage Fund II Ltd. (15)
4.17 Form of Common Stock Purchase Warrant issued to Koch Industries, Inc.,
Advantage Fund II Ltd., Wharton Capital Partners Ltd., Leslie Bines,
and Neidiger Tucker Bruner Inc. (15)
4.18 Form of Registration Rights Agreement between Rocky Mountain Internet,
Inc. and (i) Koch Industries, Inc.; and (ii) Advantage Fund II Ltd.
(15)
4.19 Form of Registration Rights Agreement between Rocky Mountain Internet
and (i) Wharton Capital Partners Ltd.; (ii) Leslie Bines; and (iii)
Neidiger Tucker Bruner Inc. (15)
4.20 Form of Subscription Agreement dated as of December 7, 1999*
4.21 Form of Class A Warrant (Annex I to Subscription Agreement)*
4.22 Form of Class B Warrant (Annex II to Subscription Agreement)*
4.23 Form of Registration Rights Agreement (Annex IV to Subscription
Agreement)*
5.01 Opinion and Consent of Christopher J. Melcher, Esq., as to legality of
securities being registered. *
10.01 Agreement of Lease between Denver-Stellar Associates Limited
Partnership, Landlord and Rocky Mountain Internet, Inc., Tenant (2)
</TABLE>
II-2
<PAGE> 22
<TABLE>
<S> <C>
10.02 Asset Purchase Agreement - Acquisition of CompuNerd, Inc. (2)
10.03 Confirmation of $2.0 million lease line of credit (2)
10.04 Agreement between MCI and Rocky Mountain Internet, Inc. governing the
provision of professional information system development services for
the design and development of the MCI internal Intranet project
referred to as Electronic Advice. (2)
10.05 Sublease Agreement - February 26, 1997 - 1800 Glenarm, Denver, CO (4)
10.06 Acquisition Agreement for The Information Exchange (4)
10.07 Asset Purchase Agreement for On-Line Network Enterprises (4)
10.08 1996 Incentive Compensation Plan - Annual Bonus Incentive (4)
10.09 1997 Incentive Compensation Plan - Annual Bonus Incentive (4)
10.10 Termination Agreement of joint venture between Rocky Mountain
Internet, Inc. and Zero Error Networks, Inc. (5)
10.11 Private Placement Memorandum (5)
10.12 Carrier Services Switchless Agreement Between Frontier Communications
of the West, Inc. and Rocky Mountain Broadband, Inc.** (15)
10.13 Wholesale Usage Agreement Between PSINet Inc. and Rocky Mountain
Internet, Inc.** (15)
10.14 PacNet Reseller Agreement between PacNet Inc. and Rocky Mountain
Internet, Inc.** (15)
10.15 Operating Agreement of The Mountain Area EXchange LLC (15)
10.16 Software License and Consulting Services Agreement Between Rocky
Mountain Internet, Inc. and Novazen Inc.** (15)
10.19 Merger Agreement among Rocky Mountain Internet, Inc., RMI-INI,
Internet Now, Hutchinson Persons, Leslie Kelly, Taufik, Islam, Susan
Coupal, and Gary Kim, dated November 20, 1998 (12)
10.20 Asset Purchase Agreement between Rocky Mountain Internet, Inc. and
Unicom Communications Corporation dated as of November 24, 1998 (12)
10.21 Asset Purchase Agreement among Rocky Mountain Internet, Inc.,
Stonehenge Business Systems Corporation, Todd Keener, and Danette
Keener, dated as of November 30, 1998 (12)
10.22 Commitment letter dated December 10, 1998 from Advantage Fund Ltd. to
Rocky Mountain Internet, Inc. (15)
10.23 Agreement and Plan of Merger by and between Rocky Mountain Internet,
Inc. and August 5th Corporation, d/b/a Dave's World dated February 2,
1999 (17)
10.24 Asset Purchase Agreement by and among Rocky Mountain Internet, Inc.,
ImageWare Technologies, L.L.C., and Communication Network Services,
L.L.C. dated February 5, 1999 (17)
10.25 Agreement and Plan of Merger by and among Rocky Mountain Internet,
inc. d/b/a/ RMI.NET, Inc. and IdealDial Corporation. (20)
10.26 Agreement and Plan of Merger by and among Rocky Mountain Internet,
inc. d/b/a/ RMI.NET, Inc. and Internet Connect, Inc. (20)
10.27 Agreement and Plan of Merger and Reorganization by and among Rocky
Mountain Internet, Inc. d/b/a/ RMI.NET, Inc. and Colorado Mountain
Net, Inc. dated June 16, 1999 (21)
10.28 Stock Exchange Agreement between Rocky Mountain Internet, Inc. d/b/a
RMI.NET, Inc. and Roger L. Penner (CommerceGate) dated June 24, 1999
(22)
10.29 Asset Purchase Agreement by and between Rocky Mountain Internet, Inc.
d/b/a RMI.NET, Inc. and CyberDesic Communications Corporation, Inc.
dated June 28, 1999 (23)
10.30 Asset Purchase Agreement by and among RMI.NET, Inc. f/k/a Rocky
Mountain Internet, Inc. and Triad Resources, LLC dated July 30, 1999
(24)
10.31 Asset Purchase Agreement by and among RMI.NET, Inc. and ACES Research,
Inc. dated July 30, 1999 (25)
10.32 Asset Purchase Agreement by and among RMI.NET, Inc. and Novo Media
Group, Inc. dated August 30, 1999 (26)
10.33 Asset Purchase Agreement by and among RMI.NET, Inc. and Wolfe Internet
Access, LLC dated August 31, 1999 (27)
10.34 Asset Purchase Agreement by and among RMI.NET, Inc. and Networld.com,
Inc. and FutureOne, Inc. dated November 19, 1999 (28)
10.35 Asset Purchase Agreement by and among RMI.NET, Inc. and Western
Regional Networks, Inc. dated November 24, 1999 (29)
10.36 Asset Purchase Agreement by and among RMI.NET, Inc. and AIS Network
Corporation dated December 23, 1999 (30)
</TABLE>
II-3
<PAGE> 23
<TABLE>
<S> <C>
16.01 Letter re change in certifying accountant (3)
16.02 Letter re change in certifying accountant (14)
21.01 Subsidiaries of the Registrant (18)
23.01 Consent of Ernst & Young LLP ***
23.02 Consent of Baird, Kurtz & Dobson ***
23.03 Consent of Christopher J. Melcher, Esq. (included in Exhibit 5.01) *
24.01 Power of Attorney (31)
27.01 Financial Data Schedule (19)
</TABLE>
* Filed herein.
** Portions of these documents have been omitted pursuant to a request for
confidential treatment.
*** To be filed by amendment.
(1) Incorporated by reference from the Registrant's Registration Statement on
Form SB-2 (Reg. No. 333-05040C) and amendments thereto, as previously
filed with the Securities and Exchange Commission.
(2) Incorporated by reference from the Registrant's Quarterly Report on Form
10-QSB for the quarter ended September 30, 1996.
(3) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated January 28, 1997.
(4) Incorporated by reference to the Registrant's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1996.
(5) Incorporated by reference to the Registrant's Quarterly Report on Form
10-QSB for the quarter ended June 30, 1997.
(6) Incorporated by reference to the Registrant's documents filed with the
Registrant's Initial Public Offering.
(7) Incorporated by reference to the Registrant's Registration Statement on
Form S-8, as filed with the Securities and Exchange Commission on
September 26, 1997.
(8) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated October 6, 1997.
(9) Incorporated by reference to the Definitive Proxy Statement (Appendix A)
filed on Schedule 14A on February 13, 1998.
(10) Incorporated by reference to the Definitive Proxy Statement (Appendix B)
filed on Schedule 14A on February 13, 1998.
(11) Incorporated by reference to the Definitive Proxy Statement (Appendix C)
filed on Schedule 14A on February 13, 1998.
(12) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated November 20, 1998.
(13) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated December 8, 1998.
(14) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated December 9, 1998.
(15) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated December 10, 1998.
(16) Incorporated by reference from the Registrant's Registration Statement on
Form S-1 (Reg. No. 333-52731) and amendments thereto, as previously filed
with the Securities and Exchange Commission.
(17) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated February 2, 1999.
(18) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1998.
(19) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1999.
(20) Incorporated by reference to the Registrant's Current Report on Form
8-K/A dated June 11, 1999.
(21) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated June 16, 1999.
(22) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated June 23, 1999.
(23) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated June 28, 1999.
(24) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated July 30, 1999.
(25) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated July 30, 1999.
(26) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated August 30, 1999.
(27) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated August 31, 1999.
(28) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated November 19, 1999.
(29) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated November 24, 1999.
(30) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated December 23, 1999.
(31) Included in Part II of this Registration Statement under the caption
"Signatures."
II-4
<PAGE> 24
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the 1934 Act)
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
II-5
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Denver, State of Colorado, on January 21, 2000.
RMI.NET, INC.
a Delaware corporation
By: /s/ Douglas H. Hanson
-------------------------------
Name: Douglas H. Hanson
Title: Chief Executive Officer,
President and Chairman of
the Board of Directors
(Principal Executive Officer)
POWER OF ATTORNEY
We, the undersigned officers and directors of RMI.NET, Inc. hereby
severally constitute Douglas H. Hanson, Christopher J. Melcher, and Michael D.
Dingman, Jr., and each of them singly, our true and lawful attorneys with full
power to them, and each of them singly, to sign for us and in our names in the
capacities indicated below the Registration Statement filed herewith and any and
all amendments to said Registration Statement, and generally to do all such
things in our name and behalf in our capacities as officers and directors to
enable RMI.NET, Inc. to comply with the provisions of the Securities Act of
1933, as amended, and all requirements of the Securities and Exchange
Commission, hereby ratifying and confirming our signatures as they may be signed
by our said attorneys, or any of them, to said Registration Statement and any
and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and Power of Attorney has been signed below by the
following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
NAME TITLE DATE
- ---- ----- ----
<S> <C> <C>
/s/ Douglas H. Hanson Chief Executive Officer, President January 21, 2000
- ----------------------------------------- and Chairman of the Board of
Douglas H. Hanson Directors (Principal Executive
Officer)
/s/ Michael D. Dingman, Jr. Treasurer (Principal Financial January 21, 2000
- ----------------------------------------- Officer and Principal Accounting
Michael D. Dingman, Jr. Officer)
/s/ D.D. Hock Director January 21, 2000
- -----------------------------------------
D.D. Hock
</TABLE>
II-6
<PAGE> 26
<TABLE>
<S> <C> <C>
/s/ Mary Beth Vitale Director January 21, 2000
- -----------------------------------------
Mary Beth Vitale
/s/ Robert S. Grabowski Director January 21, 2000
- -----------------------------------------
Robert S. Grabowski
/s/ Lewis H. Silverberg Director January 21, 2000
- -----------------------------------------
Lewis H. Silverberg
</TABLE>
II-7
<PAGE> 27
EXHIBIT INDEX*
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
<S> <C>
4.20 Form of Subscription Agreement dated as of December 7, 1999
4.21 Form of Class A Warrant (Annex I to Subscription Agreement)
4.22 Form of Class B Warrant (Annex II to Subscription Agreement)
4.23 Form of Registration Rights Agreement (Annex IV to Subscription
Agreement)
5.01 Opinion and Consent of Christopher J. Melcher, Esq., as to legality of
securities being registered
23.01 Consent of Ernst & Young LLP **
23.02 Consent of Baird, Kurtz & Dobson **
23.03 Consent of Christopher J. Melcher, Esq. (included in Exhibit 5.01)
24.01 Power of Attorney (included in Part II of this Registration Statement
under the caption "Signatures" )
</TABLE>
* Excludes exhibits incorporated by reference. For a list of exhibits
incorporated by reference, refer to Item 16 above.
** To be filed by amendment.
<PAGE> 1
Exhibit 4.20
SUBSCRIPTION AGREEMENT
DATED AS OF DECEMBER 7, 1999
BY AND BETWEEN
RMI.NET, INC.
AND
__________________________________________
____________________
COMMON STOCK
AND
COMMON STOCK PURCHASE WARRANTS
<PAGE> 2
SUBSCRIPTION AGREEMENT
COMMON STOCK
AND
COMMON STOCK PURCHASE WARRANTS
RMI.NET, INC.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. AGREEMENT TO SUBSCRIBE......................................................................1
(a) Subscription.......................................................................1
(b) Form of Payment....................................................................1
(c) Method of Payment..................................................................2
2. BUYER REPRESENTATIONS, WARRANTIES, ETC......................................................2
(a) Purchase for Investment............................................................2
(b) Accredited Investor................................................................2
(c) Reoffers and Resales...............................................................2
(d) Company Reliance...................................................................2
(e) Information Provided...............................................................2
(f) Absence of Approvals...............................................................3
(g) Subscription Agreement.............................................................3
3. COMPANY REPRESENTATIONS, WARRANTIES, ETC....................................................3
(a) Organization and Authority.........................................................3
(b) Capitalization.....................................................................3
(c) Concerning the Shares and the Common Stock.........................................4
(d) Subscription Agreement and Other Transaction Documents.............................4
(e) Non-contravention..................................................................4
(f) Approvals..........................................................................5
(g) Information Provided...............................................................5
(h) Absence of Certain Changes.........................................................5
(i) Absence of Certain Proceedings.....................................................5
(j) Properties.........................................................................6
(k) Labor Relations....................................................................6
(l) SEC Filings........................................................................7
(m) Absence of Brokers, Finders, Etc...................................................7
(n) No Solicitation....................................................................7
(o) Certain Issuances of Securities....................................................7
(p) Absence of Rights Agreement........................................................7
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.......................................................7
(a) Transfer Restrictions..............................................................7
(b) Restrictive Legend.................................................................8
(c) Registration Rights Agreement......................................................9
(d) Form D.............................................................................9
(e) Authorization for Trading; Reporting Status........................................9
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
(f) Use of Proceeds....................................................................9
(g) Blue Sky Laws......................................................................9
(h) Certain Expenses...................................................................9
(i) Certain Issuances of Securities....................................................10
(j) Certain Trading Restrictions.......................................................11
(k) Monthly Reports....................................................................11
(l) Best Efforts.......................................................................11
5. REPURCHASE AT OPTION OF THE COMPANY.........................................................11
(a) Repurchase Right...................................................................11
(b) Certain Definitions................................................................11
6. CLOSING DATE................................................................................12
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND ISSUE....................................12
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE............................................13
9. MISCELLANEOUS...............................................................................13
(a) Governing Law......................................................................13
(b) Counterparts.......................................................................13
(c) Headings, etc......................................................................13
(d) Severability.......................................................................14
(e) Amendments.........................................................................14
(f) Waivers............................................................................14
(g) Notices............................................................................14
(h) Assignment.........................................................................14
(i) Survival of Representations and Warranties.........................................14
(j) Entire Agreement...................................................................14
(k) Termination........................................................................14
(l) Further Assurances.................................................................15
(m) Public Statements, Press Releases, Etc.............................................15
(n) Construction.......................................................................15
</TABLE>
SCHEDULES
Schedule 3(a)-1 Subsidiaries
ANNEXES
Annex I Form of Common Stock Purchase Warrant, Class A
Annex II Form of Common Stock Purchase Warrant, Class B
Annex III Joint Escrow Instructions
Annex IV Form of Registration Rights Agreement
Annex V Form of Opinion of Counsel to Be Delivered on Closing Date
<PAGE> 4
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT, dated as of December 7, 1999, by
and between RMI.NET, INC., a Delaware corporation (the "Company"), with
headquarters located at 999 18th Street, Suite 2201, Denver, Colorado 80202, and
__________________________(the "Buyer").
W I T N E S S E T H:
WHEREAS, the Buyer wishes to purchase, upon the terms and
subject to the conditions of this Agreement, shares of Common Stock, $.001 par
value (the "Common Stock"), of the Company and in connection therewith the
Company is to issue to the Buyer warrants to purchase shares of Common Stock as
provided in this Agreement; and
WHEREAS, the Company and the Buyer are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by Rule 506 of Regulation D as promulgated by the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act");
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(a) SUBSCRIPTION. The Buyer hereby agrees to purchase from the
Company the number of shares (the "Common Shares") of Common Stock set forth on
the signature page of this Agreement at the price per share and for the
aggregate purchase price set forth on the signature page of this Agreement (the
"Purchase Price"). The Purchase Price shall be payable in United States dollars.
In connection with the purchase of the Common Shares by the Buyer, the Company
shall issue to the Buyer, at the closing on the Closing Date (as defined
herein), (1) Common Stock Purchase Warrants, Class A in the form attached hereto
as ANNEX I (the "Class A Warrants") to purchase the number of shares of Common
Stock set forth therein (subject to adjustment as provided in the Class A
Warrants) and (2) Common Stock Purchase Warrants, Class B in the form attached
hereto as ANNEX II (the "Class B Warrants") to purchase the number of shares of
Common Stock set forth therein (subject to adjustment as provided in the Class B
Warrants). The Class A Warrants and the Class B Warrants are referred to herein
collectively as the "Warrants." The shares of Common Stock issuable upon
exercise of the Warrants are referred to herein as the "Warrant Shares." The
Common Shares and the Warrant Shares are referred to herein collectively as the
"Shares." The Shares and the Warrants are referred to herein collectively as the
"Securities."
(b) FORM OF PAYMENT. The Buyer shall pay the Purchase Price
for the Common Shares by delivering good funds in United States Dollars to the
escrow agent (the "Escrow Agent") identified in the Joint Escrow Instructions
attached hereto as ANNEX III (the "Joint Escrow Instructions"). Such delivery of
funds shall be made against delivery by the Company of the certificates for the
Common Shares and the Warrants registered in the name of the Buyer or its
nominee. Promptly following payment by the Buyer to the Escrow Agent of the
Purchase Price, but in any event prior to the Closing Date (as defined herein),
the Company shall deliver certificates for the Common Shares and the Warrants,
registered in the corporate securities records of the Company in the name of the
Buyer or its nominee, to the Escrow
1
<PAGE> 5
Agent. The certificates for the Common Shares shall be delivered by the Company
to the Escrow Agent on a delivery against payment basis at the closing. By
signing this Agreement, the Buyer and the Company each agrees to all of the
terms and conditions of, and becomes a party to, the Joint Escrow Instructions,
all of the provisions of which are incorporated herein by this reference as if
set forth in full.
(c) METHOD OF PAYMENT. Payment of the Purchase Price for the
Common Shares shall be made by wire transfer of funds to:
Not later than 4:00 p.m., New York City time, on the date which is one Business
Day after the Company shall have accepted this Agreement and returned a signed
counterpart of this Agreement to the Buyer or its legal counsel, the Buyer shall
deposit with the Escrow Agent an amount equal to the Purchase Price. As used in
this Agreement, the term "Business Day" means any day other than a Saturday,
Sunday or other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.
The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
(a) PURCHASE FOR INVESTMENT. The Buyer is purchasing the
Common Shares and acquiring the Warrants, and upon exercise of the Warrants will
acquire the Warrant Shares, for its own account for investment only and not with
a view towards the public sale or distribution thereof, except as contemplated
by the Registration Rights Agreement (as defined herein);
(b) ACCREDITED INVESTOR. The Buyer is an "accredited investor"
as that term is defined in Rule 501 of the General Rules and Regulations under
the 1933 Act by reason of Rule 501(a)(3);
(c) REOFFERS AND RESALES. All subsequent offers and sales of
the Securities by the Buyer shall be made pursuant to registration of the
Securities being offered and sold under the 1933 Act or pursuant to an exemption
from registration;
(d) COMPANY RELIANCE. The Buyer understands that the Common
Shares are being offered and sold, the Warrants are being issued, and the
Warrant Shares are being offered, in each case to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and the Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Common Shares and the Warrants and to receive an offer of the
Warrant Shares;
2
<PAGE> 6
(e) INFORMATION PROVIDED. The Buyer and its advisors, if any,
have been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Common Shares and the issuance of the Warrants and the offer of the Warrant
Shares which have been requested by the Buyer; the Buyer and its advisors, if
any, have been afforded the opportunity to ask questions of the Company and have
received satisfactory answers to any such inquiries; without limiting the
generality of the foregoing, the Buyer has had the opportunity to obtain and to
review the Company's (1) Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 (the "1998 10-K"), (2) Quarterly Reports on Form 10-Q for the
fiscal quarters ended March 31, 1999, June 30, 1999 and September 30, 1999, (3)
definitive proxy statement for the Company's 1999 Annual Meeting of Shareholders
held on June 24, 1999 and (4) Current Reports on Form 8-K filed June 28, July 1,
July 8, July 19, August 26, August 30, September 14, September 15, 1999 and
December 6, 1999 and on Form 8-K/A filed April 19, July 1, July 12 and November
15, 1999, in each case as filed with the SEC (collectively, the "SEC Reports");
and the Buyer understands that its investment in the Shares involves a high
degree of risk;
(f) ABSENCE OF APPROVALS. The Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Shares; and
(g) SUBSCRIPTION AGREEMENT. This Agreement has been duly and
validly authorized, executed and delivered on behalf of the Buyer and is a valid
and binding agreement of the Buyer enforceable in accordance with its terms,
subject as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium and other similar laws affecting the enforcement of
creditors' rights generally.
3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.
The Company represents and warrants to, and covenants and
agrees with, the Buyer that:
(a) ORGANIZATION AND AUTHORITY. Each of the Company and its
subsidiaries listed on SCHEDULE 3(a)-1 attached hereto (the "Subsidiaries") is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, and has all requisite corporate power and
authority to (i) own, lease and operate its properties and to carry on its
business as now being conducted, and (ii) to execute, deliver and perform its
obligations under this Agreement, the Warrants, the Registration Rights
Agreement, the form of which is attached hereto as ANNEX IV (the "Registration
Rights Agreement"), and the other agreements to be executed and delivered by the
Company in connection herewith, and to consummate the transactions contemplated
hereby and thereby. Each of the Company and the Subsidiaries is duly qualified
to do business as a foreign corporation and is in good standing in all
jurisdictions wherein such qualification is necessary and where failure so to
qualify could have a material adverse effect on the business, properties,
operations, condition (financial or other), results of operations or prospects
of the Company and the Subsidiaries, taken as a whole (a "Company Material
Adverse Effect"). The Company has no subsidiaries or equity investment in any
person other than the Subsidiaries.
(b) CAPITALIZATION. The authorized capital stock of the
Company consists of (a) 100,000,000 shares of Common Stock of which 18,807,926
shares were outstanding on November 30, 1999, all of which are fully paid and
nonassessable; and (b) 750,000 shares of Preferred Stock, $.001 par value, of
which 9,600 shares are designated as Series B Convertible
3
<PAGE> 7
Preferred Stock and none of which are outstanding; and on the Closing Date there
will be (x) no material increase from November 30, 1999 in the number of shares
of Common Stock outstanding and (y) no issuances of preferred stock or other
equity securities other than Common Stock will have occurred since November 30,
1999. No shares of the Company's former Series A Preferred Stock, $.001 par
value, are outstanding and such series was retired on April 30, 1998. As of
November 30, 1999, the Company had outstanding options, warrants and similar
rights entitling the holders to purchase 1,890,833 shares of Common Stock. Other
than as set forth in the preceding sentence, the Company does not have
outstanding any material amount of securities (or obligations to issue any such
securities) convertible into, exchangeable for or otherwise entitling the
holders thereof to acquire shares of Common Stock, except as disclosed in the
SEC Reports. The Company has duly reserved from its authorized and unissued
shares of Common Stock the full number of shares required for (a) all options,
warrants, convertible securities and other rights to acquire shares of Common
Stock which are outstanding and (b) all shares of Common Stock and options and
other rights to acquire shares of Common Stock which may be issued or granted
under the stock option and similar plans which have been adopted by the Company
or any of the Subsidiaries. No antidilution or similar adjustments will occur by
reason of the issuance of the Common Shares or the issuance or exercise of the
Warrants or the issuance of the shares of Common Stock and the issuance or
exercise of the warrants to be issued pursuant to the other subscription
agreement for the purchase of shares of Common Stock and the acquisition of
common stock purchase warrants being entered into in connection herewith (the
"Other Subscription Agreement"). The outstanding shares of Common Stock and
outstanding options, warrants and other securities convertible into,
exchangeable for or otherwise entitling the holder thereof to acquire shares of
Common Stock have been duly authorized and validly issued. None of such
outstanding shares of Common Stock, options, warrants and other securities has
been issued in violation of the preemptive rights of any securityholder of the
Company. The offers and sales of the outstanding shares of Common Stock and such
options, warrants and other securities were at all relevant times either
registered under the 1933 Act and applicable state securities laws or exempt
from such requirements. No holder of any of the Company's securities has any
rights, "demand," "piggy-back" or otherwise, to have such securities registered
by reason of the intention to file, filing or effectiveness of the Registration
Statement (as defined in the Registration Rights Agreement).
(c) CONCERNING THE SHARES AND THE COMMON STOCK. The Shares
have been duly authorized. The Common Shares, when issued and paid for in
accordance with this Agreement and the Warrant Shares, when issued upon exercise
of the Warrants, will be duly and validly issued, fully paid and non-assessable
and will not subject the holder thereof to personal liability by reason of being
such holder. There are no preemptive or similar rights of any stockholder of the
Company or any other person to acquire any of the Shares. The Company has duly
reserved 1,500,000 shares of Common Stock for issuance as Common Shares and for
exercise of the Warrants and for the shares of Common Stock and warrants
issuable in connection with the Other Subscription Agreement, and such shares
shall remain so reserved, and the Company shall from time to time reserve such
additional shares of Common Stock as shall be required to be reserved pursuant
to the Warrants, as long as the Warrants are exercisable. The Common Stock is
listed for trading on the Nasdaq National Market ("Nasdaq") and (1) the Company
and the Common Stock meet the criteria for continued listing and trading on
Nasdaq; (2) the Company has not been notified since January 1, 1998 by Nasdaq or
the Nasdaq SmallCap Market ("Nasdaq SmallCap") of any failure or potential
failure to meet the criteria for continued listing and trading thereon and (3)
no suspension of trading in the Common Stock is in effect. The Company knows of
no reason that the Shares will not be eligible for listing on Nasdaq.
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(d) SUBSCRIPTION AGREEMENT AND OTHER TRANSACTION DOCUMENTS.
This Agreement, the Registration Rights Agreement and the Warrants and the other
agreements and instruments contemplated hereby and thereby have been duly and
validly authorized by the Company, this Agreement has been duly executed and
delivered by the Company and this Agreement is, and the Registration Rights
Agreement and the Warrants and such other agreements, when executed and
delivered by the Company, will be, valid and binding obligations of the Company
enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
(e) NON-CONTRAVENTION. The execution and delivery by the
Company of this Agreement and the other documents contemplated by this Agreement
and the consummation by the Company of the issuance of the Common Shares and the
Warrants as contemplated by this Agreement, and the other transactions
contemplated by this Agreement, the Registration Rights Agreement and the
Warrants do not and will not, with or without the giving of notice or the lapse
of time, or both (i) result in any violation of any terms of the Certificate of
Incorporation, as amended, or By-laws of the Company or any Subsidiary, (ii)
conflict with or result in a breach by the Company or any Subsidiary of any of
the terms or provisions of, or constitute a default under, or result in the
modification, amendment, termination or cancellation of, result in the
acceleration of any obligation of the Company or any Subsidiary under, or result
in the creation or imposition of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company or any
Subsidiary pursuant to, any indenture, mortgage, deed of trust or other
agreement or instrument to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary or any of their respective properties or
assets is bound or affected, (iii) violate or contravene any applicable law,
rule or regulation or any applicable decree, judgment or order of any court,
United States federal or state regulatory body, administrative agency or other
governmental body having jurisdiction over the Company or any Subsidiary or any
of their respective properties or assets or (iv) have any Company Material
Adverse Effect on any permit, certification, registration, approval, consent,
license or franchise necessary for the Company or any Subsidiary to own or lease
and operate any of their respective properties or to conduct any of their
respective businesses or the ability of the Company or any Subsidiary to make
use thereof.
(f) APPROVALS. No authorization, approval or consent of, or
filing with, any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the stockholders of the Company is
required to be obtained or made by the Company for (1) the execution, delivery
and performance by the Company of this Agreement, the Registration Rights
Agreement, the Warrants and the other agreements and instruments contemplated
hereby and thereby, (2) the issuance and sale of the Common Shares and the
issuance of the Warrants as contemplated by this Agreement and (3) the issuance
of Warrant Shares upon the exercise of the Warrants, other than (x) registration
of the resale of the Shares under the 1933 Act as contemplated by the
Registration Rights Agreement, (y) as may be required under applicable state
securities or "blue sky" laws and (z) filing of one or more Forms D with respect
to the Securities as required under Regulation D.
(g) INFORMATION PROVIDED. The information provided by or on
behalf of the Company to the Buyer in connection with the transactions
contemplated by this Agreement, including, without limitation, the information
referred to in Section 2(e) of this Agreement, does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they are
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<PAGE> 9
made, not misleading, it being understood that, for purposes of this Section
3(g), any statement contained in such information shall be deemed to be modified
or superseded for purposes of this Section 3(g) to the extent that a statement
in any document included in such information which was prepared or filed with
the SEC on a later date modifies or replaces such statement, whether or not such
later prepared or filed statement so states. The Company has not filed any
reports with the SEC under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), since December 31, 1998 other than the SEC Reports.
(h) ABSENCE OF CERTAIN CHANGES. Since December 31, 1998, there
has been no change and no development which could have a Company Material
Adverse Effect, except as disclosed in the SEC Reports. Except as and to the
extent disclosed, reflected or reserved against in the financial statements of
the Company and the notes thereto included in the SEC Reports, neither the
Company nor any Subsidiary has any material (individually or in the aggregate)
liabilities, debts or obligations whether accrued, absolute, contingent or
otherwise, and whether due or to become due. Subsequent to December 31, 1998,
neither the Company nor any Subsidiary has incurred any liabilities, debts or
obligations of any nature whatsoever which are individually or in the aggregate
material to the Company and the Subsidiaries taken as a whole, other than those
incurred in the ordinary course of their respective businesses or disclosed in
the SEC Reports.
(i) ABSENCE OF CERTAIN PROCEEDINGS. Except as disclosed in the
SEC Reports, there is no action, suit, proceeding, inquiry or investigation
before or by any court, arbitrator, public board or body or governmental agency
(collectively, an "Action") pending or, to the knowledge of the Company or any
Subsidiary, threatened against the Company or any Subsidiary, in any such case
wherein an unfavorable decision, ruling or finding could have a Company Material
Adverse Effect or a material adverse effect on the transactions contemplated by
this Agreement or any of the documents contemplated hereby or which could
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, this Agreement or any of such
other documents; neither the Company or any Subsidiary nor any director or
officer thereof is or has been the subject of any Action involving a claim of
violation of or liability under federal or state securities laws or a claim of
breach of fiduciary duty; the Company does not have pending before the SEC any
request for confidential treatment of information and to the best of the
Company's knowledge no such request will be made by the Company prior to the
time the Registration Statement relating to the Shares which is contemplated by
the Registration Rights Agreement is first ordered effective by the SEC; and
there has not been, and to the best of the Company's knowledge there is not
pending or contemplated, any investigation by the SEC involving the Company or
any current or former director or officer of the Company.
(j) PROPERTIES. The Company and the Subsidiaries have good
title to or leasehold interests in all property real and personal (tangible and
intangible) and other assets owned by them, free and clear of all security
interests, charges, mortgages, liens or other encumbrances, except with respect
to capital lease obligations and protective filings by lessors and except such
as are described in the SEC Reports or such as do not materially interfere with
the use of such property made, or proposed to be made, by the Company or any
Subsidiary. The leases, licenses or other contracts or instruments under which
the Company and the Subsidiaries lease, hold or are entitled to use any
property, real or personal, are valid, subsisting and enforceable with only such
exceptions as do not materially interfere with the use of such property made, or
proposed to be made, by the Company or any Subsidiary. Neither the Company nor
any Subsidiary has received notice of any material violation of any applicable
law, ordinance, regulation, order or requirement relating to its owned or leased
properties. The
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Company does not have any knowledge of, and the Company has not given or
received any notice of, any pending conflicts with or infringement of the rights
of others with respect to any Company Proprietary Rights (as defined herein) or
with respect to any license of Company Proprietary Rights. No action, suit,
arbitration, or legal, administrative or other proceeding or investigation is
pending, or, to the best knowledge of the Company, threatened, which involves
any Company Proprietary Rights. Neither the Company nor any Subsidiary is
subject to any judgment, order, writ, injunction or decree of any court or any
federal, state, local, foreign or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, or any
arbitrator, or has entered into or is a party to any contract which restricts or
impairs the use of any such Company Proprietary Rights in a manner which would
have a material adverse effect on the use by the Company or any Subsidiary of
any of the Company Proprietary Rights. To the best knowledge of the Company, no
Company Proprietary Rights and no services or products sold by the Company or
any Subsidiary, conflict with or infringe upon any proprietary rights available
to any third party. Neither the Company nor any Subsidiary has received written
notice of any pending conflict with or infringement upon such third-party
proprietary rights. Neither the Company nor any Subsidiary has entered into any
consent, indemnification, forbearance to sue or settlement agreement with
respect to Company Proprietary Rights other than in the ordinary course of
business. No claims have been asserted by any person with respect to the
validity of the Company's or any Subsidiary's ownership or right to use the
Company Proprietary Rights and, to the best knowledge of the Company, there is
no reasonable basis for any such claim to be successful. To the best knowledge
of the Company, the Company Proprietary Rights are valid and enforceable. No
registration relating to the Company Proprietary Rights has lapsed, expired or
been abandoned or canceled or is the subject of cancellation or other
adversarial proceedings, and all applications therefor are pending and are in
good standing, except for such lapses, expirations, abandonments, cancellations,
adversarial proceedings or failures to be in good standing which would not,
singly or in the aggregate, have a Company Material Adverse Effect. The Company
and the Subsidiaries have complied, in all material respects, with their
respective contractual obligations relating to the protection of the Company
Proprietary Rights used pursuant to licenses. To the best knowledge of the
Company, no person is infringing on or violating the Company Proprietary Rights.
As used herein, the term "Company Proprietary Rights" means all patents, patent
applications, inventions, trademarks, trade names, applications for registration
of trademarks, service marks, service mark applications, copyrights, know-how,
manufacturing processes, formulae, trade secrets, licenses and rights in any
thereof and any other intangible property and assets which are material to the
businesses of the Company and the Subsidiaries as now conducted, as proposed to
be conducted or as described in this Agreement.
(k) LABOR RELATIONS. No material labor problem exists or, to
the knowledge of the Company or any Subsidiary, is imminent with respect to any
of the employees of the Company or any Subsidiary.
(l) SEC FILINGS. The Company has timely filed all required
forms, reports and other documents required to be filed by the Company with the
SEC under the 1934 Act. All of such forms, reports and other documents complied,
when filed, in all material respects, with all applicable requirements of the
1933 Act and the 1934 Act.
(m) ABSENCE OF BROKERS, FINDERS, ETC. No broker, finder or
similar person is entitled to any commission, fee or other compensation by
reason of the transactions contemplated by this Agreement other than Wharton
Capital Partners Ltd. and an affiliated entity, and the Company shall pay, and
indemnify and hold harmless the Buyer from, any claim
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<PAGE> 11
made against the Buyer by such persons and any other person for any such
commission, fee or other compensation.
(n) NO SOLICITATION. No form of general solicitation or
general advertising was used by the Company or, to the best of its knowledge,
any other person acting on behalf of the Company, in respect of or in connection
with the offer and sale of the Securities. Neither the Company nor, to its
knowledge, any person acting on behalf of the Company has, either directly or
indirectly, sold or offered for sale to any person any of the Shares or the
Warrants or, within the six months prior to the date hereof, any other similar
security of the Company except as contemplated by this Agreement and the Other
Subscription Agreement; and neither the Company nor any person authorized to act
on its behalf will sell or offer for sale any shares of Common Stock or
Warrants, or solicit any offers to buy any shares of Preferred Stock or shares
of Common Stock or Warrants, so as thereby to cause the issuance or sale of any
of the Shares or the issuance of the Warrants to be in violation of Section 5 of
the 1933 Act.
(o) CERTAIN ISSUANCES OF SECURITIES. The Company has not
issued any shares of Common Stock or shares of any series of preferred stock or
other securities convertible into, exchangeable for or otherwise entitling the
holder to acquire shares of Common Stock which are subject to Rule 4460(i)(1)(D)
of Nasdaq as in effect from time to time or any successor, replacement or
similar provision thereof or of any other market on which the Common Stock is
listed for trading (the "Shareholder Approval Rule") and which would be
integrated with the sale of the Common Shares to the Buyer or the issuance of
Warrant Shares upon exercise of the Warrants for purposes of the Shareholder
Approval Rule.
(p) ABSENCE OF RIGHTS AGREEMENT. The Company has not adopted a
shareholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of Common Stock or a change in control of the Company.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
(a) TRANSFER RESTRICTIONS. (1) The Company and the Buyer
acknowledge and agree that (A) the Shares and the Warrants have not been and are
not being registered under the provisions of the 1933 Act and, except as
provided in the Registration Rights Agreement with respect to the resale of the
Shares, the Shares have not been and are not being registered for resale under
the 1933 Act, and the Securities may not be transferred unless (i) subsequently
registered for resale thereunder or (ii) the Buyer shall have delivered to the
Company an opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; (B) any resale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act ("Rule 144") may be made only in accordance with
the terms of Rule 144 and further, if Rule 144 is not applicable, any such
resale of Securities under circumstances in which the seller, or the person
through whom the sale is made, may be deemed to be an underwriter, as that term
is used in the 1933 Act, may require compliance with some other exemption under
the 1933 Act or the rules and regulations of the SEC thereunder; and (C) neither
the Company nor any other person is under any obligation to register the
Securities (other than pursuant to the Registration Rights Agreement) under the
1933 Act or to comply with the terms and conditions of any exemption thereunder
(other than pursuant to Section 4(d) hereof and pursuant to the Registration
Rights Agreement).
(2) In addition to the restrictions set forth in Section
4(a)(1), so long as the Company is in compliance in all material respects with
its obligations to the Buyer under this
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Agreement, the Warrants and the Registration Rights Agreement, the Buyer may not
sell or transfer any Securities in a transaction other than pursuant to a
registration statement under the 1933 Act or pursuant to Rule 144 (a "Private
Transaction") without obtaining the prior approval of the Company of the
proposed transferee in such Private Transaction (the "Proposed Transferee") in
accordance with this Section 4(a)(2). At least ten Business Days prior to the
consummation of a Private Transaction, the Buyer shall notify the Company of the
identity of the Proposed Transferee and the amount of Securities proposed to be
transferred. If within eight Business Days after receiving such notice the
Company provides the Buyer with a certified copy of a resolution of the
Company's Board of Directors (a "Restricted Person Resolution") stating that the
Proposed Transferee is a Restricted Person (as defined herein), the Buyer may
not transfer any Securities to such Proposed Transferee without again seeking
the approval of the Company pursuant to this Section 4(a)(2). If the Company
notifies the Buyer of its approval of such Proposed Transferee or fails to
deliver a Restricted Person Resolution to the Buyer within such eight Business
Day period, the Company shall be deemed to have approved the Proposed Transferee
and shall thereupon cooperate with the Buyer to promptly consummate such Private
Transaction in accordance with this Agreement and Section 9 of the Registration
Rights Agreement. As used in this Agreement, "Restricted Person" means a
Proposed Transferee, as reasonably determined by the Board of Directors of the
Company, who has acquired, or is reasonably likely to attempt to acquire, shares
of Common Stock for the purpose of (i) seeking control of or seeking to
influence control of the Company or its Board of Directors, (ii) entering into
an unsolicited business combination transaction with the Company or (iii)
seeking to influence the management or policies of the Company.
(b) RESTRICTIVE LEGEND. (1) The Buyer acknowledges and agrees
that the Warrants shall bear a restrictive legend in substantially the following
form (and a stop-transfer order may be placed against transfer of the Warrants):
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be resold, transferred or assigned
in the absence of an effective registration statement for the
securities under the Securities Act of 1933, as amended, or an opinion
of counsel that registration is not required under said Act.
(2) The Buyer further acknowledges and agrees that until such
time as the Shares have been registered for resale under the 1933 Act as
contemplated by the Registration Rights Agreement, the certificates for the
Shares may bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for the
Shares):
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be resold, transferred or assigned
in the absence of an effective registration statement for the
securities under the Securities Act of 1933, as amended, or an opinion
of counsel that registration is not required under said Act.
(3) Once the Registration Statement required to be filed by
the Company pursuant to Section 2 of the Registration Rights Agreement has been
declared effective, thereafter (1) upon request of the Buyer the Company will
substitute certificates without restrictive legend for certificates for all
Shares issued prior to the date such Registration Statement is declared
effective by the SEC which bear such restrictive legend and remove any
stop-transfer restriction relating thereto promptly, but in no event later than
three Trading Days
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(as defined herein) after surrender of such certificates by the Buyer and (2)
the Company shall not place any restrictive legend on certificates for Warrant
Shares or impose any stop-transfer restriction thereon. As used in this
Agreement, "Trading Day" means a day on whichever of (x) the national securities
exchange, (y) Nasdaq or (z) the Nasdaq SmallCap which at the time constitutes
the principal securities market for the Common Stock is open for general
trading.
(c) REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to
enter into the Registration Rights Agreement in the form attached hereto as
ANNEX IV on or before the Closing Date.
(d) FORM D. The Company agrees to file a Form D with respect
to the Securities as required under Regulation D and to provide a copy thereof
to the Buyer promptly after such filing. The Buyer agrees to cooperate with the
Company in connection with such filing and, upon request of the Company, to
provide all information relating to the Buyer reasonably required for such
filing.
(e) AUTHORIZATION FOR TRADING; REPORTING STATUS. On or before
the Closing Date, the Company shall file a notification for listing of
additional shares with the Nasdaq relating to the Shares and shall provide
evidence of such filing to the Buyer. So long as the Buyer beneficially owns any
of the Shares or the Warrants, the Company shall file all reports required to be
filed with the SEC pursuant to Section 13 or 15(d) of the 1934 Act and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would permit such termination.
(f) USE OF PROCEEDS. Neither the Company nor any Subsidiary
owns or has any present intention of acquiring any "margin stock" as defined in
Regulation G (12 CFR Part 207) of the Board of Governors of the Federal Reserve
System ("margin stock"). The proceeds of sale of the Shares will be used for
general working capital purposes and in the operation of the Company's business.
None of such proceeds will be used, directly or indirectly (1) to make any loan
to or investment in any other person (other than financing the Company's
subsidiaries in the ordinary course of business or in connection with an
acquisition of another corporation or business or assets of another corporation
or business) or (2) for the purpose, whether immediate, incidental or ultimate,
of purchasing or carrying any margin stock or for the purpose of maintaining,
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any stock that is currently a margin stock or for any other purpose
which might constitute the transactions contemplated by this Agreement a
"purpose credit" within the meaning of such Regulation G. Neither the Company
nor any agent acting on its behalf has taken or will take any action which might
cause this Agreement or the transactions contemplated hereby to violate
Regulation G, Regulation T or any other regulation of the Board of Governors of
the Federal Reserve System or to violate the 1934 Act, in each case as in effect
now or as the same may hereafter be in effect.
(g) BLUE SKY LAWS. On or before the Closing Date, the Company
shall take such action as shall be necessary to qualify, or to obtain an
exemption for, the Common Shares for sale to the Buyer and the Warrants for
issuance to the Buyer pursuant to this Agreement and the Warrant Shares for
issuance to the Buyer upon exercise of the Warrants under such of the securities
or "blue sky" laws of jurisdictions as shall be applicable to the sale of the
Common Shares and the issuance of the Warrants pursuant to this Agreement and
the issuance to the Buyer of Warrant Shares upon exercise of the Warrants. The
Company shall furnish copies of all filings, applications, orders and grants or
confirmations of exemptions relating to such securities or "blue sky" laws on or
prior to the Closing Date.
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(h) CERTAIN EXPENSES. If the closing occurs, the Company shall
pay or reimburse the Buyer for all reasonable expenses (including, without
limitation, legal fees and expenses of counsel to the Buyer and the Buyer's due
diligence expenses) not in excess of $30,000 incurred by the Buyer in connection
with this Agreement and the transactions contemplated hereby and the buyer under
the Other Subscription Agreement. In addition, the Company or the Buyer, as the
case may be, shall pay on demand all expenses incurred by the other party,
including reasonable attorneys' fees and expenses, as a consequence of, or in
connection with (1) the negotiation, preparation or execution of any amendment,
modification or waiver of this Agreement, the Registration Rights Agreement, the
Warrants and the other agreements and instruments contemplated hereby and
thereby requested by the requesting party, (2) any default or breach of any of
the defaulting or breaching party's obligations set forth in any of such
agreements or instruments and (3) the enforcement or restructuring of any right
of, including the collection of any payments due, the other party under any of
such agreements or instruments, including any action or proceeding relating to
such enforcement, or any order, injunction or other process seeking to restrain
a party from paying any amount due the other party, in which the other party
prevails.
(i) CERTAIN ISSUANCES OF SECURITIES. (1) Unless the Company
obtains the approval of its stockholders as required by the Shareholder Approval
Rule or a waiver thereof from Nasdaq, the Company will not issue any shares of
Common Stock or shares of any series of preferred stock or other securities
convertible into, exchangeable for, or otherwise entitling the holder to
acquire, shares of Common Stock which would be subject to the requirements of
the Shareholder Approval Rule and which would be integrated with the sale of the
Common Shares and issuance of the Warrants to the Buyer or the issuance of
Warrant Shares upon exercise of the Warrants for purposes of the Shareholder
Approval Rule.
(2) During the period from the date of this Agreement to the
date on which the Registration Statement shall have been effective with the SEC
for 180 consecutive days, the Company shall not offer, sell, contract to sell or
issue (or engage any person to assist the Company in taking any such action) (A)
any security (whether debt or equity) containing terms relating to the number of
shares issuable and the purchase price therefor which are similar to the terms
of the Class B Warrants or (B) any equity securities or securities convertible
into, exchangeable for or otherwise entitling the holder to acquire, any Common
Stock at a price below the market price of the Common Stock on the date of such
issuance (or below an average market price for a reasonable period prior to such
issuance) or the date of conversion, exchange or other exercise thereof,
including, without limitation, any combination of different types of securities
where the aggregate purchase price paid or payable for all securities is less
than the aggregate market value of such securities and, in the case of warrants
and similar securities, taking into account reasonable assumptions regarding
valuation using the Black-Scholes model and similar techniques (collectively,
"Equity Securities"); provided, however, that nothing in this Section 4(i)(2)
shall prohibit the Company from issuing securities (w) pursuant to compensation
plans for employees, directors, officers, advisers or consultants of the Company
and in accordance with the terms of such plans as in effect as of the date of
this Agreement, (x) upon exercise of conversion, exchange, purchase or similar
rights issued, granted or given by the Company and outstanding as of the date of
this Agreement and disclosed in the SEC Reports or this Agreement, (y) pursuant
to a public offering underwritten on a firm commitment basis registered under
the 1933 Act or (z) as part of a transaction involving a strategic alliance,
acquisition of stock or assets, merger, collaboration, joint venture,
partnership or other similar arrangement of the Company with another
corporation, partnership or other business entity which is engaged in a business
similar to or related to the business of the Company, so long as
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in the case of this clause (z) the Board of Directors by resolution duly adopted
(and a copy of which shall be furnished to the Buyer promptly after adoption)
determines that such issuance is fair to the holders of each class and series of
capital stock of the Company and to the Buyer in respect of its equity interest
in the Company that is represented by the Shares and the Warrants.
(3) Subject to the restrictions in Section 4(i)(1), during the
period from the date of execution and delivery of this Agreement to the date
which is one year after the Closing Date, the Company shall not offer, sell,
contract to sell or issue (or engage any person to assist the Company in taking
any such action) any Equity Securities without giving the Buyer the first right
to acquire the Equity Securities on the same terms as the Equity Securities are
to be offered to other investors; provided, however, that this Section 4(i)(3)
shall not apply to the offer or sale of Equity Securities by the Company in the
transactions, and subject to the conditions, set forth in clauses (w), (x), (y)
and (z) of the proviso to the first sentence of Section 4(i)(2) above. The
Company shall give notice to the Buyer of the detailed terms of the Equity
Securities proposed to be issued and, promptly after requested by the Buyer,
such other information as requested by the Buyer to the extent such information
is reasonably available to the Company. The Buyer may, by notice to the Company,
exercise such right of first refusal at any time until the later of (x) ten
Business Days after such notice from the Company to the Buyer and (y) one
Business Day after the Company provides such additional information as shall
have been requested by the Buyer during such ten Business Day period.
(j) CERTAIN TRADING RESTRICTIONS. The Buyer agrees that on the
Closing Date it will have no short position in the Common Stock. The Buyer
agrees on its behalf and on behalf of its affiliates that on and after the
Closing Date it will not engage in any short sales or other hedging transactions
relating to the Common Stock so long as the Company does not intentionally or
negligently fail to comply in all material respects with its obligations to the
Buyer under this Agreement, the Warrants and the Registration Rights Agreement
which failure results in a material adverse effect on the Buyer's ability to
timely sell Shares as contemplated by this Agreement and, in the event of any
noncompliance with such obligations, such noncompliance is cured within ten
Business Days of the Company's receipt of notice thereof from the Buyer.
(k) MONTHLY REPORTS. Within five Business Days after the end
of each calendar month commencing December 1999 to and including the month in
which the Buyer sells or transfers all remaining Common Shares, the Buyer shall
give notice to the Company of the number of Common Shares held by the Buyer as
of the close of business on the last day of each such month.
(l) BEST EFFORTS. Each of the parties shall use its best
efforts timely to satisfy each of the conditions to the other party's
obligations to sell and purchase the Common Shares set forth in Section 7 or 8,
as the case may be, of this Agreement on or before the Closing Date.
5. REPURCHASE AT OPTION OF THE COMPANY.
If (i) the Company shall be in compliance in all material
respects with its obligations to the Buyer (including, without limitation, its
obligations under this Agreement, the Warrants and the Registration Rights
Agreement), (ii) on the date the Repurchase Notice (as defined herein) is given
and at all times until the Repurchase Date (as defined herein), the Registration
Statement is effective and available for use by the Buyer for the resale of its
Shares and (iii) on the date the Repurchase Notice is given and on the
Repurchase Date, the Company has available and unrestricted Cash and Cash
Equivalent Balances not less than the aggregate
12
<PAGE> 16
amount to be paid to repurchase shares of Common Stock pursuant to Section 5 of
this Agreement and the Other Subscription Agreement, then the Company shall have
the right to repurchase outstanding Common Shares and Warrant Shares issued upon
exercise of the Class B Warrants held by the Buyer (collectively, "Outstanding
Shares") as follows:
(a) REPURCHASE RIGHT. If the Company gives a Repurchase Notice
to the Buyer not less than ten Trading Days or more than 30 Trading Days prior
to the Repurchase Date, the Company may at any time repurchase all or from time
to time any part of the Outstanding Shares held on the Repurchase Date which are
subject to such Repurchase Notice in accordance with this Section 5. On the
Repurchase Date, the Company shall make payment to the Buyer of the applicable
Repurchase Price (as defined herein) multiplied by the number of Outstanding
Shares to be repurchased in immediately available funds to such account as
specified by the Buyer in writing to the Company at least one Trading Day prior
to the Repurchase Date. Notwithstanding anything to the contrary in this Section
5, prior to the Repurchase Date or such later date on which the Repurchase Price
is paid, the Buyer shall be free to sell or otherwise transfer any Outstanding
Shares which are subject to the Repurchase Notice with respect to such
Repurchase Date.
(b) CERTAIN DEFINITIONS. As used in this Agreement, the
following terms shall have the following meanings:
"Cash and Cash Equivalent Balances" of any person on any date
shall be determined from such person's books maintained in accordance with
Generally Accepted Accounting Principles, and means, without duplication, the
sum of (1) the cash accrued by such person and its subsidiaries on a
consolidated basis on such date and available for use by such person and its
subsidiaries on such date and (2) all assets which would, on a consolidated
balance sheet of such person and its subsidiaries prepared as of such date in
accordance with Generally Accepted Accounting Principles, be classified as cash
or cash equivalents, less the amount thereof which secures any outstanding
indebtedness of the Company or its Subsidiaries.
"Generally Accepted Accounting Principles" for any person
means the generally accepted accounting principles and practices applied by such
person from time to time in the preparation of its audited financial statements.
"Market Price" shall have the meaning provided in the Class B
Warrants.
"Repurchase Date" means the date of repurchase of Outstanding
Shares pursuant to Section 5.
"Repurchase Notice" means a notice given by the Company to the
Buyer pursuant to Section 5 exercising the Company's right to repurchase all or
a portion of the Outstanding Shares pursuant to Section 5 which states (1) the
number of Outstanding Shares which are to be repurchased, (2) the Repurchase
Price and the formula for determining the same, determined in accordance
herewith and (3) the applicable Repurchase Date.
"Repurchase Price" means, for each Outstanding Share
repurchased pursuant to Section 5, 120% of the greater of: (x) the arithmetic
average of the Market Price on each of the five consecutive Trading Days prior
to the date the Repurchase Notice is given to the Buyer, (y) the arithmetic
average of the Market Price on each of the five consecutive Trading Days prior
to the Repurchase Date and (z) if determined prior to 180 days after the Closing
Date, the price
13
<PAGE> 17
per share paid by the Buyer for the Common Shares on the Closing
Date or, if determined on or after the day which is 180 days after the Closing
Date, the most recent Adjustment Price (as defined in the Class B Warrants).
6. CLOSING DATE.
Subject to the satisfaction or waiver of the conditions set
forth in Sections 7 and 8, the date and time of the issuance and sale of the
Common Shares and the issuance of the Warrants (the "Closing Date") shall be
12:00 noon, New York City time, on or before the date which is one Business Day
after the date the Buyer has deposited the Purchase Price with the Escrow Agent
in accordance with Section 1(b), or such other mutually agreed to time. The
closing shall occur on the Closing Date at the_________________________________.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND
ISSUE.
The Buyer understands that the Company's obligation to sell
the Common Shares and issue the Warrants to the Buyer pursuant to this Agreement
is conditioned upon the satisfaction of the following conditions precedent on or
before the Closing Date (any or all of which may be waived by the Company in its
sole discretion):
(a) The receipt and acceptance by the Company of this
Agreement as evidenced by execution of this Agreement by the Company and
delivery of an executed counterpart of this Agreement to the Buyer or its legal
counsel;
(b) Delivery by the Buyer to the Escrow Agent of good funds as
payment in full of an amount equal to the Purchase Price for the Common Shares
in accordance with Section 1(b) hereof; and
(c) The accuracy on the Closing Date of the representations
and warranties of the Buyer contained in this Agreement as if made on the
Closing Date and the performance by the Buyer on or before the Closing Date of
all covenants and agreements of the Buyer required to be performed on or before
the Closing Date.
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to
purchase the Common Shares and acquire the Warrants on the Closing Date is
conditioned upon the satisfaction of the following conditions precedent on or
before the Closing Date (any or all of which may be waived by the Buyer in its
sole discretion):
(a) Delivery by the Company to the Escrow Agent of the
certificates for the Common Shares, the Class A Warrants and the Class B
Warrants in accordance with this Agreement;
(b) The accuracy on the Closing Date of the representations
and warranties of the Company contained in this Agreement as if made on the
Closing Date and the performance by the Company on or before the Closing Date of
all covenants and agreements of the Company required to be performed on or
before the Closing Date, and receipt by the Buyer of a certificate, dated the
Closing Date, of the Chief Executive Officer of the Company confirming such
matters and such other matters as the Buyer may reasonably request;
14
<PAGE> 18
(c) The receipt by the Buyer of a certificate, dated the
Closing Date, of the Secretary of the Company certifying (1) the Certificate of
Incorporation, as amended, and By-Laws of the Company as in effect on the
Closing Date and (2) all resolutions of the Board of Directors (and committees
thereof) of the Company relating to this Agreement and the transactions
contemplated hereby; and
(d) Receipt by the Buyer on the Closing Date of an opinion of
Christopher J. Melcher, Esq., Vice President and General Counsel of the Company,
dated the Closing Date, in form, scope and substance reasonably satisfactory to
the Buyer, to the effect set forth in ANNEX V attached hereto.
9. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Colorado.
(b) COUNTERPARTS. This Agreement may be executed in
counterparts and by the parties hereto on separate counterparts, all of which
together shall constitute one and the same instrument. A facsimile transmission
of this Agreement bearing a signature on behalf of a party hereto shall be legal
and binding on such party. Although this Agreement is dated as of the date first
set forth above, the actual date of execution and delivery of this Agreement by
each party is the date set forth below such party's signature on the signature
page hereof. Any reference in this Agreement or in any of the documents executed
and delivered by the parties hereto in connection herewith to (1) the date of
execution and delivery of this Agreement by the Buyer shall be deemed a
reference to the date set forth below the Buyer's signature on the signature
page hereof, (2) the date of execution and delivery of this Agreement by the
Company shall be deemed a reference to the date set forth below the Company's
signature on the signature page hereof and (3) the date of execution and
delivery of this Agreement or the date of execution and delivery of this
Agreement by the Buyer and the Company shall be deemed a reference to the later
of the dates set forth below the signatures of the parties on the signature page
hereof.
(c) HEADINGS, ETC. The headings, captions and footers of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement.
(d) SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
(e) AMENDMENTS. No amendment, modification, waiver, discharge
or termination of any provision of this Agreement nor consent to any departure
by the Buyer or the Company therefrom shall in any event be effective unless the
same shall be in writing and signed by the party to be charged with enforcement,
and then shall be effective only in the specific instance and for the purpose
for which given. No course of dealing between the parties hereto shall operate
as an amendment of this Agreement.
(f) WAIVERS. Failure of any party to exercise any right or
remedy under this Agreement or otherwise, or delay by a party in exercising such
right or remedy, or any course of
15
<PAGE> 19
dealings between the parties, shall not operate as a waiver thereof or an
amendment hereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or exercise of any other
right or power.
(g) NOTICES. Any notices required or permitted to be given
under the terms of this Agreement shall be delivered personally (which shall
include telephone line facsimile transmission with answer back confirmation) or
by courier and shall be effective upon receipt, in the case of the Company
addressed to the Company at its address shown in the introductory paragraph of
this Agreement, Attention: Chief Executive Officer (telephone line facsimile
transmission number (303) 672-0711) or, in the case of the Buyer, at its address
or telephone line facsimile transmission number shown on the signature page of
this Agreement, with a copy to_________________________________________________
or such other address or telephone line facsimile transmission number as a party
shall have provided by notice to the other party in accordance with this
provision.
(h) ASSIGNMENT. Prior to the Closing Date, the Buyer may not
assign its rights and obligations under this Agreement. Any transfer of the
Shares or the Warrants by the Buyer after the Closing Date shall be made in
accordance with Section 4(a). After the Closing Date, the Buyer shall have the
right to assign its rights and obligations under this Agreement in connection
with any transfer of the Buyer's rights under the Registration Rights Agreement
by compliance with the provisions of Section 9 of the Registration Rights
Agreement.
(i) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations, warranties, covenants and agreements of the Buyer and the
Company contained in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement shall survive the delivery of and
payment for the Common Shares and shall remain in full force and effect
regardless of any investigation made by or on behalf of them or any person
controlling or advising any of them.
(j) ENTIRE AGREEMENT. This Agreement and its Schedules and
Annexes set forth the entire agreement between the parties hereto with respect
to the subject matter hereof and supersede all prior agreements and
understandings, whether written or oral, with respect thereto.
(k) TERMINATION. Either party shall have the right to
terminate this Agreement by giving notice to the other party at any time at or
prior to the Closing Date if:
(1) the other party shall have failed, refused, or been unable
at or prior to the date of such termination of this Agreement to
perform any of its obligations hereunder;
(2) any other condition of the terminating party's obligations
hereunder is not fulfilled; or
(3) the closing shall not have occurred on a Closing Date on
or before December 15, 1999, other than solely by reason of a breach of
this Agreement by the terminating party.
Any such termination shall be effective upon the giving of notice thereof by the
terminating party. Upon such termination, neither party shall have any further
obligation to the other party hereunder; provided, however, that each party
shall remain liable for an amount not to exceed
16
<PAGE> 20
$30,000 for any breach by such party of this Agreement or the other documents
contemplated hereby which occurred on or prior to the date of such termination,
including, without limitation, liability for the fees and expenses of counsel
for the non-breaching party.
(l) FURTHER ASSURANCES. Each party to this Agreement will
perform any and all acts and execute any and all documents as may be necessary
and proper under the circumstances in order to accomplish the intents and
purposes of this Agreement and to carry out its provisions.
(m) PUBLIC STATEMENTS, PRESS RELEASES, ETC. The Company and
the Buyer shall have the right to approve before issuance any press releases or
any other public statements with respect to the transactions contemplated
hereby; provided, however, that the Company shall be entitled, without the prior
approval of the Buyer, to make any press release or other public disclosure with
respect to such transactions as is required by applicable law or Nasdaq
regulation (although the Buyer shall be consulted by the Company in connection
with any such press release or other public disclosure prior to its release and
shall be provided with a copy thereof).
(n) CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
17
<PAGE> 21
IN WITNESS WHEREOF, this Agreement has been duly executed by
the Buyer and the Company by their respective officers or other representatives
thereunto duly authorized on the respective dates set forth below.
NUMBER OF SHARES:
---------------------
PRICE PER SHARE: $
---------------------
AGGREGATE PURCHASE PRICE: $
---------------
----------------------
By: ,
------------------------------------
as General Manager
By:
------------------------------------
President
Date: December 7, 1999
-----------------
Address:
-------------------------------
Facsimile No.:
-------------------------
RMI.NET, INC.
By:
------------------------------------
Douglas H. Hanson
Chairman & CEO
Date: December 7, 1999
----------------
<PAGE> 1
Exhibit 4.21
ANNEX I
TO
SUBSCRIPTION
AGREEMENT
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE RESOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR AN OPINION OF COUNSEL THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT.
Right to Purchase 91,393 Shares of Common
Stock of RMI.NET, Inc.
RMI.NET, INC.
COMMON STOCK PURCHASE WARRANT, CLASS A
No. A-___
RMI.NET, INC., a Delaware corporation (the "Company"), hereby certifies
that, for value received,____________________ or registered assigns (the
"Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company at any time or from time to time after the date hereof, and before
5:00 p.m., New York City time, on the Expiration Date (such capitalized term and
all other capitalized terms used herein having the respective meanings provided
herein), 91,393 fully paid and nonassessable shares of Common Stock at a
purchase price per share equal to the Purchase Price. The number of such shares
of Common Stock and the Purchase Price are subject to adjustment as provided in
this Warrant.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
"Class A Warrants" means this Warrant and the other Common Stock
Purchase Warrants, Class A issued or issuable by the Company pursuant to
the Subscription Agreement and the Other Subscription Agreement.
"Class B Warrants" means the Common Stock Purchase Warrants, Class B
issued or issuable by the Company pursuant to the Subscription Agreement
and the Other Subscription Agreement.
"Common Stock" means the Company's Common Stock, $.001 par value per
share, as authorized on the date hereof, and any other securities into
which or for which the Common Stock may be converted or exchanged pursuant
to a plan of recapitalization, reorganization, merger, sale of assets or
otherwise.
<PAGE> 2
"Company" shall include RMI.NET, Inc., a Delaware corporation, and any
corporation that shall succeed to or assume the obligation of RMI.NET, Inc.
hereunder in accordance with the terms hereof.
"Company Put Closing Date" shall have the meaning provided in Section
1.4(a).
"Company Put Notice" means a Company Put Notice, in the form of Exhibit
2 to this Warrant.
"Company Put Requirements" means
(1) The Registration Statement shall be effective and available for use
for the resale of the shares of Common Stock issuable upon exercise of this
Warrant and the Other Warrants and shall be expected to remain effective
and available for use for at least 30 days after the issuance of the Common
Stock that is issuable pursuant to this Warrant by reason of the Company
Put Notice; and
(2) The Company shall, simultaneously with the giving of the Company
Put Notice, have exercised its rights under Section 1.3 of each of the
Other Class A Warrants to require the holders of such Other Class A
Warrants to exercise such Other Class A Warrants in to the same proportion
as this Warrant is being required to be exercised.
"Company Put Threshold Event" means the occurrence of a period of 20
consecutive Trading Days during which period the closing bid price of the
Common Stock on Nasdaq as reported by Bloomberg, L.P. is greater than 150%
of the Purchase Price on each of such Trading Days.
"Expiration Date" means December 7, 2004.
"Issuance Date" means the first date of original issuance of this
Warrant.
"Nasdaq" means the Nasdaq National Market.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"1933 Act" means the Securities Act of 1933, as amended.
"Other Class A Warrants" means the Class A Warrants issued pursuant to
the Other Subscription Agreement.
"Other Securities" refers to any stock (other than Common Stock) and
other securities of the Company or any other person (corporate or
otherwise) which the Holder at any time shall be entitled to receive, or
shall have received, on the exercise of this Warrant, in lieu of or in
addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4.
"Other Subscription Agreement" means the subscription agreement, dated
as of the date of the Subscription Agreement, between the Company and the
buyer named therein, as amended from time to time in accordance with its
terms.
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<PAGE> 3
"Other Warrants" means the Class A Warrants (other than this Warrant)
and the Class B Warrants.
"Purchase Price" shall mean $9.8476 per share, subject to adjustment as
provided in this Warrant.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of December 7, 1999, by and between the Company and the
original Holder of this Warrant, as amended from time to time in accordance
with its terms.
"Registration Statement" shall have the meaning provided in the
Registration Rights Agreement.
"Subscription Agreement" means the Subscription Agreement, dated as of
December 7, 1999, by and between the Company and the original Holder of
this Warrant, as amended from time to time in accordance with its terms.
"Trading Day" means a day on which the principal securities market for
the Common Stock is open for general trading of securities.
"Transaction Documents" means this Warrant, the Class B Warrants issued
to the original Holder of this Warrant on the Issuance Date, the
Subscription Agreement and the Registration Rights Agreement.
1. EXERCISE OF WARRANT; COMPANY PUT RIGHT.
1.1 EXERCISE. (a) This Warrant may be exercised by the Holder hereof in
full or in part at any time or from time to time during the exercise period
specified in the first paragraph hereof until the Expiration Date by surrender
of this Warrant and the subscription form in the form of EXHIBIT 1 to this
Warrant (duly executed by the Holder) to the Company and by making payment, in
cash or by certified or official bank check payable to the order of the Company,
in the amount obtained by multiplying (a) the number of shares of Common Stock
designated by the Holder in the subscription form by (b) the Purchase Price then
in effect. If at the request of the Company the subscription form is delivered
to the Company's transfer agent for the Common Stock, the Holder shall provide a
copy of the subscription form to the Company at the time of exercise and the
Company will confirm the exercise instructions given therein by notice to the
Company's transfer agent within one Trading Day after receiving subscription
form. On any partial exercise the Company will forthwith issue and deliver to or
upon the order of the Holder hereof a new Warrant or Warrants of like tenor, in
the name of the Holder hereof or as the Holder (upon payment by the Holder of
any applicable transfer taxes) may request, providing in the aggregate on the
face or faces thereof for the purchase of the number of shares of Common Stock
for which such Warrant or Warrants may still be exercised.
(b) Notwithstanding any other provision of this Warrant, in no event
shall the Holder be entitled at any time to purchase a number of shares of
Common Stock on exercise of this Warrant in excess of that number of shares upon
purchase of which the sum of (1) the number of shares of Common Stock
beneficially owned by the Holder and all persons whose beneficial ownership of
shares of Common Stock would be aggregated with the Holder's beneficial
ownership of shares of Common Stock for purposes of Section 13(d) of the 1934
Act and Regulation 13D-G thereunder (each such person other than the Holder an
"Aggregated
-3-
<PAGE> 4
Person" and all such persons other than the Holder, collectively, the
"Aggregated Persons") (other than shares of Common Stock deemed beneficially
owned through the ownership by the Holder and all Aggregated Persons of the
Holder of the unexercised portion of this Warrant and the unexercised or
unconverted portion of any other security of the Company which contains similar
provisions) (2) the number of shares of Common Stock issuable upon exercise of
the portion of this Warrant with respect to which the determination in this
sentence is being made, would result in beneficial ownership by the Holder and
all Aggregated Persons of the Holder of more than 4.9% of the outstanding shares
of Common Stock. For purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the 1934 Act
and Regulation 13D-G thereunder, except as otherwise provided in clause (1) of
the immediately preceding sentence.
1.2 NET ISSUANCE. Notwithstanding anything to the contrary contained in
Section 1.1, the Holder may elect to exercise this Warrant in whole or in part
by receiving shares of Common Stock equal to the net issuance value (as
determined below) of this Warrant, or any part hereof, upon surrender of this
Warrant to the principal office of the Company together with the subscription
form annexed hereto (duly executed by the Holder), in which event the Company
shall issue to the Holder a number of shares of Common Stock computed using the
following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Common Stock to be issued to the Holder
Y = the number of shares of Common Stock as to which this
Warrant is to be exercised
A = the current fair market value of one share of Common Stock
calculated as of the last Trading Day immediately preceding
the exercise of this Warrant
B = the Purchase Price
As used herein, current fair market value of Common Stock as of
a specified date shall mean with respect to each share of Common Stock the
closing sale price of the Common Stock on the principal securities market on
which the Common Stock may at the time be listed or, if there have been no sales
on any such exchange on such day, the average of the highest bid and lowest
asked prices on the principal securities market at the end of such day, or, if
on such day the Common Stock is not so listed, the average of the representative
bid and asked prices quoted in the Nasdaq System as of 4:00 p.m., New York City
time, or, if on such day the Common Stock is not quoted in the Nasdaq System,
the average of the highest bid and lowest asked price on such day in the
domestic over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case averaged
over a period of five consecutive Trading Days consisting of the day as of which
the current fair market value of a share of Common Stock is being determined (or
if such day is not a Trading Day, the Trading Day next preceding such day) and
the four consecutive Trading Days prior to such day. If on the date for which
current fair market value is to be determined the Common Stock is not listed on
any securities exchange or quoted in the Nasdaq System or the over-the-counter
market, the current fair market value of Common Stock shall be the highest price
per share which the Company could then obtain from a willing buyer (not a
current
-4-
<PAGE> 5
employee or director) for shares of Common Stock sold by the Company, from
authorized but unissued shares, as determined in good faith by the Board of
Directors of the Company, unless prior to such date the Company has become
subject to a merger, acquisition or other consolidation pursuant to which the
Company is not the surviving party, in which case the current fair market value
of the Common Stock shall be deemed to be the value received by the holders of
the Company's Common Stock for each share thereof pursuant to the Company's
acquisition.
1.3 COMPANY PUT RIGHT. (a) If a Company Put Threshold Event occurs,
then at any time within ten Trading Days after such Company Put Threshold Event,
the Company shall have the right to require the Holder to exercise this Warrant
in full or in part in accordance with Sections 1.1 and 1.2 with respect to the
shares of Common Stock that are subject to this Warrant that the Holder has not
previously purchased and to require the holders of the Other Class A Warrants to
exercise such Other Class A Warrants in full or in part (in the same proportion
as this Warrant) with respect to all of the shares of Common Stock that such
holders have not previously purchased. To exercise its right to require the
Holder to purchase Common Stock pursuant to this Warrant, the Company shall give
the Holder a Company Put Notice within five Trading Days after the Company Put
Threshold Event and the Holder shall be obligated to exercise this Warrant as
specified in such Notice if the requirements of this Section and Section 1.4 are
satisfied. The Company may give the Holder a Company Put Notice no more
frequently than once during any period of 90 consecutive days. Notwithstanding
the Company's put rights, nothing in this Section 1.3 or Section 1.4 shall
prevent the Holder from exercising this Warrant in accordance with Sections 1.1
and 1.2 at any time prior to the Company Put Closing Date (as defined herein).
(b) The Company shall be entitled to give the Company Put Notice only
if the Company Put Requirements are met on the date the Company Put Notice is
given. If the Company shall have given the Company Put Notice with respect to a
particular Company Put Threshold Event, the Company shall be entitled to require
the Holder to purchase shares of Common Stock pursuant to this Section 1.3 only
if the Company Put Requirements are met at all times from the time the Company
gives such Company Put Notice to and including the applicable Company Put
Closing Date.
1.4 EXERCISE OF COMPANY PUT RIGHT; CONDITIONS. (a) Notwithstanding
anything to the contrary in this Warrant, the date and time of the issuance and
sale of shares of Common Stock pursuant to the exercise of the Company's rights
under Section 1.3 and this Section 1.4 shall be the date which is not earlier
than ten Trading Days and not later than 30 Trading Days after the Company gives
the Company Put Notice, or such earlier date as specified by the Holder by
notice to the Company (the "Company Put Closing Date"). The closing of such
exercise shall occur at a location and time of day as mutually agreed by the
Holder and the Company.
(b) The obligation of the Holder to exercise this Warrant pursuant to
Section 1.3 on the Company Put Closing Date is subject to the satisfaction of
the following conditions precedent (any or all of which may be waived by the
Holder in its sole discretion):
(1) On the Company Put Closing Date, no legal action, suit or
proceeding shall be pending or threatened which seeks to restrain or prohibit
the transactions contemplated by this Warrant or the other Transaction
Documents;
-5-
<PAGE> 6
(2) The material representations and warranties of the Company
contained in the Transaction Documents shall have been true and correct on the
respective dates of the Transaction Documents and shall be true and correct on
the Company Put Closing Date, as if made on and as of the Company Put Closing
Date (except for representations made as of a specific date, which
representations shall be true and correct as of such date) and on or before the
Company Put Closing Date the Company shall have performed all covenants and
agreements of the Company contained in the Transaction Documents required to be
performed by the Company on or before the Company Put Closing Date;
(3) At all times from the time the Company gives the Company Put Notice
to and including the Company Put Closing Date, the Company Put Requirements
shall have been met;
(4) The Company shall have delivered to the Holder its certificate,
dated the Company Put Closing Date, duly executed by its Chief Executive Officer
to the effect set forth in clauses (1), (2) and (3) of this Section 1.4(b);
(5) On the Put Closing Date, the Holder shall have received an opinion
of counsel selected by the Company and reasonably acceptable to the Holder,
dated the Put Closing Date, addressed to the Holder, in form, scope and
substance reasonably satisfactory to the Holder, substantially in the form of
EXHIBIT 3 to this Warrant; and
(6) On the Company Put Closing Date (i) trading in securities on the
New York Stock Exchange, Inc., the American Stock Exchange, Inc., the Nasdaq or
the Nasdaq SmallCap shall not have been suspended or materially limited and (ii)
a general moratorium on commercial banking activities in the State of Colorado
or the State of New York shall not have been declared by either federal or state
authorities.
2. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE. As soon as
practicable after the exercise of this Warrant, and in any event within three
Trading Days thereafter, the Company at its expense (including the payment by it
of any applicable issue or stamp taxes) will cause to be issued in the name of
and delivered to the Holder hereof, or as the Holder (upon payment by the Holder
of any applicable transfer taxes) may direct, a certificate or certificates for
the number of fully paid and nonassessable shares of Common Stock (or Other
Securities) to which the Holder shall be entitled on such exercise, in such
denominations as may be requested by the Holder, plus, in lieu of any fractional
share to which the Holder would otherwise be entitled, cash equal to such
fraction multiplied by the then current fair market value (as determined in
accordance with subsection 1.2) of one full share, together with any other stock
or other securities and property (including cash, where applicable) to which the
Holder is entitled upon such exercise pursuant to Section 1 or otherwise. Upon
exercise of this Warrant as provided herein, the Company's obligation to issue
and deliver the certificates for Common Stock shall be absolute and
unconditional, irrespective of the absence of any action by the Holder to
enforce the same, any waiver or consent with respect to any provision thereof,
the recovery of any judgment against any person or any action to enforce the
same, any failure or delay in the enforcement of any other obligation of the
Company to the Holder, or any setoff, counterclaim, recoupment, limitation or
termination, or any breach or alleged breach by the Holder or any other person
of any obligation to the Company, and irrespective of any other circumstance
which might otherwise limit such obligation of the Company to the Holder in
connection with such exercise. If the Company fails to issue and deliver the
certificates for the Common Stock to the Holder pursuant to the first sentence
of this paragraph as and when required to do so, in addition to any other
liabilities the Company may have hereunder and
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<PAGE> 7
under applicable law, the Company shall pay or reimburse the Holder on demand
for all out-of-pocket expenses including, without limitation, reasonable fees
and expenses of legal counsel incurred by the Holder as a result of such
failure.
3. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY, ETC.;
RECLASSIFICATION, ETC. In case at any time or from time to time after the
Issuance Date, all the holders of Common Stock (or Other Securities) shall have
received, or (on or after the record date fixed for the determination of
stockholders eligible to receive) shall have become entitled to receive, without
payment therefor,
(a) other or additional stock or other securities or property (other
than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of earnings
or earned surplus of the Company), or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock-split (adjustments in respect of which are provided
for in Section 5), then and in each such case the Holder, on the exercise hereof
as provided in Section 1, shall be entitled to receive the amount of stock and
other securities and property (including cash in the cases referred to in
subdivisions (b) and (c) of this Section 3) which the Holder would hold on the
date of such exercise if on the date thereof the Holder had been the holder of
record of the number of shares of Common Stock called for on the face of this
Warrant and had thereafter, during the period from the date hereof to and
including the date of such exercise, retained such shares and all such other or
additional stock and other securities and property (including cash in the case
referred to in subdivisions (b) and (c) of this Section 3) receivable by the
Holder as aforesaid during such period, giving effect to all adjustments called
for during such period by Section 4. Notwithstanding anything in this Section 3
to the contrary, no adjustments pursuant to this Section 3 shall actually be
made until the cumulative effect of the adjustments called for by this Section 3
since the date of the last adjustment actually made would change the amount of
stock or other securities and property which the Holder would hold by more than
1%.
4. EXERCISE UPON REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case at
any time or from time to time after the Issuance Date, the Company shall (a)
effect a reorganization, (b) consolidate with or merge into any other person, or
(c) transfer all or substantially all of its properties or assets to any other
person under any plan or arrangement contemplating the dissolution of the
Company, then, in each such case, as a condition of such reorganization,
consolidation, merger, sale or conveyance, the Company shall give at least 30
days notice to the Holder of such pending transaction whereby the Holder shall
have the right to exercise this Warrant prior to any such reorganization,
consolidation, merger, sale or conveyance. Any exercise of this Warrant pursuant
to notice under this Section shall be conditioned upon the closing of such
reorganization, consolidation, merger, sale or conveyance which is the subject
of the notice and the exercise of this Warrant shall not be deemed to have occ
until immediately prior to the closing of such transaction.
5. ADJUSTMENT FOR EXTRAORDINARY EVENTS. In the event that after the
Issuance Date the Company shall (i) issue additional shares of Common Stock as a
dividend or
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<PAGE> 8
other distribution on outstanding Common Stock, (ii) subdivide or reclassify
its outstanding share of Common Stock, or (iii) combine its outstanding share of
Common Stock into a smaller number of shares of Common Stock, then, in each
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the Purchase Price in effect immediately prior
to such event by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such event and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after such event, and the product so obtained shall thereafter be
the Purchase Price then in effect. The Purchase Price, as so adjusted, shall be
readjusted in the same manner upon the happening of any successive event or
events described herein in this Section 5. The Holder shall thereafter, on the
exercise hereof as provided in Section 1, be entitled to receive that number of
shares of Common Stock determined by multiplying the number of shares of Common
Stock which would be issuable on such exercise immediately prior to such
issuance by a fraction of which (i) the numerator is the Purchase Price in
effect immediately prior to such issuance and (ii) the denominator is the
Purchase Price in effect on the date of such exercise.
6. ADJUSTMENT FOR CERTAIN STOCK ISSUANCES. In case at any time the
Company shall issue shares of its Common Stock or debt or equity securities
convertible into or exercisable or exchangeable for shares of Common Stock
(collectively, the "Newly Issued Shares"), other than (i) an issuance pro rata
to all holders of its outstanding Common Stock, (ii) pursuant to compensation
plans for employees, directors, officers, advisers or consultants of the Company
and in accordance with the terms of such plans as in effect on the Issuance
Date, (iii) upon exercise of conversion, exchange, purchase or similar rights
issued, granted or given by the Company and outstanding on the Issuance Date,
(iv) pursuant to a public offering underwritten on a firm commitment basis
registered under the 1933 Act or (v) as part of a transaction involving a
strategic alliance, acquisition of stock or assets, merger, collaboration, joint
venture, partnership or other similar arrangement of the Company with another
corpo partnership or other business entity which is engaged in a business
similar to or related to the business of the Company, so long as in the case of
this clause (v) the Board of Directors of the Company by resolution duly adopted
(and a copy of which shall be furnished to the Holder promptly after adoption)
determines that such issuance is fair to the holders of each class and series of
capital stock of the Company and to the Holder in respect of its equity interest
in the Company, at a price below the Purchase Price in effect at the time of
such issuance, then following such issuance of Newly Issued Shares the number of
shares of Common Stock which the Holder shall be entitled to receive upon
exercise of this Warrant shall be increased and the Purchase Price shall be
decreased to the respective amounts determined pursuant to this Section 6. The
number of shares of Common Stock purchasable upon the exercise of this Warrant
following any such adjustment shall be determined by multiplying the number of
shares purchasable upon exercise of this Warrant immediately prior to such
adjustment by a fraction, the numerator of which shall be the sum of (a) the
number of shares of Common Stock outstanding immediately prior to the issuance
of the Newly Issued Shares (calculated on a fully-diluted basis assuming the
exercise or conversion of all options, warrants, purchase rights or convertible
securities which are exercisable at the time of the issuance of the Newly Issued
Shares), plus (b) the number of Newly Issued Shares, and the denominator of
which shall be the sum of (a) the number of shares of Common Stock outstanding
immediately prior to the issuance of the Newly Issued Shares (calculated on a
fully-diluted basis assuming the conversion of all options, warrants, purchase
rights or convertible securities which are exercisable at the time of the
issuance of the Newly Issued Shares), plus (b) the number of shares of Common
Stock which the aggregate consideration, if any, received by the Company for the
number of Newly Issued Shares would purchase at a price equal to the Purchase
Price in effect at the time of such issuance. Upon any adjustment under this
Section 6, the number of
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<PAGE> 9
shares of Common Stock purchasable upon exercise of this Warrant in full
immediately after such adjustment shall be rounded to the nearest
one-one-hundredth of a share of Common Stock subject, however, to Section 2 of
this Warrant relating to fractional shares of Common Stock. Such adjustment of
the number of shares purchasable provided for in this Section 6 may be expressed
as the following mathematical formula:
X = W x [O+N]
--------
[O+(C/P)]
where:
C = aggregate consideration received by the Company for the Newly Issued Shares
N = number of Newly Issued Shares
O = number of shares of Common Stock outstanding (on a fully diluted basis, as
described above) prior to the issuance of the Newly Issued Shares
P = Purchase Price in effect at the time of the issuance of the Newly Issued
Shares
W = number of shares issuable upon exercise of this Warrant prior to the
issuance of the Newly Issued Shares
X = number of shares issuable upon exercise of this Warrant after the issuance
of the Newly Issued Shares
Upon the issuance of such Newly Issued Shares, the Purchase Price shall,
simultaneously with the happening of such event, be adjusted by multiplying the
Purchase Price in effect immediately prior to such event by a fraction, the
numerator of which shall be the number of shares of Common Stock issuable upon
exercise of this Warrant prior to the issuance of the Newly Issued Shares and
the denominator of which shall be the number of shares of Common Stock issuable
upon the exercise of this Warrant after the issuance of the Newly Issued Shares
as provided in this Section 6, and the product so obtained shall thereafter be
the Purchase Price then in effect. The number of shares issuable upon exercise
of this Warrant and the Purchase Price, as each is so adjusted, shall be
readjusted in the same manner upon the happening of any successive issuances of
Newly Issued Shares described in this Section 6.
7. FURTHER ASSURANCES. The Company will take all action that may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of stock, free from all taxes, liens and
charges with respect to the issue thereof, on the exercise of all or any portion
of this Warrant from time to time outstanding.
8. NOTICES OF RECORD DATE, ETC. In the event of
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend on, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, or
-9-
<PAGE> 10
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all
or substantially all of the assets of the Company to or consolidation or
merger of the Company with or into any other person (other than a
wholly-owned subsidiary of the Company), or
(c) any voluntary or involuntary dissolution, liquidation or winding-up
of the Company,
then and in each such event the Company will mail or cause to be mailed to the
Holder, at least ten days prior to such record date, a notice specifying (i) the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock (or Other
Securities) shall be entitled to exchange their shares of Common Stock (or Other
Securities) for securities or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up, and (iii) the amount and character of
any stock or other securities, or rights or options with respect thereto,
proposed to be issued or granted, the date of such proposed issue or grant and
the persons or class of persons to whom such proposed issue or grant is to be
offered or made. Such notice shall also state that the action in question or the
record date is subject to the effectiveness of a registration statement under
the 1933 Act, or a favorable vote of stockholders, if either is required. Such
notice shall be mailed at least ten days prior to the date specified in such
notice on which any such action is to be taken or the record date, whichever is
earlier.
9. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANTS. The
Company will at all times reserve and keep available out of its authorized but
unissued shares of capital stock, solely for issuance and delivery on the
exercise of this Warrant, a sufficient number of shares of Common Stock (or
Other Securities) to effect the full exercise of this Warrant and the exercise,
conversion or exchange of any other warrant or security of the Company
exercisable for, convertible into, exchangeable for or otherwise entitling the
holder to acquire shares of Common Stock (or Other Securities), and if at any
time the number of authorized but unissued shares of Common Stock (or Other
Securities) shall not be sufficient to effect such exercise, conversion or
exchange, the Company shall take such action as may be necessary to increase its
authorized but unissued shares of Common Stock (or Other Securities) to such
number as shall be sufficient for such purposes.
10. TRANSFER OF WARRANT. This Warrant shall inure to the benefit of the
successors to and assigns of the Holder. This Warrant and all rights hereunder,
in whole or in part, are registrable at the office or agency of the Company
referred to below by the Holder hereof in person or by his duly authorized
attorney, upon surrender of this Warrant properly endorsed.
11. REGISTER OF WARRANTS. The Company shall maintain, at the principal
office of the Company (or such other office as it may designate by notice to the
Holder hereof), a register in which the Company shall record the name and
address of the person in whose name this Warrant has been issued, as well as the
name and address of each successor and prior owner of such Warrant. The Company
shall be entitled to treat the person in whose name this Warrant is so
registered as the sole and absolute owner of this Warrant for all purposes.
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<PAGE> 11
12. EXCHANGE OF WARRANT. This Warrant is exchangeable, upon the
surrender hereof by the Holder hereof at the office or agency of the Company
referred to in Section 11, for one or more new Warrants of like tenor
representing in the aggregate the right to subscribe for and purchase the number
of shares of Common Stock which may be subscribed for and purchased hereunder,
each of such new Warrants to represent the right to subscribe for and purchase
such number of shares as shall be designated by said Holder hereof at the time
of such surrender.
13. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
14. WARRANT AGENT. The Company may, by written notice to the Holder,
appoint the transfer agent and registrar for the Common Stock as the Company's
agent for purposes of issuing shares of Common Stock (or Other Securities) on
the exercise of this Warrant pursuant to Section 1, and the Company may, by
notice to the Holder, appoint an agent having an office in the United States of
America for the purpose of exchanging this Warrant pursuant to Section 12 and
replacing this Warrant pursuant to Section 13, or either of the foregoing, and
thereafter any such exchange or replacement, as the case may be, shall be made
at such office by such agent.
15. REMEDIES. The Company stipulates that the remedies at law of the
Holder in the event of any default or threatened default by the Company in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate, and that such terms may be specifically enforced by a
decree for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
16. NO RIGHTS OR LIABILITIES AS A STOCKHOLDER. This Warrant shall not
entitle the Holder hereof to any voting rights or other rights as a stockholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the Holder hereof to purchase Common Stock, and no mere enumeration
herein of the rights or privileges of the Holder hereof, shall give rise to any
liability of the Holder for the Purchase Price or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
17. NOTICES, ETC. All notices and other communications from the Company
to the registered Holder or from the registered Holder to the Company shall be
delivered personally (which shall include telephone line facsimile transmission
with answer back confirmation) or by courier and shall be effective upon
receipt, addressed to each party at the address or telephone line facsimile
transmission number for each party set forth in the Subscription Agreement or at
such other address or telephone line facsimile transmission number as a party
shall have provided to the other party in accordance with this provision.
18. TRANSFER RESTRICTIONS. By acceptance of this Warrant, the Holder
represents to the Company that this Warrant is being acquired for the Holder's
own account and for the purpose of investment and not with a view to, or for
sale in connection with, the distribution thereof, nor with any present
intention of distributing or selling this Warrant or the Common Stock issuable
upon exercise of this Warrant. The Holder acknowledges and agrees
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<PAGE> 12
that this Warrant and, except as otherwise provided in the Registration Rights
Agreement, the shares of Common Stock issuable upon exercise of this Warrant (if
any) have not been (and at the time of acquisition by the Holder, will not have
been or will not be), registered under the 1933 Act or under the securities laws
of any state, in reliance upon certain exemptive provisions of such statutes.
The Holder further recognizes and acknowledges that (a) because this Warrant
and, except as provided in the Registration Rights Agreement, the Common Stock
issuable upon exercise of this Warrant (if any) are unregistered, they may not
be eligible for resale, and may only be resold in the future pursuant to an
effective registration statement under the 1933 Act and any applicable state
securities laws, or pursuant to a valid exemption from such registration
requirements and (b) the transfer of this Warrant and the Common Stock issuable
upon the exercise hereof are subject to the restrictions on transfer set forth
in the Registration Rights Agreement and in Section 4 of the Subscription
Agreement. Unless the shares of Common Stock issuable upon exercise of this
Warrant have theretofore been registered for resale under the 1933 Act, the
Company may require, as a condition to the issuance of Common Stock upon the
exercise of this Warrant (i) in the case of an exercise in accordance with
Section 1.1 hereof, a confirmation as of the date of exercise of the Holder's
representations pursuant to this Section 18, or (ii) in the case of an exercise
in accordance with Section 1.2 hereof, an opinion of counsel reasonably
satisfactory to the Company that the shares of Common Stock to be issued upon
such exercise may be issued without registration under the 1933 Act.
19. LEGEND. Unless theretofore registered for resale under the 1933
Act, each certificate for shares issued upon exercise of this Warrant shall bear
the following legend:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be resold, transferred or assigned in
the absence of an effective registration statement for the securities under
the Securities Act of 1933, as amended, or an opinion of counsel that
registration is not required under said Act.
20. LIMITATION OF HOLDER'S LIABILITY. In connection with any exercise
by the Company of its rights under Section 1.3, the Holder (a) shall be liable
for damages from breach of the Holder's obligations relating to such exercise
only if and to the extent such breach shall have been determined by final
judgment, not subject to further appeal, of a court of competent jurisdiction to
have resulted from conduct of the Holder which constitutes gross negligence or
willful misconduct, (b) shall have no liability in connection with any dispute
or legal action relating to such exercise if at any time prior to a final
judgment referred to in the immediately preceding clause (a) the Holder shall
have tendered the Purchase Price of, or surrendered this Warrant in accordance
with Section 1.2 in respect of, all shares of Common Stock the purchase of which
is in dispute (in which case the Company shall issue such shares to the Holder
in accordance with this Warrant) and (c) if the immediately preceding clause (b)
is inapplicable, shall not in any event be liable for damages or liability
arising from or in any way relating to any breach or alleged breach by the
Holder of its obligations under this Warrant or otherwise in connection with
this Warrant in an amount in excess of the aggregate Purchase Price payable upon
exercise of the unexercised portion of this Warrant. This Warrant and the terms
and provisions hereof are for the sole and exclusive benefit of the Holder, the
Company and the Holder's permitted assigns and in no event shall the Holder have
any liability to any stockholder or creditor of the Company or any other Person
(other than the Company, subject to the limitations on liability to the Company
contained herein) in any way relating to or arising from this Warrant or the
transactions contemplated hereby.
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<PAGE> 13
21. ATTORNEYS' FEES. In any litigation, arbitration or court proceeding
between the Company and Holder relating hereto, the prevailing party shall be
entitled to attorneys' fees and expenses and all costs of proceedings incurred
in enforcing this Warrant.
22. AMENDMENT; WAIVER. This Warrant and any terms hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. Notwithstanding any other provision of this Warrant or
the Subscription Agreement, in addition to the requirements of the immediately
preceding sentence, any amendment of (x) Section 1.1(b), (y) the definition of
the term Aggregated Person or (z) this sentence shall require approval by the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock, present in person or represented by proxy at a duly convened
meeting of stockholders of the Company, and entitled to vote, or the consent
thereto in writing by holders of a majority of the outstanding shares of Common
Stock, and the stockholders of the Company are hereby expressly made third party
beneficiaries of this sentence.
23. MISCELLANEOUS. This Warrant shall be construed and enforced in
accordance with and governed by the internal laws of the State of Colorado. The
headings in this Warrant are for purposes of reference only, and shall not limit
or otherwise affect any of the terms hereof. The invalidity or unenforceability
of any provision hereof shall in no way affect the validity or enforceability of
any other provision.
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<PAGE> 14
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
on its behalf by one of its officers thereunto duly authorized.
Dated: December ___, 1999 RMI.NET, INC.
By:
-------------------------
Title:
----------------------
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<PAGE> 15
EXHIBIT 1
FORM OF SUBSCRIPTION
RMI.NET, INC.
(To be signed only on exercise of Warrant)
TO: RMI.NET, Inc.
999 18th Street
Suite 2201
Denver, Colorado 80202
Attention: Chief Financial Officer
1. The undersigned Holder of the attached original, executed
Warrant hereby elects to exercise its purchase right under such Warrant
with respect to ______________ shares of Common Stock, as defined in the
Warrant, of RMI.NET, Inc., a Delaware corporation (the "Company").
2. The undersigned Holder (check one):
p (a) elects to pay the aggregate purchase price for such shares of
Common Stock (the "Exercise Shares") (i) by lawful money of the
United States or the enclosed certified or official bank check
payable in United States dollars to the order of the Company in
the amount of $___________, or (ii) by wire transfer of United
States funds to the account of the Company in the amount of
$____________, which transfer has been made before or
simultaneously with the delivery of this Form of Subscription
pursuant to the instructions of the Company;
or
p (b) elects to receive shares of Common Stock having a value equal to
the value of the Warrant calculated in accordance with Section
1.2 of the Warrant.
3. Please issue a stock certificate or certificates representing the
appropriate number of shares of Common Stock in the name of the undersigned
or in such other name as is specified below:
Name:
--------------------------
Address:
-----------------------
------------------------------
<PAGE> 16
4. The undersigned Holder hereby represents to the Company that the
exercise of the Warrant elected hereby does not violate Section 1.1(b) of
the Warrant.
Dated: HOLDER:
------- ---, ---
-----------------------------------
By:
-------------------------------
(Signature must conform to name
of Holder as specified on the
face of the Warrant)
Name:
Title:
Address:
------------------------
--------------------------------
<PAGE> 17
EXHIBIT 2
COMPANY PUT NOTICE
RMI.NET, INC.
TO:
--------------------
Name of Holder
1. RMI.NET, Inc., a Delaware corporation (the "Company"), hereby elects to
exercise its right under the Company's Common Stock Purchase Warrant, Class A,
No. ___ (the "Warrant") to require the Holder to exercise the Warrant for
______________ shares of Common Stock of the Company.
2. The Company Put Closing Date will be ______________, unless another date
is specified by the Holder pursuant to Section 1.4(a) of the Warrant.
3. The Company hereby represents and warrants that the Company Put
Requirements are satisfied on the date this Notice is given.
4. Capitalized terms used in this Notice and not otherwise defined herein
shall have the respective meanings provided in the Warrant.
Dated: RMI.NET, INC.
------- ---, ----
By:
------------------------
Name:
Title:
<PAGE> 18
EXHIBIT 3
[Letterhead of Company Counsel]
[Company Put Closing Date]
To the Holders Listed on Schedule A hereto
RE: RMI.NET, INC.
Ladies and Gentlemen:
We have acted as counsel to RMI.NET, Inc., a Delaware corporation (the
"Company"), in connection with issuance by the Company of Common Stock Purchase
Warrants, Class A (the "Warrants") to purchase shares (the "Warrant Shares") of
Common Stock, $.001 par value, of the Company, pursuant to the several
Subscription Agreements, dated as of December 70+*-, 1999 (the "Agreements"),
between the Company and the several Buyers named therein (the "Buyers"). This
opinion is rendered pursuant to Section 1.4(b)(5) of the Warrants in connection
with the exercise by the Company of its put rights pursuant of Section 1.3 of
the Warrants. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings assigned to such terms in the Agreements and
the Warrants.
[OTHER INTRODUCTORY STATEMENTS ACCEPTABLE TO THE BUYERS MAY BE
INCLUDED PRIOR TO EXECUTION OF THE SUBSCRIPTION AGREEMENTS.]
Based upon the foregoing, we are of the opinion that:
(1) The Warrant Shares have been duly authorized and, when issued upon
exercise of the Warrants in accordance with the terms of Sections 1.3, 1.4 and
the other applicable provisions of the Warrants will be validly issued, fully
paid and non-assessable and will not subject the holder thereof to personal
liability by reason of being such holder;
(2) The issuance by the Company of the Warrant Shares do not, with or
without the giving of notice or the lapse of time, or both, (i) result in any
violation of any term of the certificate of incorporation or by-laws of the
Company, (ii) conflict with or result in a breach by the Company of any of the
terms or provisions of, or constitute a default under, or result in the
modification of, or result in the creation or imposition of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company pursuant to, any indenture, mortgage, deed of trust or other agreement
or instrument to which the Company is a party or by which the Company or any of
its properties or assets are bound or affected or (iii) violate or contravene
any applicable law, rule or regulation or any applicable decree, judgment or
order of any court, federal or state regulatory body, administrative agency or
other governmental body having jurisdiction over the Company or any of its
properties or assets or (iv) have any material adverse effect on any permit,
certification, registration, approval, consent, license or franchise necessary
for the Company to own or lease and operate any of its properties and to conduct
any of its business or the ability of the Company to make use thereof;
<PAGE> 19
(3) There is no legal action, suit, or proceeding pending or, to the
best of our knowledge, threatened against or affecting the Company which seeks
to restrain or prohibit the transactions contemplated by the Warrants, the Class
B Warrants or the Agreements;
(4) Assuming the representations and warranties of the Buyers in
Section 2 of the Agreements are true and correct, the Warrant Shares may be
issued to the Holders upon exercise of the Warrants without registration under
the 1933 Act; and
(5) The Registration Statement is effective under the 1933 Act, to the
best of our knowledge, no stop order proceedings with respect thereto have been
instituted or threatened by the SEC, and the prospectus contained therein may be
used by the Holders and the other selling stockholders named therein for resale
of the Warrant Shares in accordance with the 1933 Act and the "Plan of
Distribution" contained in such prospectus.
These opinions are limited to the matters expressly stated herein and
are rendered solely for your benefit and may not be quoted or relied upon for
any other purpose or by an other person.
Very truly yours,
<PAGE> 1
Exhibit 4.22
ANNEX II
TO
SUBSCRIPTION
AGREEMENT
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE RESOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR AN OPINION OF COUNSEL THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT.
Right to Purchase the Specified Number of
Shares of Common Stock of RMI.NET, Inc.
RMI.NET, INC.
COMMON STOCK PURCHASE WARRANT, CLASS B
NO. B-
---
RMI.NET, INC., a Delaware corporation (the "Company"), hereby
certifies that, for value received, ______________or registered assigns (the
"Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company at any time or from time to time during the Exercise Period (such
capitalized term and all other capitalized terms used herein having the
respective meanings provided herein), the Specified Number of fully paid and
nonassessable shares of Common Stock at a purchase price per share equal to the
Purchase Price. The number of such shares of Common Stock is subject to
adjustment as provided in this Warrant.
As used herein the following terms, unless the context
otherwise requires, have the following respective meanings:
"Adjustment Date" means any of the First Adjustment Date, the
Second Adjustment Date and each date which occurs every 90 days after
the Second Adjustment Date through and including the date with is 1,080
days after the Issuance Date.
"Adjustment Factor" means (a) 1.03 on the First Adjustment
Date and (b) 1.015 on each subsequent Adjustment Date.
"Adjustment Price" means, on each Adjustment Date, the lesser
of (a) the Ceiling Price and (b) the Average Market Price; provided,
however, that if on any Adjustment Date the Average Market Price is
greater than $20.00, "Adjustment Price" means the sum of (x) the
Ceiling Price plus (y) 50% of the excess of such Average Market Price
over $20.00 (the references to "$20.00" in this definition are subject
to equitable adjustment from time to time on terms reasonably
acceptable to the Holder for stock splits, stock dividends,
combinations, recapitalizations, reclassifications, distributions,
Tender Offers and similar events occurring after the Issuance Date).
<PAGE> 2
"Adjustment Shares" means the number of shares of Common
Stock, determined on each Adjustment Date in accordance with Section
1.2(a), to be added to or deducted from the Specified Number on each
Adjustment Date in accordance with Section 1.2(b).
"Auditors" means Ernst & Young LLP or such other firm of
independent public accountants of recognized national standing as shall
have been engaged by the Company to audit its financial statements.
"Auditors' Determination" means a determination requested by
the Company and signed by the Auditors concurring with the Company's
conclusion that a requirement of the Company to make a payment pursuant
to Section 1.4(a) by reason of the occurrence of a specified Share
Limitation Event would result in the Company being required to classify
the shares of Common Stock issuable upon exercise of this Warrant as
redeemable common stock on a balance sheet of the Company prepared in
accordance with Generally Accepted Accounting Principles and which
shall set forth (i) in reasonable detail all relevant facts considered
by the Auditors in connection therewith, (ii) all applicable accounting
principles and assumptions made in connection therewith, and (iii) in
reasonable detail or have attached thereto copies of all legal, expert
and other advice or information used by the Auditors in reaching their
conclusion.
"Average Market Price" means the arithmetic average of the
Market Price on each of the following number of Trading Days, whether
or not consecutive, during the applicable Measurement Period on which
the lowest Market Prices occurred:
<TABLE>
<S> <C> <C>
Measurement Period for No. of Trading Days
---------------------- -------------------
First Adjustment Date 20
Second Adjustment Date 15
Each Subsequent Adjustment Date 10
</TABLE>
"Cash and Cash Equivalent Balances" of any person on any date
shall be determined from such person's books maintained in accordance
with Generally Accepted Accounting Principles, and means, without
duplication, the sum of (1) the cash accrued by such person and its
subsidiaries on a consolidated basis on such date and available for use
by such person and its subsidiaries on such date and (2) all assets
which would, on a consolidated balance sheet of such person and its
subsidiaries prepared as of such date in accordance with Generally
Accepted Accounting Principles, be classified as cash or cash
equivalents, less the amount thereof which secures any outstanding
indebtedness of such person or its subsidiaries.
"Ceiling Price" means $9.8476 (subject to equitable adjustment
from time to time on terms reasonably acceptable to the Holder for
stock splits, stock dividends, combinations, recapitalizations,
reclassifications, distributions, Tender Offers and similar events
occurring after the Issuance Date).
"Class A Warrants" means the Common Stock Purchase Warrants,
Class A issued by the Company pursuant to the Subscription Agreement.
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<PAGE> 3
"Class B Warrant Shares" means those shares of Common Stock
issued upon exercise of this Warrant (subject to equitable adjustment
from time to time on terms reasonably acceptable to the Holder for
stock splits, stock dividends, combinations, recapitalizations,
reclassifications, distributions, Tender Offers and similar events
occurring after the Issuance Date).
"Common Shares Held" as of any date means the sum of (1) the
number of Initial Shares which are then held by the Holder plus (2) the
number of Class B Warrant Shares which are then held by the Holder plus
(3) the number of shares of Common Stock which are issuable upon
exercise of this Warrant immediately prior to the determination of the
number of Adjustment Shares pursuant to Section 1.2(a).
"Common Stock" means the Company's Common Stock, $.001 par
value per share, as authorized on the date hereof, and any other
securities into which or for which the Common Stock may be converted or
exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise.
"Company" shall include RMI.NET, Inc., a Delaware corporation,
and any corporation that shall succeed to or assume the obligations of
RMI.NET, Inc. hereunder in accordance with the terms hereof.
"Control Notice" means a notice given by the Company to the
Holder, in accordance with Section 1.4(b), (i) stating that a Share
Limitation Event has occurred by reason of events which are not solely
within the control of the Company and (ii) enclosing an executed copy
of an Auditors' Determination.
"Exercise Period" means the period commencing on the First
Adjustment Date and ending on the later of the date which is (x) 1,095
days after the Issuance Date or (y) five Trading Days after the
Specified Number for the Adjustment Date occurring on the 1,080th day
after the Issuance Date is mutually agreed by the Company and the
Holder.
"First Adjustment Date" means the date which is 180 days after
the Issuance Date.
"Generally Accepted Accounting Principles" for any person
means the generally accepted accounting principles and practices
applied by such person from time to time in the preparation of its
audited financial statements.
"Holder Repurchase Price" means, for each share of Common
Stock which may not be issued upon exercise of this Warrant by reason
of the Shareholder Approval Rule in accordance with Section 1.4, 120%
of the greater of: (x) the arithmetic average of the Market Price on
each of the five consecutive Trading Days immediately prior to the date
of the repurchase notice given by the Holder to the Company pursuant to
Section 1.4, (y) the arithmetic average of the Market Price on each of
the five consecutive Trading Days immediately prior to the repurchase
date pursuant to Section 1.4 and (z) if determined prior to the First
Adjustment Date, the price per share paid by the Holder for the shares
of Common Stock purchased on the Issuance Date pursuant to the
Subscription Agreement or, if determined on or after the First
Adjustment Date, the most recent Adjustment Price (subject to equitable
adjustment from time to time on terms reasonably acceptable to the
Holder for stock splits, stock dividends, combinations,
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<PAGE> 4
recapitalizations, reclassifications, distributions, Tender Offers and
similar events occurring after the Issuance Date).
"Initial Purchase Price" means $13.1301 (subject to equitable
adjustment from time to time on terms reasonably acceptable to the
Holder for stock splits, stock dividends, combinations,
recapitalizations, reclassifications, distributions, Tender Offers and
similar events occurring after the Issuance Date).
"Initial Shares" means those shares of Common Stock purchased
by the Holder on the Issuance Date pursuant to the Subscription
Agreement (subject to equitable adjustment from time to time on terms
reasonably acceptable to the Holder for stock splits, stock dividends,
combinations, recapitalizations, reclassifications, distributions,
Tender Offers and similar events occurring after the Issuance Date).
"Issuance Date" means the first date of original issuance of
this Warrant.
"Market Price" of the Common Stock on any date means the
closing bid price for one share of Common Stock on such date on the
first applicable among the following: (a) the national securities
exchange on which the shares of Common Stock are listed which
constitutes the principal securities market for the Common Stock, (b)
the Nasdaq, if the Nasdaq constitutes the principal market for the
Common Stock on such date, or (c) the Nasdaq SmallCap, if the Nasdaq
SmallCap constitutes the principal securities market for the Common
Stock on such date, in any such case as reported by Bloomberg, LP.;
provided, however, that if during any Measurement Period or other
period during which the Market Price is being determined:
(i) The Company shall declare or pay a dividend or
make a distribution to all holders of the outstanding Common
Stock in shares of Common Stock or fix any record date for any
such action, then the Market Price for each day in such
Measurement Period or such other period which day is prior to
the earlier of (1) the date fixed for the determination of
stockholders entitled to receive such dividend or other
distribution and (2) the date on which ex-dividend trading in
the Common Stock with respect to such dividend or distribution
begins shall be reduced by multiplying the Market Price
(determined without regard to this proviso) for each such day
in such Measurement Period or such other period by a fraction,
the numerator of which shall be the number of shares of Common
Stock outstanding at the close of business on the earlier of
(1) the record date fixed for such determination and (2) the
date on which ex-dividend trading in the Common Stock with
respect to such dividend or distribution begins and the
denominator of which shall be the sum of such number of shares
and the total number of shares constituting such dividend or
other distribution;
(ii) The Company shall issue rights or warrants to
all holders of its outstanding shares of Common Stock, or fix
a record date for such issuance, which rights or warrants
entitle such holders (for a period expiring within forty-five
(45) days after the date fixed for the determination of
stockholders entitled to receive such rights or warrants) to
subscribe for or purchase shares of Common Stock at a price
per share less than the Market Price (determined without
regard to this proviso) for any day in such Measurement Period
or such other period which day is prior to the end of such
45-day period, then the Market Price for each such day shall
be reduced so that the same shall equal the price
-4-
<PAGE> 5
determined by multiplying the Market Price (determined without
regard to this proviso) by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding at
the close of business on the record date fixed for the
determination of stockholders entitled to receive such rights
or warrants plus the number of shares which the aggregate
offering price of the total number of shares so offered would
purchase at such Market Price, and the denominator of which
shall be the number of shares of Common Stock outstanding on
the close of business on such record date plus the total
number of additional shares of Common Stock so offered for
subscription or purchase. In determining whether any rights or
warrants entitle the holders to subscribe for or purchase
shares of Common Stock at less than the Market Price
(determined without regard to this proviso), and in
determining the aggregate offering price of such shares of
Common Stock, there shall be taken into account any
consideration received for such rights or warrants, the value
of such consideration, if other than cash, to be determined in
good faith by a resolution of the Board of Directors of the
Company;
(iii) The outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock or
a record date for any such subdivision shall be fixed, then
the Market Price of the Common Stock for each day in such
Measurement Period or such other period which day is prior to
the earlier of (1) the day upon which such subdivision becomes
effective and (2) the date on which ex-dividend trading in the
Common Stock with respect to such subdivision begins shall be
proportionately reduced, and conversely, in case the
outstanding shares of Common Stock shall be combined into a
smaller number of shares of Common Stock, the Market Price for
each day in such Measurement Period or such other period which
day is prior to the earlier of (1) the date on which such
combination becomes effective and (2) the date on which
trading in the Common Stock on a basis which gives effect to
such combination begins, shall be proportionately increased;
(iv) The Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock shares of any
class of capital stock of the Company (other than any
dividends or distributions to which clause (i) of this proviso
applies) or evidences of its indebtedness, cash or other
assets (including securities, but excluding any rights or
warrants referred to in clause (ii) of this proviso and
dividends and distributions paid exclusively in cash and
excluding any capital stock, evidences of indebtedness, cash
or assets distributed upon a merger or consolidation) (the
foregoing hereinafter in this clause (iv) of this proviso
called the "Securities"), or fix a record date for any such
distribution, then, in each such case, the Market Price for
each day in such Measurement Period or such other period which
day is prior to the earlier of (1) the record date for such
distribution and (2) the date on which ex-dividend trading in
the Common Stock with respect to such distribution begins
shall be reduced so that the same shall be equal to the price
determined by multiplying the Market Price (determined without
regard to this proviso) by a fraction, the numerator of which
shall be the Market Price (determined without regard to this
proviso) for such date less the fair market value (as
determined in good faith by resolution of the Board of
Directors of the Company) on such date of the portion of the
Securities so distributed or to be distributed applicable to
one share of Common Stock and the denominator of which shall
be the Market Price (determined without regard to
-5-
<PAGE> 6
this proviso) for such date. If the Board of Directors of the
Company determines the fair market value of any distribution
for purposes of this clause (iv) by reference to the actual or
when issued trading market for any Securities comprising all
or part of such distribution, it must in doing so consider the
prices in such market on the same day for which an adjustment
in the Market Price is being determined.
For purposes of this clause (iv) and clauses (i) and
(ii) of this proviso, any dividend or distribution to which
this clause (iv) is applicable that also includes shares of
Common Stock, or rights or warrants to subscribe for or
purchase shares of Common Stock to which clause (i) or (ii) of
this proviso applies (or both), shall be deemed instead to be
(1) a dividend or distribution of the evidences of
indebtedness, assets, shares of capital stock, rights or
warrants other than such shares of Common Stock or rights or
warrants to which clause (i) or (ii) of this proviso applies
(and any Market Price reduction required by this clause (iv)
with respect to such dividend or distribution shall then be
made) immediately followed by (2) a dividend or distribution
of such shares of Common Stock or such rights or warrants (and
any further Market Price reduction required by clauses (i) and
(ii) of this proviso with respect to such dividend or
distribution shall then be made), except that any shares of
Common Stock included in such dividend or distribution shall
not be deemed "outstanding at the close of business on the
date fixed for such determination" within the meaning of
clause (i) of this proviso;
(v) The Company or any subsidiary of the Company
shall (x) by dividend or otherwise, distribute to all holders
of its Common Stock cash in (or fix any record date for any
such distribution), or (y) repurchase or reacquire shares of
its Common Stock (other than an Option Share Surrender) for,
in either case, an aggregate amount that, combined with (1)
the aggregate amount of any other such distributions to all
holders of its Common Stock made exclusively in cash after the
Issuance Date and within the 12 months preceding the date of
payment of such distribution, and in respect of which no
adjustment pursuant to this clause (v) has been made, (2) the
aggregate amount of any cash plus the fair market value (as
determined in good faith by a resolution of the Board of
Directors of the Company) of consideration paid in respect of
any repurchase or other reacquisition by the Company or any
subsidiary of the Company of any shares of Common Stock (other
than an Option Share Surrender) made after the Issuance Date
and within the 12 months preceding the date of payment of such
distribution or making of such repurchase or reacquisition, as
the case may be, and in respect of which no adjustment
pursuant to this clause (v) has been made, and (3) the
aggregate of any cash plus the fair market value (as
determined in good faith by a resolution of the Board of
Directors of the Company) of consideration payable in respect
of any Tender Offer by the Company or any of its subsidiaries
for all or any portion of the Common Stock concluded within
the 12 months preceding the date of payment of such
distribution or completion of such repurchase or
reacquisition, as the case may be, and in respect of which no
adjustment pursuant to clause (vi) of this proviso has been
made (such aggregate amount combined with the amounts in
clauses (1), (2) and (3) above being the "Combined Amount"),
exceeds 10% of the product of the Market Price (determined
without regard to this proviso) for any day in such
Measurement Period or such other period which day is prior to
the earlier of (A) the record date
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<PAGE> 7
with respect to such distribution and (B) the date on which
ex-dividend trading in the Common Stock with respect to such
distribution begins or the date of such repurchase or
reacquisition, as the case may be, times the number of shares
of Common Stock outstanding on such date, then, and in each
such case, the Market Price for each such day shall be reduced
so that the same shall equal the price determined by
multiplying the Market Price (determined without regard to
this proviso) for such day by a fraction (i) the numerator of
which shall be equal to the Market Price (determined without
regard to this proviso) for such day less an amount equal to
the quotient of (x) the excess of such Combined Amount over
such 10% and (y) the number of shares of Common Stock
outstanding on such day and (ii) the denominator of which
shall be equal to the Market Price (determined without regard
to this proviso) for such day; or
(vi) A Tender Offer made by the Company or any of its
subsidiaries for all or any portion of the Common Stock shall
expire and such Tender Offer (as amended upon the expiration
thereof) shall require the payment to stockholders (based on
the acceptance (up to any maximum specified in the terms of
the Tender Offer) of Purchased Shares (as defined below)) of
an aggregate consideration having a fair market value (as
determined in good faith by resolution of the Board of
Directors of the Company) that combined together with (1) the
aggregate of the cash plus the fair market value (as
determined in good faith by a resolution of the Board of
Directors of the Company), as of the expiration of such Tender
Offer, of consideration payable in respect of any other Tender
Offers, by the Company or any of its subsidiaries for all or
any portion of the Common Stock expiring within the 12 months
preceding the expiration of such Tender Offer and in respect
of which no adjustment pursuant to this clause (vi) has been
made, (2) the aggregate amount of any cash plus the fair
market value (as determined in good faith by a resolution of
the Board of Directors of the Company) of consideration paid
in respect of any repurchase or other reacquisition by the
Company or any subsidiary of the Company of any shares of
Common Stock (other than an Option Share Surrender) made after
the Issuance Date and within the 12 months preceding the
expiration of such Tender Offer and in respect of which no
adjustment pursuant to clause (v) of this proviso has been
made, and (3) the aggregate amount of any distributions to all
holders of Common Stock made exclusively in cash within 12
months preceding the expiration of such Tender Offer and in
respect of which no adjustment pursuant to clause (v) of this
proviso has been made, exceeds 10% of the product of the
Market Price (determined without regard to this proviso) for
any day in such period times the number of shares of Common
Stock outstanding on such day, then, and in each such case,
the Market Price for such day shall be reduced so that the
same shall equal the price determined by multiplying the
Market Price (determined without regard to this proviso) for
such day by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding on such day
multiplied by the Market Price (determined without regard to
this proviso) for such day and the denominator of which shall
be the sum of (x) the fair market value (determined as
aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum
specified in the terms of the Tender Offer) of all shares
validly tendered and not withdrawn as of the last time tenders
could have been made pursuant to such Tender Offer (the
"Expiration Time") (the shares deemed so accepted, up to any
such maximum, being referred to as the "Purchased Shares") and
(y) the product of
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<PAGE> 8
the number of shares of Common Stock outstanding (less any
Purchased Shares) on such day times the Market Price
(determined without regard to this proviso) of the Common
Stock on the Trading Day next succeeding the Expiration Time.
If the application of this clause (vi) to any Tender Offer
would result in an increase in the Market Price (determined
without regard to this proviso) for any trade, no adjustment
shall be made for such Tender Offer under this clause (vi) for
such day.
"Measurement Period" means, with respect to any Adjustment
Date, the period of 30 consecutive Trading Days ending on the Trading
Day prior to such Adjustment Date.
"Nasdaq" means the Nasdaq National Market.
"Nasdaq SmallCap" means the Nasdaq SmallCap Market.
"1934 Act" means the Securities Exchange Act of 1934, as
amended.
"1933 Act" means the Securities Act of 1933, as amended.
"Other Class B Warrants" means the Common Stock Purchase
Warrants, Class B issued by the Company pursuant to the Other
Subscription Agreement.
"Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person
(corporate or otherwise) which the Holder at any time shall be entitled
to receive, or shall have received, on the exercise of this Warrant, in
lieu of or in addition to Common Stock, or which at any time shall be
issuable or shall have been issued in exchange for or in replacement of
Common Stock or Other Securities pursuant to Section 4.
"Other Subscription Agreement" means the other subscription
agreement for the purchase of shares of Common Stock and the
acquisition of common stock purchase warrants entered into in
connection with the Subscription Agreement, as amended from time to
time in accordance with its terms.
"Purchase Price" means the greater of (x) $.01 per share or
(y) the par value per share of the Common Stock.
"Quarterly Period" means the 90-day period commencing on each
Adjustment Date.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of December 7, 1999, by and between the Company and
the original Holder of this Warrant, as amended from time to time in
accordance with its terms.
"Registration Statement" shall have the meaning provided in
the Registration Rights Agreement.
"Repurchase Date" means the date of repurchase by the Company
of the Securities pursuant to Section 1.3.
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<PAGE> 9
"Repurchase Notice" means a notice given by the Company to the
Holder pursuant to Section 1.3(c) exercising the Company's right to
repurchase all of the Securities pursuant to Section 1.3(b) which
states (1) the number of shares of Common Stock (including shares
issuable upon exercise of this Warrant) which are to be repurchased,
(2) the Repurchase Price and the formula for determining the same,
determined in accordance herewith and (3) the Repurchase Date.
"Repurchase Price" means, for each share of Common Stock
repurchased pursuant to Section 1.3, the product of (x) the arithmetic
average of the Market Price on each of the five consecutive Trading
Days ending on and including the Adjustment Date following which the
Repurchase Notice is given times (y) the Adjustment Factor for such
Adjustment Date.
"Second Adjustment Date" means the date which is 90 days after
the First Adjustment Date.
"Securities" as of any date means (1) the Initial Shares which
are then held by the Holder, (2) the Class B Warrant Shares which are
then held by the Holder and (3) this Warrant.
"Share Limit" means 1,000,000 shares of Common Stock (subject
to equitable adjustment from time to time on terms reasonably
acceptable to the Holder for stock splits, stock dividends,
combinations, recapitalizations, reclassifications, distributions,
Tender Offers and similar events occurring after the Issuance Date).
"Share Limitation Event" means a time at which the Company is
unable to issue all shares of Common Stock otherwise required to be
issued upon exercise of this Warrant by reason of the restrictions set
forth in the Shareholder Approval Rule and the Company has not obtained
a waiver thereof.
"Shareholder Approval" shall mean the approval by a majority
of the votes cast by the holders of shares of Common Stock (in person
or by proxy) at a meeting of the stockholders of the Company (duly
convened at which a quorum was present), or a unanimous written consent
of holders of shares of Common Stock given without a meeting, of the
issuance by the Company of 20% or more of the Common Stock of the
Company outstanding on the Issuance Date for less than the greater of
the book or market value of such Common Stock, as and to the extent
required under the Shareholder Approval Rule.
"Shareholder Approval Rule" means Rule 4460(i)(1)(D) of Nasdaq
as in effect from time to time or any successor, replacement or similar
rule or regulation of Nasdaq or any other principal securities market
on which the Common Stock is listed for trading.
"Shares" shall have the meaning provided in the Subscription
Agreement.
"Specified Number" means the number of shares of Common Stock
for which this Warrant is exercisable from time to time as determined
in accordance with Section 1.2.
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<PAGE> 10
"Subscription Agreement" means the Subscription Agreement,
dated as of December 7, 1999, by and between the Company and the
original Holder of this Warrant, as amended from time to time in
accordance with its terms.
"Tender Offer" means a tender offer or exchange offer.
"Total Common Shares" as of any date means the sum of (1) the
number of Initial Shares plus (2) the number of Class B Warrant Shares
plus (3) the number of shares of Common Stock which are issuable upon
exercise of this Warrant on such date without taking into account the
limitations in Sections 1.1(b), 1.1(c) and 1.3(a).
"Trading Day" means a day on which the principal securities
market for the Common Stock is open for general trading of securities.
1. EXERCISE OF WARRANT.
1.1 EXERCISE. (a) Subject to the limitations on exercises in
Sections 1.1(b), 1.1(c) and 1.3(a), this Warrant may be exercised by the Holder
hereof at any time or from time to time during the Exercise Period by delivery
of the subscription form annexed hereto (duly executed by the Holder) to the
Company and by making payment, in cash or by certified or official bank check
payable to the order of the Company, in the amount obtained by multiplying (a)
the number of shares of Common Stock designated by the Holder in the
subscription form by (b) the Purchase Price. If at the request of the Company
the subscription form is delivered to the Company's transfer agent for the
Common Stock, the Holder shall provide a copy of the subscription form to the
Company at the time of exercise and the Company will confirm the exercise
instructions given therein by notice to the Company's transfer agent within one
Trading Day after receiving such subscription form. The number of shares of
Common Stock for which this Warrant may be exercised at any time during each
Quarterly Period shall be the then applicable Specified Number less the number
of shares, if any, for which this Warrant has previously been exercised during
such Quarterly Period. Upon each exercise of this Warrant, the Holder shall not
be required to surrender this Warrant to the Company unless the Holder has no
further rights to purchase shares of Common Stock hereunder. The Holder and the
Company shall maintain records showing the number of shares purchased in
connection with each exercise of this Warrant and the dates of such exercises or
shall use such other method, satisfactory to the Holder and the Company, so as
to not require physical surrender of this Warrant upon each such exercise.
(b) Notwithstanding any other provision of this Warrant, in no
event shall the Holder be entitled at any time to purchase a number of shares of
Common Stock on exercise of this Warrant in excess of that number of shares upon
purchase of which the sum of (1) the number of shares of Common Stock
beneficially owned by the Holder and all persons whose beneficial ownership of
shares of Common Stock would be aggregated with the Holder's beneficial
ownership of shares of Common Stock for purposes of Section 13(d) of the 1934
Act and Regulation 13D-G thereunder (each such person other than the Holder an
"Aggregated Person" and all such persons other than the Holder, collectively,
the "Aggregated Persons") (other than shares of Common Stock deemed beneficially
owned through the ownership by the Holder and all Aggregated Persons of the
Holder of the unexercised portion of this Warrant and the unexercised or
unconverted portion of any other security of the Company which contains similar
provisions) and (2) the number of shares of Common Stock issuable upon exercise
of the portion of this Warrant with respect to which the determination in this
sentence is being made, would result in beneficial ownership by the Holder and
all Aggregated Persons of the
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<PAGE> 11
Holder of more than 4.9% of the outstanding shares of Common Stock. For purposes
of the immediately preceding sentence, beneficial ownership shall be determined
in accordance with Section 13(d) of the 1934 Act and Regulation 13D-G
thereunder, except as otherwise provided in clause (1) of the immediately
preceding sentence.
(c) Notwithstanding any other provision of this Warrant, in no
event shall the Holder be entitled to purchase any shares of Common Stock on
exercise of this Warrant unless and until the Holder shall have sold or
otherwise transferred all of the Initial Shares to one or more unaffiliated
purchasers or transferees. On or prior to the date of the first exercise of this
Warrant, the Holder shall give notice to the Company that all of the Initial
Shares have been sold or transferred in accordance with the immediately
preceding sentence.
1.2 DETERMINATION OF SPECIFIED NUMBER. (a) On each Adjustment
Date, the number of Adjustment Shares shall be computed as follows:
AS = [(C x I x F) / A] - C
where:
AS = Adjustment Shares
C = Common Shares Held
I = on the First Adjustment Date, the Initial
Purchase Price; on each subsequent Adjustment
Date, the Adjustment Price determined on the
immediately preceding Adjustment Date
A = Adjustment Price
F = Adjustment Factor
(b) For each Adjustment Date on which the number of Adjustment
Shares determined in accordance with Section 1.2(a) is zero or a positive
number,
(1) on the First Adjustment Date, the Specified Number shall
equal the number of Adjustment Shares; and
(2) on each subsequent Adjustment Date, the Specified Number
shall equal (x) the Specified Number determined on the immediately
preceding Adjustment Date plus (y) the number of Adjustment Shares less
(z) the number of shares of Common Stock for which this Warrant was
exercised during the most recently completed Quarterly Period.
(c) For each Adjustment Date after the First Adjustment Date
on which the number of Adjustment Shares determined in accordance with Section
1.2(a) is a negative number, the Specified Number shall equal (x) the Specified
Number determined on the immediately preceding Adjustment Date less (y) the sum
of (i) the number of Adjustment Shares (considered as a positive number for the
purposes of this calculation) plus (ii) the number of shares of Common Stock for
which this Warrant was exercised during the most recently completed Quarterly
Period; provided, however, that in no event shall the Specified Number be less
than zero.
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<PAGE> 12
(d) On each Adjustment Date or within three Trading Days
thereafter, the Holder shall give an Adjustment Notice in the form attached
hereto to the Company. If the Holder fails to give an Adjustment Notice within
three Trading Days after any Adjustment Date, the Company may notify the Holder
of such failure and, if the Holder does not deliver such Adjustment Notice
within three Trading Days after such notice of failure is given to the Holder,
the Company shall give such Adjustment Notice to the Holder. Absent manifest
error, the Adjustment Notice shall be binding on the Company and the Holder for
purposes of making the determinations required by this Section 1.2. The Company
and the Holder shall use their best efforts to promptly correct any error in any
Adjustment Notice.
1.3 MAXIMUM SHARE LIMITATION; COMPANY REPURCHASE RIGHT. (a)
Prior to the date which is 361 days after the Issuance Date, this Warrant may
not be exercised to purchase shares of Common Stock to the extent, and only to
the extent, such exercise would cause the Total Common Shares of the Holder to
exceed the Share Limit.
(b) If (i) on any Adjustment Date occurring after the third
Adjustment Date the Total Common Shares of the Holder exceed the Share Limit,
(ii) the Company shall be in compliance in all material respects with its
obligations to the Holder (including, without limitation, its obligations under
this Warrant, the Class A Warrants, the Subscription Agreement and the
Registration Rights Agreement), (iii) on the date the Repurchase Notice is given
and at all times until the Repurchase Date, the Registration Statement is
effective and available for use by the Holder for the resale of its Shares and
(iv) on the date the Repurchase Notice is given and on the Repurchase Date, the
Company has available unrestricted Cash and Cash Equivalent Balances not less
than the aggregate amount to be paid to repurchase shares of Common Stock
pursuant to Section 1.3 of this Warrant and the Other Class B Warrants, then the
Company shall have the right to repurchase the Securities held by the Holder in
accordance with Section 1.3(c).
(c) To exercise its repurchase right, the Company shall give a
Repurchase Notice, not more frequently than once in any period of 180
consecutive days, on the Trading Day immediately following an Adjustment Date
occurring after the third Adjustment Date. If the Repurchase Notice is timely
given, the Company shall be obligated to repurchase all, or any part, of the
Securities on a Repurchase Date which is not less than 20 Trading Days or more
than 30 Trading Days after the date of the Repurchase Notice. If this Warrant is
to be repurchased pursuant to this Section 1.3, the Company shall repurchase
this Warrant as if this Warrant had been exercised, to the extent of the portion
of this Warrant being repurchased, on the Repurchase Date and the shares of
Common Stock issuable upon such exercise were held directly by the Holder and
were being repurchased. On the Repurchase Date, the Company shall make payment
to the Holder of the applicable Repurchase Price multiplied by the number of
shares of Common Stock to be repurchased in immediately available funds to such
account as specified by the Holder in writing to the Company at least one
Trading Day prior to the Repurchase Date. Notwithstanding anything to the
contrary in the foregoing provisions of this Section 1.3, prior to the
Repurchase Date, or such later date on which the Repurchase Price is paid, the
Holder shall be free to exercise this Warrant and to sell or otherwise transfer
any shares of Common Stock which are subject to the Repurchase Notice with
respect to such Repurchase Date.
1.4 NASDAQ SHARE LIMITATION; HOLDER REPURCHASE RIGHT. (a) The
Company shall not be required to issue any shares of Common Stock upon exercise
of this Warrant to the extent, and only to the extent, such issuance would
violate the Shareholder
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<PAGE> 13
Approval Rule. In such event, at the option of the Holder, the Company shall be
required to repurchase from the Holder the Holder's rights hereunder with
respect to the number of such issuable shares of Common Stock which may not be
issued upon exercise of this Warrant by reason of the Shareholder Approval Rule.
To exercise such repurchase right, the Holder shall give the Company written
notice thereof stating the number of such issuable shares to be repurchased and
the repurchase date, which date shall not be earlier than ten Trading Days and
not later than 20 Trading Days after such notice is given to the Company. On the
specified repurchase date the Company shall make payment to the Holder of the
applicable Holder Repurchase Price multiplied by the number of such issuable
shares to be repurchased in immediately available funds to such account as
specified by the Buyer in writing to the Company at least one Trading Day prior
to the repurchase date. Upon such repurchase, the Specified Number shall be
reduced by the number of such issuable shares deemed to be repurchased.
(b) Notwithstanding any other provision of this Warrant, if a
Share Limitation Event occurs by reason of events which are not solely within
the control of the Company, the Company shall have the right to give a Control
Notice to the Holder at any time after such Share Limitation Event occurs and
prior to the earlier of (1) the date on which the Holder's right (other than as
limited by this Section 1.4(b)) to receive a cash payment pursuant to Section
1.4(a) by reason of the occurrence of such Share Limitation Event expires and
(2) the date on which the Company is obligated to make a payment to the Holder
pursuant to Section 1.4(a). For purposes of this Section 1.4(b), a Share
Limitation Event shall be deemed to have occurred by reason of events which are
not solely within the control of the Company if the requirement of the Company
to make a payment pursuant to Section 1.4(a) would result in the Company being
required to classify the shares of Common Stock issued upon exercise of this
Warrant as redeemable common stock on a balance sheet of the Company prepared in
accordance with Generally Accepted Accounting Principles. To the extent any
facts are assumed for purposes of either the Company's conclusion as to such
classification of such shares or the Auditors' Determination required to be
delivered as part of the Control Notice, the validity of such conclusion or
determination shall depend on such assumed facts being true and complete in all
material respects. If the Company timely gives a Control Notice to the Holder,
then in lieu of making the payment required by Section 1.4(a) pursuant to a
notice given by the Holder by reason of such Share Limitation Event, on the next
Adjustment Date to occur the Adjustment Price shall be reduced to 80% of the
amount such Adjustment Price would otherwise be. Such reduction of the
Adjustment Price shall continue in effect until the earliest of (x) the date
which is 90 days after the Shareholder Approval shall have been obtained from
the stockholders of the Company or waived by the Nasdaq or other securities
market on which the Common Stock is then listed, (y) the date any further
reduction of the Adjustment Price is made following a failure to obtain the
Shareholder Approval as provided below, and (z) the date when this Warrant is no
longer outstanding. On or after the date the Company gives such Control Notice,
upon notice from the Holder, the Company promptly shall call a special meeting
of its stockholders, to be held not later than 60 days after such notice is
given, to seek the Shareholder Approval for the issuance of all shares of Common
Stock issuable upon exercise of this Warrant without regard to the Shareholder
Approval Rule and shall use its best efforts to obtain the Shareholder Approval.
The Company shall prepare and file with the SEC within 30 days after such notice
is given preliminary proxy materials which set forth a proposal to seek such
Shareholder Approval. The Company shall provide the Holder an opportunity to
consult with the Company regarding the content of such proxy materials insofar
as it relates to the Shareholder Approval by providing copies of such
preliminary proxy materials and any revised preliminary proxy materials to the
Holder within a reasonable period of time prior to their filing with the SEC.
The Company shall furnish to the Holder a copy of its definitive proxy materials
for such special meeting and
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<PAGE> 14
any amendments or supplements thereto promptly after the same are mailed to
stockholders or filed with the SEC. Upon the earlier of (i) the failure to
obtain the Shareholder Approval at the special meeting, of which failure the
Company shall so notify the Holder, or (ii) the Company's failure to act in good
faith in promptly holding such special meeting and seeking the Shareholder
Approval, such of the following as shall be specified by notice to the Company
from the Holder shall occur: (1) on the next Adjustment Date to occur the
Adjustment Price shall be reduced to 60% of the amount such Adjustment Price
would otherwise be and (2) the Company shall promptly file applications and take
all other actions necessary to (i) list the Common Stock for trading and
quotation on the OTC Bulletin Board or such other securities market or exchange
which will not restrict the number of shares of Common Stock issuable upon
exercise of this Warrant and (ii) upon filing such applications, request the
immediate removal of the Common Stock from listing on the securities market on
which it is then listed which restricts the issuance of shares of Common Stock
upon exercise of this Warrant without the Shareholder Approval.
2. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE. As soon
as practicable after the exercise of this Warrant, and in any event within three
Trading Days thereafter, the Company at its expense (including the payment by it
of any applicable issue or stamp taxes) will cause to be issued in the name of
and delivered to the Holder hereof, or as the Holder (upon payment by the Holder
of any applicable transfer taxes) may direct, a certificate or certificates for
the number of fully paid and nonassessable shares of Common Stock (or Other
Securities) to which the Holder shall be entitled on such exercise, in such
denominations as may be requested by the Holder, plus, in lieu of any fractional
share to which the Holder would otherwise be entitled, cash equal to such
fraction multiplied by the then current fair market value (as reasonably
determined by the Company) of one full share, together with any other stock or
other securities and property (including cash, where applicable) to which the
Holder is entitled upon such exercise pursuant to Section 1 or otherwise. Upon
exercise of this Warrant as provided herein, the Company's obligation to issue
and deliver the certificates for Common Stock shall be absolute and
unconditional, irrespective of the absence of any action by the Holder to
enforce the same, any waiver or consent with respect to any provision thereof,
the recovery of any judgment against any person or any action to enforce the
same, any failure or delay in the enforcement of any other obligation of the
Company to the Holder, or any setoff, counterclaim, recoupment, limitation or
termination, or any breach or alleged breach by the Holder or any other person
of any obligation to the Company, and irrespective of any other circumstance
which might otherwise limit such obligation of the Company to the Holder in
connection with such exercise. If the Company fails to issue and deliver the
certificates for the Common Stock to the Holder pursuant to the first sentence
of this paragraph as and when required to do so, in addition to any other
liabilities the Company may have hereunder and under applicable law, the Company
shall pay or reimburse the Holder on demand for all out-of-pocket expenses
including, without limitation, reasonable fees and expenses of legal counsel
incurred by the Holder as a result of such failure.
3. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY, ETC.;
RECLASSIFICATION, ETC. In case at any time or from time to time after the
Issuance Date, all the holders of Common Stock (or Other Securities) shall have
received, or (on or after the record date fixed for the determination of
stockholders eligible to receive) shall have become entitled to receive, without
payment therefor,
(a) other or additional stock or other securities or property
(other than cash) by way of dividend, or
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<PAGE> 15
(b) any cash (excluding cash dividends payable solely out of
earnings or earned surplus of the Company), or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock-split (adjustments in respect of which are provided
for in Section 5), then and in each such case the Holder, on the exercise hereof
as provided in Section 1, shall be entitled to receive the amount of stock and
other securities and property (including cash in the cases referred to in
subdivisions (b) and (c) of this Section 3) which the Holder would hold on the
date of such exercise if on the date thereof the Holder had been the holder of
record of the number of shares of Common Stock called for on the face of this
Warrant and had thereafter, during the period from the date hereof to and
including the date of such exercise, retained such shares and all such other or
additional stock and other securities and property (including cash in the case
referred to in subdivisions (b) and (c) of this Section 3) receivable by the
Holder as aforesaid during such period, giving effect to all adjustments called
for during such period by Section 4. Notwithstanding anything in this Section 3
to the contrary, no adjustments pursuant to this Section 3 shall actually be
made until the cumulative effect of the adjustments called for by this Section 3
since the date of the last adjustment actually made would change the amount of
stock or other securities and property which the Holder would hold by more than
1%.
4. EXERCISE UPON REORGANIZATION, CONSOLIDATION, MERGER, ETC.
In case at any time or from time to time after the Issuance Date, the Company
shall (a) effect a reorganization, (b) consolidate with or merge into any other
person, or (c) transfer all or substantially all of its properties or assets to
any other person under any plan or arrangement contemplating the dissolution of
the Company, then, in each such case, as a condition of such reorganization,
consolidation, merger, sale or conveyance, the Company shall give at least 30
days notice to the Holder of such pending transaction whereby the Holder shall
have the right to exercise this Warrant prior to any such reorganization,
consolidation, merger, sale or conveyance. Any exercise of this Warrant pursuant
to notice under this Section shall be conditioned upon the closing of such
reorganization, consolidation, merger, sale or conveyance which is the subject
of the notice and the exercise of this Warrant shall not be deemed to have
occurred until immediately prior to the closing of such transaction.
5. ADJUSTMENT FOR EXTRAORDINARY EVENTS. In the event that
after the Issuance Date the Company shall (i) issue additional shares of Common
Stock as a dividend or other distribution on outstanding Common Stock, (ii)
subdivide or reclassify its outstanding share of Common Stock, or (iii) combine
its outstanding share of Common Stock into a smaller number of shares of Common
Stock, then, in each event, the Specified Number shall, simultaneously with the
happening of such event, be adjusted by multiplying the Specified Number in
effect immediately prior to such event by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately after such
event and the denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such event, and the product so obtained shall
thereafter be the Specified Number then in effect. The Specified Number, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described in this Section 5.
6. FURTHER ASSURANCES. The Company will take all action that
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and
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<PAGE> 16
nonassessable shares of stock, free from all taxes, liens and charges with
respect to the issue thereof, on the exercise of all or any portion of this
Warrant from time to time outstanding.
7. NOTICES OF RECORD DATE, ETC. In the event of
(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend on, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other
right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any transfer of all or substantially all of the assets of
the Company to or consolidation or merger of the Company with or into
any other person (other than a wholly-owned subsidiary of the Company),
or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then and in each such event the Company will mail or cause to be mailed to the
Holder, at least ten days prior to such record date, a notice specifying (i) the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock (or Other
Securities) shall be entitled to exchange their shares of Common Stock (or Other
Securities) for securities or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up, and (iii) the amount and character of
any stock or other securities, or rights or options with respect thereto,
proposed to be issued or granted, the date of such proposed issue or grant and
the persons or class of persons to whom such proposed issue or grant is to be
offered or made. Such notice shall also state that the action in question or the
record date is subject to the effectiveness of a registration statement under
the 1933 Act, or a favorable vote of stockholders, if either is required. Such
notice shall be mailed at least ten days prior to the date specified in such
notice on which any such action is to be taken or the record date, whichever is
earlier.
8. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF
WARRANTS. The Company will at all times reserve and keep available out of its
authorized but unissued shares of capital stock, solely for issuance and
delivery on the exercise of this Warrant, a sufficient number of shares of
Common Stock (or Other Securities) to effect the full exercise of this Warrant
and the exercise, conversion or exchange of any other warrant or security of the
Company exercisable for, convertible into, exchangeable for or otherwise
entitling the holder to acquire shares of Common Stock (or Other Securities),
and if at any time the number of authorized but unissued shares of Common Stock
(or Other Securities) shall not be sufficient to effect such exercise,
conversion or exchange, the Company shall take such action as may be necessary
to increase its authorized but unissued shares of Common Stock (or Other
Securities) to such number as shall be sufficient for such purposes.
9. TRANSFER OF WARRANT. This Warrant shall inure to the
benefit of the successors to and assigns of the Holder. This Warrant and all
rights hereunder, in whole or in part, are registrable at the office or agency
of the Company referred to below by the Holder
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<PAGE> 17
hereof in person or by his duly authorized attorney, upon surrender of this
Warrant properly endorsed.
10. REGISTER OF WARRANTS. The Company shall maintain, at the
principal office of the Company (or such other office as it may designate by
notice to the Holder hereof), a register in which the Company shall record the
name and address of the person in whose name this Warrant has been issued, as
well as the name and address of each successor and prior owner of such Warrant.
The Company shall be entitled to treat the person in whose name this Warrant is
so registered as the sole and absolute owner of this Warrant for all purposes.
11. EXCHANGE OF WARRANT. This Warrant is exchangeable, upon
the surrender hereof by the Holder hereof at the office or agency of the Company
referred to in Section 10, for one or more new Warrants of like tenor
representing in the aggregate the right to subscribe for and purchase the number
of shares of Common Stock which may be subscribed for and purchased hereunder,
each of such new Warrants to represent the right to subscribe for and purchase
such number of shares as shall be designated by said Holder hereof at the time
of such surrender.
12. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
13. WARRANT AGENT. The Company may, by written notice to the
Holder, appoint the transfer agent and registrar for the Common Stock as the
Company's agent for the purpose of issuing shares of Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 1, and the
Company may, by notice to the Holder, appoint an agent having an office in the
United States of America for the purpose of exchanging this Warrant pursuant to
Section 11 and replacing this Warrant pursuant to Section 12, or either of the
foregoing, and thereafter any such exchange or replacement, as the case may be,
shall be made at such office by such agent.
14. REMEDIES. The Company stipulates that the remedies at law
of the Holder in the event of any default or threatened default by the Company
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate, and that such terms may be specifically enforced
by a decree for the specific performance of any agreement contained herein or by
an injunction against a violation of any of the terms hereof or otherwise.
15. NO RIGHTS OR LIABILITIES AS A STOCKHOLDER. This Warrant
shall not entitle the Holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision of this Warrant, in the absence of
affirmative action by the Holder hereof to purchase Common Stock, and no mere
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of the Holder for the Purchase Price or as a stockholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
16. NOTICES, ETC. All notices and other communications from
the Company to the registered Holder or from the registered Holder to the
Company shall be delivered personally (which shall include telephone line
facsimile transmission with answer back
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<PAGE> 18
confirmation) or by courier and shall be effective upon receipt, addressed to
each party at the address or telephone line facsimile transmission number for
each party set forth in the Subscription Agreement or at such other address or
telephone line facsimile transmission number as a party shall have provided to
the other party in accordance with this provision.
17. TRANSFER RESTRICTIONS. By acceptance of this Warrant, the
Holder represents to the Company that this Warrant is being acquired for the
Holder's own account and for the purpose of investment and not with a view to,
or for sale in connection with, the distribution thereof, nor with any present
intention of distributing or selling this Warrant or the Common Stock issuable
upon exercise of this Warrant. The Holder acknowledges and agrees that this
Warrant and, except as otherwise provided in the Registration Rights Agreement,
the shares of Common Stock issuable upon exercise of this Warrant (if any) have
not been (and at the time of acquisition by the Holder, will not have been or
will not be), registered under the 1933 Act or under the securities laws of any
state, in reliance upon certain exemptive provisions of such statutes. The
Holder further recognizes and acknowledges that (a) because this Warrant and,
except as provided in the Registration Rights Agreement, the Common Stock
issuable upon exercise of this Warrant (if any) are unregistered, they may not
be eligible for resale, and may only be resold in the future pursuant to an
effective registration statement under the 1933 Act and any applicable state
securities laws, or pursuant to a valid exemption from such registration
requirements and (b) the transfer of this Warrant and the Common Stock issuable
upon the exercise hereof are subject to the restrictions on transfer set forth
in the Registration Rights Agreement and in Section 4 of the Subscription
Agreement. Unless the shares of Common Stock issuable upon exercise of this
Warrant have theretofore been registered for resale under the 1933 Act, the
Company may require, as a condition to the issuance of Common Stock upon the
exercise of this Warrant a confirmation as of the date of exercise of the
Holder's representations pursuant to this Section 17.
18. LEGEND. Unless theretofore registered for resale under the
1933 Act, each certificate for shares issued upon exercise of this Warrant shall
bear the following legend:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be resold, transferred or assigned
in the absence of an effective registration statement for the
securities under the Securities Act of 1933, as amended, or an opinion
of counsel that registration is not required under said Act.
19. ATTORNEYS' FEES. In any litigation, arbitration or court
proceeding between the Company and Holder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant.
20. AMENDMENT; WAIVER. This Warrant and any terms hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. Notwithstanding any other provision of this Warrant or
the Subscription Agreement, in addition to the requirements of the immediately
preceding sentence, any amendment of (x) Section 1.1(b), (y) the definition of
the term Aggregated Person or (z) this sentence shall require approval by the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock, present in person or represented by proxy at a duly convened
meeting of stockholders of the Company, and entitled to vote, or the consent
thereto in writing by holders of a majority of the outstanding shares of Common
Stock, and the stockholders of the Company are hereby expressly made third party
beneficiaries of this sentence.
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<PAGE> 19
21. MISCELLANEOUS. This Warrant shall be construed and
enforced in accordance with and governed by the internal laws of the State of
Colorado. The headings in this Warrant are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.
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<PAGE> 20
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed on its behalf by one of its officers thereunto duly authorized.
Dated: December 7, 1999 RMI.NET, INC.
By:
---------------------------------
Title: Chairman & CEO
-----------------------------
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<PAGE> 21
FORM OF SUBSCRIPTION
RMI.NET, INC.
(To be signed only on exercise of Warrant)
TO: RMI.NET, Inc.
999 18th Street
Suite 2201
Denver, Colorado 80202
Attention: Chief Financial Officer
1. The undersigned Holder of the attached original, executed Warrant
hereby elects to exercise its purchase right under such Warrant with respect to
______________ shares of Common Stock, as defined in the Warrant, of RMI.NET,
Inc., a Delaware corporation (the "Company").
2. The undersigned Holder elects to pay the aggregate purchase price
for such shares of Common Stock (the "Exercise Shares") (i) by lawful money of
the United States or the enclosed certified or official bank check payable in
United States dollars to the order of the Company in the amount of $___________,
or (ii) by wire transfer of United States funds to the account of the Company in
the amount of $____________, which transfer has been made before or
simultaneously with the delivery of this Form of Subscription pursuant to the
instructions of the Company.
3. Please issue a stock certificate or certificates representing the
appropriate number of shares of Common Stock in the name of the undersigned or
in such other name as is specified below:
Name:
Address:
---------------------------------
---------------------------------
4. The undersigned Holder hereby represents to the Company that the
exercise of the Warrant elected hereby does not violate Section 1.1(b) of the
Warrant.
Dated: HOLDER:
------------ ----, ----
---------------------------------
<PAGE> 22
By: ---------------------------------
(Signature must conform to name of
Holder as specified on the face of the
Warrant)
Name:
Title:
Address:
---------------------------------
-----------------------------------------
<PAGE> 23
ADJUSTMENT NOTICE
TO: RMI.NET, Inc.
999 18th Street
Suite 2201
Denver, Colorado 80202
Attention: Chief Financial Officer
Facsimile No.: (303) 672-0711
This Adjustment Notice is given pursuant to the terms of the Common
Stock Purchase Warrant, Class B, dated December 7, 1999, issued by RMI.NET,
Inc., a Delaware corporation (the "Warrant"). Capitalized terms used herein and
not otherwise defined herein have the respective meanings provided in the
Warrant. The undersigned Holder hereby notifies the Company as follows:
(1) Adjustment Date:
---------------------------------
(2) Computation of number of Adjustment Shares ("AS")
pursuant to Section 1.2(a):
(a) Common Shares Held: ("C")
-----------------
(b) If First Adjustment Date, Initial
Purchase Price: $ ("I")
-----------
If subsequent Adjustment Date, Adjustment
Price on preceding Adjustment
Date: $ ("I")
--------------
(c) The Adjustment Price ("A") is based on
(check one):
p the Ceiling Price: $
--------
p the Average Market Price
p the Ceiling Price plus 50% of excess of
Average Market Price over $20.00
(d) To determine the Average Market Price, the
Market Price on each of the ____ Trading
Days during the Measurement Period on which
the lowest Market Price occurred was as
follows:
<TABLE>
<S> <C> <C> <C>
Date Price ($) Date Price ($)
---- --------- ---- ---------
- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ----------
</TABLE>
<PAGE> 24
- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ----------
(e) Average Market Price: $
---------
(f) Adjustment Factor: ("F")
-----------
(g) AS = [(C x I x F) /A] - C
Adjustment Shares:
--------------
(3) Specified Number on preceding Adjustment Date:
------------
(4) Shares issued upon exercises during last Quarterly
Period:
------------
(5) Specified Number on Adjustment Date:
---------------
NAME OF HOLDER:
Date:
--------------- ----------------------------------
By:
-------------------------------
Name:
Title:
<PAGE> 1
Exhibit 4.23
ANNEX IV
TO
SUBSCRIPTION
AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of December 7, 1999 (this
"Agreement"), is made by and between RMI.NET, INC., a Delaware corporation (the
"Company"), and the person named on the signature page hereto (the "Initial
Investor").
W I T N E S S E T H:
WHEREAS, in connection with the Subscription Agreement, dated as of
December 7, 1999, between the Initial Investor and the Company (the
"Subscription Agreement"), the Company has agreed, upon the terms and subject to
the conditions of the Subscription Agreement, to issue and sell to the Initial
Investor shares (the "Common Shares") of Common Stock, $.001 par value (the
"Common Stock"), of the Company, and to issue Common Stock Purchase Warrants,
Class A and Common Stock Purchase Warrants, Class B (collectively, the
"Warrants") to purchase shares (the "Warrant Shares") of Common Stock; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Subscription Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 Act"), and applicable state securities laws with respect to the Common
Shares and the Warrant Shares;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Initial
Investor hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have the following
meanings:
"Investor" or "Investors" means the Initial Investor and any transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
"Majority Holders" means those Investors who hold a majority in interest of
the Registrable Securities, the Warrants and the "Registrable Securities" and
"Warrants" as such terms are defined in the Other Registration Rights Agreement.
"Nasdaq" means the Nasdaq National Market.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Other Registration Rights Agreement" means the Registration Rights
Agreement entered into in connection with the Other Subscription Agreement.
<PAGE> 2
"Permitted Transferee" means any person (1) who is an "accredited investor"
as defined in Regulation D under the 1933 Act, (2) who is not a Restricted
Person named in a Restricted Person Resolution delivered to an Investor in
accordance with Section 4(a)(2) of the Subscription Agreement and (3) who,
immediately following the assignment of rights under this Agreement holds (x) at
least 50,000 shares of Common Stock or (y) Warrants which at the time of such
transfer are exercisable for at least 50,000 shares of Common Stock, or any
combination thereof (the 50,000 share amounts referred to in this definition
being subject to equitable adjustment from time to time on terms reasonably
acceptable to the Majority Holders for (i) stock splits, (ii) stock dividends,
(iii) combinations, (iv) capital reorganizations, (v) issuance to all holders of
Common Stock of rights or warrants to purchase shares of Common Stock and (vi)
similar events relating to the Common Stock, in each such case which occur on or
after the Closing Date).
"register," "registered," and "registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any
successor rule providing for offering securities on a continuous basis ("Rule
415"), and the declaration or ordering of effectiveness of such Registration
Statement by the SEC.
"Registrable Securities" means the Common Shares and the Warrant Shares. As
to any particular securities, such securities shall cease to be Registrable
Securities when they have been sold pursuant to an effective registration
statement or in compliance with Rule 144 or are eligible to be sold pursuant to
subsection (k) of Rule 144.
"Registration Period" means the period from the Closing Date to the earlier
of (i) the date which is five years after the SEC Effective Date, (ii) the date
on which each Investor may sell all of its Registrable Securities without
registration under the 1933 Act pursuant to subsection (k) of Rule 144, without
restriction on the manner of sale or the volume of securities which may be sold
in any period and without the requirement for the giving of any notice to, or
the making of any filing with, the SEC and (iii) the date on which the Investors
no longer beneficially own any Registrable Securities.
"Registration Statement" means a registration statement of the Company
under the 1933 Act, including any amendment thereto, required to be filed by the
Company pursuant to this Agreement.
"Rule 144" means Rule 144 promulgated under the 1933 Act or any other
similar rule or regulation of the SEC that may at any time permit a holder of
any securities to sell securities of the Company to the public without
registration under the 1933 Act.
"SEC" means the United States Securities and Exchange Commission.
"SEC Effective Date" means the date the Registration Statement is declared
effective by the SEC.
"SEC Filing Date" means the date the Registration Statement is first filed
with the SEC pursuant to Section 2(a).
(b) Capitalized terms defined in the introductory paragraph or the recitals
to this Agreement shall have the respective meanings therein provided.
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Subscription Agreement.
-2-
<PAGE> 3
2. REGISTRATION.
(a) MANDATORY REGISTRATION. (1) The Company shall prepare and, on or prior
to the date which is 45 days after the Closing Date, file with the SEC a
Registration Statement on Form S-3 which, on the date of filing with the SEC,
covers the resale by the Initial Investor of a number of shares of Common Stock
at least equal to the sum of (x) the number of Common Shares plus (y) the number
of Warrant Shares issuable upon the exercise in full of the Class A Warrants
plus (z) the number of Warrant Shares equal to 175% of the number of shares of
Common Stock issuable upon the exercise of the Class B Warrants, determined as
if the First Adjustment Date (as defined in the Class B Warrants) occurred and
the Class B Warrants were otherwise exercised in full for cash in accordance
with the terms thereof on the Trading Day prior to the SEC Filing Date (in each
case determined without regard to the limitations on beneficial ownership
contained in Section 1.1(b) of the Warrants). If at any time the number of
shares of Common Stock included in the Registration Statement required to be
filed as provided in the first sentence of this Section 2(a) shall be
insufficient to cover 100% of the number of Warrant Shares issuable upon
exercise of the unexercised portion of the Warrants, then promptly, but in no
event later than 20 days after such insufficiency shall occur, the Company shall
file with the SEC an additional Registration Statement on Form S-3 (which shall
not constitute a post-effective amendment to the Registration Statement filed
pursuant to the first sentence of this Section 2(a)), covering such number of
shares of Common Stock as shall be sufficient to permit such exercise. For all
purposes of this Agreement such additional Registration Statement shall be
deemed to be the Registration Statement required to be filed by the Company
pursuant to Section 2(a) of this Agreement, and the Company and the Investors
shall have the same rights and obligations with respect to such additional
Registration Statement as they shall have with respect to the initial
Registration Statement required to be filed by the Company pursuant to this
Section 2(a). The Registration Statement shall not include securities to be sold
for the account of any selling security holder other than the Investors and the
investors contemplated by the Other Registration Rights Agreement.
(2) Prior to the SEC Effective Date or during any time subsequent to the
SEC Effective Date when the Registration Statement for any reason is not
available for use by any Investor for the resale of any Registrable Securities,
the Company shall not file any other registration statement or any amendment
thereto with the SEC under the 1933 Act or request the acceleration of the
effectiveness of any other registration statement previously filed with the SEC,
other than any registration statement registering securities issued (w) pursuant
to compensation plans for employees, directors, officers, advisers or
consultants of the Company and in accordance with the terms of such plans as in
effect as of the date of this Agreement, (x) upon exercise of conversion,
exchange, purchase or similar rights issued, granted or given by the Company and
outstanding as of the date of this Agreement and disclosed in the SEC Reports or
the Subscription Agreement, (y) pursuant to a public offering underwritten on a
firm commitment basis registered under the 1933 Act or (z) as part of a
transaction involving a strategic alliance, acquisition of stock or assets,
merger, collaboration, joint venture, partnership or other similar arrangement
of the Company with another corporation, partnership or other business entity
which is engaged in a business similar to or related to the business of the
Company, so long as in the case of this clause (z) the Board of Directors of the
Company by resolution duly adopted (and a copy of which shall be furnished to
the Investor promptly after adoption) determines that such issuance is fair to
the holders of each class and series of capital stock of the Company and to the
Investor in respect of its equity interest in the Company that is represented by
the Shares and the Warrants.
(b) CERTAIN OFFERINGS. If any offering pursuant to a Registration Statement
pursuant to Section 2(a)(1) hereof involves an underwritten offering, Investors
who hold a majority in interest of the Registrable Securities subject to such
underwritten offering shall have the right to select one legal counsel and an
investment banker or bankers and manager or managers to administer the offering,
which investment banker or bankers or manager or managers shall be reasonably
satisfactory to the Company. The Investors who hold the Registrable Securities
to be included in such underwriting shall pay all underwriting discounts and
commissions and other fees and expenses of such investment banker or
-3-
<PAGE> 4
bankers and manager or managers so selected in accordance with this Section 2(b)
(other than fees and expenses relating to registration of Registrable Securities
under federal or state securities laws, which are payable by the Company
pursuant to Section 5 hereof) with respect to their Registrable Securities and
the fees and expenses of such legal counsel so selected by the Investors.
(c) CERTAIN PAYMENTS. If for any reason the Registration Statement covering
at least the number of shares of Common Stock referred to in clauses (x) and (y)
of Section 2(a)(1) is not declared effective by the SEC on or before the date
which is 150 days after the Closing Date, the Company shall pay the Initial
Investor an amount in cash equal to 1.5% of the Purchase Price for the Common
Shares for each period of 30 days after such 150th day during which the
Registration Statement is not effective (such amount to be prorated for any
period of less than 30 days). Each such payment shall be made by the Company to
the Initial Investor at the end of each such 30-day period by wire transfer of
immediately available funds to such account as shall be specified by the Initial
Investor in writing to the Company at least one Business Day prior to the date
of each payment. Any such amount which is not paid when due shall bear interest
at the rate of 14% per annum (or such other rate as shall be the maximum rate
allowable by applicable law) until paid in full.
(d) PIGGY-BACK REGISTRATIONS. If at any time the Company shall determine to
prepare and file with the SEC a registration statement relating to an offering
for its own account or the account of others under the 1933 Act of any of its
equity securities, other than a registration statement registering securities
issued (1) pursuant to compensation plans for employees, directors, officers,
advisers or consultants of the Company and in accordance with the terms of such
plans as in effect as of the date of the Agreement or (2) as part of a
transaction involving a strategic alliance, acquisition of stock or assets,
merger, collaboration, joint venture, partnership or other similar arrangement
of the Company with another corporation, partnership, or other business entity
which is engaged in a business similar to or related to the business of the
Company, so long as in the case of this clause (2) the Board of Directors of the
Company by resolution duly adopted (and a copy of which shall be furnished to
the Investor promptly after adoption) determines that such issuance is fair to
the holders of each class and series of capital stock of the Company and to the
Investor in respect of its equity interest in the Company that is represented by
the Shares and the Warrants, the Company shall send to each Investor who is
entitled to registration rights under this Section 2(d) written notice of such
determination and, if within ten days after receipt of such notice, such
Investor shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Registrable Securities such
Investor requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company, the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)' judgment, such limitation is necessary to effect an orderly
public distribution, then the Company shall be obligated to include in such
Registration Statement only such limited portion of the Registrable Securities
with respect to which such Investor has requested inclusion hereunder. Any
exclusion of Registrable Securities shall be made pro rata among the Investors
seeking to include Registrable Securities, in proportion to the number of
Registrable Securities sought to be included by such Investors; provided,
however, that the Company shall not exclude any Registrable Securities unless
the Company has first excluded all outstanding securities the holders of which
are not entitled by right to inclusion of securities in such Registration
Statement; and provided further, however, that, after giving effect to the
immediately preceding proviso, any exclusion of Registrable Securities shall be
made pro rata with holders of other securities having the right to include such
securities in the Registration Statement, based on the number of securities for
which registration is requested except to the extent such pro rata exclusion of
such other securities is prohibited under any written agreement entered into by
the Company with the holder of such other securities prior to the date of this
Agreement, in which case such other securities shall be excluded, if at all, in
accordance with the terms of such agreement. No right to registration of
Registrable Securities under this Section 2(d) shall be construed to limit any
registration required under Section 2(a) hereof. The obligations of the
-4-
<PAGE> 5
Company under this Section 2(d) may be waived by the Majority Holders and shall
expire after the Company has afforded the opportunity for the Investors to
exercise registration rights under this Section 2(d) for two registrations;
provided, however, that any Investor who shall have had any Registrable
Securities excluded from any Registration Statement in accordance with this
Section 2(d) shall be entitled to include in an additional Registration
Statement filed by the Company the Registrable Securities so excluded.
Notwithstanding any other provision of this Agreement, if the Registration
Statement required to be filed pursuant to Section 2(a) of this Agreement shall
have been ordered effective by the SEC and the Company shall have maintained the
effectiveness of such Registration Statement as required by this Agreement and
if the Company shall otherwise have complied in all material respects with its
obligations under this Agreement, then the Company shall not be obligated to
register any Registrable Securities on such Registration Statement referred to
in this Section 2(d).
(e) ELIGIBILITY FOR FORM S-3. The Company meets the requirements for the
use of Form S-3 for registration of the Registrable Securities for resale by the
Investors. The Company shall file all reports required to be filed by the
Company with the SEC in a timely manner so as to maintain such eligibility for
the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration of the
Registrable Securities, the Company shall:
(a) prepare promptly, and file with the SEC not later than 45 days after
the Closing Date, a Registration Statement with respect to the number of
Registrable Securities provided in Section 2(a), and thereafter to use its best
efforts to cause each Registration Statement relating to Registrable Securities
to become effective as soon as possible after such filing, and keep the
Registration Statement effective pursuant to Rule 415 at all times during the
Registration Period; submit to the SEC, within three Business Days after the
Company learns that no review of the Registration Statement will be made by the
staff of the SEC or that the staff of the SEC has no further comments on the
Registration Statement, as the case may be, a request for acceleration of
effectiveness of the Registration Statement to a time and date not later than 48
hours after the submission of such request; notify the Investors of the
effectiveness of the Registration Statement on the date the Registration
Statement is declared effective; and the Company represents and warrants to, and
covenants and agrees with, the Investors that the Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein), at the time it is first filed with the SEC, at the time it is ordered
effective by the SEC and at all times during which it is required to be
effective hereunder (and each such amendment and supplement at the time it is
filed with the SEC and at all times during which it is available for use in
connection with the offer and sale of the Registrable Securities) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
(b) prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to keep
the Registration Statement effective at all times during the Registration
Period, and, during the Registration Period, comply with the provisions of the
1933 Act with respect to the disposition of all Registrable Securities of the
Company covered by the Registration Statement until such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in the
Registration Statement;
(c) furnish to each Investor whose Registrable Securities are included in
the Registration Statement and its legal counsel, (1) promptly after the same is
prepared and publicly distributed, filed with the SEC or received by the
Company, one copy of the Registration Statement and
-5-
<PAGE> 6
any amendment thereto, each preliminary prospectus and prospectus and each
amendment or supplement thereto, each letter written by or on behalf of the
Company to the SEC or the staff of the SEC and each item of correspondence from
the SEC or the staff of the SEC relating to such Registration Statement (other
than any portion of any thereof which contains information for which the Company
has sought confidential treatment) and (2) such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents, as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor;
(d) use reasonable efforts to (i) register and qualify the Registrable
Securities covered by the Registration Statement under such securities or blue
sky laws of such jurisdictions as the Investors who hold a majority in interest
of the Registrable Securities being offered reasonably request, (ii) prepare and
file in those jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof at all times until the end of
the Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto (I) to qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (II) to subject itself to general taxation in any such
jurisdiction, (III) to file a general consent to service of process in any such
jurisdiction, (IV) to provide any undertakings that cause more than nominal
expense or burden to the Company or (V) to make any change in its Certificate of
Incorporation or by-laws, which in each case the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
stockholders;
(e) in the event that the Registrable Securities are being offered in an
underwritten offering, enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering;
(f) as promptly as practicable after becoming aware of such event or
circumstance, notify each Investor of any event or circumstance of which the
Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, file such supplement or amendment with the SEC at
such time as shall permit the Investors to sell Registrable Securities pursuant
to the Registration Statement as promptly as practicable, and deliver a number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request;
(g) as promptly as practicable after becoming aware of such event, notify
each Investor who holds Registrable Securities being sold (or, in the event of
an underwritten offering, the managing underwriters) of the issuance by the SEC
of any stop order or other suspension of effectiveness of the Registration
Statement at the earliest possible time;
(h) permit a single firm of counsel designated as selling stockholders'
counsel by the Investors who hold a majority in interest of the Registrable
Securities being sold to review and comment on the Registration Statement and
all amendments and supplements thereto a reasonable period of time prior to
their filing with the SEC;
-6-
<PAGE> 7
(i) make generally available to its security holders as soon as practical,
but not later than ninety (90) days after the close of the period covered
thereby, an earnings statement (in form complying with the provisions of Rule
158 under the 1933 Act) covering a twelve-month period beginning not later than
the first day of the Company's fiscal quarter next following the effective date
of the Registration Statement;
(j) at the request of the Investors who hold a majority in interest of the
Registrable Securities being sold, furnish on the date that Registrable
Securities are delivered to an underwriter, if any, for sale in connection with
the Registration Statement (i) a letter, dated such date, from the Company's
independent certified public accountants in form and substance as is customarily
given by independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters; and (ii) an
opinion, dated such date, from counsel representing the Company for purposes of
such Registration Statement, in form and substance as is customarily given in an
underwritten public offering, addressed to the underwriters and the Investors;
(k) make available for inspection by any Investor, any underwriter
participating in any disposition pursuant to the Registration Statement, and any
attorney, accountant or other agent retained by any such Investor or underwriter
(collectively, the "Inspectors"), all pertinent financial and other records,
pertinent corporate documents and properties of the Company (collectively, the
"Records"), as shall be reasonably necessary to enable each Investor to exercise
its due diligence responsibility, and cause the Company's officers, directors
and employees to supply all information which any Inspector may reasonably
request for purposes of such due diligence; provided, however, that each
Inspector shall hold in confidence and shall not make any disclosure (except to
an Investor) of any Record or other information which the Company determines in
good faith to be confidential, and of which determination the Inspectors are so
notified, unless (i) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (ii) the
release of such Records is ordered pursuant to a subpoena or other order from a
court or government body of competent jurisdiction or (iii) the information in
such Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company shall not be
required to disclose any confidential information in such Records to any
Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(k). Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at the Company's own expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential. The Company shall hold in confidence and shall not make any
disclosure of information concerning an Investor provided to the Company
pursuant to Section 4(e) hereof unless (i) disclosure of such information is
necessary to comply with federal or state securities laws, (ii) the disclosure
of such information is necessary to avoid or correct a misstatement or omission
in any Registration Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other order from a court or governmental body of
competent jurisdiction or (iv) such information has been made generally
available to the public other than by disclosure in violation of this or, to the
knowledge of the Company, any other agreement. The Company agrees that it shall,
upon learning that disclosure of such information concerning an Investor is
sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to such Investor and allow such
Investor, at such Investor's own expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, such information;
(l) use its best efforts (i) to cause all the Registrable Securities
covered by the Registration Statement to be listed on the Nasdaq or such other
principal securities market on which securities of the same class or series
issued by the Company are then listed or traded or (ii) if securities of
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<PAGE> 8
the same class or series as the Registrable Securities are not then listed on
Nasdaq or any such other securities market, to cause all of the Registrable
Securities covered by the Registration Statement to be listed on the New York
Stock Exchange, the American Stock Exchange or the Nasdaq SmallCap Market;
(m) provide a transfer agent and registrar, which may be a single entity,
for the Registrable Securities not later than the effective date of the
Registration Statement;
(n) cooperate with the Investors who hold Registrable Securities being
offered and the managing underwriter or underwriters, if any, to facilitate the
timely preparation and delivery of certificates (not bearing any restrictive
legends) representing Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates to be in such denominations
or amounts, as the case may be, as the managing underwriter or underwriters, if
any, or the Investors may reasonably request and registered in such names as the
managing underwriter or underwriters, if any, or the Investors may request; and,
within three Business Days after a Registration Statement which includes
Registrable Securities is ordered effective by the SEC, the Company shall
deliver to the transfer agent for the Registrable Securities (with copies to the
Investors whose Registrable Securities are included in such Registration
Statement) an instruction substantially in the form attached hereto as EXHIBIT 1
and shall cause legal counsel selected by the Company to deliver to the
Investors an opinion of such counsel in the form attached hereto as EXHIBIT 2
(with a copy to the Company's transfer agent);
(o) during the period the Company is required to maintain effectiveness of
the Registration Statement pursuant to Section 3(a), the Company shall not bid
for or purchase any Common Stock or any right to purchase Common Stock or
attempt to induce any person to purchase any such security or right if such bid,
purchase or attempt would in any way limit the right of the Investors to sell
Registrable Securities by reason of the limitations set forth in Regulation M
under the 1934 Act; and
(p) take all other reasonable actions necessary to expedite and facilitate
disposition by the Investors of the Registrable Securities pursuant to the
Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it and the intended method of disposition of the Registrable Securities
held by it as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least five days prior to
the first anticipated filing date of the Registration Statement, the Company
shall notify each Investor of the information the Company requires from each
such Investor (the "Requested Information") if any of such Investor's
Registrable Securities are eligible for inclusion in the Registration Statement.
If at least two Business Days prior to the filing date the Company has not
received the Requested Information from an Investor (a "Non-Responsive
Investor"), then the Company may file the Registration Statement without
including Registrable Securities of such Non-Responsive Investor but shall not
be relieved of its obligation to file a Registration Statement with the SEC
relating to the Registrable Securities of such Non-Responsive Investor promptly
after such Non-Responsive Investor provides the Requested Information; provided,
however, that (i) all expenses of the Company relating to the preparation,
amendment and filing of the Registration Statement to include the Registrable
Securities of such Non-Responsive Investor shall be paid by such Non-Responsive
Investor and (ii) the Company shall not be considered in breach of any of its
obligations to such Non-Responsive Investor to timely file the Registration
Statement under this Agreement or be subject to any liability to such
Non-Responsive
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<PAGE> 9
Investor pursuant to Section 2(c) to the extent a delay in filing or obtaining
the effectiveness of the Registration Statement for such Non-Responsive Investor
is due to the failure of such Non-Responsive Investor to timely provide the
Requested Information.
(b) Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement;
(c) In the event Investors holding a majority in interest of the
Registrable Securities being registered determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement;
(d) Each Investor agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(f) or 3(g),
such Investor will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(f) or 3(g) and, if so directed by the
Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession of the prospectus covering such
Registrable Securities current at the time of receipt of such notice;
(e) No Investor may participate in any underwritten registration hereunder
unless such Investor (i) agrees to sell such Investor's Registrable Securities
on the basis provided in any underwriting arrangements approved by the Investors
entitled hereunder to approve such arrangements, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and other fees and expenses of investment bankers and
any manager or managers of such underwriting and legal expenses of the
underwriters applicable with respect to its Registrable Securities, in each case
to the extent not payable by the Company pursuant to the terms of this
Agreement; and
(f) Each Investor agrees to take all reasonable actions necessary to comply
with the prospectus delivery requirements of the 1933 Act applicable to its
sales of Registrable Securities.
5. EXPENSES OF REGISTRATION. All reasonable expenses, other than
underwriting discounts and commissions and other fees and expenses of investment
bankers and other than brokerage commissions, incurred in connection with
registrations, filings or qualifications pursuant to Sections 2 and 3,
including, without limitation, all registration, listing and qualifications
fees, printers and accounting fees and the fees and disbursements of counsel for
the Company and one legal counsel for the Investors and the investors under the
Other Registration Rights Agreement (in addition to the payment of the Initial
Investor's expenses to the extent provided in the Subscription Agreement), shall
be borne by the Company, provided, however, that the Investors shall bear the
fees and out-of-pocket expenses of the one legal counsel selected by the
Investors and the investors under the Other Registration Rights Agreement
pursuant to Section 2(b) hereof and thereof.
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<PAGE> 10
6. INDEMNIFICATION. In the event any Registrable Securities are included in
a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, each person, if
any, who controls any Investor within the meaning of the 1933 Act or the 1934
Act, any underwriter (as defined in the 1933 Act) for the Investors, the
directors, if any, of such underwriter and the officers, if any, of such
underwriter, and each person, if any, who controls any such underwriter within
the meaning of the 1933 Act or the 1934 Act (each, an "Indemnified Person"),
against any losses, claims, damages, liabilities or expenses (joint or several)
incurred (collectively, "Claims") to which any of them may become subject under
the 1933 Act, the 1934 Act or otherwise, insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any of the following statements or omissions in or violations
with respect to the Registration Statement, or any post-effective amendment
thereof, or any prospectus included therein: (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
any post-effective amendment thereof or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus if
used prior to the effective date of such Registration Statement, or contained in
the final prospectus (as amended or supplemented, if the Company files any
amendment thereof or supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the statements
made therein, in light of the circumstances under which the statements therein
were made, not misleading or (iii) any violation or alleged violation by the
Company of the 1933 Act, the 1934 Act, any state securities law or any rule or
regulation under the 1933 Act, the 1934 Act or any state securities law (the
matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to the restrictions set forth in Section 6(d) with
respect to the number of legal counsel, the Company shall reimburse the
Investors and the other Indemnified Persons, promptly as such expenses are
incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (I) shall not apply to
a Claim arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by any
Indemnified Person or underwriter for such Indemnified Person expressly for use
in connection with the preparation of the Registration Statement, the prospectus
or any such amendment thereof or supplement thereto, if such prospectus was
timely made available by the Company pursuant to Section 3(c) hereof; (II) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Person if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected in the prospectus, as then
amended or supplemented, if such prospectus was timely made available by the
Company pursuant to Section 3(c) hereof; and (III) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
(b) In connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to indemnify and hold harmless, to the
same extent and in the same manner set forth in Section 6(a), the Company, each
of its directors, each of its officers who signs the Registration Statement,
each person, if any, who controls the Company within the meaning of the 1933 Act
or the 1934 Act, any underwriter and any other stockholder selling securities
pursuant to the Registration Statement or any of its directors or officers or
any person who controls such stockholder or
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<PAGE> 11
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
to which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; and such Investor will reimburse any legal or other expenses
reasonably incurred by any Indemnified Party, promptly as such expenses are
incurred and are due and payable, in connection with investigating or defending
any such Claim; provided, however, that the indemnity agreement contained in
this Section 6(b) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of such Investor,
which consent shall not be unreasonably withheld; provided, further, however,
that the Investor shall be liable under this Section 6(b) for only that amount
of a Claim as does not exceed the amount by which the net proceeds to such
Investor from the sale of Registrable Securities pursuant to such Registration
Statement exceeds the cost of such Registrable Securities to such Investor. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(b) with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the prospectus, as then amended or
supplemented.
(c) The Company shall be entitled to receive indemnities from underwriters,
selling brokers, dealer managers and similar securities industry professionals
participating in any distribution, to the same extent as provided above, with
respect to information so furnished in writing by such persons expressly for
inclusion in the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel selected by the indemnifying party but reasonably
acceptable to the Indemnified Person or the Indemnified Party, as the case may
be; provided, however, that an Indemnified Person or Indemnified Party shall
have the right to retain its own counsel with the fees and expenses to be paid
by the indemnifying party, if, in the reasonable opinion of counsel retained by
the indemnifying party, the representation by such counsel of the Indemnified
Person or Indemnified Party and the indemnifying party would be inappropriate
due to actual or potential differing interests between such Indemnified Person
or Indemnified Party and any other party represented by such counsel in such
proceeding. In such event, the Company shall pay for only one separate legal
counsel for the Investors; such legal counsel shall be selected by the Investors
holding a majority in interest of the Registrable Securities included in the
Registration Statement to which the Claim relates. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION. To the extent any indemnification by an indemnifying party
is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with
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<PAGE> 12
respect to any amounts for which it would otherwise be liable under Section 6 to
the fullest extent permitted by law; provided, however, that (a) no contribution
shall be made under circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in Section 6, (b) no seller
of Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any seller of Registrable Securities who was not guilty of such fraudulent
misrepresentation and (c) contribution by any seller of Registrable Securities
shall be limited in amount to the amount by which the net amount of proceeds
received by such seller from the sale of such Registrable Securities exceeds the
purchase price paid by such seller for such Registrable Securities.
8. REPORTS UNDER 1934 ACT. With a view to making available to the Investors
the benefits of Rule 144, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act; and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144 and the 1934 Act,
(ii) a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company and (iii) such other
information as may be reasonably requested to permit the Investors to sell such
securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any Permitted Transferee only if: (a)
the Investor agrees in writing with such Permitted Transferee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) except as otherwise provided in
Section 4(a)(2) of the Subscription Agreement, the Company is, within a
reasonable time after such transfer or assignment, furnished with written notice
of (i) the name and address of such Permitted Transferee and (ii) the securities
with respect to which such registration rights are being transferred or
assigned, (c) immediately following such transfer or assignment the further
disposition of such securities by such Permitted Transferee is restricted under
the 1933 Act and applicable state securities laws, and (d) at or before the time
the Company receives the written notice contemplated by clause (b) of this
sentence (or such later time within ten Business Days after the Company approves
a Proposed Transferee pursuant to Section 4(a)(2) of the Subscription Agreement)
such Permitted Transferee agrees in writing with the Company to be bound by all
of the provisions contained herein. In connection with any such transfer the
Company shall, at the cost and expense of the Permitted Transferee, promptly
after such assignment take such actions as shall be reasonably acceptable to the
Initial Investor and such Permitted Transferee to assure that the Registration
Statement and related prospectus are available for use by such Permitted
Transferee for sales of the Registrable Securities in respect of which the
rights to registration have been so assigned. In connection with any such
assignment, each Investor shall have the right to assign to such Permitted
Transferee such Investor's rights under the Subscription Agreement by notice of
such assignment to the Company. Following such notice of assignment of rights
under the Subscription Agreement, the Company shall be obligated to such
Permitted Transferee to perform all of its covenants under the Subscription
Agreement as if such Permitted Transferee were the Buyer under the Subscription
Agreement.
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<PAGE> 13
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Majority Holders. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each Investor and the
Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable Securities
whenever such person or entity owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
(b) Notices required or permitted to be given hereunder shall be in writing
and shall be deemed to be sufficiently given when personally delivered (by hand,
by courier, by telephone line facsimile transmission (with answer back
confirmation) or other means) (i) if to the Company, at 999 18th Street, Suite
2201, Denver, Colorado 80202, Attention: Chief Executive Officer, telephone line
facsimile transmission number (303) 672-0711, (ii) if to the Initial Investor,
c/o _____________________________, telephone line facsimile transmission number
_______________________ and (iii) if to any other Investor, at such address as
such Investor shall have provided in writing to the Company, or at such other
address as each such party furnishes by notice given in accordance with this
Section 11(b), and shall be effective upon receipt.
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of Colorado applicable to agreements made
and to be performed entirely within such State. In the event that any provision
of this Agreement is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any provision hereof which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision hereof.
(e) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof.
(f) Subject to the requirements of Section 9 hereof, this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
(i) The Company acknowledges that any failure by the Company to perform its
material obligations under this Agreement, including, without limitation, the
Company's obligations under Section 3(n), or any delay in such performance could
result in damages to the Investors and the Company agrees that, in addition to
any other liability the Company may have by reason of any such failure or
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<PAGE> 14
delay, the Company shall be liable for the following damages to the extent
caused by any such failure or delay: (i) an amount equal to the aggregate
purchase price paid by the Initial Investor for the Securities pursuant to the
Subscription Agreement plus (ii) an amount equal to the Initial Investor's
historical rate of return on all of such Initial Investor's investments in
private placements of debt and equity securities of corporate issuers multiplied
by such aggregate purchase price paid.
(j) Each party shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
(k) The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
(l) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
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<PAGE> 15
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of day and
year first above written.
RMI.NET, INC.
By:
-------------------------------------
Name:
Title:
-----------------------------------------
By:
-------------------------------------
Name:
Title:
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<PAGE> 16
EXHIBIT 1
TO
REGISTRATION
RIGHTS AGREEMENT
[Company Letterhead]
[Date]
American Securities Transfer & Trust, Inc.,
as Transfer Agent and Registrar
938 Quail Street
Suite 101
Lakewood, Colorado 80215-5513
Ladies and Gentlemen:
This letter shall serve as our irrevocable authorization and direction
to you (1) to transfer or re-register the certificates for the shares of Common
Stock, $.001 par value (the "Common Stock"), of RMI.NET, Inc., a Delaware
corporation (the "Company"), represented by certificate numbers _______ and
_______ for an aggregate of _______ shares (the "Outstanding Shares") of Common
Stock presently registered in the name of [Name of Investors] upon surrender of
such certificate(s) to you, notwithstanding the legend appearing on such
certificates, and (2) to issue shares (the "Warrant Shares") of Common Stock to
or upon the order of the holder from time to time on exercise of the Common
Stock Purchase Warrants, Class A and Common Stock Purchase Warrants, Class B
(collectively, the "Warrants") exercisable for Common Stock issued by the
Company upon receipt by you of a subscription form from such holder in the form
enclosed herewith. The transfer or re-registration of the certificates for the
Outstanding Shares by you should be made at such time as you are requested to do
so by the record holder of the Outstanding Shares. The certificate issued upon
such transfer or re-registration should be registered in such name as requested
by the holder of record of the certificate surrendered to you and should not
bear any legend which would restrict the transfer of the shares represented
thereby. In addition, you are hereby directed to remove any stop-transfer
instruction relating to the Outstanding Shares. Certificates for the Warrant
Shares should not bear any restrictive legend and should not be subject to any
stop-transfer restriction.
Contemporaneously with the delivery of this letter, the Company is
delivering to you the following:
(a) a list showing the name and address of each holder of record of the
Warrants and the date of issuance, Warrant number, and, in the case of the
Class A Warrants, the initial fixed number of shares issuable upon exercise
thereof;
(b) the form of subscription relating to the exercise of the Warrants;
and
(c) an opinion of Christopher J. Melcher, Esq., Vice President and
General Counsel of the Company, as to registration of the Outstanding
Shares and the Warrant Shares for resale under the Securities Act of 1933,
as amended.
1-16
<PAGE> 17
Should you have any questions concerning this matter, please contact
me.
Very truly yours,
RMI.NET, INC.
By:
-------------------------------------
Name:
Title:
Enclosures
cc: [Names of Investors]
1-17
<PAGE> 18
EXHIBIT 2
TO
REGISTRATION
RIGHTS AGREEMENT
[SEC Effective Date]
[Names and Addresses of Investors]
RMI.NET, INC.
SHARES OF COMMON STOCK
Ladies and Gentlemen:
I am Vice President and General Counsel of RMI.NET, Inc., a Delaware
corporation (the "Company"), and I understand that the Company has sold to
[Names of Investors] (the "Holders") an aggregate of ________ shares (the
"Common Shares") of the Company's Common Stock, $.001 par value (the "Common
Stock"), and issued to the Holders Common Stock Purchase Warrants, Class A and
Common Stock Purchase Warrants, Class B (collectively, the "Warrants"). The
Common Shares were sold, and the Warrants were issued, to the Holders pursuant
to several Subscription Agreements, dated as of December 7, 1999, by and between
the Holders and the Company (the "Subscription Agreements"). Pursuant to the
several Registration Rights Agreements, dated as of December 7, 1999, by and
between the Company and each Holder (the "Registration Rights Agreements")
entered into in connection with the purchase by the Holders of the Common
Shares, the Company agreed with each Holder, among other things, to register for
resale (1) the Common Shares and (2) the shares (the "Warrant Shares") of Common
Stock issuable upon exercise of the Warrants under the Securities Act of 1933,
as amended (the "1933 Act"), upon the terms provided in the Registration Rights
Agreements. The Common Shares and the Warrant Shares are referred to herein
collectively as the "Shares." Pursuant to the Registration Rights Agreements, on
____________________ , _____ the Company filed a Registration Statement on Form
S-3 (File No. 333-__________) (the "Registration Statement") with the Securities
and Exchange Commission (the "SEC") relating to the Shares, which names the
Holders as selling stockholders thereunder.
[Other introductory and scope of examination language to be inserted]
Based on the foregoing, I am of the opinion that:
(1) Since the Closing Date, the Company has timely filed with the SEC
all forms, reports and other documents required to be filed with the SEC
under the Securities 1934 Act of 1934, as amended (the "1934 Act"). All of
such forms, reports and other documents complied, when filed, in all
material respects, with all applicable requirements of the 1933 Act and the
1934 Act;
(2) The Registration Statement and the Prospectus contained therein
(other than the financial statements and financial schedules and other
financial and statistical information contained or incorporated by
reference therein, as to which I have not been requested to and do
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<PAGE> 19
not express any opinion) comply as to form in all material respects with
the applicable requirements of the 1933 Act and the rules and regulations
promulgated thereunder; and
(3) The Registration Statement has become effective under the 1933 Act,
to the best of my knowledge after due inquiry, no stop order proceedings
with respect thereto have been instituted or threatened by the SEC. The
Shares have been registered under the 1933 Act and may be resold by the
respective Holders pursuant to the Registration Statement.
I have participated in the preparation of the Registration Statement
and the Prospectus, including review and discussions with officers and other
representatives of the Company, representatives of the independent public
accountants for the Company, and your representatives at which the contents of
the Registration Statement and the Prospectus contained therein and related
matters were discussed, and, although I am not passing upon and do not assume
any responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and the Prospectus contained therein, on
the basis of the foregoing, nothing has come to my attention that leads me to
believe either that the Registration Statement at the time the Registration
Statement became effective contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the Prospectus contained in
the Registration Statement, as of its date, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (it being understood that I have not
been requested to and do not express any view with respect to the financial
statements and schedules and other financial and statistical data included or
incorporated by reference in the Registration Statement or the Prospectus
contained therein).
Paragraph (3) of this opinion may be relied upon by American Securities
Transfer & Trust, Inc., as Transfer Agent and Registrar (the "Transfer Agent"),
as if addressed to the Transfer Agent.
Very truly yours,
cc: American Securities Transfer & Trust, Inc.,
as Transfer Agent and Registrar
2-19
<PAGE> 1
Exhibit 5.01
LETTERHEAD OF RMI.NET, INC.
January 21, 2000
RMI.NET, Inc.
999 Eighteenth Street, Suite 2201
Denver, Colorado 80202
Re: Registration of Common Stock; Registration Statement on Form S-3
Ladies and Gentlemen:
I have acted as counsel to RMI.NET, Inc., a Delaware corporation (the
"Company"), in connection with the registration under the Securities Act of
1933, as amended, pursuant to the Company's Registration Statement on Form S-3
(the "Registration Statement"), of a public offering of up to 3,773,089 shares
of common stock, $0.001 par value (the "Shares"), of the Company. All of the
Shares are being sold by the Selling Security Holders identified in the "Selling
Security Holders" section of the Registration Statement (the "Selling Security
Holders").
In this capacity, I have examined the Registration Statement (including
all amendments thereto), the Company's Certificate of Incorporation and
originals or copies, certified or otherwise identified to our satisfaction, of
such corporate records, agreements, documents, and other instruments of the
Company relating to the authorization and issuance of the Shares to be sold by
the Selling Security Holders and other matters as we have deemed relevant and
necessary as a basis for the opinion hereinafter set forth.
In conducting our examination I have assumed the genuineness of all
signatures, the legal capacity of all natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such documents.
Based upon the foregoing, and in reliance thereon, we are of the
opinion that the Shares, when issued and delivered against payment therefor,
will be legally and validly issued, fully paid, and non-assessable.
I hereby consent to the incorporation of this opinion into the
Registration Statement as Exhibit 5.1 thereto and to the reference to our firm
under the heading "Legal Matters" in the prospectus constituting a part of the
Registration Statement.
Very truly yours,
/s/ CHRISTOPHER J. MELCHER
