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As Filed with the Securities and Exchange Commission on October 24, 2000
REGISTRATION NO. 333-38382
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SECURITIES AND EXCHANGE COMMISSION
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AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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RMI.NET, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 7370 04-3153858
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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CHRISTOPHER J. MELCHER
RMI.NET, INC.
999 EIGHTEENTH STREET, SUITE 2300
DENVER, COLORADO 80202
(303) 672-0700
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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Copies to:
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JEFFREY M. KNETSCH STEVEN A. COHEN
BROWNSTEIN HYATT & FARBER, P.C. HOGAN & HARTSON L.L.P.
410 SEVENTEENTH STREET ONE TABOR CENTER, SUITE 1500
DENVER, COLORADO 80202 1200 SEVENTEENTH STREET
(303) 223-1100 DENVER, COLORADO 80202
(303) 899-7300
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Approximate date of commencement of proposed sale to public: Upon consummation
of the merger referred to herein.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act of 1933, as amended, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d) 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. [ ]
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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)(3) PRICE(2)(3) (1)
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Common Stock, $0.001 par value 6,741,139(4) $2,920.00(2)(5)
Common stock, $0.001 par value 274,500 88.00(3)(5)
Warrants
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(1) Based upon the maximum number of shares of the Registrant's common stock and
warrants to acquire shares of the Registrant's common stock expected to be
issued in connection with the merger described herein to holders of shares of
common stock of Internet Communications Corporation.
(2) The amount of the registration fee was calculated in accordance with Rule
457(f) under the Securities Act of 1933, as amended, based on the average of the
high and low prices of the common stock of Internet Communications to be
received by the Registrant as reported on the Nasdaq National Market on May 25,
2000 ($1.03125) assuming 10,724,960 shares of Internet Communications
Corporation common stock will be outstanding immediately prior to the issuance
of the securities registered herein.
(3) The amount of the registration fee was calculated in accordance with Rule
457(f) under the Securities Act of 1933, as amended, based on the average of the
high and low prices of the common stock of Internet Communications to be
received by the Registrant as reported on the Nasdaq National Market on October
12, 2000 ($0.54685), assuming an additional 610,000 shares of Internet
Communications Corporation common stock will be outstanding immediately prior
to the issuance of the securities registered herein.
(4) Includes 2,408,255 shares issuable upon exercise of warrants registered
herein. Also includes an indeterminate number of shares issuable upon exercise
of a warrant registered herein to be issued to Interwest Group, Inc.
(5) Previously paid.
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 that specifically states that this registration statement
will thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, 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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SUBJECT TO COMPLETION
THIS JOINT PROXY STATEMENT/PROSPECTUS AND THE INFORMATION CONTAINED HEREIN IS
SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE
SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED UNTIL THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROXY STATEMENT/PROSPECTUS SHALL
NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
RMI.NET, INC. INTERNET COMMUNICATIONS CORPORATION
999 EIGHTEENTH STREET, SUITE 2300 7100 EAST BELLEVIEW AVENUE, SUITE 201
DENVER, COLORADO 80202 GREENWOOD VILLAGE, COLORADO 80111
To the Shareholders of RMI.NET, Inc. and Internet Communications Corporation:
RMI and Internet Communications have agreed to combine in a merger. We
believe that this merger will create a stronger competitor in the rapidly
changing telecommunications industry capable of offering a complete spectrum of
communications solutions. Accordingly, we believe that this merger will benefit
the shareholders of both companies, and we ask for your support in voting for
the merger proposals at our meetings.
As a result of the merger, Internet Communications will become a wholly
owned subsidiary of RMI. RMI intends to change its name to Internet Commerce &
Communications, Inc. following completion of the merger.
In the merger, each share of Internet Communications common stock (other
than shares held by shareholders who exercise statutory dissenters' rights and
shares held by Interwest Group, Inc., Internet Communications's largest
shareholder) will convert into the right to receive 0.55 shares of RMI common
stock. Interwest Group will receive 0.45 shares of RMI common stock for each of
its shares of Internet Communications common stock. In addition to shares of RMI
common stock, Internet Communications's shareholders (excluding shareholders who
exercise statutory dissenters' rights, Interwest Group and Internet
Communications's directors) will be entitled to receive for each share of
Internet Communications common stock a warrant exercisable for one share of RMI
common stock at $7.00. The warrants are cancelable on 30-days' notice by RMI if
RMI's closing share price exceeds $8.00 for five consecutive trading days. The
exercise period for the warrants will begin 30 days after the closing date of
the merger and will expire two years from the closing date of the merger.
Interwest Group has agreed to convert its outstanding loans to Internet
Communications (up to $5.0 million in principal amount) into shares of Internet
Communications common stock at $2.50 per share immediately prior to the closing
of the merger. These shares will also be converted into 0.45 shares of RMI
common stock each. In addition, Interwest Group will receive a warrant that may
become exercisable to purchase additional shares of RMI common stock one year
after the closing of the merger.
The Denver, Colorado-based investment banking firm of Neidiger, Tucker,
Bruner, Inc. has rendered a written opinion to Internet Communications's board
of directors that, as of October 12, 2000, the consideration to be received by
Internet Communications's shareholders as a result of the merger was fair to
those shareholders from a financial point of view. As part of its investment
banking business, Neidiger, Tucker is regularly engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive bidding, secondary distributions of listed
and unlisted securities, private placements and valuations for estate, corporate
and other purposes.
The boards of directors of both RMI and Internet Communications believe the
merger is advisable, fair and in the best interests of their respective
shareholders, have approved the merger and recommend that their respective
shareholders vote FOR proposals related to the merger as described in the
attached materials. We cannot complete the merger unless shareholders of both
companies approve the respective proposals relating to the merger.
In connection with the merger, Internet Communications and RMI will each
hold a special meeting of its shareholders. The matters to be submitted for
consideration at your special meeting is described in the attached notice of
special meeting from your company and in the joint proxy statement/prospectus.
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Interwest Group, Inc. beneficially own shares of Internet Communications
common stock and preferred stock representing approximately 67% of the voting
power of Internet Communications voting stock. Interwest Group has agreed with
RMI to vote all of its shares in favor of the merger agreement. Accordingly,
approval by the Internet Communications shareholders of the proposal to adopt
the merger agreement is assured.
The Internet Communications special meeting will be held at 9:00 a.m., local
time, on November 28, 2000, at the Hotel Monaco, 1717 Champa Street, Denver,
Colorado 80202.
The RMI special meeting will be held at 11:00 a.m., local time, on November
28, 2000, at the Hotel Monaco, 1717 Champa Street, Denver, Colorado 80202.
Details of the proposed merger appear in the accompanying proxy
statement/prospectus. Please give this material your careful attention.
Whether or not you plan to attend your special shareholder meeting, please
complete, sign and date the accompanying proxy and return it in the enclosed,
postage prepaid, return envelope. If you hold shares and attend your meeting,
you may vote your shares in person even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
Sincerely,
Douglas H. Hanson Thomas C. Galley
Chairman of the Board, Chief President and Chief Executive Officer
Executive Officer and President Internet Communications Corporation
of RMI.NET, Inc.
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INTERNET COMMUNICATIONS CORPORATION
7100 EAST BELLEVIEW AVENUE, SUITE 201
GREENWOOD VILLAGE, COLORADO 80111
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held November 28, 2000
To the shareholders of Internet Communications Corporation:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Internet
Communications Corporation will be held at 9:00 a.m., local time, on November
28, 2000, at the Hotel Monaco, 1717 Champa Street, Denver, Colorado 80202, for
the following purposes:
1. To vote on a proposal to approve the Amended and Restated Agreement and
Plan of Merger dated as of October 18, 2000, by and among RMI.NET, Inc.,
Internet Acquisition Corporation, a wholly owned subsidiary of RMI, and
Internet Communications. As a result of the merger, Internet
Communications will become a wholly owned subsidiary of RMI.
2. To transact any other business that may properly come before the special
meeting and any adjournments or postponements thereof.
The accompanying joint proxy statement/prospectus describes the merger
agreement and the proposed merger. We encourage you to read it carefully.
Only holders of record of shares of common stock or preferred stock of
Internet Communications outstanding on October 3, 2000, will be entitled to vote
at the special meeting and any adjournments or postponements thereof. Holders of
Internet Communications preferred stock will be entitled to vote their shares on
an as-converted-to-common-stock basis, together with the shares of common stock
as a single class. Each share of Internet Communications common stock will be
entitled to one vote and each share of Internet Communications preferred stock
will be entitled to a number of votes equal to the number of shares of Internet
Communications common stock into which those shares could be converted in
accordance with the terms of the Internet Communications preferred stock.
Article 113 of the Colorado Business Corporation Act provides a procedure by
which dissenting shareholders who were record shareholders of Internet
Communications immediately prior to the effectiveness of the merger may seek an
appraisal of the fair value of their shares, exclusive of any element of value
arising from the expectation or accomplishment of the merger, together with a
fair rate of interest, if any, to be paid thereon. Any dissenting shareholder
who wishes to exercise this right to an appraisal must do so by making written
demand to Internet Communications at the address set forth in the proxy
statement/prospectus, which must be received before the taking of the vote on
the merger, and by following certain other procedures set forth in Article 113
of the Colorado Business Corporation Act. For purposes of Article 113 of the
Colorado Business Corporation Act, this Notice of Special Meeting of
Shareholders is being mailed on or about [________] [__], 2000 to record
shareholders of Internet Communications on the record date.
YOUR VOTE IS VERY IMPORTANT. PLEASE SUBMIT YOUR PROXY ACCORDING TO THE
INSTRUCTIONS ON THE ATTACHED PROXY CARD.
By Order of the Board of Directors
Thomas C. Galley
President and Chief Executive Officer
October [__], 2000
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RMI.NET, INC.
999 EIGHTEENTH STREET, SUITE 2300
DENVER, COLORADO 80202
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held November 28, 2000
To the shareholders of RMI.NET, Inc.
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of RMI.NET,
Inc. will be held at 11:00 a.m., local time, on November 28, 2000, at the Hotel
Monaco, 1717 Champa Street, Denver, Colorado 80202, for the following purposes:
1. To vote on a proposal to approve the Amended and Restated Agreement and
Plan of Merger dated as of October 18, 2000, by and among RMI.NET,
Inc., Internet Acquisition Corporation, a wholly owned subsidiary of
RMI, and Internet Communications. As a result of the merger, Internet
Communications will become a wholly owned subsidiary of RMI.
2. To vote on a proposal to change of the name of the Company from RMI.NET,
Inc. to "Internet Commerce & Communications, Inc.," subject to
completion of the proposed merger between the Company and Internet
Communications Corporation.
3. To transact any other business that may properly come before the special
meeting and any adjournments or postponements thereof.
The accompanying joint proxy statement/prospectus describes the merger
agreement and the proposed merger. We encourage you to read it carefully.
Only holders of record of shares of common stock of RMI outstanding on
October 3, 2000, will be entitled to vote at the special meeting and any
adjournments or postponements thereof.
YOUR VOTE IS VERY IMPORTANT. PLEASE SUBMIT YOUR PROXY ACCORDING TO THE
INSTRUCTIONS ON THE ATTACHED PROXY CARD.
By Order of the Board of Directors
Christopher J. Melcher
Corporate Secretary
October [__], 2000
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TABLE OF CONTENTS
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PAGE
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Questions and Answers About the Merger 1
Summary of the Proxy Statement/Prospectus 5
The Companies 5
Internet Communications Special Meeting 6
The Merger 7
Comparative Market Price and Dividend Information 11
Risk Factors 12
Risk Factors Related to the Merger 12
Risk Factors Related to RMI 13
Cautionary Note About Forward-Looking Statements 23
The Internet Communications Special Meeting
Date, Time and Place; Matters to be Considered 26
The Merger 27
Background of the Merger 27
Reasons for the Merger; Recommendations of the Boards of Directors 31
Opinion of Neidiger, Tucker, Bruner, Inc. 33
Effective Time 36
Interests of Certain Persons in the Merger 36
Rights of Dissenting Shareholders 37
Accounting Treatment 38
The Merger Agreement 38
The Warrant Agreement and the Warrants 44
The Shareholder Agreement 45
The Exchange Agreement 46
Unaudited Pro Forma Combined Financial Statements 46
Comparison of the Rights of Holders of Internet Communications Common Stock
and RMI Common Stock 52
Number of Directors 52
Staggered/Classified Board of Directors 52
Removal of Directors 52
Filling Vacancies on the Board of Directors 53
Amendments to Governing Documents 53
Advance Notice of Meeting 54
Shareholder Consent in Lieu of Meeting 54
Indemnification and Limitation of Liability 54
Dissenters' Rights 55
Inspection of Shareholder List 55
Shareholder Approval of Extraordinary Transactions 55
Anti-Takeover Provisions and Interested Shareholder Transactions 55
Shareholder Derivative Suits 56
Selling Shareholder Plan of Distribution 56
Experts 58
Legal Matters 58
Proxy Solicitation Costs 58
Where You Can Find More Information 58
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APPENDICES
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Appendix A Merger Agreement
Appendix B Form of Warrant Agreement
Appendix C Exchange Agreement
Appendix D Shareholder Agreement
Appendix E Common Stock Purchase and Adjustment Warrant Agreement
Appendix F Fairness Opinion of Neidiger, Tucker, Bruner, Inc.
Appendix G Title 7, Article 113 of the Colorado Business Corporation Act
(Dissenters' Rights)
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QUESTIONS AND ANSWERS ABOUT THE MERGER
The following questions and answers briefly address some anticipated
questions about the merger, briefly describe the principal terms of the merger
and are intended to provide sufficient information to understand the essential
features and significance of the merger.
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What am I being asked to o You are being asked to approve the merger of Internet Communications and a newly
vote upon? formed subsidiary of RMI. As a result of the merger, Internet Communications will
become a wholly owned subsidiary of RMI. RMI intends to change its name to
Internet Commerce & Communications, Inc. following the merger. Interwest Group,
Inc. owns approximately 67% of Internet Communications and is the largest
shareholder of Internet Communications. Interwest Group has already agreed to vote
in favor of the merger. Therefore, approval of the merger by Internet
Communications shareholders is assured.
Why are Internet o Internet Communications's board of directors and RMI's board of directors believe
Communications and RMI that Internet Communications's strengths and capabilities complement RMI's
recommending the merger? business. The merger is designed to create a company capable of offering a more
complete spectrum of communications solutions. The boards believe that the merger
is fair to and in your best interest and that this business combination will
provide increased long-term value to the shareholders of both companies.
What will Internet o At the effective time of the merger each outstanding share of Internet
Communications shareholders Communications common stock will be converted into the right to receive 0.55
receive in exchange for shares of RMI common stock except for:
Internet Communications
common stock? o Shares of Internet Communications common stock held by Interwest Group and its
affiliates, each of which will be converted into the right to receive 0.45
shares of RMI common stock per share of Internet Communications common stock.
o Shares of Internet Communications common stock held as treasury stock by
Internet Communications, which will be cancelled.
o Shares of Internet Communications common stock held by Internet Communications
shareholders who perfect their statutory dissenters' rights.
o Cash in lieu of fractional shares.
o In addition to the merger consideration described above, at the effective time of
the merger each shareholder of Internet Communications (other than dissenting
shareholders, Interwest Group and Internet Communications's directors) will
receive a warrant to purchase one share of RMI common stock for each share of
Internet Communications common stock held by such shareholder immediately prior to
the merger. See "The Merger -- The Merger Agreement -- Merger Consideration."
o The warrants will have the following features:
o Exercise price of $7.00 per share.
o Exercisable for the period beginning 30 days following the merger and ending
24 months from the date of the merger.
o Exercisable only for cash.
o Cancelable on 30 days' prior notice at the option of RMI if the daily closing
price of RMI common stock equals or exceeds $8.00 per share for five
consecutive trading days. See "The Merger -- The Merger Agreement -- Merger
Consideration."
o Interwest Group will receive a warrant that may become exercisable to purchase
additional shares of RMI common stock one year and one day after the closing of
the merger. See "The Merger -- The Merger Agreement -- Treatment of the
Interwest Group Loan."
What will the holders of options o Immediately prior to the merger, all unexpired and unexercised outstanding
and warrants to purchase shares of Internet Communications stock options with an exercise price below $2.50 per share
of Internet Communications common will be converted into the right to receive the number of shares of RMI common
stock receive? stock equal to (a) the excess, if any, of $2.50 over the exercise price per share
of such option multiplied by (b) the number of shares of Internet Communications
common stock that may be purchased upon exercise of such option divided by (c)
$2.50. All other options will terminate upon completion of the merger. See "The
Merger -- The Merger Agreement -- Treatment of Options and Warrants."
o Pursuant to the terms of the warrants previously issued to Neidiger Tucker Bruner,
Inc., Neidiger Tucker's warrants to purchase shares of Internet Communications
will be converted into warrants to purchase RMI shares. See "The Merger -- The
Merger Agreement -- Treatment of Options and Warrants."
What will Internet o Immediately prior to completion of the merger the outstanding shares of Internet
Communications's Communications preferred stock will be converted into shares of Internet
preferred stock Communications common stock. Interwest Group is the sole preferred stock
shareholder. Therefore, Interwest Group will receive 0.45 shares of
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shareholders receive for RMI common stock in exchange for its converted shares of Internet Communications
their shares? preferred stock.
What are the federal tax o The merger is intended to qualify as a tax-free reorganization under the Internal
consequences of the merger? Revenue Code of 1986, as amended. Therefore, the merger should not create any
federal income tax liabilities for the shareholders of either Internet
Communications or RMI except for taxes payable because of cash received by
Internet Communications shareholders instead of fractional shares and taxes
payable due to the exercise of options and warrants. See "The Merger
-- The Merger Agreement -- Certain Federal Income Tax Consequences of the Merger."
What are the required o Shareholder Approval -- Internet Communications: Once a quorum is present for
approvals for the merger? purposes of the special meeting, approval by the majority of all the votes
entitled to be cast for the merger is required to approve the merger. Interwest
Group has agreed with RMI to vote all of its shares of Internet Communications
voting stock in favor of the merger and against any competing offer to acquire
Internet Communications. Therefore, approval of the merger by Internet
Communications's shareholders is assured. See "The Merger -- The Merger Agreement
-- Conditions."
o Shareholder Approval -- RMI: Once a quorum is present for purposes of the special
meeting approval by the majority of the votes cast is required to approve the
merger. In addition, approval by the majority of all the votes entitled to be cast
is required to approve changing RMI's name to Internet Communications Company,
Inc.
o Regulatory Approval: The consummation of the merger is subject to:
o The continued effectiveness of the registration statement of which this proxy
statement/prospectus is a part.
o The absence of any injunction or other legal restraint prohibiting the merger.
See "The Merger -- The Merger Agreement -- Conditions."
What do Internet o Internet Communications shareholders who do not vote in favor of the merger may
Communications shareholders elect to dissent and demand payment of the fair value of their shares of Internet
receive if they choose not to Communications common stock in lieu of receipt of the merger consideration. See
vote in favor of the merger? "The Merger -- Rights of Dissenting Shareholders." Otherwise, upon closing of the
merger, shareholders will receive the merger consideration described above
regardless of how they voted on the merger.
How will Internet o The merger agreement requires Interwest Group to loan up to $5.0 million to
Communications satisfy Internet Communications prior to the closing date of the merger.
its working capital
needs prior to completion of the o $4.1 million of this amount has been loaned to Internet Communications as of
merger? the date of this proxy statement/prospectus to satisfy Internet Communications's
mature line of credit and to fund a portion of Internet Communications's working
capital needs. Interwest Group may be required to loan the remaining $900,000 to
fund additional working capital needs prior to closing the merger.
o Interwest Group has agreed to convert its outstanding loans to Internet
Communications into shares of Internet Communications common stock at $2.50 per
share immediately prior to the closing of the merger. These shares will also be
converted into 0.45 shares of RMI common stock each. In addition, Interwest Group
will receive a warrant that may become exercisable to purchase additional shares
of RMI common stock one year after the closing of the merger. See "The Merger--The
Merger Agreement--Treatment of the Interwest Loan."
Will Internet Communications o Yes. In connection with the merger, RMI is required to file a registration
shareholders be able to sell their statement with the Securities and Exchange Commission to register the issuance of
shares of RMI common stock the shares and warrants Internet Communications shareholders receive in the
and warrants immediately after the merger. As a result, absent any independent contractual arrangement between
merger is completed? certain Internet Communications shareholders and RMI, Internet Communications
shareholders may immediately sell their shares of RMI common stock and the
warrants.
o The registration statement will also cover (a) the issuance of the RMI common
stock upon exercise of the warrants and (b) the resale by Interwest Group of the
shares of RMI common stock received by it in the merger, as well as any shares of
RMI common stock received by Interwest Group upon exercise of the Interwest Group
warrant described above. See "The Merger -- Registration of Shares." RMI's common
stock is listed for trading on the Nasdaq National Market. The warrants will not
be listed on Nasdaq or any other exchange; therefore, it is possible that no
trading market will develop for the warrants.
Is Internet Communications o Subject to the fiduciary duty obligations of the board of directors of Internet
obligated to complete the Communications to entertain unsolicited, competing third-party bids, the merger
merger even if the board agreement prohibits Internet Communications and its directors, officers, employees
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of directors receives a and affiliates from soliciting or promoting any third party takeover proposal. The
more attractive offer? board of directors may only entertain such unsolicited bids if a majority of the
directors agree that such bid could reasonably be expected to lead to a
transaction that is more favorable to Internet Communications's shareholders. See
"The Merger -- The Merger Agreement -- No Solicitation." However, if an
alternative takeover transaction closes within 12 months of termination of the
merger agreement, Interwest Group would be required to pay to RMI an amount
significantly greater than the additional consideration Interwest Group received
in that transaction compared to the merger. Thus, it is unlikely that Interwest
Group, which beneficially owns shares representing approximately 67% of Internet
Communications's voting power, would vote in favor of a more attractive offer
received by the board of directors prior to the closing of the merger. See "The
Merger -- The Shareholder Agreement."
In what instances can RMI or o The merger agreement may be terminated by either RMI or Internet Communications
Internet Communications if:
terminate the merger
agreement? o RMI and Internet Communications mutually consent to such termination.
o The merger is not consummated by November 30, 2000. See "The Merger -- The
Merger Agreement -- Termination; Effect of Termination."
o The merger agreement may be terminated by RMI if:
o Internet Communications or Interwest Group fails to comply in any material
respect with any of the covenants or agreements contained in the merger
agreement, which failure is not cured within the appropriate time period
(generally ten business days).
o Internet Communications or Interwest Group breaches any representation or
warranty that gives rise to a failure of the fulfillment of a condition of
RMI's obligations to consummate the merger.
o Internet Communications's shareholders do not approve the merger.
o The board of directors of Internet Communications recommends an alternative
transaction to the merger.
o A third party commences a tender offer for 20% or more of Internet
Communications outstanding stock and the board of directors fails to recommend
against the offer.
o The board of directors of Internet Communications revokes its approval or
recommendation that the shareholders of Internet Communications approve the
merger. See "The Merger -- The Merger Agreement -- Termination; Effect of
Termination."
o The merger agreement may be terminated by Internet Communications if:
o RMI fails to comply in any material respect with any of the covenants or
agreements contained in the merger agreement, which failure is not cured
within the appropriate time period (generally ten business days).
o RMI breaches any representation or warranty that gives rise to a failure of the
fulfillment of a condition of Internet Communications's obligations to
consummate the merger.
o RMI's stockholders do not approve the merger.
o Prior to the approval of the merger by the shareholders of Internet
Communications, the board of directors determines in good faith that an
unsolicited third party takeover proposal would be more favorable to the
Internet Communications shareholders. See "The Merger -- The Merger Agreement
-- Termination; Effect of Termination."
What do I need to do now? o After carefully reading and considering the information contained in this proxy
statement/prospectus, please fill out and sign your proxy card. Then, mail your
completed, signed and dated proxy card in the enclosed return envelope as soon as
possible so that your shares can be voted at your special meeting.
If my shares are held in o Brokers will not be able to vote any shares without instructions from the
"street name" by my broker, will my beneficial shareholders. You should follow the directions provided by your broker
broker vote these shares for me? to vote such shares.
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How do I change my vote o At any time before your special meeting, you may change your vote by sending a
after I have mailed my written notice stating that you would like to revoke your proxy or by completing
signed proxy card? and submitting a new, later dated proxy card to the Corporate Secretary of RMI or
Internet Communications, as the case may be. You can also attend your special
meeting and vote in person.
Should Internet o No. After the merger is completed, Internet Communications shareholders will
Communications shareholders receive written instructions for exchanging their stock certificates for stock
send in their stock certificates representing shares of RMI common stock and warrant certificates
certificates now? representing their right to purchase shares of RMI common stock.
When do you expect the o We expect to complete the merger in the fourth calendar quarter of 2000. We
merger to be completed? are working to complete the merger as quickly as possible and intend to do so
shortly after the special meetings.
Who can help answer my o After reading this proxy statement/prospectus, if you have additional questions
questions? about the merger, you should contact:
RMI.NET, Inc.
999 Eighteenth Street, Suite 2300
Denver, Colorado 80202
Attention: Christopher J. Melcher
or
Internet Communications Corporation
7100 East Belleview Avenue, Suite 201
Greenwood Village, Colorado 80111
Attention: Thomas C. Galley
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SUMMARY OF THE PROXY STATEMENT/PROSPECTUS
This summary highlights selected information from this joint proxy
statement/prospectus and may not contain all of the information that is
important to you. You should carefully read this entire proxy
statement/prospectus, including the appendices, and the other documents we refer
to for a more complete understanding of the merger. In addition, we incorporate
by reference important business and financial information about RMI and Internet
Communications into this proxy statement/prospectus. You may obtain the
information incorporated by reference into this proxy statement/prospectus
without charge by following the instructions in the section entitled "Where You
Can Find More Information" on page __ of this proxy statement/prospectus. In
particular, you are urged to read carefully the information contained in this
document under the caption "RISK FACTORS", beginning on page __.
RMI has provided the information in this joint proxy statement/prospectus
about RMI, and Internet Communications has provided the information about
Internet Communications.
THE COMPANIES
INTERNET COMMUNICATIONS CORPORATION
7100 E. Belleview Avenue, Suite 201
Englewood, Colorado 80111
Website: www.incc.net
(303) 770-7600
Internet Communications is an Internet technologies and integration company
that specializes in the design, implementation, and management of Web-based
applications and connections, wide area networks, voice systems and e-commerce
solutions. Internet Communications targets Colorado-based middle-market
businesses.
Internet Communications offers a wide array of communication services such
as network management, maintenance, professional services, Internet access, web
hosting, project management, network integration and transport services.
Internet Communications has an installed base of business, government and
institutional customers, ranging from single location, single system customers
to national accounts with integrated networks dispersed over a wide geographic
area.
Additional information regarding Internet Communications is included in its
Annual Report on Form 10-K for the year ended December 31, 1999 (including the
amendment thereto on Form 10K-A filed on April 28, 2000), its Quarterly Report
for the quarter ended March 31, 2000, and its Quarterly Report for the quarter
ended June 30, 2000, which are incorporated herein by reference and included
with this joint proxy statement/prospectus.
RMI.NET, INC.
999 Eighteenth Street, Suite 2300
Denver, Colorado 80202
Website: www.rmi.net
(303) 672-0700
RMI began offering Internet access services in 1994 and has grown from a
regional Internet service provider into a premier nationwide e-commerce, Web
solutions, and connectivity services provider for small and medium-sized
business enterprises, as well as dial-up residential customers and DSL
customers.
Through RMI's nationwide network of owned and leased dial-up access sites,
RMI's customers are able to access the Internet in 100% of the strategic
marketing areas in the United States via a local telephone call. RMI's current
customer base is approximately 100,000 customers.
RMI offers its customers access to value-added Web services, including (a)
Web site hosting, production, marketing, and training, (b) a Web portal
constructed to provide multiple services, including an online search engine with
a large reference database, an audio feed, a stock quote service, and additional
content, and (c) various e-commerce products and services.
Additional information regarding RMI is included in its Annual Report on
Form 10-K for the year ended December 31, 1999, its Quarterly Report for the
quarter ended March 31, 2000, its Quarterly Report for the quarter ended June
30, 2000 and its definitive proxy statement for the 2000 annual meeting of
stockholders, each of which has been filed with the Securities and Exchange
Commission and is incorporated herein by reference.
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<PAGE> 13
RMI SPECIAL MEETING
PURPOSE OF THE SPECIAL MEETING (SEE PAGE __)
The purpose of the RMI special meeting is to consider and vote upon a
proposal to approve the merger of Internet Communications with RMI, a proposal
to change the name of the Company from RMI.NET, Inc. to "Internet Commerce &
Communications, Inc.," subject to completion of the proposed merger, and
transact any other business that may properly come before the special meeting or
any adjournments or postponements thereof. RMI is seeking shareholder approval
of the merger because the rules of the Nasdaq National Market require
shareholder approval of a transaction that could result in the issuance of
voting stock representing more than 20% of RMI's currently outstanding voting
stock.
DATE, TIME AND PLACE (SEE PAGE __)
The special meeting will be held at 11:00 a.m., local time, on November
28, 2000, at the Hotel Monaco, 1717 Champa Street, Denver, Colorado 80202.
RECORD DATE; SHARES OUTSTANDING; QUORUM (SEE PAGE __)
The close of business on October 3, 2000 is the record date for the
determination of the RMI shareholders of record entitled to notice of, and to
vote at, the special meeting and any adjournments or postponements thereof. Only
holders of record of shares of RMI voting stock will be entitled to vote at the
special meeting. Holders of stock options and warrants, as such, are not
entitled to vote on the merger.
As of the record date, there were issued and outstanding 23,349,575 shares
of RMI common stock entitled to vote. The presence in person or by proxy of
holders of record of a majority of the voting power of the RMI voting stock will
constitute a quorum at the special meeting for purposes of adopting the merger
agreement.
VOTES PER SHARE
Each share of RMI common stock will be entitled to one vote on all matters
upon which they vote at the special meeting or any adjournments or postponements
thereof.
INTERNET COMMUNICATIONS SPECIAL MEETING
PURPOSE OF THE SPECIAL MEETING (SEE PAGE __)
The purpose of the Internet Communications special meeting is to consider
and vote upon a proposal to approve the merger of Internet Communications with
RMI, and transact any other business that may properly come before the special
meeting or any adjournments or postponements thereof.
DATE, TIME AND PLACE (SEE PAGE __)
The special meeting will be held at 9:00 a.m., local time, on November 28,
2000 at the Hotel Monaco, 1717 Champa Street, Denver, Colorado 80202.
RECORD DATE; SHARES OUTSTANDING; QUORUM (SEE PAGE __)
The close of business on October 3, 2000 is the record date for the
determination of the Internet Communications shareholders of record entitled to
notice of, and to vote at, the special meeting and any adjournments or
postponements thereof. Only holders of record of shares of Internet
Communications voting stock will be entitled to vote at the special meeting.
Holders of stock options and warrants, as such, are not entitled to vote on the
merger.
As of the record date, there were issued and outstanding 6,027,586 shares of
Internet Communications common stock and 69,000 shares of Internet
Communications preferred stock. The presence in person or by proxy of holders of
record of a majority of
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<PAGE> 14
the voting power of the Internet Communications voting stock will constitute a
quorum at the special meeting for purposes of adopting the merger agreement.
VOTES PER SHARE
Each share of Internet Communications common stock will be entitled to one
vote on all matters upon which they vote at the special meeting or any
adjournments or postponements thereof. Each share of Internet Communications
preferred stock will be entitled to a number of votes equal to the number of
shares of Internet Communications common stock into which that preferred stock
share could be converted in accordance with its terms on all matters upon which
they vote at the special meeting or any adjournments or postponements thereof.
THE MERGER
THE MERGER CONSIDERATION (SEE PAGE __)
Internet Communications and RMI have entered into a merger agreement that
provides for the merger of Internet Communications with a newly formed
subsidiary of RMI. Following the merger, Internet Communications will continue
its operations as a wholly owned subsidiary of RMI and shareholders of Internet
Communications will become shareholders of RMI. Following the completion of the
merger, RMI intends to change its name to Internet Commerce & Communications,
Inc. Internet Communications shareholders (other than Interwest Group) will be
entitled to receive 0.55 shares of RMI common stock for each share of Internet
Communications common stock owned by such shareholder at the closing of the
merger. Interwest Group will be entitled to receive 0.45 shares of RMI common
stock for each share of Internet Communications common stock owned by Interwest
Group at the closing of the merger. In addition, Interwest Group will receive a
warrant that may become exercisable to purchase additional shares of RMI common
stock one year and one day after the closing of the merger. See "The Merger --
The Merger Agreement -- Treatment of the Interwest Group Loan." It is
anticipated that approximately 10.7 million shares of Internet Communications
common stock will be outstanding on the closing date of the merger, including
shares of Internet Communications common stock to be issued upon (a) payment of
dividends on Internet Communications preferred stock, (b) conversion of Internet
Communications preferred stock to Internet Communications common stock, and (c)
repayment of a loan by Interwest Group (as described below). In addition to the
shares of RMI common stock the shareholders of Internet Communications
(excluding Interwest Group and the directors of Internet Communications) will be
entitled to receive in exchange for each share of Internet Communications common
stock, a warrant exercisable for one share of RMI common stock. The warrants
will be exercisable at $7.00 per share beginning 30 days' after the merger
closes and ending 24 months after the closing of the merger. The warrants will
be cancelable by RMI on 30 days' notice by RMI if RMI's share price equals or
exceeds $8.00 for five consecutive trading days. See "The Merger -- The Warrant
Agreement and the Warrants."
You are urged to read the merger agreement and the form of warrant agreement
in their entirety, each of which is attached as Appendix A and Appendix B,
respectively, to this proxy statement/prospectus.
RECOMMENDATION OF THE RMI BOARD OF DIRECTORS (SEE PAGE __)
After careful consideration, RMI's board of directors has unanimously
approved the merger agreement and determined that the merger is advisable and in
the best interest of RMI and its shareholders. RMI's board of directors
recommends that you vote "FOR" approval of the merger agreement and the change
of RMI's name to "Internet Commerce & Communications, Inc." following the
closing of the merger.
RECOMMENDATION OF THE INTERNET COMMUNICATIONS BOARD OF DIRECTORS (SEE PAGE __)
After careful consideration, Internet Communications's board of directors
has unanimously approved the merger agreement and determined that the merger is
advisable and in the best interest of Internet Communications and its
shareholders. Internet Communications's board of directors recommends that you
vote "FOR" approval of the merger agreement.
OPINION OF INTERNET COMMUNICATIONS'S FINANCIAL ADVISOR (SEE PAGE __)
Neidiger, Tucker, Bruner, Inc., Internet Communications's financial advisor,
delivered an opinion to the Internet Communications board of directors that, as
of the date of the opinion and based on the procedures followed, factors
considered and assumptions made by Neidiger, Tucker, and subject to the
limitations set forth in the opinion, the consideration to be received by
Internet
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<PAGE> 15
Communications's shareholders pursuant to the merger agreement was fair to the
shareholders from a financial point of view. The complete opinion of Neidiger,
Tucker is attached as Appendix F. You are urged to read it in its entirety.
SHAREHOLDER APPROVAL (SEE PAGE __)
RMI
The General Corporation Law of the State of Delaware and the bylaws of RMI
require the affirmative vote of a majority of the votes present at the RMI
special meeting to approve the merger.
INTERNET COMMUNICATIONS
The Colorado Business Corporation Act and the bylaws of Internet
Communications require the affirmative vote of the holders of a majority of the
voting power of all outstanding shares of Internet Communications voting stock
to approve the merger.
In accordance with the terms of a shareholder agreement entered into between
RMI, Internet Communications and Interwest Group at the time the merger
agreement was signed, Interwest Group has agreed to vote all of its shares of
voting stock of Internet Communications in favor of the merger agreement.
Interwest Group has the right to cast approximately 67% of the votes entitled
to be cast at the special meeting. Accordingly, approval of the merger agreement
by Internet Communications shareholders is assured. See "The Merger -- The
Shareholder Agreement."
CONDITIONS TO COMPLETION OF THE MERGER (SEE PAGE __)
RMI's and Internet Communications's respective obligations to complete the
merger are subject to the prior satisfaction or waiver of a number of
conditions. If either RMI or Internet Communications waives any conditions, RMI
and Internet Communications will each consider the facts and circumstances at
that time and make a determination as to whether a resolicitation of proxies
from either RMI or Internet Communications shareholders is appropriate. The
following conditions, among others, must be satisfied or waived before the
completion of the merger:
o Approval of the merger agreement by the shareholders of RMI;
o Approval of the merger agreement by the shareholders of Internet
Communications;
o The registration statement of which this proxy statement/prospectus is a
part will have become effective in accordance with the provisions of the
Securities Act, no stop order suspending the effectiveness of the
registration statement will have been issued by the Securities and Exchange
Commission and no proceedings for that purpose will have been initiated or
threatened by the Securities and Exchange Commission, and all necessary
state securities or blue sky authorizations will have been received;
o There will have been no material adverse change with respect to Internet
Communications or RMI since the date of the merger agreement;
o The holders of no more than 300,000 shares of outstanding Internet
Communications common stock have provided notice of their intent to exercise
dissenters' rights under the Colorado Business Corporation Act;
o The fairness opinion of Neidiger, Tucker will not have been adversely
modified or withdrawn; and
o No injunction or order preventing the completion of the merger or
restricting RMI's operation of Internet Communications after the merger may
be in effect.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE __)
The merger agreement may be terminated before the completion of the merger
by the mutual consent of Internet Communications and RMI or by either party if:
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<PAGE> 16
o The merger is not consummated by November 30, 2000;
The merger agreement may be terminated by RMI if:
o Internet Communications or Interwest Group fails to comply in any material
respect with any of the covenants or agreements contained in the merger
agreement;
o Internet Communications or Interwest Group breaches any representation or
warranty that gives rise to a failure of the fulfillment of a condition of
RMI's obligations to consummate the merger;
o Internet Communications's shareholders do not approve the merger;
o The board of directors of Internet Communications approves and recommends a
qualified takeover proposal instead of the merger;
o A tender offer or exchange offer for 20% or more of the outstanding capital
stock of Internet Communications is commenced by a third party that is not
an affiliate of RMI, and the board of directors of Internet Communications
fails to recommend against acceptance of such tender offer or exchange offer
by its shareholders; or
o The board of directors of Internet Communications revokes its approval or
recommendation that the shareholders of Internet Communications approve the
merger.
The merger agreement may be terminated by Internet Communications if:
o RMI fails to comply in any material respect with any of the covenants or
agreements contained in the merger agreement;
o RMI breaches any representation or warranty that gives rise to a failure of
the fulfillment of a condition of Internet Communications's obligations to
consummate the merger;
o RMI's shareholders do not approve the merger; or
o Prior to the approval of the merger by the shareholders of Internet
Communications, the board of directors determines in good faith that an
unsolicited third party takeover proposal would be more favorable to the
Internet Communications shareholders.
INTERNET COMMUNICATIONS NON-SOLICITATION PROVISIONS (SEE PAGE __)
Until the merger is completed or the merger agreement is terminated,
Internet Communications has agreed not to take, directly or indirectly, any of
the following actions with any party other than RMI:
o Solicit, initiate, encourage or agree to any takeover proposal (as described
below); or
o Engage in negotiations or discussions with respect to a takeover proposal or
enter into any agreement with respect to a takeover proposal requiring
Internet Communications to abandon, terminate or fail to consummate the
merger agreement.
Internet Communications may engage in any of these otherwise prohibited
acts, other than solicitation, initiation or encouragement of any takeover
proposal, if:
o Internet Communications's board of directors believes in good faith that a
particular takeover proposal will result in a transaction more favorable to
the Internet Communications shareholders than the merger; and
o Internet Communications's board of directors determines in good faith after
advice of counsel that the failure to engage in the prohibited negotiations
or discussions or provide non-public information is inconsistent with the
fiduciary duties of the board of directors under applicable law.
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<PAGE> 17
o Internet Communications's board of directors is not prohibited from taking
and disclosing to the Internet Communications shareholders a position with
respect to a tender offer pursuant to Rule 14e-2 under the Securities
Exchange Act of 1934. Internet Communications has agreed to provide RMI with
detailed information about any takeover proposal it receives.
A takeover proposal is:
o Any offer or proposal for a merger or other business combination involving
Internet Communications;
o The acquisition of the outstanding shares of capital stock of Internet
Communications or any of its subsidiaries; or
o The sale or transfer of any substantial portion of the assets of Internet
Communications.
INTERWEST GROUP SHAREHOLDER AGREEMENT (SEE PAGE __)
In connection with the execution of the original merger agreement, Interwest
Group entered into a shareholder agreement with RMI and Internet Communications
that requires Interwest Group to vote all shares of Internet Communications
common and preferred stock beneficially owned by it for approval of the merger
agreement. The shareholder agreement provides that after the merger closes,
Interwest Group will vote all RMI common stock beneficially owned by it as
directed by a majority of RMI's board of directors. In addition, Interwest Group
may not sell any RMI shares that it receives in the merger for one year
following the closing of the merger, except that it may sell up to 300,000
shares under specified conditions related to increases in the market price of
RMI's common stock. Interwest Group was not paid additional consideration in
connection with the shareholder agreement.
Interwest Group held approximately 67% of the voting power of Internet
Communications as of the date of this proxy statement/prospectus.
You are urged to read the shareholder agreement in its entirety, a copy of
which is attached as Appendix D to this proxy statement/prospectus.
EXCHANGE AGREEMENT (SEE PAGE __)
Concurrently with the execution of the merger agreement and as a condition
to RMI entering into the merger agreement, RMI and Internet Communications
entered into an exchange agreement. If the merger agreement is terminated,
subject to certain exceptions discussed under "The Merger--The Exchange
Agreement," Internet Communications will deliver 1,199,490 shares, representing
19.9% of Internet Communications's outstanding common stock on October 18, 2000,
to RMI, and RMI will deliver 857,635 shares of RMI common stock to Internet
Communications, representing the number of Internet Communications shares issued
to RMI under the exchange agreement multiplied by an exchange ratio of 0.715.
The exchange of shares contemplated by the exchange agreement may discourage
third parties who are interested in acquiring a significant stake in Internet
Communications and is intended by RMI to increase the likelihood that the merger
will be completed.
You are urged to read the exchange agreement in its entirety, a copy of
which is attached as Appendix C to this proxy statement/prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (SEE PAGE __)
When considering the recommendation of the Internet Communications board of
directors, Internet Communications shareholders should be aware that some
Internet Communications's directors and officers have interests in the merger
that are different from, or are in addition to, those of Internet Communications
shareholders. As a result, Internet Communications's directors and officers who
are also shareholders may be more likely to vote to approve the merger than
Internet Communications's shareholders generally. These interests include the
following:
o As of the date of this proxy statement/prospectus, Interwest Group holds
approximately 67% of the voting power of Internet Communications and two
affiliates of Interwest Group are members of the Internet Communications
board of directors. Interwest Group has agreed to vote in favor of the
merger and the affirmative vote of Interwest Group is sufficient by itself
to approve the merger. Accordingly, Interwest Group may be subject to a
conflict of interest as a result of its position as the largest shareholder
of Internet Communications with affiliates on Internet Communications's
board of directors because its interests with respect to the merger may
differ from the interests of Internet Communications shareholders, as a
whole.
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<PAGE> 18
o Thomas C. Galley, Internet Communications's President and Chief Executive
Officer, has an employment agreement dated February 7, 2000, with Internet
Communications that provides that, in addition to his annual compensation,
Mr. Galley may earn cash bonuses from Internet Communications if (a) he
continues to be employed by Internet Communications for one year following
the date of his employment agreement, (b) he finds a replacement candidate
for the position of President/Chief Executive Officer of Internet
Communications and that candidate serves in such capacity for at least 60
days, and (c) Internet Communications is sold.
o As a result of the merger, all unvested options outstanding under Internet
Communications's stock option plans will become fully vested and
exercisable. Therefore, shareholders who hold options may be more inclined
to vote in favor of the merger in order to receive the benefit of this
vesting.
o RMI has agreed to indemnify each present and former Internet
Communications's officer and director against liabilities arising out of the
fact that such person is or was a director or officer of Internet
Communications. This indemnification may appeal to shareholders who are also
officers or directors and may provide additional incentives to such
individuals to approve the merger.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (SEE PAGE __)
The merger has been structured so that, in general, Internet Communications
shareholders will not recognize gain or loss for United States federal income
tax purposes in the merger, except for taxes payable because of cash received by
Internet Communications shareholders instead of fractional shares and taxes
payable due to the exercise of options and warrants.
RESTRICTIONS ON THE ABILITY TO SELL RMI STOCK AND WARRANTS (SEE PAGE __)
All shares of RMI common stock and RMI warrants received by an Internet
Communications shareholder in connection with the merger will be freely
transferable unless that shareholder is considered an "affiliate" of either
Internet Communications or RMI for purposes of the Securities Act of 1933.
Shares of RMI common stock and RMI warrants held by these affiliates may only be
sold pursuant to a registration statement or an exemption under the Securities
Act.
COMPARATIVE MARKET PRICE AND DIVIDEND INFORMATION
RMI MARKET PRICE DATA
RMI's common stock is traded on the Nasdaq National Market under the symbol
"RMII." The following table shows the range of high and low sale prices of RMI's
common stock as reported by the Nasdaq National Market for the periods
indicated, and based on RMI's fiscal year end of December 31:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal 1998
First Quarter............................... $ 5.19 $ 1.88
Second Quarter.............................. $ 11.75 $ 5.31
Third Quarter............................... $ 18.50 $ 8.00
Fourth Quarter.............................. $ 28.50 $ 7.00
Fiscal 1999
First Quarter............................... $ 15.88 $ 10.50
Second Quarter.............................. $ 16.63 $ 10.94
Third Quarter............................... $ 13.63 $ 6.67
Fourth Quarter.............................. $ 10.00 $ 6.09
Fiscal 2000
First Quarter............................... $ 13.50 $ 6.69
Second Quarter.............................. $ 7.06 $ 3.00
Third Quarter............................... $ 3.38 $ 1.25
</TABLE>
INTERNET COMMUNICATIONS MARKET PRICE DATA
Internet Communications's common stock is traded on the Nasdaq SmallCap
Market under the symbol "INCC". See "Reasons for the Merger; Recommendation of
the Board of Directors -- Internet Communications's Share Value." The following
table shows the range of high and low sale prices of Internet Communications's
common stock as reported by the Nasdaq SmallCap Market for the periods
indicated, and based on Internet Communications's fiscal year end of December
31:
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<PAGE> 19
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal 1998
First Quarter.......................... $ 6.75 $ 4.44
Second Quarter......................... $ 6.75 $ 4.63
Third Quarter.......................... $ 6.72 $ 4.38
Fourth Quarter......................... $ 5.25 $ 2.13
Fiscal 1999
First Quarter.......................... $ 3.94 $ 2.13
Second Quarter......................... $ 4.69 $ 2.13
Third Quarter.......................... $ 3.13 $ 2.50
Fourth Quarter......................... $ 6.06 $ 1.63
Fiscal 2000
First Quarter.......................... $ 5.19 $ 2.50
Second Quarter......................... $ 2.50 $ 1.00
Third Quarter.......................... $ 1.16 $ 0.66
</TABLE>
DIVIDEND INFORMATION
RMI and Internet Communications have never paid any cash dividends on their
common stock and both companies anticipate that they will continue to retain any
earnings for the foreseeable future for use in the operation of their respective
businesses.
RECENT CLOSING PRICES
On March 17, 2000, the last trading day before announcement of the proposed
merger, the closing prices per share of RMI common stock and Internet
Communications common stock on the Nasdaq National Market and the Nasdaq
SmallCap Market, respectively, were $10.125 and $3.56, respectively. On
September 8, 2000, the last trading day before RMI and Internet Communications
announced that they had agreed to amend the terms of the merger, the closing
prices per share of RMI common stock and Internet Communications common stock on
the Nasdaq National Market and the Nasdaq SmallCap Market, respectively, were
$2.188 and $1.094, respectively. On October 17, 2000, the latest practicable
trading day before the printing of this proxy statement/prospectus, the closing
prices per share of RMI common stock and Internet Communications common stock on
the Nasdaq National Market and the Nasdaq SmallCap Market, respectively, were
$1.03 and $0.58, respectively.
Because the market price of RMI common stock fluctuates, the market value of
the shares of RMI common stock that holders of Internet Communications common
stock will receive in the merger may increase or decrease prior to and following
the merger. Shareholders are urged to obtain current market quotations for RMI
common stock and Internet Communications common stock. No assurance can be given
as to the future prices or markets for RMI common stock or Internet
Communications common stock.
NUMBER OF SHAREHOLDERS
As of October 3, 2000, there were approximately 198 RMI shareholders of
record and approximately 111 Internet Communications shareholders of record, as
shown on the transfer agents' records for each of Internet Communications and
RMI.
RISK FACTORS
You should carefully consider the risks described below in evaluating RMI,
Internet Communications and the merger. You should review this proxy
statement/prospectus carefully, including the documents incorporated by
reference, before deciding how to vote on the merger.
RISKS FACTORS RELATED TO THE MERGER
FIXED CONVERSION RATIO OF SHARES OF INTERNET COMMUNICATIONS COMMON STOCK TO RMI
COMMON STOCK MAY REDUCE VALUE OF MERGER PROCEEDS TO INTERNET COMMUNICATIONS
SHAREHOLDERS
RMI cannot assure the Internet Communications shareholders of the value of
the shares of RMI common stock to be issued to them in the merger. Shares of
Internet Communications common stock will convert into RMI common stock at a
fixed ratio. Accordingly, if the trading price of RMI common stock declines, so
will the value of the merger consideration. In addition, the trading price of
RMI's common stock following the merger is likely to change based upon changes
in the business, operations and prospects of RMI, general market and economic
conditions and other factors beyond the control of RMI.
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<PAGE> 20
NO TRADING MARKET FOR THE WARRANTS MAY DEVELOP
The issuance of the warrants to be issued in connection with the merger has
been registered under the Securities Act, and the warrants may be resold without
registration (except for warrants held by affiliates of RMI). However, RMI is
not required, and has no intention, to list the warrants on any stock exchange.
Consequently, there can be no assurance that a trading market for the warrants
will develop.
SUCCESSFUL INTEGRATION OF INTERNET COMMUNICATIONS'S OPERATIONS INTO RMI AND THE
REALIZATION OF POTENTIAL BENEFITS OF THE MERGER ARE UNCERTAIN
RMI and Internet Communications expect that the merger will result in
benefits to both companies through the integration of the companies' operations
and the synergies created thereby. If RMI and Internet Communications fail to
integrate the two companies efficiently, the expected benefits of the merger may
not be realized. The integration of operations may require, among other things,
the combination of the two companies' administrative, executive and technical
staffs and sales and marketing operations. This integration would require the
dedication of management resources that could temporarily distract management's
attention from the day to day business of the combined companies. We cannot
assure you that this integration will be achieved efficiently or that any of the
expected benefits of the merger will be realized.
IF RMI DOES NOT SUCCESSFULLY INTEGRATE INTERNET COMMUNICATIONS OR THE MERGER'S
BENEFITS DO NOT MEET THE EXPECTATIONS OF FINANCIAL OR INDUSTRY ANALYSTS, THE
MARKET PRICE OF RMI COMMON STOCK MAY DECLINE
In connection with the merger, we estimate that between 5.4 million and
5.6 million newly-issued shares of RMI common stock will be issued to Internet
Communications shareholders, depending upon the number of shares of Internet
Communications common stock outstanding on the date of the closing of the
merger. In addition, warrants to purchase approximately 2.4 million additional
shares of RMI common stock will be issued in the merger to shareholders other
than Interwest Group and its affiliates. Interwest Group will receive a warrant
that may be exercisable into additional RMI shares a year and a day after the
merger closes. The issuance of these shares and warrants could decrease the per
share market price of RMI common stock. The market price of RMI common stock
also may decline as a result of the merger if:
o the integration of Internet Communications is unsuccessful;
o RMI does not achieve the perceived benefits of the merger as rapidly or to
the extent anticipated by financial or industry analysts; or
o the effect of the merger on RMI's financial results is not consistent with
the expectations of financial or industry analysts.
RISK FACTORS RELATED TO RMI
RMI HAS A SHORT OPERATING HISTORY, HAS INCURRED NET LOSSES SINCE ITS INCEPTION
AND EXPECTS FUTURE LOSSES
RMI started its business in 1993 and began offering Internet access services
in 1994. RMI has incurred operating losses in every year of its existence. Net
losses were $2.3 million for the year ended December 31, 1996, $4.2 million for
the year ended December 31, 1997, $10.7 million for the year ended December 31,
1998, and $24.9 million for the year ended December 31, 1999. In the first six
months of 2000, RMI incurred a net loss of $16.3 million. As of June 30, 2000,
RMI has an accumulated deficit of $58.8 million. RMI may never be profitable.
In 1998, a proposed merger transaction with Internet Communications and
related financing transactions were terminated. Claims by third parties
unrelated to Internet Communications allegedly arising from the terminated 1998
merger remain outstanding. RMI has not agreed that it is responsible for these
claims and has consistently disputed their validity. As a result, RMI has
recorded to date costs, expenses, and related fees of approximately $6.1
million. Of this amount, approximately $4.2 million relates to warrants that RMI
issued. Although RMI is attempting to agree on a resolution of these disputes
that is satisfactory to all parties, it may be unable to reach an agreement with
all parties. RMI does not currently have the ability to pay all of these
expenses.
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IF RMI IS UNABLE TO RAISE ADDITIONAL FUNDS, IT WILL NOT BE ABLE TO MAINTAIN ITS
CURRENT LEVEL OF OPERATIONS OR TO PURSUE GROWTH OPPORTUNITIES
RMI intends to expand or open new access sites or make other capital
investments as dictated by customer demand and strategic considerations. To open
new dial-up access sites, known in RMI's industry as points of presence or POPs,
RMI must spend significant amounts of money for new equipment as well as for
leased telecommunications facilities and advertising. In addition, to expand its
customer base nationwide, RMI will have to spend significant amounts of money on
additional equipment to maintain the high speed and reliability of RMI's
Internet access services. RMI may also need to spend significant amounts of cash
to:
o fund growth, operating losses, and increased expenses;
o implement its acquisition strategy;
o 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
o respond to unanticipated developments or competitive pressures.
RMI will require additional funds through equity, debt or other external
financing in order to fund its current operations and to achieve its business
plan. RMI cannot assure that any additional capital resources will be available
to RMI, or, if available, will be on terms that will be acceptable to RMI. 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, RMI's ability to execute its business plan and operate its
business could be materially and adversely affected.
RMI FACES INTENSE COMPETITION, AND IF IT IS UNABLE TO COMPETE EFFECTIVELY, IT
MAY LOSE MARKET SHARE OR BE FORCED TO REDUCE PRICES
RMI operates in the Internet services market, which is extremely
competitive. Current and prospective competitors include many large companies
that have substantially greater market presence, financial, technical,
marketing, and other resources than RMI. RMI competes directly or indirectly
with the following categories of companies:
o established online services, such as America Online, the Microsoft Network,
CompuServe, and Prodigy;
o local, regional, and national Internet service providers, such as Earthlink,
Network, Internet America, PSINet and Verio;
o national telecommunications companies, such as AT&T, WorldCom, Sprint, and
GTE;
o regional Bell operating companies, such as BellSouth and SBC Communications;
o computer hardware and software companies, such as International Business
Machines and Microsoft Corporation; and
o online cable services, such as At Home and Roadrunner.
RMI's competition is likely to increase. RMI believes 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
RMI at a significant competitive disadvantage. In addition, competitors may
charge less than RMI does for Internet services, causing RMI to reduce or
preventing RMI from raising its fees. As a result, RMI's business may suffer.
IF RMI IS UNABLE TO COMPETE IN THE LOCAL EXCHANGE AND LONG DISTANCE TELEPHONE
MARKET, ITS PROFITABILITY WILL BE ADVERSELY AFFECTED
In 1998, RMI entered the long distance telephone market. RMI 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 RMI's
competitors are significantly larger and have substantially greater market
presence and financial, technical, operational, marketing, and other resources.
RMI will face stiff price competition and may not be able to compete.
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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. RMI will be required
to develop new products, services, and systems and will need to develop new
marketing initiatives to sell these services. RMI's inability to overcome any of
these operating complexities could have a material adverse effect on RMI.
IF RMI FAILS TO KEEP PACE WITH TECHNOLOGICAL CHANGE AND EVOLVING INDUSTRY
STANDARDS, IT MAY LOSE CUSTOMERS
The Internet services market is characterized by rapidly changing
technology, evolving industry standards, changes in customer needs, and frequent
new service and product introductions. RMI's future success depends, in part, on
its ability to:
o use leading technologies to develop its technical expertise;
o enhance its existing services; and
o develop new services that meet changing customer needs on a timely and
cost-effective basis.
In particular, RMI must provide customers with the appropriate products,
services, and guidance to best take advantage of the rapidly evolving Internet.
RMI's failure to respond in a timely and effective manner to new and evolving
technologies could have a negative impact on its business. RMI's ability to
compete will also depend upon the continued compatibility of its services with
products offered by various vendors. Although RMI intends to support emerging
standards in the market for Internet access, industry standards may not be
established. Moreover, if industry standards are established, RMI may not be
able to conform to these new standards in a timely fashion. RMI's competitors
may develop services and technologies that will render its services or
technology noncompetitive or obsolete.
RMI is 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 RMI's customers and RMI use.
RMI must develop new technology or modify its 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. RMI may not succeed in adapting its Internet access business
to new and faster access devices.
ANY DECLINE IN RMI'S CUSTOMER RETENTION LEVELS OR RMI'S PRICES WILL ADVERSELY
AFFECT REVENUES AND PROFITABILITY
RMI's new customer acquisition costs are substantial relative to the monthly
fees it charges. Accordingly, RMI's long-term success largely depends on the
retention of existing customers. While RMI continues to invest significant
resources in its infrastructure and technical and customer support capabilities,
it is relatively easy for Internet users to switch to competing providers.
Consequently, RMI's investments may not help customer retention. Any significant
loss of customers will substantially decrease RMI's revenue and cause its
business to suffer.
As a result of competitive pricing pressures in the market for Internet
services, RMI reduced the prices it charges its Internet customers during 1995,
1997, and 1998. RMI expects that continued price pressures may cause it to
reduce prices further in order to remain competitive, and RMI expects that such
further price reductions could adversely effect its results of operations,
unless it can lower costs commensurate with such price decreases.
IF RMI FAILS TO EFFECTIVELY MANAGE ITS GROWTH, THE QUALITY OF ITS SERVICE WILL
DECLINE AND RMI WILL LOSE CUSTOMERS
RMI's rapid growth has and will place a significant strain on its
managerial, operational, financial, and information systems resources. To manage
growth, RMI must continue to implement and improve these systems and attract,
train, manage, and retain qualified employees. These demands will require RMI 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, RMI must:
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o closely monitor service quality, particularly through third party POPs;
o acquire and install necessary equipment and telecommunications facilities;
o create and implement marketing strategies in new and existing markets;
o employ qualified personnel to provide technical and marketing support for
new sites; and
o continue to expand managerial, operational, and financial resources to
support expansion.
Although RMI is taking steps to manage growth effectively, it may not
succeed. If RMI is unable to manage its growth, its ability to maintain and
increase its customer base will be impaired and its business will suffer.
IF RMI FAILS TO INTEGRATE RESOURCES ACQUIRED THROUGH ACQUISITIONS, IT WILL LOSE
CUSTOMERS AND ITS LIQUIDITY, CAPITAL RESOURCES AND PROFITABILITY WILL BE
ADVERSELY AFFECTED
Since January 1999, RMI has acquired the stock or assets of 17 companies and
may continue to acquire a number of other companies in the future. As part of
its long-term business strategy, RMI continually evaluates strategic
acquisitions of businesses and customer accounts. Acquisitions often involve a
number of special risks, including the following:
o RMI may experience difficulty integrating acquired operations and personnel;
o RMI may be unable to retain acquired customers;
o the acquisition may disrupt RMI's ongoing business;
o RMI may not be able to successfully incorporate acquired technology and
rights into its service offerings and maintain uniform standards, controls,
procedures, and policies;
o the businesses RMI acquires may fail to achieve anticipated revenues and
earnings;
o RMI may ultimately be liable for contingent and other liabilities, not
previously disclosed to it, of the companies that it acquires; and
o RMI's resources may be diverted in asserting and defending its legal rights.
RMI may not successfully overcome problems encountered in connection with
past and future acquisitions. In addition, acquisitions could materially
adversely affect RMI's operating results by:
o causing RMI to incur additional debt;
o increasing amortization expenses related to goodwill and other intangible
assets; and
o diluting your ownership interest.
Any of these factors could have a material adverse effect on RMI's business.
IF RMI IS UNABLE TO OBTAIN SUFFICIENT NETWORK CAPACITY FROM ITS INTERNAL AND
LEASED NETWORK, ITS ABILITY TO GROW WILL BE SEVERELY CURTAILED
RMI's success depends, in part, on the capacity, reliability, and security
of its network. RMI's 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:
o particular dial-up POPs affecting only customers attempting to use that
particular point of presence; and
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o system wide services, such as e-mail and news services, which can affect all
customers.
Capacity constraints result in slowdowns, delays, or inaccessibility when
customers try to use a particular service. Poor network performance could cause
customers to terminate their service with RMI. To reduce the probability of such
problems, RMI will be required to expand and improve its network. Such expansion
and improvement will be very costly and time consuming. RMI may not be able to
expand or adapt its network to meet additional demand or changing customer
requirements on a timely basis or at a commercially reasonable cost.
In order to provide Internet access and other online services, RMI leases
access lines from multiple national telecommunications service providers. RMI is
dependent upon these providers of data communications facilities. In addition,
RMI has a wholesale usage agreement with PSINet, which allows it to provide
dial-up access through PSINet's POPs throughout the United States. RMI also has
other agreements with service providers on whom RMI relies to deliver its
product and service offerings. Moreover, PSINet provides network access to some
of RMI's competitors. PSINet could choose to grant these competitors
preferential network access, potentially limiting RMI's customers' 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 INTERRUPT RMI'S SERVICE AND
ADVERSELY AFFECT ITS REVENUES
RMI must protect its infrastructure against fire, earthquakes, power loss,
telecommunications failure, computer viruses, security breaches, and similar
events. RMI does not currently maintain a redundant or backup network hub for
all of its customers. Because RMI leases its lines from telecommunications
companies and regional Bell operating companies, it is dependent upon these
companies for physical repair and maintenance of the leased lines. RMI maintains
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
RMI's network operations center or any of its POPs may cause interruptions in
the services RMI provides. In addition, failure of RMI's telecommunications
providers to provide the data communications capacity RMI requires as a result
of a natural disaster, operational disruption, or for any other reason could
cause interruptions in the services RMI provides. Any damage or failure that
causes interruptions in RMI's operations could have a material adverse effect on
RMI.
RMI'S NETWORK IS SUBJECT TO SECURITY RISKS AND INAPPROPRIATE USE BY INTERNET
USERS THAT COULD INTERRUPT RMI'S SERVICE AND CAUSE A DECLINE IN ITS
PROFITABILITY
The future success of RMI's business will depend on the security of its
network and the networks of third parties over which RMI has no control. Despite
implementation of security measures, RMI remains vulnerable to computer viruses,
sabotage, break-ins, and similar disruptive problems caused by customers or
other Internet users. Any breach of RMI's network security or other
inappropriate use of its 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 RMI's customers. These customers, in turn, could
terminate their service or assert claims against RMI. Third parties could also
potentially jeopardize the security of confidential information stored in RMI's
computer systems or its customers' computer systems by their inappropriate use
of the Internet, which could cause losses to RMI's customers or RMI or deter
potential customers from subscribing to RMI's services. Inappropriate use of the
Internet includes attempting to gain unauthorized access to information or
systems, commonly known as "cracking" or "hacking." Although RMI intends to
continue to implement security measures, "hackers" have circumvented such
measures in the past, and others may be able to circumvent RMI's security
measures or the security measures of RMI's third-party network providers in the
future.
To fix problems caused by computer viruses or other inappropriate uses or
security breaches, RMI may have to interrupt, delay, or cease service to its
customers, which could have a material adverse effect on its business. In
addition, RMI expects that its customers 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, or completed
with compromised security. As a result, customers or others may assert claims of
liability against RMI. Further, until more comprehensive security technologies
are developed, the security and privacy concerns of existing and potential
customers may inhibit the growth of the Internet service industry in general and
RMI's customer base and revenue in particular.
If RMI is unable to deliver services via third party carriers and other
suppliers, it could experience service delays and increased costs in expanding
its network. RMI relies on traditional telecommunications carriers to transmit
traffic over local and long distance networks. These networks may experience
disruptions and capacity constraints that are not easily remedied. RMI may have
no means
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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.
RMI also depends on certain suppliers of hardware and software components.
RMI acquires a majority of its networking service components, including terminal
servers and high-performance routers, from Cisco Systems, Inc., Sun
Microsystems, Inc., and Lucent Technologies, Inc. The expansion of RMI's network
places a significant demand on its suppliers, some of which have limited
production capacity. In the past, RMI has experienced delays in delivery 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 customers who are trying to connect to RMI.NET. If RMI's
suppliers cannot meet increased demand and it is not able to develop alternative
sources of supply, RMI could experience delays and increased costs in expanding
its network, difficulty in providing its services, and the loss of dissatisfied
customers.
TO PROTECT RMI'S PROPRIETARY RIGHTS OR TO AVOID CLAIMS THAT RMI INFRINGES THE
PROPRIETARY RIGHTS OF OTHERS, RMI MAY BE FORCED TO INCUR SUBSTANTIAL COSTS AND
TO DIVERT VALUABLE MANAGERIAL RESOURCES AWAY FROM ITS BUSINESS OPERATIONS
RMI's success is dependent in part on its technology and other proprietary
rights. To protect its rights, RMI relies on a combination of copyright,
trademark, patent and trade secret laws, and contractual restrictions. RMI
cannot be sure that these steps will be adequate to prevent misappropriation or
infringement of its intellectual property. Nor can RMI be sure that competitors
will not independently develop technologies that are substantially equivalent or
superior to its proprietary property and technology.
In RMI's industry, competitors often assert intellectual property claims
against one another. The success of RMI's business depends on its ability to
assert and defend its intellectual property rights. Future litigation may have
an adverse impact on RMI's financial condition. These claims could result in
substantial costs and diversion of resources, even if the claim is ultimately
decided in RMI's favor. If a claim is asserted alleging that RMI infringed the
proprietary technology or information of a third party, RMI may be required to
seek licenses for such intellectual property. RMI 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 RMI's business.
MR. HANSON HAS A CONTROLLING INTEREST IN RMI THAT MAY PREVENT YOU FROM REALIZING
A PREMIUM RETURN ON YOUR INVESTMENT
RMI's CEO, President, and Chairman of the Board of Directors, Douglas
Hanson, has a controlling interest in RMI through his direct ownership of common
stock, ability to exercise outstanding options, and voting rights agreements. As
a result, Mr. Hanson has voting control of RMI and can influence all matters
that require stockholder approval. Mr. Hanson may designate the members of RMI's
board of directors and can decide RMI's 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 RMI, 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.
FUTURE ISSUANCE OF RMI COMMON STOCK PURSUANT TO STOCK OPTION PLANS AND EXERCISE
OF WARRANTS WILL DILUTE YOUR OWNERSHIP INTEREST, AND THE SALE OF SUCH SHARES MAY
NEGATIVELY AFFECT RMI'S STOCK PRICE
As of October 3, 2000, RMI had 23,349,575 shares of common stock
outstanding, and has reserved approximately 7.0 million 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 RMI's stockholders sell substantial amounts of RMI common stock in the public
market, the market price of RMI's common stock and RMI's publicly traded
warrants could fall. Such sales also might make it more difficult for RMI to
sell equity or equity-related securities in the future at a price it deems
appropriate. Also, RMI will issue warrants to purchase approximately 2.4 million
shares of RMI common stock in connection with the merger. In addition, Interwest
Group will receive a warrant to purchase additional shares of RMI common stock
under certain circumstances. See "The Merger -- The Merger Agreement --
Treatment of the Interwest Group Loan." Also, RMI has issued and plans to issue
additional convertible equity and debt securities. If these securities are
exercised or converted, you may experience significant dilution in the market
value of your RMI common stock. RMI's stock price is highly volatile.
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RMI'S OUTSTANDING CLASS B WARRANTS AND THE INTERWEST GROUP WARRANT COULD RESULT
IN SUBSTANTIAL DILUTION OF YOUR INVESTMENT, A DETRIMENTAL EFFECT ON RMI'S
LIQUIDITY AND ABILITY TO RAISE ADDITIONAL CAPITAL, AND A SIGNIFICANT DECLINE IN
THE VALUE OF RMI'S COMMON STOCK.
In a December 1999 private placement, RMI sold the following securities to
two institutional investors, Advantage Fund II Ltd. and Koch Investment Group
Limited, for aggregate consideration of $10 million:
o 761,610 shares of common stock;
o Class A Warrants to purchase 182,786 shares of common stock; and
o Class B Warrants to purchase a potentially unlimited number of shares of
common stock.
In connection with the merger, RMI will issue a warrant to Interwest Group
that is exercisable one year and one day after the closing of the merger. The
number of shares for which this warrant will be exercisable, if any, depends on
the trading price of RMI's common stock at that time. See "The Merger
Agreement -- Treatment of Interwest Group Loan."
The outstanding Class B Warrants and the Interwest Group warrant carry certain
risks, including the potential for:
o substantial dilution of your investment in RMI;
o a detrimental effect on RMI's ability to raise additional funds; and
o a decline in the market value of RMI's common stock as a result of the
exercise of the Class B Warrants and the Interwest Group warrant and
subsequent sales of the common stock.
Each of these risks is discussed in greater detail below.
IF THE MARKET VALUE OF RMI'S COMMON STOCK DECLINES, RMI MAY ISSUE A SUBSTANTIAL
AMOUNT OF COMMON STOCK UPON EXERCISE OF CLASS B WARRANTS AND THE INTERWEST GROUP
WARRANT AND YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION.
The number of shares that RMI may issue to holders of RMI's Class B Warrants
is based on the market price of RMI's common stock from May 2000 through
November 2002. In effect, the holders of the Class B Warrants have the
opportunity to profit from a rise in the market price of RMI's common stock, if
any, thereby reducing the risk of loss on their initial investment resulting
from a decline in RMI's stock price. If the market price of RMI's common stock
decreases, RMI may issue a greater number of shares upon exercise of the Class B
Warrants and the Interwest Group warrant. The Interwest Group warrant is
exercisable if the market value of the RMI common stock received by Interwest
Group upon conversion of the Interwest Group loan on the date that is one year
and one day after the date of conversion is less than the original amount of the
Interwest Group loan converted into RMI common stock. Accordingly, if the market
price of RMI's common stock decreases, RMI may issue a greater number of shares
upon exercise of the Interwest Group warrant. There is theoretically no limit on
the number of shares of common stock that RMI may be required to issue upon
exercise of the Class B Warrants. Your percentage ownership of RMI's common
stock could be diluted substantially. Moreover, because the exercise price of
the Class B Warrants and the Interwest Group warrant is only $0.01 per share and
$0.001 per share, respectively, RMI will not receive material cash proceeds from
the exercise of the Class B Warrants and the Interwest Group warrant.
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------------
Sales of RMI common stock by holders of Class B Warrants prior to November 2002
and by the holder of the Interwest Group warrant by ______, 2001 will reduce the
number of shares issuable upon exercise of the Class B Warrants and the
Interwest warrant, respectively.
THE EXISTENCE OF RMI'S CLASS B WARRANTS AND THE INTERWEST GROUP WARRANT MAY
HINDER RMI'S ABILITY TO RAISE ADDITIONAL CAPITAL
Because of the potential for dilution, as outlined above, RMI may find it
more difficult to raise additional equity capital while the Class B Warrants and
the Interwest Group warrant are outstanding. Sources of equity capital may be
reluctant to provide needed operating capital, which could have an adverse
affect on RMI's ability to finance growth opportunities and on RMI's liquidity.
IF INSTITUTIONAL INVESTORS SELL LARGE VOLUMES OF RMI COMMON STOCK WITHIN A
RELATIVELY SHORT PERIOD OF TIME, INCLUDING SHARES TO BE ISSUED UPON EXERCISE OF
CLASS B WARRANTS, THE VALUE OF RMI COMMON STOCK MAY DECLINE
If the institutional investors sell large volumes of RMI common stock within
a relatively short period of time, the market price of RMI common stock may
decrease and allow the institutional investors to convert their Class B Warrants
into a greater amount of RMI common stock. Further sales of the common stock
issued upon exercise of the Class B Warrants could cause even greater declines
in the price of RMI common stock. Although holders of the Class B Warrants are
restricted in their ability to engage in short sales and similar transactions,
the downward pressure on the market price caused by exercise of Class B Warrants
and sale of the underlying common stock could encourage short sales by other
investors and further undermine the value of RMI common stock.
IF THE NUMBER OF SHARES ISSUABLE UPON EXERCISE OF THE CLASS B WARRANTS EXCEEDS
20% OF THE NUMBER OF SHARES OUTSTANDING BEFORE THE DECEMBER 1999 PRIVATE
PLACEMENT, RMI MAY BE REQUIRED TO SEEK STOCKHOLDER APPROVAL OF THE CLASS B
WARRANT SHARES
Under the rules of the Nasdaq Stock Market, RMI is required to obtain
stockholder approval for the issuance of common stock upon exercise of the Class
B Warrants if the number of shares issuable upon exercise of the Class B
Warrants equals or exceeds 20% of the number of shares of common stock
outstanding before the Class B Warrants were issued. On the date the Class B
Warrants were issued, RMI had 18,865,448 shares of common stock outstanding.
Thus, RMI will be able to issue 3,773,089 shares upon exercise of Class B
Warrants without obtaining stockholder approval.
However, the terms of the Class B Warrants are structured so that RMI will
comply with Nasdaq's 20% limitation even if RMI is unable to obtain stockholder
approval. If the market price of RMI's common stock declines and RMI would need
to otherwise issue common stock in excess of the Nasdaq 20% limitation, RMI
would then have the option of either:
o seeking stockholder ratification of shares to be issued upon exercise of the
Class B Warrants before issuing the underlying common stock; or
o instead of issuing the common stock, pay a redemption fee equal to 120% of
the average market value of the unissued common stock over a five-day period
immediately preceding the holder's request for redemption.
Redemption of the underlying common stock that cannot be issued due to the
Nasdaq limitation at a 20% premium could severely diminish RMI's working capital
and harm its ability to raise additional capital. Furthermore, if RMI is unable
to obtain stockholder approval and is deemed to have issued 20% or more of its
outstanding common stock in connection with the exercise of Class B Warrants,
RMI may be required to delist its shares from the Nasdaq National Market.
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THE PRICE OF RMI COMMON STOCK MAY FLUCTUATE SIGNIFICANTLY, WHICH COULD LEAD TO
LOSSES FOR INDIVIDUAL INVESTORS AND COULD DAMAGE RMI'S REPUTATION AND LEAD TO
COSTLY AND TIME CONSUMING SECURITIES CLASS ACTION LITIGATION
RMI's financial results may fluctuate significantly because of several
factors, many of which are beyond its control. These factors include:
o costs associated with gaining and retaining customers and capital
expenditures for upgrading systems and infrastructure;
o timing and market acceptance of new and upgraded Internet service
introductions, technologies, and services by RMI and its competitors;
o loss of customers and seasonal fluctuations in demand for RMI's services;
o downward pressure on prices due to increased competition;
o changes in RMI's operating expenses, including telecommunications costs; and
o the effect of potential acquisitions.
Historically, the trading prices of RMI's common stock and publicly traded
warrants have been volatile. RMI believes 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 its performance. If the market value of RMI common
stock decreased substantially, the common stock could be delisted from the
Nasdaq National Market. Consequently, you could find it difficult or impossible
to sell your 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, RMI's 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.
In the past, there have been class action lawsuits filed against companies
after periods of fluctuations in the market price of their securities. If RMI
was subject to this type of litigation, it would be a strain on RMI's personnel
and financial resources, and divert management's attention from running the
company. Litigation could also negatively affect RMI's public image and
reputation.
RMI HAS NO INTENTION TO PAY DIVIDENDS
RMI has never paid any cash dividends on its common stock. RMI currently
intends to retain all future earnings, if any, for use in its business and does
not expect to pay any dividends in the foreseeable future.
RMI FACES POTENTIAL COSTS AND LIABILITY IN CONNECTION WITH THE INFORMATION IT
HOSTS AND THAT IS DISSEMINATED THROUGH ITS NETWORK
RMI is not currently subject to direct federal, state, or local government
regulation, other than regulations applicable to businesses generally. There
currently is only a small body of laws and regulations directly applicable to
the provision of access to or commerce services on the Internet. For example, in
late 1998, Congress enacted the Digital Millennium Copyright Act, which includes
a limitation on liability of online service providers for copyright infringement
for transmitting, routing, or providing connections, storage or caching of data
at the direction of a user. This limitation on liability applies if the service
provider has no actual knowledge that the particular data infringed on third
party intellectual property rights and if certain other conditions are met.
Because this law is relatively new, RMI is not sure how it will be applied to
limit any liability that it may face in the future for possible copyright
infringement-related issues that arise in connection with the services RMI
provides. This law also requires that service providers follow certain notice
and take-down procedures with respect to allegedly infringing materials in order
to take advantage of the limitation on liability provided by the Digital
Millenium Copyright Act. RMI is in the process of implementing these sorts of
procedures across its operations. Certain provisions of the Communications
Decency Act, which imposes criminal penalties for using an interactive computer
service for transmitting obscene or indecent communications, have been found
unconstitutional by the U.S. Supreme Court. Other federal legislation that was
enacted to require limitations on access to pornography and other material
deemed harmful to minors was determined to violate the First Amendment, but that
decision is on appeal. RMI is unable to predict the
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outcome of this appeal or whether other similar legislation will be enacted or
enforced. In addition, the Federal Trade Commission adopted final rules,
effective April 21, 2000, regarding the Children's Online Privacy Protection
Act's prohibition of unfair and deceptive acts and practices in connection with
the collection and use of personal information from and about children on the
Internet. The rules provide that Web sites directed at children under 13 years
of age must obtain verifiable parental consent before collecting personal
information from children and must take other measures intended to safeguard
children's privacy. Additional requirements may be imposed on Web site
operations relating to the use, dissemination, and collection of personal
information. RMI has adopted a standard acceptable use policy that applies to
all of its customers and that prohibits them from posting, transmitting, or
storing material on or through RMI's services that it determines to be in
violation of third party intellectual property rights. RMI's acceptable use
policy also imposes other restrictions on its customers in connection with the
use of its services, including prohibitions on illegal activity or other
activity that is destructive or potentially destructive to RMI's business or
reputation or to its customers. RMI initially designed and continues to evolve
its acceptable use policy to promote the security, reliability, and privacy of
its systems and network. However, RMI cannot assure you that its policy will
accomplish this goal or shield RMI from liability under the Digital Millennium
Copyright Act or otherwise with respect to the activities of, or the content
hosted or transmitted by, RMI's customers or other Internet users.
Because of the increased popularity and use of the Internet, it is likely
that a number of additional laws and regulations may be adopted at the federal,
state, and local levels, governing such issues as user privacy, freedom of
expression, pricing, taxation, advertising, intellectual property rights,
information security, and the convergence of traditional telecommunications
services with online services and Internet communications. Legislation
addressing such things as online security, privacy, mass unsolicited commercial
e-mail messages, and the regulation of sales of products, such as
pharmaceuticals, firearms, drug paraphernalia, and gambling, is proposed
regularly in many states and in Congress. The implementation of any such
legislation could result in direct or indirect regulation of online service
providers generally, including RMI. In that case, it is likely that RMI would
have to implement additional policies and procedures designed to assure its
compliance with the particular legislation.
The imposition on Internet service providers or Web hosting providers of
potential liability for materials carried on or disseminated through their
systems could require RMI to implement measures to reduce its exposure to such
liability. These measures may require that RMI spend substantial resources or
discontinue certain product or service offerings. Any of these actions could
have a material adverse effect on RMI's business, financial condition and
results of operations. Further, the adoption of such laws and regulations might
decrease growth of the Internet generally, which in turn could negatively impact
RMI's business. In addition, applicability to the Internet of existing laws
governing such things as property ownership, intellectual property rights,
taxation, obscenity, defamation, libel, and personal property is uncertain.
Because so many of the existing laws on these topics were adopted prior to the
advent of the Internet and related technologies, they do not contemplate,
address, or readily apply to the unique issues that the Internet and its use
create.
The law relating to the regulation and liability of Internet access
providers in relation to information carried or disseminated is also developing
in other countries. For example, the European Union has enacted its own data
privacy regulations, and Australia has imposed new obligations on Internet
service providers to block access to certain types of content. Decisions, laws,
regulations, and other activities regarding regulation and content liability may
significantly affect the development and profitability of companies offering
online and Internet access services.
RMI carries an errors and omissions insurance policy. This insurance may not
be adequate or available to compensate RMI for all liability that may be
imposed.
RMI MAY BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATION, WHICH COULD DECREASE
ITS REVENUES AND INCREASE ITS COSTS
Although as an Internet access provider RMI is not currently subject to
direct federal governmental regulation other than regulations applicable to
businesses generally, changes in the regulatory environment relating to the
Internet connectivity market could affect RMI's business, financial condition,
and results of operations. For example, regulations at the Federal
Communications Commission require discounted Internet connectivity rates for
schools and libraries. Due to the increasingly widespread use of the Internet
for the hosting, use, and transmission of content, it is likely that additional
laws and regulations will be adopted at the federal, state, and local level,
especially that is content related, that will apply directly or indirectly to
RMI. For example, legislation concerning unsolicited commercial e-mail messages,
online gambling, online sales of pharmaceuticals, drug paraphernalia, and other
illegal or controlled goods and services, privacy, libel, intellectual property
protection and infringement, technology export, and other controls is pending
and, in some cases, has been adopted in various states as well as at the federal
level. RMI may be subject to similar or other laws and regulations in non-U.S.
jurisdictions.
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Moreover, the Federal Communications Commission continues to review its
regulatory position on the usage of the basic network and communications
facilities by Internet service providers. Although the Federal Communications
Commission determined that Internet service providers should not be treated as
telecommunications carriers and, therefore, need not be regulated, in an April
1998 report, the regulatory status of Internet service providers remains
uncertain. Indeed, in its 1998 report, the Federal Communications Commission
concluded that certain services offered over the Internet, such as
phone-to-phone Internet protocol telephony, may be functionally
indistinguishable from traditional telecommunications service offerings and
their non-regulated status may have to be re-examined.
Changes in the regulatory structure and environment affecting the Internet
access market, including regulatory changes that directly or indirectly affect
telecommunications costs or increase the likelihood of competition from regional
bell operating companies or other telecommunications companies, could adversely
affect RMI. Although the Federal Communications Commission has decided not to
allow local telephone companies to impose per-minute access charges on Internet
service providers, and that decision has been upheld by a reviewing court,
further regulatory and legislative consideration of this issue is likely. In
addition, some telephone companies are seeking relief through the Federal
Communications Commission and state regulatory agencies. Such rules, if adopted,
are likely to have a greater impact on consumer-oriented Internet access
providers than on business-oriented Internet service providers such as RMI.
Nonetheless, the imposition of access charges would affect RMI's costs of
serving dial-up customers and could have a material adverse effect on RMI's
business, financial condition, and results of operations.
IF RMI IS UNABLE TO RETAIN KEY EXECUTIVES, ITS GROWTH POTENTIAL AND OPERATING
RESULTS WILL BE ADVERSELY AFFECTED
RMI's success greatly depends on its ability to attract and retain key
technical, sales, marketing, information systems, financial, and executive
personnel. RMI is especially dependent on the continued services of its senior
management team, particularly Douglas H. Hanson, RMI's 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 RMI. All
members of RMI's senior management team can terminate their employment at any
time. RMI does not maintain key person life insurance on any of its personnel.
If RMI fails to attract, hire, or retain the necessary personnel, or if it loses
the services of any member of its senior management team, RMI's business could
be adversely affected.
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
This proxy statement/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. Each of Internet
Communications and RMI intends the forward-looking statements to be covered by
the safe harbor provisions for forward-looking statements in these sections. All
statements regarding expected financial positions and operating results,
business strategy, financing plans and the outcome of any contingencies are
forward-looking statements. These statements can sometimes be identified by the
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 each of RMI and Internet Communications believes that its
expectations expressed in these forward-looking statements are reasonable,
neither can promise that its expectations will turn out to be correct. The
actual results of either company could be materially different from these
expectations, including the following:
o RMI or Internet Communications may lose subscribers or fail to grow its
customer base;
o RMI or Internet Communications may not be able to sustain its current growth
or to successfully integrate new customers or assets obtained through
acquisitions;
o RMI or Internet Communications may fail to compete with existing and new
competitors;
o RMI or Internet Communications may not adequately respond to technological
developments impacting the Internet;
o RMI or Internet Communications may fail to implement proper security
measures to protect its network from inappropriate use, which could overload
our network's capacity and cause it to experience a major system failure;
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o RMI or Internet Communications may issue a substantial number of shares of
its common stock upon exercise of its outstanding warrants, especially if
the market value of our stock declines, thereby causing significant dilution
to RMI shareholders;
o RMI or Internet Communications may fail to settle outstanding litigation;
and
o RMI or Internet Communications 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 proxy
statement/prospectus. These factors are not intended to represent a complete
list of all risks and uncertainties inherent in the businesses conducted by RMI
and Internet Communications, and should be read in conjunction with the more
detailed cautionary statements included in this proxy statement/prospectus under
the caption "Risk Factors."
THE RMI SPECIAL MEETING
DATE, TIME AND PLACE; MATTERS TO BE CONSIDERED
RMI is furnishing this proxy statement/prospectus to its shareholders in
connection with the solicitation of proxies by RMI for use at the special
meeting of its shareholders and any adjournments or postponements thereof. The
RMI special meeting will be held 11:00 a.m., local time, on November 28, 2000,
at the Hotel Monaco, 1717 Champa Street, Denver, Colorado 80202. At the RMI
special meeting, RMI shareholders will be asked to vote upon a proposal to
approve the merger of Internet Communications with a subsidiary of RMI, a
proposal to change RMI's name from RMI.NET, Inc. to "Internet Commerce &
Communications, Inc.," subject to completion of the proposed merger, and
transact any other business that may properly come before the special meeting or
any adjournments or postponements thereof.
THE BOARD OF DIRECTORS OF RMI HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED THEREBY AND DETERMINED THAT THEY ARE ADVISABLE
AND FAIR TO RMI SHAREHOLDERS, AND IN THEIR BEST INTERESTS. THE BOARD OF
DIRECTORS OF RMI UNANIMOUSLY RECOMMENDS THAT RMI SHAREHOLDERS VOTE FOR APPROVAL
OF THE MERGER AGREEMENT.
RECORD DATE; QUORUM; VOTING AT THE SPECIAL MEETING
RMI has fixed the close of business on October 3, 2000 as the record date
for determining the holders of RMI voting stock entitled to notice of and to
vote at the RMI special meeting. As of the record date, there were outstanding
23,349,575 shares of RMI common stock entitled to vote. RMI also has outstanding
stock options and warrants. The holders of stock options and warrants, as such,
will not be entitled to vote at the RMI special meeting.
A quorum is necessary to hold a vote on the proposals presented at the RMI
special meeting. The presence in person or by proxy of the holders of record of
a majority of the voting power of the outstanding shares of RMI voting stock is
necessary for there to be a quorum for purposes of voting on the merger
agreement.
Abstentions (that is, votes withheld by shareholders who are present and
entitled to vote) and broker non-votes (that is, shares held by a broker for its
customers that are not voted because the broker does not receive instructions
from the customer or because the broker does not have discretionary voting power
with respect to the item under consideration) will be counted as present for
purposes of determining whether there is a quorum for the transaction of
business.
Once a quorum is present for purposes of the RMI special meeting, the
affirmative vote of a majority of the votes present at the meeting is required
to approve the merger and the affirmative vote by a majority of all the votes
entitled to be cast by the RMI shareholders is required to approve the change of
RMI's name to "Internet Commerce & Communications, Inc." Accordingly,
abstentions and broker non-votes will have the same effect as votes against the
approval of the merger agreement and the change of RMI's name.
RMI will appoint one or more inspectors, who may be employees of RMI, to
determine, among other things, the number of shares of RMI voting stock
represented at the RMI special meeting and the validity of the proxies submitted
for voting at the RMI special meeting. RMI has retained Computershare Trust
Company as its transfer agent and as proxy tabulator to assist the inspectors in
the performance of their duties. Computershare Trust Company can be reached at
(303) 986-5400, facsimile no. (303) 986-2444, Attention: Ms. Tammy Davis.
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VOTING OF PROXIES
All shares of RMI voting stock that are represented at the RMI special
meeting by properly executed proxy cards received prior to or at the RMI special
meeting, and not duly and timely revoked, will be voted at the RMI special
meeting (or any adjournment or postponement thereof) in accordance with the
instructions indicated on the proxy cards. If no instructions are indicated, the
proxies will be voted "FOR" approval of the merger agreement and the name
change. Abstentions and broker non-votes have the same effect as votes against
the approval of the merger agreement and the change of RMI's name.
In the event that there is a motion to adjourn or postpone the RMI special
meeting to another time and/or place (including for the purpose of soliciting
additional votes in favor of the adoption of the merger agreement), then (a)
proxies of holders of RMI voting stock who vote in favor of adoption of the
merger agreement and proxies of holders of RMI voting stock that contain no
voting instructions will be voted in favor of the motion to adjourn or postpone
the RMI special meeting, (b) proxies of holders of RMI voting stock who vote
against the adoption of the merger agreement will be voted against the motion to
adjourn or postpone the RMI special meeting, and (c) proxies of holders of RMI
voting stock who abstain from voting on the adoption of the merger agreement
will abstain on the vote on adjournment or postponement, which will have no
effect on a vote regarding adjournment or postponement. If any other matters are
properly presented for consideration at the RMI special meeting, then Douglas H.
Hanson and Christopher J. Melcher (the persons named in the enclosed proxy card
as the proxies for RMI common stock) will have discretion to vote on these
matters in accordance with their best judgment.
REVOCATION OF PROXIES AND VOTING INSTRUCTIONS
RMI shareholders may revoke a proxy card given in connection with this
solicitation at any time before the proxy card is voted by submitting a written
revocation to the Corporate Secretary of RMI, by returning a subsequently dated
proxy card to the proxy tabulator or to the Corporate Secretary of RMI, or by
voting in person at the special meeting. Attendance at the special meeting will
not in and of itself revoke a proxy card.
RMI shareholders are entitled to revoke their proxy cards via facsimile at
the number set forth above in "--Record Date; Quorum; Voting at the Special
Meeting." If an RMI shareholder is the beneficial owner of RMI voting stock but
his or her shares are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee and that RMI shareholder wishes to revoke
his or her proxy, such RMI shareholder should contact the registered holder
promptly and instruct the registered holder to revoke on his or her behalf.
There can be no assurance that the registered holder will have sufficient time
prior to the special meeting to deliver a revocation upon instruction by such
RMI shareholder.
PROXY SOLICITATION
RMI will pay its own expenses incurred in connection with this proxy
statement/prospectus and the RMI special meeting, including the disbursements of
legal counsel and accountants. In addition to solicitation by mail, proxies may
be solicited by directors, officers and employees of RMI in person or by
telephone, facsimile or other means of communication. The directors, officers
and employees will not be additionally compensated, but will be reimbursed for
reasonable out-of-pocket expenses in connection with their solicitation.
Arrangements will also be made with custodians, nominees and fiduciaries for
forwarding of proxy solicitation materials to beneficial owners of shares held
of record by the custodians, nominees and fiduciaries, and RMI will reimburse
the custodians, nominees and fiduciaries for reasonable expenses incurred in
connection therewith.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF RMI
After careful consideration, RMI's board of directors has unanimously
approved the merger agreement and determined that the merger is advisable and in
the best interest of RMI and its shareholders. RMI's board of directors
recommends that its shareholders vote "FOR" approval of the merger agreement.
RMI SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS.
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THE INTERNET COMMUNICATIONS SPECIAL MEETING
DATE, TIME AND PLACE; MATTERS TO BE CONSIDERED
Internet Communications is furnishing this proxy statement/prospectus to its
shareholders in connection with the solicitation of proxies by Internet
Communications for use at the special meeting of its shareholders and any
adjournments or postponements thereof. The special meeting will be held 9:00
a.m., local time, on November 28, 2000, at the Hotel Monaco, 1717 Champa Street,
Denver, Colorado 80202. At the special meeting, Internet Communications
shareholders will be asked to vote on a proposal to approve the Internet
Communications merger agreement and transact any other business that may
properly come before the special meeting or any adjournments or postponements
thereof.
THE BOARD OF DIRECTORS OF INTERNET COMMUNICATIONS HAS UNANIMOUSLY APPROVED
THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AND DETERMINED
THAT THEY ARE ADVISABLE AND FAIR TO INTERNET COMMUNICATIONS SHAREHOLDERS, AND IN
THEIR BEST INTERESTS. THE BOARD OF DIRECTORS OF INTERNET COMMUNICATIONS
UNANIMOUSLY RECOMMENDS THAT INTERNET COMMUNICATIONS SHAREHOLDERS VOTE FOR
APPROVAL OF THE MERGER AGREEMENT.
RECORD DATE; QUORUM; VOTING AT THE SPECIAL MEETING
Internet Communications has fixed the close of business on October 3, 2000
as the record date for determining the holders of Internet Communications voting
stock entitled to notice of and to vote at the Internet Communications special
meeting. As of the record date, there were outstanding 6,027,586 shares of
Internet Communications common stock and 69,000 shares of Internet
Communications preferred stock. Internet Communications also has outstanding
stock options and warrants. The holders of stock options and warrants, as such,
will not be entitled to vote at the Internet Communications special meeting.
A quorum is necessary to hold a vote on the proposals presented at the
Internet Communications special meeting. The presence in person or by proxy of
the holders of record of a majority of the voting power of the outstanding
shares of Internet Communications voting stock is necessary for there to be a
quorum for purposes of voting on the merger agreement.
Abstentions (that is, votes withheld by shareholders who are present and
entitled to vote) and broker non-votes (that is, shares held by a broker for its
customers that are not voted because the broker does not receive instructions
from the customer or because the broker does not have discretionary voting power
with respect to the item under consideration) will be counted as present for
purposes of determining whether there is a quorum for the transaction of
business.
Once a quorum is present for purposes of the Internet Communications special
meeting, the affirmative vote by a majority of all the votes entitled to be cast
by the Internet Communications shareholders is required to approve the merger.
Accordingly, abstentions and broker non-votes will have the same effect as votes
against the approval of the merger agreement.
Internet Communications will appoint one or more inspectors, who may be
employees of Internet Communications, to determine, among other things, the
number of shares of Internet Communications voting stock represented at the
Internet Communications special meeting and the validity of the proxies
submitted for voting at the special meeting. Internet Communications has
retained Computershare Trust Company as its transfer agent and as proxy
tabulator to assist the inspectors in the performance of their duties.
Computershare Trust Company can be reached at (303) 986-5400, facsimile no.
(303) 986-2444, Attention: Ms. Tammy Davis.
As of the record date, Interwest Group beneficially owns shares of Internet
Communications voting stock representing approximately 67% of the voting power
of the outstanding voting stock. Therefore, Interwest Group's presence at the
Internet Communications special meeting will constitute a quorum. In accordance
with the shareholder agreement between Interwest Group and RMI, Interwest Group
has agreed to vote all shares of Internet Communications voting stock owned
beneficially by it in favor of approval of the merger agreement at the Internet
Communications special meeting. Interwest Group possesses the right to cast
approximately 67% of the votes entitled to be cast at the Internet
Communications special meeting. Accordingly, passage of the proposal to adopt
the merger agreement is assured. See "The Merger--Shareholder Agreement."
VOTING OF PROXIES
All shares of Internet Communications voting stock that are represented at
the Internet Communications special meeting by properly executed proxy cards
received prior to or at the Internet Communications special meeting, and not
duly and timely revoked, will be voted at the Internet Communications special
meeting (or any adjournment or postponement thereof) in accordance with the
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instructions indicated on the proxy cards. If no instructions are indicated, the
proxies will be voted "FOR" approval of the merger agreement. Abstentions and
broker non-votes have the same effect as votes against the approval of the
merger agreement.
In the event that there is a motion to adjourn or postpone the Internet
Communications special meeting to another time and/or place (including for the
purpose of soliciting additional votes in favor of the adoption of the merger
agreement), then (a) proxies of holders of Internet Communications voting stock
who vote in favor of adoption of the merger agreement and proxies of holders of
Internet Communications voting stock that contain no voting instructions will be
voted in favor of the motion to adjourn or postpone the Internet Communications
special meeting, (b) proxies of holders of Internet Communications voting stock
who vote against the adoption of the merger agreement will be voted against the
motion to adjourn or postpone the Internet Communications special meeting, and
(c) proxies of holders of Internet Communications voting stock who abstain from
voting on the adoption of the merger agreement will abstain on the vote on
adjournment or postponement, which will have no effect on a vote regarding
adjournment or postponement. If any other matters are properly presented for
consideration at the Internet Communications special meeting, then Thomas C.
Galley and T. Timothy Kershisnik (the persons named in the enclosed proxy card
as the proxies for Internet Communications voting stock) will have discretion to
vote on these matters in accordance with their best judgment.
REVOCATION OF PROXIES AND VOTING INSTRUCTIONS
Internet Communications's shareholders may revoke a proxy card given in
connection with this solicitation at any time before the proxy card is voted by
submitting a written revocation to the Corporate Secretary of Internet
Communications, by returning a subsequently dated proxy card to the proxy
tabulator or to the Corporate Secretary of Internet Communications, or by voting
in person at the special meeting. Attendance at the special meeting will not in
and of itself revoke a proxy card.
Internet Communications's shareholders are entitled to revoke their proxy
cards via facsimile at the number set forth above in "--Record Date; Quorum;
Voting at the Special Meeting." If you are the beneficial owner of Internet
Communications voting stock but your shares are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and you wish to
revoke your proxy, you should contact the registered holder promptly and
instruct the registered holder to revoke on your behalf. There can be no
assurance that the registered holder will have sufficient time prior to the
special meeting to deliver a revocation upon instruction by you.
PROXY SOLICITATION
Internet Communications will pay its own expenses incurred in connection
with this proxy statement/prospectus and the Internet Communications special
meeting, including the disbursements of legal counsel and accountants. In
addition to solicitation by mail, proxies may be solicited by directors,
officers and employees of Internet Communications in person or by telephone,
facsimile or other means of communication. The directors, officers and employees
will not be additionally compensated, but will be reimbursed for reasonable
out-of-pocket expenses in connection with their solicitation. Arrangements will
also be made with custodians, nominees and fiduciaries for forwarding of proxy
solicitation materials to beneficial owners of shares held of record by the
custodians, nominees and fiduciaries, and Internet Communications will reimburse
the custodians, nominees and fiduciaries for reasonable expenses incurred in
connection therewith.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF INTERNET COMMUNICATIONS
After careful consideration, Internet Communications's board of directors
has unanimously approved the merger agreement and determined that the merger is
advisable and in the best interest of Internet Communications and its
shareholders. Internet Communications's board of directors recommends that its
shareholders vote "FOR" approval of the merger agreement.
INTERNET COMMUNICATIONS SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES
WITH THEIR PROXY CARDS.
THE MERGER
BACKGROUND OF THE MERGER
In July of 1999, Internet Communications's senior officers informed its
board of directors that Internet Communications faced continued significant
liquidity problems resulting from negative operating results. At that time,
Internet Communications was having
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difficulty maintaining open credit lines with vendors due to inadequate cash
reserves. In addition, Internet Communications had tight constraints on capital
expenditures and was not in compliance with certain financial covenants under
its line of credit with Norwest Bank N.A. Unsuccessful in its attempt to obtain
additional funding from Norwest Bank, Internet Communications requested and
received from Interwest Group loans that enabled Internet Communications to
satisfy a portion of its working capital needs.
On August 11, 1999, Internet Communications executed a stock purchase
agreement with Interwest Group. Under the terms of the agreement, Internet
Communications issued to Interwest Group 19,000 shares of Series B 7 3/8%
convertible preferred stock, convertible into common stock at $2.9063 per share,
and 100,000 warrants to purchase common stock (exercisable for four years at
$2.9063) in exchange for $1.9 million. In addition, the agreement provided a
one-year commitment by Interwest Group to purchase an additional 5,000 shares of
Series B 7 3/8% convertible preferred stock at an aggregate price of $500,000,
subject to Internet Communications meeting certain requirements. Internet
Communications has not sold and does not anticipate selling any additional
shares under the commitment. In conjunction with the stock purchase agreement,
Internet Communications amended and modified its credit agreement with Norwest
Bank. The amendment reduced the line of credit from $4,000,000 to $3,500,000,
waived certain covenant violations, and relaxed covenants dealing with EBITDA,
accounts receivable and accounts payable targets.
At a May 1999 meeting, Internet Communications's board of directors began to
discuss the reasons for the company's continued inability to generate positive
cash flow. The board, along with its senior officers, determined that these
reasons included high employee turnover due to a failed merger attempt with RMI
in 1998, increased competition, changing market conditions in Internet
Communications's areas of expertise regarding wide area network solutions and
voice systems, and Internet Communications's inability to expand sales of its
voice systems division. Internet Communications was unable to expand sales of
its voice systems division due to: (a) its failure to sell successfully to its
existing data division customer base, (b) increased competition of voice system
sales from manufacturer direct and alternative channels, most notably the direct
sales office for NEC (Internet Communications's primary voice supplier) and
Lucent, and (c) difficulty in attracting and retaining high quality voice system
sales professionals in a market greatly demanding these individuals.
Internet Communications's board of directors appointed Thomas Galley, a
director of Internet Communications and Internet Communications's President and
Chief Executive Officer since February 4, 2000, and Craig Slater, a director of
Internet Communications and an employee of an affiliate of Interwest Group, to
examine alternatives that would assist Internet Communications in achieving its
business goals. After analyzing the reasons for Internet Communications's lack
of success in certain areas, it was determined that additional capital infusions
would only be helpful to Internet Communications on a short-term basis. Indeed,
Internet Communications believed that it would have to define clearly the types
of changes that would have to be implemented in order to place Internet
Communications in the most advantageous position for future success.
Traditionally, Internet Communications has been successful in the design,
integration, management and support of networks for commercial customers that
operate multiple remote locations on an inter-exchange or intra-exchange basis
where the applications provided over these networks were vital to the business
of the customers. Examples of these customers are retail stores, health care
enterprises, distribution companies, securities firms and public and private
educational systems. In addition, Internet Communications has performed well in
providing wide area networks such as intra-exchange circuits, communications
hardware and inter-exchange carrier circuits as turnkey systems, including high
profit margin services such as design, integration, support and management of
these networks.
However, as inter-exchange and local exchange carriers released newer
technologies at lower prices, it became more challenging for Internet
Communications to offer competitive prices for its products and services.
Additional competitive pressure from Cisco, 3Com, Motorola and their direct and
alternate sales channels reduced profit margins from hardware sales to single
digits in many instances. While Internet Communications still possessed strong
technical capabilities, maintaining low prices became increasingly difficult
without the ability to lower costs and differentiate Internet Communications
among a growing number of competitors. Existing customers would often choose a
different vendor when their contracts expired, causing a reduction in the
monthly recurring revenue stream, while at the same time, Internet
Communications experienced a reduction in the number of new customers requesting
products and services, relative to previous periods.
Newly formed Internet/World Wide Web companies brought additional
competition to the areas in which Internet Communications had enjoyed some
success. These companies were beginning to gain favor with commercial consumers
by bringing online Web sites, developing e-commerce applications, providing Web
access, and becoming engaged in customers' servers at central site and remote
locations. Although Internet Communications enjoyed a continual flow of new
Internet related customers throughout 1998, many of these customers began to
favor related suppliers that could provide more content-based value such as
e-commerce and other similar and expanded services.
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Based upon the difficulties facing Internet Communications, its board of
directors decided to contact an investment banking firm to seek a strategic
business combination that would rectify Internet Communications's operating
short-falls. On July 9, 1999 Internet Communications retained the investment
banking firm of Neidiger, Tucker, Bruner, Inc. to act as a financial advisor in
connection with a possible strategic business combination by Internet
Communications. Neidiger, Tucker was authorized to advise on any merger, reverse
merger, consolidation, recapitalization, joint venture, business combination or
exchange offer.
Neidiger, Tucker screened various potential candidate companies and
presented three candidates to Mr. Slater and Mr. Galley. Based upon the analysis
and recommendations of Neidiger, Tucker, Mr. Slater and Mr. Galley concluded
that a business combination with a large industry leader would best serve the
long-term interests of the shareholders.
Mr. Slater and Mr. Galley recommended that Internet Communications identify
a partner that could combine its strengths with those of Internet Communications
in order to create a high degree of synergy for both organizations and thereby
increase shareholder value.
Internal analysis of Internet Communications's relative strengths and
weaknesses identified two profiles of potential partners:
o Internet service provider with the following strategic profile:
o Strong western United States presence.
o Unique product set within the Internet and Web market.
o Adequate cash resources and proven ability to obtain additional capital as
needed.
o Strong management team.
o Public capital structure.
o Of a size sufficient to create increased value for the shareholders of
merger and the partner.
o Carrier with the following strategic profile:
o Backbone network architecture that would allow easy migration of Internet
Communications's transport protocols over to new network architectures.
o Strategic focus on network and voice system partners.
o Adequate cash resources and ability to obtain additional capital as needed.
o Clear marketing strategy that includes the Web and Internet services.
Following are the advantages of selecting a partner in the Internet related
and/or carrier market:
o Internet Communications's network systems division has enjoyed success with
legacy wide area networks, an area in which most Internet and Web companies
had virtually no experience or operating infrastructure. Internet
Communications's ability to design, operate and manage large networks could
potentially be leveraged into this industry because the companies that
operated in this area typically did not offer customer-specific products and
services and generally the solutions offered by these companies lacked
network management and maintenance services.
o Internet Communications was in need of immediate and direct access to
Internet and Web products in order to complete its existing product
offering.
o Gross profit margins in the service sector are traditionally higher than
those of hardware oriented companies and tend to lead to recurring revenue
streams.
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o A carrier partner could offer alternatives to Internet Communications's high
cost in providing backbone circuits and allow for more competitive
offerings.
o Unlike Internet Communications, most carriers have little or no ability to
integrate hardware, management, and maintenance into their offerings, an
area in which Internet Communications could bring proven capabilities.
Internet Communications concluded that the most favorable structure for a
potential transaction would be in the form of a stock exchange agreement. In
that regard, Internet Communications would merge with an enterprise that would
provide the shareholders of both companies with the most long-term value.
Significantly, a regional company would allow for the most near-term synergy
since Internet Communications's strength is in the Rocky Mountain West.
Through the efforts of Neidiger, Tucker, together with the direct efforts of
Mr. Slater and Mr. Galley, three companies indicated a high level of interest in
a business combination.
Company A, a wide area networking company similar to Internet Communications
but with a much larger variety and number of products and services, had
demonstrated an ability to expand outside of traditional networking markets and
had significantly increased its higher profit margin service sales. Also,
Company A had proven its ability to raise capital and was in need of expanding
its presence to the West and specifically in Colorado.
Company A had designs of capitalizing on the advent of the Web, but lacked
any material presence in the area. Because Company A received nearly 50% of its
annual revenue from an unrelated business, Mr. Slater and Mr. Galley advised the
board that Company A had not sufficiently realized its plan to expand into the
Web market. Therefore, Company A could not provide adequate synergies to make a
combination with Internet Communications viable.
Company B, a total communications supplier that possessed a marketing
strategy very similar to the traditional strategy of Internet Communications,
had expanded its product set to include the Web and various e-commerce products.
Further, it was in the process of building a national IP network infrastructure
that, if combined with Internet Communications's products, would have lowered
its operating costs. Significantly, Company B had a presence in the Rocky
Mountain West and had a desire to expand its geographic footprint in Colorado.
Although Company B was an early stage enterprise, it possessed considerable
cash resources. Company B had little operating history in the areas of
e-commerce and carrier, but Internet Communications thought the overall
synergies between Company B and Internet Communications were considerable.
Therefore, Internet Communications believed that a possible relationship between
the two companies was worthy of further discussion. In September of 1999,
discussions among Company B and Mr. Slater, Mr. Galley, and Internet
Communications's senior officers commenced. Over the course of the following
three weeks, the parties expressed a high level of interest and it was agreed
that significant synergies existed between the companies. However, Company B was
subsequently directed by its board of directors to focus on other strategic
issues and all discussions were terminated.
Company C, RMI, had an unfortunate history with Internet Communications due
to a failed merger attempt in 1998. Nevertheless, RMI possessed what Internet
Communications believed was a good strategic fit and was in need of the
capabilities of Internet Communications in order to carry out its business plan.
Having acquired 16 companies in the 12 months prior to its renewed discussions
with Internet Communications, RMI possessed great strength in the areas of
Internet connectivity and infrastructure, Web e-commerce and application
development, and had a large presence in the western United States. RMI fit the
profile that Internet Communications had set forth.
RMI planned to roll out a national ATM backbone network that would allow
Internet Communications to lower its network operating costs materially. While
RMI had little experience in operating and managing such a network, Internet
Communications had demonstrated strong capabilities in the area.
Also, RMI possessed strengths in the areas of Web design, hosting, and
management of e-commerce solutions, each of which represented important
strategic value to Internet Communications. RMI had proven an ability to raise
capital and, in Internet Communications's opinion, was undervalued relative to
its market segment. Internet Communications could potentially benefit from RMI's
expanded capabilities, so increased shareholder value appeared to be
considerable. RMI was in the process of Web-enabled application development
which, when combined with Internet Communications's capabilities, could produce
great future value to Internet Communications's shareholders.
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RMI could provide Internet Communications with immediate benefits in the
areas of Internet connectivity, technical development and deployment,
information systems, central office infrastructure, Web hosting and support, and
local carrier access costs.
RMI had little infrastructure in the areas of network management and
recognized its need to expand into wide area network and voice systems solutions
as a means of pursuing its business plan to provide total communications
solutions. Further, Internet Communications could provide RMI with immediate
benefits in the areas of inter-exchange carrier availability, office space in
Colorado, and installation, maintenance and management of routers and other
Internet connectivity support.
RMI had a voice long distance resale business enterprise that would fit
directly in the product set of Internet Communications's voice systems products
and provide increased value-based offerings in that division while lowering both
companies' respective selling expenses as the result of this integration.
In summary, the strategic directions of both companies made this combination
one that provides potential long-term increased value to the shareholders of
both companies.
RMI and Internet Communications commenced negotiating a merger agreement and
related documents in early 2000. The merger agreement was signed and the
combination announced in March, 2000. In response to stock market activity in
the months since the original merger agreement was signed, RMI and Internet
Communications agreed in September, 2000 to amend the terms of the agreement
with respect to the ratio at which Internet Communications's shares would be
converted into RMI common stock.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
Internet Communications's and RMI's boards of directors believe that the
terms of the merger agreement and the merger contemplated thereby are advisable
and fair to and in the best interests of their respective shareholders. Based on
Internet Communications's discussions with other potential buyers, the board of
directors of Internet Communications believes that the merger is the best
transaction available for its shareholders. Accordingly, Internet
Communications's and RMI's boards of directors have unanimously approved the
merger agreement and have recommended that you approve the merger agreement. In
reaching their conclusions to approve the merger agreement, Internet
Communications's and RMI's boards of directors consulted with their management
as well as their legal and financial advisors, and considered a number of
factors, including the following:
INTERNET COMMUNICATIONS'S LIQUIDITY AND OPERATING LOSSES
One reason that Internet Communications's board of directors is in favor of
the merger is Internet Communications's current liquidity situation and history
of operating losses. When Internet Communications's line of credit matured on
March 1, 2000, Norwest Bank was unwilling to renegotiate the loan. Internet
Communications had entered into three amendments to the line of credit during
1999, each of which provided for the waiver of certain financial covenant
violations and required equity infusions and/or reductions in the line of
credit. Also in 1999, Internet Communications had entered into two stock
purchase agreements with Interwest Group pursuant to which Internet
Communications issued $5,000,000 of Series A Preferred Stock and $1,900,000 of
Series B Preferred Stock to Interwest Group. The proceeds from these issuances
were used for debt reduction and working capital. However, Interwest Group
informed Internet Communications that it would not continue to provide capital
infusions because of Internet Communications's financial condition at that time.
Additionally, Internet Communications recorded operating losses of
$3,807,000, $5,723,000 and $2,950,000 for the years ended December 31, 1999 and
1998, and the eleven months ended December 31, 1997, respectively. Additionally,
Internet Communications generated negative cash flow from operating activities
of continuing operations of $652,000 and $4,826,000 in 1999 and 1998,
respectively.
STRATEGIC FIT
The business combination between RMI and Internet Communications brings
technical, sales, marketing, and operational capabilities to the combined
company that will make the combined company's network and voice systems products
more attractive and competitive in the marketplace.
o The absence of a strategic alliance, changing market conditions and the
rapid acceleration of technological advances would put
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5
Internet Communications nearly 12 months behind the market in the
development of Web-based technologies and e-commerce solutions. Following
the merger, these technologies and solutions will become immediately
available to Internet Communications.
o RMI's customer base provides sales opportunities for Internet
Communications's sales personnel because few of RMI's customers, if any,
have previously been provided network management, maintenance or network
analysis services.
o RMI's planned national ATM network will allow Internet Communications's
sales opportunities to be more competitive due to a much lower cost
structure.
o RMI's capabilities in the areas of Web hosting, design, e-commerce, and
application development offer additional revenue opportunities for Internet
Communications when packaged together with Internet Communications's
existing products and services. In addition, these capabilities, together
with those of Internet Communications, will help achieve Internet
Communications's goal to be perceived as a total communications solution.
o RMI's voice long distance business provides increased revenue opportunities
for Internet Communications's voice systems division by packaging long
distance with voice hardware solutions.
o RMI's voice long distance business provides increased acceptance as a
complete voice solution when packaged with Internet Communications's
existing voice products and services.
INTERNET COMMUNICATIONS'S SHARE VALUE
o The lack of liquidity in the market for Internet Communications's common
stock and the related adverse consequences for Internet Communications and
its shareholders provided Internet Communications with an additional reason
to recommend the merger. The following summarizes the average daily trading
volume of Internet Communications's common stock for each quarter of 1999
and the first three quarters of 2000:
<TABLE>
<S> <C>
Quarter ended March 31, 1999 17,628
Quarter ended June 30, 1999 28,048
Quarter ended September 30, 1999 9,514
Quarter ended December 31, 1999 181,683(1)
Quarter ended March 31, 2000 70,621
Quarter ended June 30, 2000 18,594
Quarter ended September 30, 2000 10,987
</TABLE>
----------
(1) On December 6, 1999 and December 7, 1999, Internet Communications's common
stock traded 7,146,700 shares and 1,454,800 shares, respectively. Internet
Communications issued a press release on December 3, 1999, which stated that
Internet Communications was utilizing digital subscriber lines in its wide area
networks. Internet Communications knows of no other reason for the unusually
high activity in the stock on these two days. Without that unusual activity, the
average daily trading volume was 51,763.
o In addition to the lack of liquidity relating to its low trading volume,
Internet Communications disclosed in its Annual Report on Form 10-K, that as
of December 31, 1999, Internet Communications no longer satisfied the
consolidated net tangible asset condition for continued listing on the
Nasdaq SmallCap Market. In a notice letter dated April 7, 2000, Nasdaq
confirmed that Internet Communications no longer satisfies that condition
for continued listing on Nasdaq. In a letter dated April 20, 2000, Internet
Communications requested a waiver of the continued listing requirements
until September 13, 2000, based on the announced merger with RMI. The waiver
request was denied in a letter dated September 19, 2000. A hearing to appeal
the decision to delist Internet Communications's common stock has been
scheduled for October 20, 2000. The delisting will be stayed until the
result of the hearing is released.
o Due to the size, geographic presence, and improved capabilities of the
combined enterprise, the merger will provide potential long-term value to
shareholders that could exceed the value of Internet Communications and RMI
as stand-alone entities.
o Internet Communications obtained the opinion of Neidiger, Tucker, a
reputable investment banking firm, that the merger consideration is fair,
from a financial point of view, to the shareholders of Internet
Communications.
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FUTURE OPERATIONS
o Network operating synergies resulting from the merger will create reduced
carrier costs for the combined company upon completion of RMI's planned
national ATM network development.
o RMI's carrier infrastructure in central office locations will lower the
combined company's costs in shared locations.
o RMI's national presence of technical personnel will lower the combined
company's maintenance support costs. Internet Communications presently
relies on various third-party venders for maintenance support.
o Internet Communications will eliminate Internet connection expenses by
utilizing connections already in place within RMI's existing infrastructure.
o The combined company will be able to eliminate or reduce certain public
company expenses, including legal, audit, management and printing expenses.
o The recent trend toward consolidation among telecommunications and
networking companies has created competitors that have greater scope and
scale than that of either Internet Communications or RMI alone. Many
technical and sales employees favor larger entities because they believe
these entities provide a more secure environment. After the merger, the
combined company will be a larger enterprise. If the combined company's
employees believe that the business prospects of the larger enterprise are
more certain, they may be less likely to seek alternative employment, which
should result in significantly reduced employee turnover. Also, employee
turnover should decrease because the larger enterprise will provide an
opportunity for employees that wish to choose alternate career paths to do
so, yet remain within the combined company.
o The recent trend toward consolidation among telecommunications and
networking companies has created a market preference to those vendors that
are larger in size and have a larger geographic scope than that of either
Internet Communications or RMI alone.
INTERNET COMMUNICATIONS'S AND RMI'S BOARDS OF DIRECTORS HAVE UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AND
DETERMINED THAT THEY ARE ADVISABLE AND FAIR TO THEIR RESPECTIVE SHAREHOLDERS AND
IN THEIR BEST INTERESTS. INTERNET COMMUNICATIONS'S AND RMI'S BOARDS OF DIRECTORS
UNANIMOUSLY RECOMMEND THAT YOU APPROVE THE MERGER AGREEMENT.
OPINION OF NEIDIGER, TUCKER, BRUNER, INC.
On October 12, 2000, Neidiger, Tucker delivered its written opinion to
Internet Communications that, as of the date of the opinion, the merger
consideration to be received by Internet Communications shareholders pursuant to
the merger agreement was fair from a financial point of view.
THE FULL TEXT OF THE WRITTEN OPINION OF NEIDIGER, TUCKER, WHICH SETS FORTH
THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW
UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED AS APPENDIX F TO THIS
PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. YOU ARE
URGED TO, AND SHOULD, READ THE OPINION IN ITS ENTIRETY.
In connection with its opinion, Neidiger, Tucker reviewed, among other
things:
o the merger agreement;
o the form of certificate relating to the warrants to be issued as part of the
merger consideration;
o publicly available information relating to Internet Communications and RMI,
including Internet Communications's and RMI's respective quarterly reports
on Form 10-Q for the quarters ended March 31, 2000 and June 30, 2000 and
annual reports for the year ended December 31, 1999;
o the financial condition of Internet Communications, including its debt
structure and bank line of credit;
o the past operating results of Internet Communications;
o certain additional financial statements and other financial and operating
data concerning Internet Communications prepared internally by its senior
management;
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o certain financial forecasts and other forward looking financial information
prepared by the senior management of Internet Communications; and
o the stock price and trading history of the common stock of Internet
Communications and RMI.
Neidiger, Tucker also held discussions with members of senior management of
Internet Communications and their financial and legal advisors regarding
Internet Communications's past and current business operations, financial
condition and future prospects, and made other studies and inquiries, and took
into account such other matters as it deemed relevant, including an assessment
of general economic, market and monetary conditions. Neidiger, Tucker also
compared the financial performance of Internet Communications and the prices and
trading activity of Internet Communications common stock to that of certain
other publicly traded companies comparable to Internet Communications. A summary
of the results of the comparison is set forth below.
Neidiger, Tucker relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and assumed such accuracy and
completeness for purposes of rendering its opinion. In addition, Neidiger,
Tucker did not make any independent evaluation or appraisal of the assets and
liabilities of Internet Communications or any of its subsidiaries, and Neidiger,
Tucker was not furnished with any such evaluation or appraisal. The opinion of
Neidiger, Tucker was provided for Internet Communications's information and
assistance in connection with Internet Communications's consideration of the
transaction contemplated by the merger agreement. Neidiger, Tucker's opinion
does not address the relative merits of the merger and the other business
strategies that the board of Internet Communications has considered or may be
considering, or the underlying business decision of the board of Internet
Communications to proceed with the merger. The opinion does not constitute a
recommendation as to how you should vote with respect to the merger.
In rendering its opinion, Neidiger, Tucker considered the recent liquidity
problems experienced by Internet Communications, its history of operating losses
and its recent restructuring. Neidiger, Tucker also took into consideration the
various capital contributions made by Internet Communications's majority
shareholder and the significance of these contributions to Internet
Communications's ability to continue its operations. Neidiger, Tucker also
considered the results of its discussions with parties in the telecommunications
and information technologies industries regarding merging and/or acquiring
Internet Communications.
In its review and analysis, and in arriving at its opinion, Neidiger, Tucker
assumed and relied upon the accuracy and completeness of all of the financial
and other information provided to it (including information furnished to it
orally or otherwise discussed with it by the senior management of Internet
Communications) or publicly available and neither attempted to verify, nor
assumed responsibility for verifying, any such information. Neidiger, Tucker
relied upon the assurances of senior management of Internet Communications that
they were not aware of any facts that would make the information provided
inaccurate or misleading.
Neidiger, Tucker assumed that the financial forecasts and projections (and
assumptions and basis therefore) of Internet Communications provided for
Neidiger, Tucker's review:
o had been prepared in good faith on the basis of reasonable assumptions;
o reflected the best available estimates and judgments as to the future
financial condition and performance of Internet Communications; and
o would be realized in the amounts and in the time periods estimated.
In addition, Neidiger, Tucker assumed that:
o the merger will be consummated upon the terms set forth in the merger
agreement without material alteration thereof; and
o the historical financial statements of Internet Communications and RMI
reviewed by it had been prepared and fairly presented in accordance with
U.S. generally accepted accounting principles consistently applied.
Although developments following the date of the Neidiger, Tucker opinion may
affect the opinion, Neidiger, Tucker assumed no obligation to update, revise or
reaffirm its opinion. The Neidiger, Tucker opinion is necessarily based upon
market, economic and other conditions as in effect on, and information made
available to Neidiger, Tucker as of, the date of the Neidiger, Tucker opinion.
It should be understood that subsequent developments may affect the conclusion
expressed in the Neidiger, Tucker opinion, and that
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Neidiger, Tucker disclaims any undertaking or obligation to advise any person of
any change in any matter affecting the opinion which may come or be brought to
its attention after the date of the opinion. The Neidiger, Tucker opinion is
limited to the fairness, from a financial point of view and as of the date
thereof, of the merger consideration to the holders of Internet Communications
common stock.
Neidiger, Tucker does not express any opinion as to:
o the value of any employee agreement or other arrangement entered into in
connection with the merger; or
o any tax or other consequences that might result from the merger.
The following is a summary of certain of the financial and comparative
analyses that provided the basis for Neidiger Tucker's opinion, which was
presented to Internet Communications's board of directors on October 12, 2000.
Comparable Public Company Market Analysis. Neidiger, Tucker compared the
financial and market performance of Internet Communications with that of a group
of publicly traded communication solution providers. The purpose of the
comparable public company market analysis was to establish a range for the
potential equity value of Internet Communications. Neidiger, Tucker selected
this group of companies based on similarities to Internet Communications in
product and service offerings and target market as evidenced by total revenues
and market capitalization. Neidiger, Tucker examined certain publicly available
financial and operating data of such comparable companies, in particular:
o annualized revenues;
o market capitalization;
o sales per share; and
o price to sales ratios.
The analysis showed a range of annualized run-rate revenue for the
communication solution providers considered of $3.4 million to $827.00 million,
as compared to approximately $24.8 million for Internet Communications. The
average annualized run-rate revenues for the companies considered were $79.2
million. The approximate market capitalization for the companies considered
ranged from $18.2 million to $937.0 million, as compared to approximately $4.80
million fully diluted for Internet Communications. The annualized revenue per
share for the companies considered ranged from $0.35 to $6.80, as compared to
approximately $2.91 per share fully diluted for Internet Communications. The
average annualized revenues per share for the companies considered were
approximately $7.35. The range of the ratio of price per share to revenue per
share was 0.50 to 9.86. The ratio of price per share to revenue per share for
Internet Communications was 0.19, based on the price per share being offered as
the merger consideration. The average ratio of price per share to revenue per
share for the companies considered was 2.65. Although Internet Communications's
price to revenue ratio, based on the price per share being offered as the merger
consideration, was substantially below the average of the companies considered,
Neidiger, Tucker believes that the merger consideration is fair based on
Internet Communications's lack of sustained profitability and positive cash
flow. Additionally, Internet Communications has been unable to demonstrate
continued growth in total revenue over the last three years. In fact, total
revenues have decreased substantially from fiscal 1997 through fiscal 1999.
While the foregoing summary describes certain analyses and factors that
Neidiger, Tucker deemed material to its presentation to the Internet
Communications board of directors, it is not a comprehensive description of all
analyses and factors considered by Neidiger, Tucker. The preparation of a
fairness opinion is a complex process and is not necessarily susceptible to
partial analysis or summary description. Selecting portions of the analyses or
of the summary set forth above, without considering the analyses as a whole,
could create an incomplete view of the processes underlying Neidiger, Tucker's
opinion. In arriving at its fairness determination, Neidiger, Tucker considered
the results of all such analyses. No company or transaction used in the above
analyses as a comparison is directly comparable to Internet Communications or
the contemplated transaction. The analyses were prepared solely for the purpose
of Neidiger, Tucker's providing its opinion to Internet Communications as to the
fairness from a financial point of view of the merger consideration to be
received by Internet Communications shareholders pursuant to the merger
agreement and do not purport to be appraisals or necessarily reflect the prices
at which businesses or securities actually may be sold. Analyses based upon
forecasts of future results are not necessarily indicative of actual future
results, which may be significantly more or less favorable than suggested by
such analyses. Because such analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of the parties or
their respective advisors, none of Internet Communications, Neidiger, Tucker or
any other person assumes responsibility if future results are materially
different from those forecast. As described above, Neidiger, Tucker's opinion to
Internet Communications was one of many factors taken into consideration by
Internet Communications in making its determination to approve the merger
agreement. The foregoing summary does not purport to be a complete description
of the analysis performed by Neidiger, Tucker and is qualified by reference to
the written opinion of Neidiger, Tucker set forth in Appendix F to this proxy
statement/prospectus.
Neidiger, Tucker, as part of its investment banking business, is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive bidding,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate and other purposes. Internet Communications
selected Neidiger, Tucker as its financial advisor because it is an investment
banking firm that has substantial expertise in transactions similar to the
merger.
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Neidiger, Tucker has provided certain investment banking services to
Internet Communications for which it has been paid fees, including acting as
co-managing underwriter for an offering of Internet Communications securities.
Neidiger, Tucker has also rendered investment banking services to RMI from time
to time. Neidiger, Tucker maintains a market in the shares of Internet
Communications common stock and RMI common stock in the ordinary course of its
business, Neidiger, Tucker may trade in Internet Communications and RMI's
securities for its own account and the account of its customers and,
accordingly, may at any time hold a long or short position in Internet
Communications and/or RMI's securities.
Pursuant to a letter agreement dated March 6, 2000, as amended by a letter
agreement dated October 11, 2000, Internet Communications engaged Neidiger,
Tucker to render an opinion as to the fairness from a financial point of view of
the proposed merger agreement and the consideration to be paid to Internet
Communications shareholders. In consideration for Neidiger, Tucker's rendering
of its opinion, Internet Communications paid Neidiger, Tucker a fee of $50,000
prior to the delivery of the opinion to Internet Communications, with an
additional $50,000 fee to be paid upon consummation of the merger. Internet
Communications has also agreed to indemnify and hold harmless Neidiger, Tucker
and its affiliates and any director, employee or agent of Neidiger, Tucker or
any of its affiliates for certain losses, claims, damages, expenses and
liabilities relating to or arising out of services provided by Neidiger, Tucker
as financial advisor to Internet Communications, unless caused by Neidiger,
Tucker's bad faith or negligence. The terms of the fee arrangement between
Neidiger, Tucker and Internet Communications were negotiated at arm's length,
and the board of directors of Internet Communications was informed of such fee
arrangements.
EFFECTIVE TIME
The effective time of the merger will be the time of filing of Articles of
Merger relating to the merger with the Secretary of State of the State of
Colorado in accordance with the provisions of the Colorado Business Corporation
Act or as otherwise provided in such Articles of Merger. Subject to the
satisfaction or waiver of the closing conditions set forth in the merger
agreement, the merger will be consummated on or before November 30, 2000
(subject to extension under certain circumstances, as provided in the merger
agreement).
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of Internet Communications's board of
directors that Internet Communications shareholders vote for the adoption of the
merger agreement and approve the transactions contemplated thereby, Internet
Communications shareholders should be aware that certain members of the
management of Internet Communications have certain interests in the merger and
the related transactions that differ from, and are in addition to, the interests
of Internet Communications's shareholders generally, and which may present them
with potential conflicts of interest. Internet Communications's board of
directors were aware of these interests and considered them, among other
matters, in approving and adopting the merger agreement and the transactions
contemplated thereby.
INTERWEST GROUP'S VOTING CONTROL OF INTERNET COMMUNICATIONS
As of the date of this proxy statement/prospectus, Interwest Group holds
approximately 67% of the voting power of Internet Communications and two
affiliates of Interwest Group are members of the Internet Communications board
of directors. Interwest Group has agreed to vote in favor of the merger and the
affirmative vote of Interwest Group is sufficient by itself to approve the
merger. Accordingly, Interwest Group may be subject to a conflict of interest as
a result of its position as the largest shareholder of Internet Communications
with affiliates on the Internet Communications's board of directors because its
interests with respect to the merger may differ from the interests of Internet
Communications shareholders as a whole.
PRESIDENT AND CHIEF EXECUTIVE OFFICER'S EMPLOYMENT AGREEMENT
Thomas C. Galley has an employment agreement with Internet Communications
dated February 7, 2000. Among other things, the employment agreement provides
that, in addition to his annual compensation, Mr. Galley may earn certain other
additional compensation. First, if Mr. Galley continues to be employed by
Internet Communications for one year following the date of the employment
agreement, he will receive a bonus of $100,000. Second, if Mr. Galley finds a
candidate for the position of President/Chief Executive Officer of Internet
Communications and that candidate serves in such capacity for at least 60 days,
then Mr. Galley will receive a bonus of $100,000. Finally, if Internet
Communications is sold while Mr. Galley is employed by Internet Communications,
or if discussions regarding such a sale begin while Mr. Galley is employed by
Internet Communications, Mr. Galley is involved in such discussions and
thereafter such a sale is completed (regardless of whether Mr. Galley is
employed by Internet Communications at the time of the sale), then Mr. Galley
will receive a $400,000 bonus.
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VESTING OF OPTIONS UNDER THE INTERNET COMMUNICATIONS'S STOCK OPTION PLANS
As a result of the merger, all unvested options outstanding under the
Internet Communications 1996 Incentive Stock Option Plan and the 1995 Stock
Option Plan for Non-Employee Directors will become fully vested and exercisable.
Therefore, shareholders who hold options may be more inclined to vote in favor
of the merger in order to receive the benefit of this vesting.
RIGHTS OF DISSENTING SHAREHOLDERS
Under Colorado law, Internet Communications shareholders have the right and
are entitled to dissent from the consummation of the merger and receive payment
of the fair value of the shares of Internet Communications common stock owned by
them. In the event an Internet Communications shareholder elects to exercise
dissenters' rights, that shareholder must comply with the applicable procedures
set forth in Sections 7-113-201 through 7-113-209 of the Colorado Business
Corporation Act, as summarized below, in order to receive payment of the fair
value of any shares of Internet Communications common stock owned by that
shareholder. A copy of Title 7, Article 113 of the Colorado Business Corporation
Act is set forth in Appendix G to this Proxy Statement/Prospectus.
THE FOLLOWING IS ONLY A SUMMARY OF THE PROCEDURES FOR DISSENTING
SHAREHOLDERS PRESCRIBED BY SECTIONS 7-113-101 THROUGH 7-113-302 OF THE COLORADO
BUSINESS CORPORATION ACT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF TITLE 7, ARTICLE 113 OF THE COLORADO BUSINESS CORPORATION ACT AS
SET FORTH IN APPENDIX G TO THIS PROXY STATEMENT/PROSPECTUS.
Section 7-113-102 of the Colorado Business Corporation Act provides that an
Internet Communications shareholder, as a record or beneficial shareholder of
Internet Communications, is entitled to dissent from the merger and demand
payment of the fair value of such shareholder's shares. In accordance with
Section 7-113-202, in order to exercise dissenters' rights, an Internet
Communications shareholder must, prior to the taking of the vote of the
shareholders on the merger, deliver to Internet Communications written notice of
such shareholder's intent to demand payment for his or her shares in the event
the merger is approved and must not vote his or her shares in favor of the
merger. In accordance with Section 7-113-203, within ten days after the merger
is effected, Internet Communications must deliver a written dissenter's notice
to all Internet Communications shareholders who satisfy the requirements of
Section 7-113-202. The dissenter's notice must (a) state that the merger was
authorized, the effective date of the merger, the address at which Internet
Communications will receive payment demands and where stock certificates will be
deposited, (b) supply a form for demanding payment, which form will request an
address from the dissenting shareholder to which payment is to be made, and (c)
set the date by which Internet Communications must receive the payment demand
and stock certificates, which date will not be less than 30 days after the date
the dissenter's notice was delivered. Furthermore, the dissenter's notice may
require that all beneficial shareholders, if any, certify as to the assertion of
dissenters' rights and be accompanied by Title 7, Article 113 of the Colorado
Business Corporation Act. Pursuant to Section 7-113-204 of the Colorado Business
Corporation Act, an Internet Communications shareholder receiving the
dissenter's notice must demand payment in writing and deposit such shareholder's
stock certificates in accordance with the terms of the dissenter's notice. An
Internet Communications shareholder's demand for payment and deposit of his or
her stock certificates are irrevocable unless the effective date of the merger
occurs more than sixty days after the payment demand date established by
Internet Communications. If an Internet Communications shareholder does not
comply with Title 7, Article 113 of the Colorado Business Corporation Act, such
shareholder will receive the merger consideration provided in the merger
agreement.
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Upon the later of the effective date of the merger, or upon receipt of a
demand for payment by a dissenting shareholder, Internet Communications must pay
each dissenting shareholder who complies with Section 7-113-204 the amount
Internet Communications estimates to be the fair value of such shares, plus
accrued interest in accordance with Section 7-113-206. The payment must be
accompanied by (a) Internet Communications's balance sheet as of the fiscal year
ending not more than sixteen months before the date of payment, an income
statement for that year, a statement of change in shareholders' equity for that
year, and the latest available interim financial statement, (b) a statement of
Internet Communications's estimate of the fair value of the shares, (c) an
explanation by Internet Communications of how the interest was calculated, (d) a
statement of the dissenting shareholder's right to demand payment under Section
7-113-209, and (e) a copy of Title 7, Article 113 of the Colorado Business
Corporation Act. In the event that an Internet Communications shareholder is
dissatisfied with Internet Communications's payment or offer of payment, such
shareholder may notify Internet Communications in writing within 30 days after
Internet Communications makes or offers to pay each dissenting shareholder, of
such shareholder's own estimate of the fair value of such shares and the amount
of interest due, and demand payment of such Internet Communications
shareholder's estimate, less any payment already made by Internet Communications
under Section 7-113-206, or reject Internet Communications's offer under Section
7-113-208 and demand payment for the fair value of the shares and interest due.
An Internet Communications shareholder may effect the foregoing if (a) such
Internet Communications shareholder believes that the amount paid or offered is
less than the fair value of the shares or that the interest due is incorrectly
calculated, (b) Internet Communications has failed to make payment within 60
days after the date set for demanding payment, or (c) Internet Communications
does not return the deposited stock certificates within the time specified by
Section 7-113-207 of the Colorado Business Corporation Act. In the event a
demand for payment under Section 7-113-209 remains unresolved, Internet
Communications may commence a court proceeding to determine the fair value of
the shares and accrued interest within 60 days after receiving the payment
demand from an Internet Communications shareholder pursuant to Section
7-113-301. No assurance can be given that any court's determination of the fair
value of the shares will be greater than the merger consideration provided in
the merger agreement.
ACCOUNTING TREATMENT
The merger will be accounted for by RMI as a purchase of a business. Under
this method of accounting, the assets and liabilities of Internet
Communications, including intangible assets, will be recorded at their fair
values. The results of operations and cash flows of Internet Communications will
be included in RMI's financial statements prospectively as of the consummation
of the merger.
THE MERGER AGREEMENT
The following is a summary of the material provisions of the merger
agreement, a copy of which is attached as Appendix A and incorporated into this
proxy statement/prospectus by reference. This summary is qualified in its
entirety by reference to the full text of the merger agreement. YOU ARE URGED TO
READ THE MERGER AGREEMENT IN ITS ENTIRETY FOR A COMPLETE DESCRIPTION OF THE
MERGER.
MERGER CONSIDERATION
If the conditions to the merger are satisfied or waived, then, at the
effective time of the merger, Internet Acquisition Corporation, a wholly owned
subsidiary of RMI, will be merged with and into Internet Communications, with
Internet Communications continuing as the surviving corporation and as a wholly
owned subsidiary of RMI. Following the consummation of the merger, RMI intends
to change its name to Internet Commerce & Communications, Inc.
Upon the consummation of the merger and in accordance with the terms of the
merger agreement, except for (a) shares held in the treasury of Internet
Communications or owned by any of its wholly owned subsidiaries, all of which
will be canceled, (b) shares held by persons who perfect dissenters' rights, and
(c) shares held by Interwest Group, each issued and outstanding share of
Internet Communications's common stock outstanding immediately prior to the
effective time of the merger will automatically convert into the right to
receive 0.55 shares of RMI common stock. Interwest Group will receive 0.45
shares of RMI common stock for each of its shares of Internet Communications
common stock. In addition to shares of RMI common stock, Internet
Communications's shareholders (excluding shareholders who exercise statutory
dissenters' rights, Interwest Group and Internet Communications's directors)
will be entitled to receive for each share of Internet Communications common
stock a warrant exercisable for one share of RMI common stock at $7.00. The
warrants are cancelable on 30-days' notice by RMI if RMI's closing share price
exceeds $8.00 for five consecutive trading days. The exercise period for the
warrants will begin 30 days after the closing date of the merger and will expire
two years from the closing date of the merger. No fractional shares of RMI
common stock will be issued upon conversion of Internet Communications common
stock. Rather, each fractional share will automatically be converted into the
right to receive cash in lieu of such fractional share. All applicable
withholding taxes attributable to the cash payments or distributions made to the
holders in respect of such fractional shares will be deducted from the amounts
payable in respect of such fractional shares, and all such taxes will be
withheld from the proceeds received in respect of such fractional shares.
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Interwest Group has agreed to convert its outstanding loans to Internet
Communications into shares of Internet Communications common stock (at $2.50 per
share) immediately prior to the closing of the merger. Each of these shares will
also be converted into 0.45 shares of RMI common stock. In addition, Interwest
Group will receive a warrant that may become exercisable to purchase additional
shares of RMI common stock one year and one day after the closing of the merger.
See "-- Treatment of the Interwest Group Loan."
Interwest Group, which beneficially owns approximately 67% of the voting
power of Internet Communications's voting stock, has agreed with RMI to vote in
favor of the merger. Therefore, shareholder approval of the merger agreement is
assured. See "The Merger -- The Shareholder Agreement."
If an Internet Communications shareholder does not vote in favor of the
merger agreement, and complies with the provisions of the Colorado Business
Corporation Act regarding the exercise of dissenters' rights, that Internet
Communications shareholder will have the right to seek a determination and
payment of the fair value of his or her shares in lieu of the merger
consideration provided in the merger agreement (See "The Merger -- Rights of
Dissenting Shareholders").
Promptly after the effective time of the merger, RMI will cause
Computershare Trust Company, as the exchange agent for the merger, to mail a
transmittal letter to each holder of record of shares of Internet
Communications's common stock. After receipt of a transmittal letter, Internet
Communications shareholders should send their certificates formerly representing
shares of Internet Communications common stock to the exchange agent with the
completed transmittal letter. The exchange agent will then send to each Internet
Communications shareholder the certificates representing the number of whole
shares of RMI common stock such Internet Communications shareholder is entitled
to receive, and cash in lieu of any fractional share, as described above.
Instructions specifying other details of the exchange will accompany the
transmittal letters.
INTERNET COMMUNICATIONS SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK
CERTIFICATES UNTIL THEY RECEIVE A TRANSMITTAL LETTER FROM COMPUTERSHARE TRUST
COMPANY.
TREATMENT OF PREFERRED STOCK
Immediately prior to the effective time of the merger, all issued and
outstanding shares of Internet Communications's preferred stock, plus any and
all accrued and unpaid dividends on such preferred stock, will be converted into
the right to receive a number of shares of Internet Communications common stock
in accordance with the terms of the Internet Communications preferred stock.
These newly-issued shares of Internet Communications common stock will
subsequently be converted into the right to receive the merger consideration. As
of the date of this proxy statement/prospectus, 69,000 shares of Internet
Communications preferred stock are outstanding, all of which are held by
Interwest Group and will be converted into 2,875,974 shares of Internet
Communications common stock immediately prior to the closing of the merger.
TREATMENT OF OPTIONS AND WARRANTS
Immediately prior to the effective time of the merger, all unexpired and
unexercised outstanding Internet Communications stock options with an exercise
price below $2.50 per share will immediately vest (if not already vested) and be
converted into the right to receive shares of Internet Communications common
stock in an amount equal to (a) the excess of $2.50 over the exercise price per
share of such option, multiplied by (b) the number of shares of Internet
Communications common stock that may be purchased upon exercise of such option,
divided by (c) $2.50. The shares of Internet Communications common stock
issuable upon the conversion will thereafter immediately be converted into the
right to receive the merger consideration. All applicable withholding taxes
attributable to the payments or distributions made to the holders in respect of
the stock options will be deducted from the amounts payable in respect of the
stock options, and all such taxes will be withheld from the proceeds received in
respect of the conversion of the stock options. Any taxes withheld will be
withheld in the form of cancellation of shares of Internet Communications common
stock, valued at $2.50 per share, otherwise issuable upon such conversion. As
the date of this proxy statement/prospectus there were options to acquire
237,950 shares of Internet Communications common stock with an exercise price
below $2.50 per share outstanding. All Internet Communications stock options
with an exercise price of $2.50 per share or greater will terminate according to
their terms upon closing of the merger.
Warrants to purchase shares of Internet Communications's common stock
previously issued to Neidiger Tucker will be converted into warrants to purchase
shares of RMI common stock at the effective time. See "-- Neidiger Tucker
Warrants."
TREATMENT OF THE INTERWEST GROUP LOAN
Immediately prior to the closing of the merger, all outstanding loans by
Interwest Group to Internet Communications (up to $5 million), plus all accrued
and unpaid interest on such amounts, will be converted into shares of Internet
Communications's common stock at $2.50 a share. Each of these shares will be
converted in the merger into 0.45 shares of RMI common stock. In addition,
Interwest Group will receive a warrant that may become exercisable to purchase
additional shares of RMI common stock one year and one day after the closing of
the merger. This warrant will be exercisable if the aggregate amount of the
loans made by Interwest Group (together with all accrued and unpaid interest) on
the closing date exceeds the sum of (i) the product of (a) the number of shares
of RMI common stock issued to Interwest Group in exchange for the Internet
Communications shares into which the loans are converted less any of such shares
repurchased by RMI, multiplied by (b) the average of the closing bid prices of
RMI common stock on the Nasdaq National Market for the 15 consecutive trading
days immediately preceding the date that is one year and one day after the
closing date of the merger and (ii) the product of (x) the number of any of such
shares repurchased by RMI prior to such time and (y) the per share price paid by
RMI for such shares. In the event that the warrant becomes
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exercisable, it will entitle Interwest Group to purchase a number of shares of
RMI common stock equal to the quotient of (x) the excess described above divided
by (y) the average of the closing bid prices of RMI common stock on the Nasdaq
National Market for the 15 consecutive trading days immediately preceding the
date that is one year and one day after the closing date of the merger. The
exercise price per share of RMI common stock issuable pursuant to the Interwest
Group warrant will be $0.001. RMI may elect to make a cash payment to Interwest
in lieu of delivery shares upon exercise of the Interwest warrant.
The form of Internet Group warrant is attached as Appendix E to this proxy
statement/prospectus. You are urged to read it in its entirety.
NEIDIGER TUCKER WARRANTS
Neidiger Tucker currently holds warrants to purchase an aggregate of 100,000
shares of Internet Communications common stock. At the closing of the merger and
in accordance with their terms, those warrants will be converted into warrants
to purchase an aggregate of 55,000 shares of RMI common stock for $7.73 per
share. All other terms of the Neidiger Tucker warrants will be the same as those
of the original warrants.
REGISTRATION OF SHARES
In connection with the merger, RMI was required to file a registration
statement with the Securities and Exchange Commission on Form S-4, which
contains this proxy statement/prospectus. The registration statement will cover
(a) the issuance and sale of the shares of RMI common stock and warrants issued
to Internet Communications's shareholders in the merger, (b) the RMI common
stock issuable upon exercise of the warrants, and (c) the resale by Interwest
Group of the shares of RMI common stock received by it in the merger and upon
exercise of the Interwest Group warrant. In addition, RMI will use commercially
reasonable efforts to maintain the effectiveness of the registration statement
continuously for a period of the shorter of two years after the effective time
of the merger or the time at which Interwest Group has sold all of its shares of
RMI common stock. The shares issued in the merger and the shares issued upon
exercise of the warrants will be included in RMI's listing on the Nasdaq
National Market by RMI. The warrants will not be listed on Nasdaq or any other
exchange; therefore, it is possible that no trading market will develop for the
warrants.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains various representations and warranties by
Internet Communications relating to, among other things, (a) organization,
standing and power, (b) capital structure - stock, derivative securities,
contractual obligations (relating to Internet Communications's securities) and
subsidiaries, (c) authority of Internet Communications to perform its
obligations under the merger agreement, (d) consents and approvals and
compliance with charter documents and laws, (e) Securities and Exchange
Commission documents and filings, (f) absence of certain changes or events, (g)
permits and compliance, (h) tax matters, (i) actions and proceedings, (j)
certain agreements - compensation agreements, contracts and enforceability of
such contracts, (k) ERISA, (l) no undisclosed material liabilities, (m) labor
matters, (n) intellectual property, (o) opinion of financial advisor, (p)
required vote of Internet Communications's shareholders, (q) reorganization, (r)
environmental matters, (s) suppliers and distributors, (t) insurance, (u)
affiliate transactions, (v) title to and sufficiency of assets, (w) brokers, (x)
books and records, (y) bank accounts, and (z) litigation.
The merger agreement contains various representations and warranties by RMI
relating to, among other things, (a) organization, standing and power, (b)
capital structure - stock, derivative securities, contractual obligations
(relating to RMI's securities) and subsidiaries, (c) authority of RMI to perform
its obligations under the merger agreement, (d) consents and approvals and
compliance with charter documents and laws, (e) RMI common stock to be issued in
connection with the merger, (f) Securities and Exchange Commission documents and
filings, (g) absence of certain changes or events, (h) reorganization, (i)
permits and compliance, (j) tax matters, (k) actions and proceedings, (l)
liabilities, (m) intellectual property, (n) environmental matters, (o) suppliers
and distributors, (p) insurance, (q) affiliate transactions, and (r) brokers.
COVENANTS
Internet Communications has agreed that, until the effective time of the
merger, except as contemplated by the merger agreement, it will conduct its
business in the ordinary course as currently conducted, and use commercially
reasonable efforts to (a) preserve its business organization intact, (b) keep
available to RMI the services of its present officers and key employees, and (c)
preserve for the benefit of RMI its relationships with customers, suppliers and
others having business relations with it.
Internet Communications has also agreed that, except as otherwise provided
in the merger agreement, it will not, without the prior written consent of RMI,
permit Internet Communications or any of its subsidiaries to (a) amend its
organizational documents, (b) authorize, issue, sell, deliver or agree or commit
to do any of the foregoing with respect to any stock or other securities or
equity equivalents, except with respect to stock options of Internet
Communications outstanding as of the date of the merger agreement, or amend the
terms of any such securities agreements, (c) split, combine or reclassify any
shares of its capital stock, declare, set aside or pay any dividend or other
distribution in respect of capital stock, or redeem or otherwise acquire any of
the securities of Internet Communications or its subsidiaries, (d) acquire or
agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of or equity in, any other business or entity
or otherwise agree to acquire any assets for an amount exceeding $25,000 in the
aggregate, (e) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets exceeding $25,000 in the aggregate, (f)
except for the loans funded by Interwest Group, incur any indebtedness for
borrowed money, guarantee any such indebtedness, incur, assume, guarantee,
endorse, or prepay any material indebtedness (directly or indirectly), or make
any loans, advances or capital contributions to, or other investments in, any
other person, other than in amounts not to exceed
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$25,000 in the aggregate, (g) except for conversion of the outstanding shares of
Internet Communications's preferred stock, alter the corporate structure or
ownership of Internet Communications or any of its subsidiaries, (h) enter into
or adopt any, or amend any existing, severance plan, agreement or arrangement or
enter into or amend any Internet Communications stock option or other similar
plan, oral or written employment agreement of any kind individually equal to or
in excess of $80,000 annually, or any consulting agreement in any amount, (i)
increase the aggregate compensation payable or to become payable to its
directors, officers or employees by more than 104.2% of the current cumulative
annualized compensation levels; (j) grant any severance or termination pay to
any director or officer of Internet Communications or any of its subsidiaries,
or establish, adopt, enter into, or, except as may be required to comply with
applicable law, amend in any material respect any rights or benefits under, any
labor, collective bargaining, bonus, profit sharing, compensation, stock option,
pension or other plan, trust, fund, policy or arrangement for the benefit of any
director, officer or employee, (k) knowingly violate or knowingly fail to
perform any material obligation or duty imposed upon it or any of its
subsidiaries by any applicable federal, state or local law, rule or regulation,
(l) make any change to accounting policies or procedures of Internet
Communications, (m) prepare or file, or take any position or make any election
with respect to, any material tax return inconsistent with its past practice,
(n) make or rescind any express or deemed material election relating to taxes or
change any of its methods of reporting income or deductions for tax purposes,
(o) commence any litigation or proceeding with respect to any material tax
liability or settle or compromise any material tax liability or commence any
other litigation or proceedings or settle or compromise any other material
claims or litigation, (p) except for annual expenditures reasonably expected to
be less than $25,000 in the aggregate, enter into, renew, terminate or amend any
agreement or contract material to Internet Communications and its subsidiaries,
or purchase any real property or make or agree to make any new capital
expenditures which in the aggregate exceed $25,000, (q) pay, discharge or
satisfy any claims, liabilities or obligations, other than in the ordinary
course of business consistent with past practice or in accordance with their
terms, or liabilities reflected or reserved against in the most recent financial
statements (or the notes thereto) of Internet Communications included in
Internet Communications's filings with the Securities and Exchange Commission
documents, (r) permit any insurance policy naming Internet Communications or any
subsidiary of Internet Communications as a beneficiary or a loss payee to be
cancelled or terminated, (s) enter into any contract, authorize, recommend,
propose or announce an intention to do any of the foregoing, or (t) make any
individual expenditure in excess of $25,000 other than by issuance of a check
requiring the signature of a designated RMI observer of Internet Communications.
NO SOLICITATION
Internet Communications has agreed, prior to the effective time of the
merger, that it will not, and will not authorize or permit any of its
subsidiaries or any of its or its subsidiaries' directors, officers, employees,
agents or representatives to, with any party other than RMI, solicit or initiate
any inquiries or the making of any proposals with respect to any
recapitalization, merger, consolidation or other business combination involving
Internet Communications, or the acquisition of the outstanding capital stock of
Internet Communications (other than upon exercise of options or warrants which
are outstanding as of the date of the merger agreement) or any subsidiary of
Internet Communications or the acquisition of any substantial portion of the
assets of Internet Communications and its subsidiaries, or provide any
non-public information to any party other than RMI in connection with the
foregoing.
Internet Communications has further agreed that it will not, and will not
authorize or permit any of its subsidiaries or any of its or its subsidiaries'
directors, officers, employees, agents or representatives to, negotiate or
otherwise engage in discussions with any person, other than RMI or its
respective directors, officers, employees, agents or representatives, with
respect to a proposal described in the first paragraph of this section or enter
into any agreement, arrangement or understanding requiring it to abandon,
terminate or fail to consummate the merger or any other transactions
contemplated by the merger agreement.
Notwithstanding the foregoing, the merger agreement does not prohibit
Internet Communications from furnishing non-public information to, entering into
discussions with, or recommending a transaction with respect to, any person who
(a) delivers a bona fide written proposal for a transaction described in the
first paragraph of this section which was not solicited or initiated by Internet
Communications, directly or indirectly, after the date of the merger agreement
and (b) enters into an appropriate confidentiality agreement with Internet
Communications (which agreement will be no less favorable to Internet
Communications than the confidentiality agreement between RMI and Internet
Communications), if, but only if, the board of directors of Internet
Communications determines in good faith by a majority vote that such proposal
could reasonably be expected to lead to a transaction which the board of
directors of Internet Communications reasonably determines, in the exercise of
its fiduciary duty, based on the written advice of its outside legal counsel, is
more favorable to Internet Communications and its shareholders than the merger;
provided further, that nothing in the merger agreement prevents Internet
Communications from complying with the provisions of Rule 14e-2 of the Exchange
Act of 1934 with respect to any proposal described in the first paragraph of
this section.
Internet Communications has agreed that, prior to accepting any proposal
described in the first paragraph of this section and terminating the merger
agreement, it will (a) provide RMI two business days' written notice that it
intends to terminate the merger
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agreement, (b) identify the transaction to be accepted in lieu of the merger
agreement, (c) deliver to RMI an accurate description of all material terms of
such transaction to be entered into and (d) on the date of termination, deliver
to RMI a written notice of termination of the merger agreement.
CONDITIONS
The obligations of each party to consummate the merger are subject to the
satisfaction or, if permissible, waiver, of the following conditions: (a) the
approval of the merger agreement by the shareholders of Internet Communications
in accordance with Colorado law and Internet Communications's charter documents,
(b) the approval of the merger agreement by the stockholders of RMI in
accordance with Delaware law and RMI's charter documents, (c) the RMI common
stock issuable in the merger and not previously listed will have been authorized
for listing on the Nasdaq National Market, subject to official notice of
issuance, (d) all authorizations, consents, orders, declarations or approvals
of, or filings with, or terminations or expirations of waiting periods imposed
by any governmental entity or any other third party, will have been obtained,
will have been made or will have occurred, (e) the registration statement of
which this proxy statement/prospectus is a part will have become effective in
accordance with the provisions of the Securities Act, no stop order suspending
the effectiveness of the registration statement will have been issued by the
Securities and Exchange Commission and no proceedings for that purpose will have
been initiated or threatened by the Securities and Exchange Commission, and all
necessary state securities or blue sky authorizations will have been received,
and (f) the absence of any injunction or legal restraint prohibiting the merger.
The obligation of RMI to consummate the merger is subject to the
satisfaction or, if permissible, waiver, of the following conditions: (a)
Internet Communications and Interwest Group will have performed in all material
respects each of its covenants and agreements contained in the merger agreement,
(b) the representations and warranties of Internet Communications and Interwest
Group will be true in all material respects as of the closing date of the
merger, and RMI will have received a certificate signed on behalf of Internet
Communications by one of its officers to such effect, (c) Internet
Communications will have obtained the consent or approval of each person or
governmental entity whose consent or approval will be required in connection
with the transactions contemplated by the merger agreement under any loan or
credit agreement, note, mortgage, indenture, lease or other agreement or
instrument and, in obtaining any approval or consent required to consummate any
of the transactions contemplated by the merger agreement, no such governmental
entity will have imposed or will have sought to impose any condition, penalty or
requirement, (d) RMI will have received the written agreements relating to Rule
145 under the Securities Act from certain affiliates of Internet Communications,
(e) there will have been no material adverse change with respect to Internet
Communications since the date of the merger agreement, and RMI will have
received a certificate signed on behalf of Internet Communications by one of its
officers to such effect, (f) all preferred stock, warrants, options or other
securities convertible into capital stock of Internet Communications will either
have been converted into shares of Internet Communications common stock or will
have been otherwise cancelled, (g) all of the directors of Internet
Communications and its subsidiaries and any officers thereof designated by RMI
will have tendered their resignation in form and substance satisfactory to RMI,
(h) at the closing of the merger, Internet Communications will not be obligated
under any undisclosed volume purchase commitments or minimum traffic volume
commitments pursuant to any carrier agreements binding Internet Communications,
(i) at the closing of the merger, Internet Communications will not be obligated
under any balloon or other extraordinary payments due or payable (or paid) by
Internet Communications or RMI as severance, change-of-control or other
"parachute" provisions, and (j) as of the effective time of the merger, RMI will
have confirmed that the holders of shares representing no more than 300,000
shares of outstanding Internet Communications common stock have provided notice
of their intent to exercise dissenters' rights under the Colorado Business
Corporation Act.
The obligations of Internet Communications are subject to the satisfaction
or, if permissible, waiver, of the following conditions: (a) RMI and Internet
Acquisition will have performed in all material respects each of its covenants
and agreements contained in the merger agreement, (b) the representations and
warranties of RMI and Internet Acquisition will be true in all material respects
as of the closing date of the merger, and Internet Communications will have
received a certificate signed on behalf of each of RMI and Internet Acquisition
by one of its officers to such effect, (c) there will have been no material
adverse change with respect to RMI since the date of the merger agreement, and
Internet Communications will have received a certificate signed on behalf of RMI
to such effect, (d) each of RMI and Internet Acquisition will have obtained the
consent or approval of each person or governmental entity whose consent or
approval will be required in connection with the transactions contemplated by
the merger agreement under any loan or credit agreement, note, mortgage,
indenture, lease or other agreement or instrument and, in obtaining any approval
or consent required to consummate any of the transactions contemplated the
merger agreement, no governmental entity will have imposed or will have sought
to impose any condition, penalty or requirement, (e) the fairness opinion of
Internet Communications's financial advisor will not have been adversely
modified or withdrawn prior to the effective time of the merger, (f) at the
closing of the merger, each Internet Communications shareholder, other than
Interwest Group or any director of Internet Communications, will receive from
RMI a warrant to purchase
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one share of RMI common stock for each share of Internet Communications common
stock held by such Internet Communications shareholder, (g) Interwest Group will
have received from RMI the Interwest Group warrant, (h) Neidiger Tucker will
have received from RMI the Neidiger Tucker warrant and (i) the board of
directors of Internet Communications shall be satisfied in its reasonable
discretion that, based upon the price per share of RMI common stock on the
Nasdaq National Market, the merger is in the best interests of Internet
Communications's shareholders.
TERMINATION; EFFECT OF TERMINATION
The merger agreement may be terminated by either Internet Communications or
RMI if (a) Internet Communications and RMI mutually consent to such termination,
or (b) the merger is not consummated by November 30, 2000.
The merger agreement may be terminated by RMI if (a) Internet Communications
or Interwest Group fails to comply in any material respect with any of the
covenants or agreements contained in the merger agreement, which failure is not
cured within the appropriate time period, (b) Internet Communications or
Interwest Group breaches any representation or warranty that gives rise to a
failure of the fulfillment of a condition of RMI's obligations to consummate the
merger, (c) Internet Communications's shareholders do not approve the merger or
more than 300,000 Internet Communications voting shares exercise dissenters'
rights, or (d) the board of directors of Internet Communications fails to
approve or recommend that the shareholders of Internet Communications approve
the merger, and (e) the board of directors of Internet Communications approves
and recommends an alternative transaction to the merger, or (f) a tender offer
or exchange offer for 20% or more of the outstanding capital stock of Internet
Communications is commenced by a third party that is not an affiliate of RMI,
and the board of directors of Internet Communications fails to recommend against
acceptance of such tender offer or exchange offer by its shareholders.
The merger agreement may be terminated by Internet Communications if (a) RMI
or Internet Acquisition fails to comply in any material respect with any of the
covenants or agreements contained in the merger agreement, which failure is not
cured within the appropriate time period, (b) RMI or Internet Acquisition
breaches any representation or warranty that gives rise to a failure of the
fulfillment of a condition of Internet Communications's obligations to
consummate the merger, (c) RMI's shareholders do not approve the merger, or (d)
prior to shareholder approval, the board of directors of Internet Communications
determines in good faith that an unsolicited third party takeover proposal would
be more favorable to the shareholders.
If the merger agreement is terminated for any reason described above, the
merger agreement will become void and of no further force and effect, except
with respect to the agreement between the parties to maintain in confidence the
confidential information of the other parties and to pay the appropriate fees of
the respective parties, and except that each of the parties will retain all
rights that it may have for willful breach of the merger agreement.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Internet Communications shareholders should be aware that this discussion
does not deal with all federal income tax considerations that may be relevant to
particular shareholders of Internet Communications in light of their particular
circumstances, such as dealers in securities, banks, insurance companies, tax
exempt organizations, foreign persons, persons who acquired their shares in
connection with warrants, stock options or stock purchase plans or in other
compensatory transactions, and persons who do not hold their Internet
Communications common stock as capital assets. In addition, the following
discussion is based on current legal authorities as of the date hereof, and no
assurance can be given that further legislation, regulations, administrative
pronouncements or court decisions will not significantly change the law and
materially affect the discussion contained herein. Further, the following
discussion does not address the tax consequences of the merger under foreign,
state or local tax laws. Finally, the following discussion also does not address
the tax consequences of transactions effectuated prior or subsequent to or
concurrently with the merger (whether or not such transactions are in connection
with the merger), including without limitation, transactions in which Internet
Communications common stock is acquired or sold, shares of RMI common stock are
disposed of, or transactions in which Internet Communications common stock is
sold after the date of the merger agreement and prior to the effective time of
the merger.
ACCORDINGLY, INTERNET COMMUNICATIONS SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN
TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING THE
APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE
MERGER IN THEIR PARTICULAR CIRCUMSTANCES.
Subject to the limitations and qualifications referred to herein, qualification
of the merger as a "reorganization" within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended, will result in the following federal
income tax consequences:
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<PAGE> 51
o No gain or loss will be recognized by Internet Communications shareholders
upon their receipt of RMI common stock and warrants to purchase RMI common
stock solely in exchange for their shares of Internet Communications common
stock pursuant to the merger (except to the extent of gain or loss
recognized as a result of cash received in lieu of a fractional share of RMI
common stock).
o The aggregate tax basis of the RMI common stock and warrants received by
Internet Communications Shareholders in the merger will be the same as the
aggregate tax basis of Internet Communications common stock surrendered in
exchange therefor less the tax basis, if any, allocated to fractional share
interests. This aggregate tax basis will be allocated between the RMI common
stock received by an Internet Communications shareholder and the warrants
received by him or her in proportion to their fair market values.
o The holding period of the RMI common stock received in the merger will
include the period for which Internet Communications common stock
surrendered in exchange therefor was held, provided that Internet
Communications common stock is held as a capital asset at the time of the
merger. The holding period of the warrants received in the merger will
include the period for which Internet Communications common stock
surrendered in exchange therefor was held provided that Internet
Communications common stock is held as a capital asset at the time of the
merger. However, the holding period for any stock acquired at the exercise
date will not include any part of the period for which either the exercised
warrants or the Internet Communications common stock surrendered in exchange
for the exercised warrants were held.
o If an Internet Communications shareholder receives cash in lieu of a
fractional share of RMI common stock, such Internet Communications
shareholder will be treated as if such fractional share of RMI common stock
had been issued in the merger and then redeemed by RMI. Upon receiving such
cash, the Internet Communications shareholder will generally recognize gain
or loss upon such payment, equal to the difference (if any) between the
amount of cash received and his or her basis in the fractional share.
o Neither RMI nor Internet Communications will recognize material amounts of
gain solely as a result of the merger.
No ruling has been or will be obtained from the Internal Revenue Service in
connection with the merger. A successful challenge to the reorganization status
of the merger would result in the shareholders of Internet Communications
recognizing taxable gain or loss, as of the effective time of the merger, with
respect to each share of Internet Communications common stock surrendered equal
to the difference between the shareholder's basis in such share and the fair
market value, as of the effective time of the merger, of the RMI common stock
received in exchange therefor. In such event, an Internet Communications
shareholder's aggregate basis in the RMI common stock so received would equal
its fair market value and the holding period for such stock would begin the day
after the effective time of the merger.
THE WARRANT AGREEMENT AND THE WARRANTS
In addition to receiving shares of RMI common stock in the merger, the
shareholders of Internet Communications (excluding shareholders who have
perfected their dissenters' rights, Interwest Group and the directors of
Internet Communications), will be entitled to receive a warrant to purchase one
share of RMI common stock in exchange for each share of Internet Communications
common stock held by such shareholders. The warrants will be issued pursuant to
a warrant agreement between RMI and Computershare Trust Company.
The warrants will have an exercise price of $7.00 per share and will be
exercisable for a period beginning 30 days after the closing of the merger and
continuing until two years after the closing of the merger. The exercise price
of the warrants and the number of shares issuable upon exercise of a warrant
will be adjusted in the event of a stock dividend, subdivision or combination of
stock, the issuances of stock, warrants or convertible securities for less than
the fair market value at the time of the transaction and the repurchase of
stock, warrants or convertible securities for more than the fair market value at
the time of the transaction. Fair market value is calculated as the average of
the closing bid prices for the five consecutive trading days prior to the
transaction.
In the event of an adjustment, the exercise price of the warrant will be
changed to a price determined by multiplying the exercise price by a fraction,
the numerator of which will be the sum of (a) the number of shares of RMI common
stock outstanding immediately prior to the transaction and (b) the number of
shares of RMI common stock which the aggregate consideration received for the
issuance of such additional shares in the transaction would purchase at the
current market price per share of RMI common stock, and the denominator of which
will be the number of shares of RMI common stock outstanding immediately after
the transaction.
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<PAGE> 52
The number of shares issuable upon exercise of a warrant will also be
adjusted. The total number of shares of RMI common stock purchasable upon the
exercise of the warrant will be the number of shares purchasable at the exercise
price immediately before the adjustment multiplied by a fraction, the numerator
of which will be the exercise price in effect immediately prior to the
adjustment and the denominator of which will be the exercise price in effect
immediately after the adjustment.
If RMI common stock trades above $8.00 per share for at least five
consecutive trading days, RMI may elect to cancel the warrants at any time prior
to their expiration. If RMI elects to cancel the warrants, RMI must provide
written notice to each warrant holder. The notice will advise holders that
unless exercised, their warrants will terminate 30 days from the date of such
notice.
In the event of any consolidation or merger of RMI with another company,
other than a merger that does not result in reclassification, conversion,
exchange or cancellation of outstanding shares of RMI common stock, or any sale
or transfer of substantially all assets, warrant holders have the right to
exercise their warrants to receive the same kind and amount of consideration
that they would have been entitled to if they had exercised their warrants prior
to the consolidation or merger transaction.
The terms of the warrants may be modified with the agreement of RMI and
holders of at least 50% of the warrants then outstanding. However, no change in
the number or nature of securities purchasable, exercise price or expiration
date can be made without written consent of each holder so affected.
The form of warrant agreement is attached as Appendix B to this proxy
statement/prospectus. You are urged to read it in its entirety.
THE SHAREHOLDER AGREEMENT
Concurrently with the execution of the merger agreement and as a condition
to RMI entering into the merger agreement, Interwest Group entered into a
shareholder agreement with RMI and Internet Communications. The shareholder
agreement requires that, until the closing of the merger or the termination of
the merger agreement, Interwest Group must vote all of the voting stock of
Internet Communications owned beneficially by it (a) in favor of the merger and
for each of the other actions contemplated by the merger agreement, (b) against
any action or agreement that would result in a breach in any material respect of
any representation, warranty or covenant of Internet Communications in the
merger agreement, and (c) against any action or agreement that would impede,
interfere with, delay, postpone, attempt to discourage the merger or otherwise
materially adversely affect the merger, including, without limitation, any
action or agreement with respect to an acquisition proposal with any person
other than RMI.
The shareholder agreement also provides that, during the term of the
agreement, Interwest Group will not, and will not authorize or permit any of its
directors, officers, employees, agents or representatives to (a) solicit or
initiate, or furnish or disclose non-public information in furtherance of any
inquiries or the making of any proposal for an acquisition of Internet
Communications, (b) negotiate or otherwise engage in discussion with any person
other than RMI with respect to any proposed acquisition of Internet
Communications, or (c) enter into any agreement, arrangement or understanding
requiring Interwest Group to abandon, terminate or fail to consummate the
merger.
Interwest Group may not sell or grant proxies with respect to any shares of
Internet Communications voting stock it beneficially owns.
If the merger agreement is terminated or the merger does not close for any
reason (other than termination of the merger agreement (i) by RMI, (ii) by
Internet Communications if the shareholders of RMI fail to approve the merger
agreement or the merger at the RMI shareholder meeting, (iii) by Internet
Communications if the merger has not closed on or prior to November 30, 2000
because either the fairness opinion of Internet Communications's financial
advisor has been adversely modified or withdrawn or because the board of
directors of Internet Communications is not satisfied in its reasonable
discretion that, based upon the price per share of RMI common stock on the
Nasdaq National Market, the merger is in the best interests of Internet
Communications's shareholders, or (iv) by Internet Communications because of a
material breach by RMI), and Internet Communications completes an acquisition
with a different entity within a year after the termination date, then Interwest
Group will be obligated to pay to RMI (a) the excess of the consideration it
receives in that transaction over the consideration it would have received if
the merger had closed, plus (b) one dollar per share of Internet Communications
voting stock held by Interwest Group prior to the acquisition. Also, if the
merger agreement is terminated or the merger does not close because of a
material breach by RMI and Internet Communications completes an acquisition by a
different entity within six months of the termination date, Interwest Group will
be obligated to pay RMI the amount described in the preceding sentence.
The shareholder agreement also provides that after the merger closes,
Interwest Group will vote all RMI common stock beneficially owned by it as
directed by a majority of RMI's board of directors. Interwest Group may not sell
any RMI shares that it receives in the merger for one year following the closing
of the merger, except that it may sell up to 300,000 shares under specified
conditions related to increases in the market price of RMI's common stock.
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<PAGE> 53
RMI has agreed to maintain the effectiveness of the registration statement
of which this proxy statement/prospectus is a part until the earlier of (a) two
years from the closing of the merger or (b) until Interwest Group no longer owns
any of the RMI shares acquired in the merger. RMI has also agreed to provide
Interwest Group with "piggy-back" registration rights for these shares
commencing two years after the closing of the merger.
THE EXCHANGE AGREEMENT
Concurrently with the execution of the original merger agreement and as a
condition to RMI entering into the merger agreement, RMI and Internet
Communications entered into an amended and restated exchange agreement. If the
merger agreement is terminated, subject to the exceptions discussed below,
Internet Communications will deliver to RMI 1,199,490 shares of Internet
Communications common stock, representing 19.9% of Internet Communications's
outstanding common stock on October 18, 2000, and RMI will deliver to Internet
Communications 857,635 shares of RMI common stock, representing the number of
Internet Communications shares issued to RMI under the exchange agreement
multiplied by an exchange ratio of 0.715.
The exchange of shares contemplated by the exchange agreement may discourage
third parties who are interested in acquiring a significant stake in Internet
Communications and is intended by RMI to increase the likelihood that the merger
will be completed.
The share exchange will not take place if:
o The merger is consummated.
o The merger agreement is terminated, and both RMI and Internet Communications
agree not to proceed with the exchange.
o The merger agreement is terminated, and Internet Communications, in its sole
discretion, elects not to proceed with the exchange.
o Internet Communications terminates the merger agreement for any reason other
than because of a material uncured breach of the merger agreement by RMI.
o RMI terminates the merger agreement because of an uncured default by
Internet Communications with respect to the limitations on its conduct of
its business specified in the merger agreement that would give rise to a
financial effect on Internet Communications in excess of $375,000 or would
be commercially reasonable for Internet Communications to cure.
Each party to the exchange agreement has granted a proxy in favor of the
board of directors of the other party to vote the shares received under the
exchange agreement until transferred to an unaffiliated third party.
Internet Communications and RMI are subject to certain resale restrictions
with respect to the shares received in the share exchange. During the first year
following the date of the share exchange and provided that certain market and
sale price conditions are satisfied, Internet Communications may sell up to a
maximum of 300,000 shares of RMI, or 42% of its RMI shares. Similarly, RMI may
sell up to a maximum of 503,786 shares, or 42% of its Internet Communications
shares, subject to certain market and sale price conditions. Internet
Communications and RMI have agreed to grant registration rights for the resale
by the other party of shares received in the share exchange.
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The selected unaudited pro forma condensed combined financial information
presented below has been derived from the unaudited or audited historical
financial statements of RMI and Internet Communications and reflects the present
estimate of pro forma adjustments, including a preliminary estimate of the
purchase price allocations, which ultimately may be different.
The acquisition will be accounted for using the purchase method of
accounting. Accordingly, the purchase price will be allocated to assets acquired
and liabilities assumed, recorded at their estimated relative fair values, which
will be subject to adjustment based upon appraisals and other analysis.
Under the terms of the merger agreement, subject to certain conditions, RMI
agreed to issue 0.55 shares of RMI common stock for each share of Internet
Communications common stock owned by shareholders other than Interwest Group and
its affiliates and to issue 0.45 shares of RMI common stock for each share of
Internet Communications common stock owned by Interwest Group and its
affiliates. The total number of shares to be issued upon consummation of the
merger is currently expected to be between 5.4 and 5.6 million. The final number
of shares issued ultimately may be different. In
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<PAGE> 54
addition, in determining the total number of shares issued, RMI and Internet
Communications have assumed that no options or warrants to acquire Internet
Communications shares will be exercised prior to closing the merger.
The unaudited pro forma condensed combined statements of operations for the
year ended December 31, 1999 and the six months ended June 30, 2000 give effect
to the acquisition as if it had been consummated at the beginning of such
periods. These pro forma statements of operations combine the historical
consolidated statements of operations for the periods reported for RMI and
Internet Communications.
The unaudited pro forma condensed combined balance sheet as of June 30, 2000
gives effect to the acquisition as if it had been consummated on that date. The
pro forma balance sheet combines the historical consolidated balance sheets at
that date for RMI and Internet Communications.
The unaudited pro forma condensed combined financial statements may not be
indicative of the results that actually would have occurred if the transaction
described above had been completed and in effect for the periods indicated or
the results that may be obtained in the future. The unaudited pro forma
condensed combined financial data presented below should be read in conjunction
with the audited historical financial statements and related notes thereto of
RMI and Internet Communications.
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<PAGE> 55
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
INTERNET PRO FORMA PRO FORMA PRO FORMA
RMI.NET, INC. COMMUNICATIONS SUBTOTAL ADJUSTMENTS(A) COMBINED
------------- -------------- -------- -------------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,507 $ 24 $ 2,531 $ -- $ 2,531
Trade receivables less
allowance for doubtful accounts 5,539 2,242 7,781 -- 7,781
Prepaid expenses and other 1,075 3,642 4,717 -- 4,717
-------- ------------- ---------------- -------- --------
Total Current Assets 9,121 5,908 15,029 0 15,029
-------- ------------- ---------------- -------- --------
PROPERTY AND EQUIPMENT, net 10,041 888 10,929 -- 10,929
Goodwill, net 38,874 728 39,602 7,648 (1) 47,250
Other assets, net 5,614 364 5,978 -- 5,978
-------- ------------- ---------------- -------- --------
Total Assets $ 63,650 $ 7,888 $ 71,538 $ 7,648 $ 79,186
======== ============= ================ ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 3,432 $ 2,178 $ 5,610 $ -- $ 5,610
Current maturities of
long term debt and
capital lease obligations 2,069 3,547 5,616 (3,500)(2) 2,116
Deferred revenue 2,488 579 3,067 -- 3,067
Accrued expenses and other 6,159 946 7,105 -- 7,105
-------- ------------- ---------------- -------- --------
Total Current Liabilities 14,148 7,250 21,398 (3,500) 17,898
LONG-TERM DEBT AND
CAPITAL LEASE OBLIGATIONS 5,982 10 5,992 -- 5,992
DEFERRED REVENUE -- 66 66 -- 66
-------- ------------- ---------------- -------- --------
Total Liabilities 20,130 7,326 27,456 (3,500) 23,956
STOCKHOLDERS' EQUITY
Preferred stock, Series A -- 5,000 5,000 (5,000)(3) --
Preferred stock, Series B -- 1,822 1,822 (1,822)(3) --
Common stock 22 15,687 15,709 3,500 (2) 27
6,822 (3)
124 (4)
5 (1)
(26,133)(1)
Additional paid in capital 102,397 102,397 11,705 (1) 114,102
Dividends payable -- 124 124 (124)(4) --
Accumulated deficit (58,826) (22,071) (80,897) 22,071 (1) (58,826)
Unearned compensation (73) -- (73) -- (73)
-------- ------------- ---------------- -------- --------
43,520 562 44,082 11,148 55,230
-------- ------------- ---------------- -------- --------
Total Liabilities and Stockholders' Equity $ 63,650 $ 7,888 $ 71,538 $ 7,648 $ 79,186
======== ============= ================ ======== ========
</TABLE>
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<PAGE> 56
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
HISTORICAL
INTERNET PRO FORMA PRO FORMA PRO FORMA
RMI.NET, INC. COMMUNICATIONS SUBTOTAL ADJUSTMENTS(A) COMBINED
------------- -------------- -------- -------------- --------
(AMOUNT IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenue:
Connectivity Services $ 19,122 $ -- $ 19,122 $ -- $ 19,122
Web Solutions 4,603 -- 4,603 -- 4,603
Network Integration -- 6,826 6,826 -- 6,826
Network Services -- 4,961 4,961 -- 4,961
-------- ------- -------- ------- --------
23,725 11,787 35,512 -- 35,512
-------- ------- -------- ------- --------
Costs and expenses:
Operating expenses 13,828 9,181 23,009 -- 23,009
Selling expenses 3,642 1,419 5,061 -- 5,061
General and administrative expenses 13,959 2,205 16,164 -- 16,164
Depreciation and amortization 8,504 419 8,923 765(5) 9,688
-------- ------- -------- ------- --------
Total costs and expenses 39,933 13,224 53,157 765 53,922
-------- ------- -------- ------- --------
Operating loss (16,208) (1,437) (17,645) (765) (18,410)
-------- ------- -------- ------- --------
Other income (expense):
Interest expense (174) (230) (404) 145(6) (259)
Interest income 130 -- 130 -- 130
Other income (expense), net 10 -- 10 -- 10
-------- ------- -------- ------- --------
(34) (230) (264) 145 (119)
--------- ------- -------- ------- --------
Net loss (16,242) (1,667) (17,909) (620) (18,529)
Preferred stock dividends -- 248 248 (248)(7) --
-------- ------- -------- ------- --------
Net loss applicable to common stockholders $(16,242) $(1,915) $(18,157) $ (372) $(18,529)
======== ======= ======== ======= ========
Loss per share to common stockholders:
Weighted average number of common shares (5,916)
outstanding(8) 21,295 5,916 5,101 26,396
======== ======= ======= ========
Basic and Diluted loss per share(8) $ (0.76) $ (0.32) $ (0.70)
======== ======= ========
</TABLE>
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<PAGE> 57
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
HISTORICAL
INTERNET PRO FORMA PRO FORMA PRO FORMA
RMI.NET, INC. COMMUNICATIONS SUBTOTAL ADJUSTMENTS(A) COMBINED
------------- -------------- -------- -------------- --------
(AMOUNT IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenue:
Connectivity Services $ 25,864 $ -- $ 25,864 $ -- $ 25,864
Web Solutions 4,258 -- 4,258 -- 4,258
Network Integration -- 12,575 12,575 -- 12,575
Network Services -- 11,875 11,875 -- 11,875
-------- -------- -------- ------- --------
30,122 24,450 54,572 -- 54,572
-------- -------- -------- ------- --------
Costs and expenses:
Operating expenses 17,816 18,798 36,614 -- 36,614
Selling expenses 6,005 3,367 9,372 -- 9,372
General and administrative expenses 21,995 5,131 27,126 -- 27,126
Depreciation and amortization 8,852 961 9,813 1,530(5) 11,343
-------- -------- -------- ------- --------
Total costs and expenses 54,668 28,257 82,925 1,530 84,455
-------- -------- -------- ------- --------
Operating loss (24,546) (3,807) (28,353) (1,530) (29,883)
-------- -------- -------- ------- --------
Other income (expense):
Interest expense (542) (258) (800) 262(6) (538)
Interest income 174 -- 174 -- 174
Other income (expense), net (14) -- (14) -- (14)
-------- -------- -------- ------- --------
(382) (258) (640) 262 (378)
-------- -------- -------- ------- --------
Net loss (24,928) (4,065) (28,993) (1,268) (30,261)
Preferred stock dividends 207 412 619 (412)(7) 207
-------- -------- -------- ------- --------
Net loss applicable to common stockholders $(25,135) $ (4,477) $(29,612) $ (856) $(30,468)
======== ======== ======== ======= ========
Loss per share to common stockholders:
Weighted average number of common shares (5,647)
outstanding(8) 13,736 5,647 5,101 18,837
======== ======== ======= ========
Basic and Diluted loss per share(8) $ (1.83) $ (0.79) $ (1.62)
======== ======== ========
</TABLE>
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<PAGE> 58
NOTES TO THE PRO FORMA CONDENSED
COMBINED FINANCIAL DATA
(unaudited)
BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed combined balance sheet is
presented as of June 30, 2000. The accompanying unaudited pro forma condensed
combined statement of operations is presented for the year ended December 31,
1999 and the six months ended June 30, 2000.
(A) Pro Forma Adjustments: The following pro forma adjustments have been made to
the unaudited condensed combined balance sheet as of June 30, 2000 and the
unaudited condensed combined statements of operations for the year ended
December 31, 1999 and the six months ended June 30, 2000.
(1) To reflect the issuance of 5,100,848 shares of RMI common stock valued
at $11.7 million, in connection with the acquisition of Internet
Communications and to eliminate the equity accounts of the acquired
company. The $7.6 million excess of the purchase price over the fair
value of the assets acquired has been allocated to goodwill. Shares of
common stock issued for the acquisition were recorded at fair market
value as based on the current market price of RMI's publicly traded
stock. The final allocation of the purchase price will be made after
the appropriate appraisals or analyses are performed. Upon completion
of the appraisals and in accordance with the terms thereof, the excess
purchase price currently allocated to goodwill will be allocated to the
appropriate asset classifications, including customer list and
goodwill. While goodwill will be amortized over a period of five years,
other identified intangibles may be amortized over shorter periods,
which would therefore increase amortization expense.
(2) To record the conversion of the $3.5 million loan from Interwest Group,
Inc., Internet Communications' controlling shareholder, to equity.
Under the terms of the acquisition agreement, immediately prior to
completion of the acquisition, the loan will be converted to Internet
Communications equity at the rate of $2.50 per share that will then be
converted into RMI common stock.
(3) To record the conversion of the Series A and Series B Preferred Stock
to common stock.
(4) To convert the dividends payable of acquired company to common stock.
(5) To adjust amortization expense for the increase in goodwill, using a
life of five years, as if such acquisition had been completed as of the
beginning of such periods.
(6) To reduce interest expense for the reduction in the outstanding
Internet Communications line of credit balance. The outstanding line of
credit was repaid with the $3.5 million loan received from Interwest
Group, Inc.
(7) To eliminate preferred stock dividends as a result of the conversion of
Internet Communications preferred stock into RMI common stock.
(8) The Basic and Diluted loss per share from continuing operations and the
average number of common shares outstanding for the pro forma combined
amounts give effect to the results as if the acquisition of Internet
Communications Corporation had been completed at the beginning of the
period.
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<PAGE> 59
COMPARISON OF THE RIGHTS OF HOLDERS OF INTERNET COMMUNICATIONS COMMON
STOCK AND RMI COMMON STOCK
Internet Communications is a Colorado corporation and the rights of its
shareholders are governed by the laws of the State of Colorado and its articles
of incorporation and bylaws. RMI is a Delaware corporation and the rights of it
shareholders are governed by the laws of the State of Delaware and its
certificate of incorporation and bylaws. Following consummation of the merger,
Internet Communications shareholders will become RMI shareholders and as such
their rights will be governed by Delaware law and RMI's certificate of
incorporation and bylaws.
The following is a summary of the material differences between the rights of
holders of Internet Communications capital stock and the rights of holders of
RMI capital stock at the date hereof. These differences arise from disparities
between the Colorado Business Corporation Act and the General Corporation Law of
the State of Delaware and between the respective corporate charters and bylaws
of Internet Communications and RMI. This summary is not a complete comparison of
rights that may be of interest to Internet Communications shareholders, and
Internet Communications shareholders should therefore read the full text of each
states' corporate statutes and the respective corporate charters and bylaws of
Internet Communications and RMI. For information as to how these documents may
be obtained, refer to "Where You Can Find More Information" on page __ of this
proxy statement/prospectus.
NUMBER OF DIRECTORS
Both Delaware and Colorado law state that the board of directors shall
consist of one or more members with the number of directors to be fixed as
provided in the bylaws of the corporation, unless the certificate of
incorporation fixes the number of directors, in which case a change in the
number of directors shall be made only by amendment of the certificate of
incorporation. The RMI bylaws and the Internet Communications bylaws provide
that the number of directors which shall constitute the board of directors shall
be fixed from time to time by the their respective board of directors.
STAGGERED/CLASSIFIED BOARD OF DIRECTORS
A staggered board of directors (as it is called under Colorado law) or a
classified board of directors (as it is called under Delaware law) is one on
which a certain number, but not all, of the directors are elected on a rotating
basis each year. This method of electing directors makes changes in the
composition of the board of directors more difficult, and thus a potential
change of control of a corporation is a lengthier and more difficult process.
Both Delaware and Colorado law permit, but do not require, a classified or
staggered board of directors, by which the directors can be divided into as many
as three classes with staggered terms of office with only one class of directors
standing for election each year. RMI's charter and bylaws do not provide for a
classified board. Internet Communications's charter and bylaws provide for a
staggered board divided into three classes, each of which serves for a staggered
three-year term. Following the merger, the change of control protections
provided to the Internet Communications's shareholders provided by the staggered
board will be terminated.
REMOVAL OF DIRECTORS
In both Delaware and Colorado, a corporation may remove directors, with or
without cause, with the approval of a majority of the outstanding shares
entitled to vote. However, no director may be removed if the number of votes
cast against such removal would be sufficient to elect the director.
Under Colorado law, the shareholders may remove one or more directors with
or without cause unless the articles of incorporation provide that directors may
be removed only for cause. Internet Communications's articles of incorporation
provide that directors may be removed only for cause, which combined with the
staggered board, may make it harder for a third party to take over control of
the board of directors.
In the case of a Delaware corporation having cumulative voting, if less than
the entire board is to be removed, a director may not be removed without cause
if the number of shares voted against such removal would be sufficient to elect
the director under cumulative voting. A director of a corporation with a
classified board of directors may be removed only for cause, unless the
certificate of incorporation otherwise provides. RMI's certificate of
incorporation does not provide for a classified board of directors or for
cumulative voting. Therefore, after the merger, the former shareholders of
Internet Communications will be entitled to greater rights to remove the
directors of RMI.
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FILLING VACANCIES ON THE BOARD OF DIRECTORS
Delaware law provides that, unless otherwise provided in the certificate of
incorporation or bylaws, vacancies may be filled by a majority of the directors
then in office, although less than a quorum, or by a sole remaining director.
Further, if, at the time of filling any vacancy, the directors then in office
shall constitute less than a majority of the whole board, the Delaware Court of
Chancery may, upon application of any shareholder or shareholders holding at
least 10% of the total number of the shares at the time outstanding having the
right to vote for such directors, summarily order any election to be held to
fill any such vacancies or newly created directorships, or to replace the
directors chosen by the directors then in office.
RMI's bylaws provide that vacancies may be filled by a majority of the
directors then in office. Any director elected by the board of directors to fill
a vacancy or newly created directorship shall hold office until such director's
successor is elected and qualified.
Colorado law provides that, unless otherwise provided in the articles of
incorporation or bylaws, vacancies may be filled by the shareholders or the
directors. If, at the time of the vacancy, the directors remaining in office
constitute fewer than a quorum of the board, they may fill the vacancy by the
affirmative vote of a majority of all the directors remaining in office.
Internet Communications's bylaws provide that vacancies may be filled by a
majority of the directors then in office. Any director elected by the board of
directors to fill a vacancy or newly created directorship shall hold office for
the remainder of the full term of the class of directors in which such
directorship is part, and until such director's successor is elected and
qualified.
AMENDMENTS TO GOVERNING DOCUMENTS
In order to amend a Delaware corporation's certificate of incorporation,
Delaware requires a vote of the corporation's board of directors followed by the
affirmative vote of a majority of the outstanding stock of each class entitled
to vote for any amendment to the certificate of incorporation, unless a greater
level of approval is required by the certificate of incorporation. Further,
Delaware law states that if an amendment would increase or decrease the
aggregate number of authorized shares of a particular class, increase or
decrease the par value of shares of such class or alter or change the powers,
preferences or special rights of a particular class or series of stock so as to
affect them adversely, the class or series shall be given the power to vote as a
class notwithstanding the absence of any specifically enumerated power in the
certificate of incorporation. Delaware law provides that the power to adopt,
amend or repeal the bylaws of a corporation shall be in the shareholders
entitled to vote, provided that the corporation in its certificate of
incorporation may confer such power on the board of directors in addition to the
shareholders. RMI's certificate of incorporation expressly authorizes the board
of directors to adopt, amend and repeal the RMI bylaws.
Under Colorado law, unless otherwise provided in the articles of
incorporation, the board of directors may adopt, without shareholder action,
various non-substantive amendments to the articles of incorporation, such as
deleting the names and addresses of the initial directors or the initial
registered agent (provide that a statement of change is on file) from the
articles of incorporation or certain minor changes to the corporate name. For
all other amendments to the articles of incorporation, the board of directors or
shareholders representing at least 10% of all of the votes entitle to be cast on
the amendment may propose an amendment to the articles of incorporation for
submission to the shareholders. For an amendment to be adopted, the board of
directors must recommend the amendment to the shareholders unless the amendment
is proposed by the shareholders or unless the board of directors determines
that, because of a conflict of interest or other special circumstances, it
should not make a recommendation and communicates the basis for such a
determination to the shareholders with the amendment. Further, Colorado law
states that if an amendment would increase or decrease the aggregate number of
authorized shares of a particular class, increase or decrease the par value of
shares of such class or alter or change the powers, preferences or special
rights of a particular class or series of stock so as to affect them adversely,
the class or series shall be given the power to vote as a class notwithstanding
the absence of any specifically enumerated power in the articles of
incorporation. Under Colorado law, the board of directors may amend the bylaws
at any time to add, change or delete a provision, unless the articles of
incorporation or a specific provision of Colorado law reserves such power
exclusively to the shareholders in whole or in part. In addition, the
shareholders may amend the bylaws even though the bylaws may also be amended by
the board of directors.
Internet Communications's articles of incorporation provide that the
articles of incorporation may be amended by the affirmative vote or ratified by
the written consent of a majority of the shares entitled to vote thereon at a
meeting called for such purpose or ratified by the written consent of the
required shareholders. Internet Communications's bylaws may be altered, amended
or repealed, and new bylaws may be adopted by the affirmative vote of a majority
of the members of the board of directors represented at any regular or special
meeting of the board of directors.
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ADVANCE NOTICE OF MEETING
Delaware law and RMI's bylaws require that shareholders be provided prior
written notice no more than 60 days nor less than ten days before the date of
the meeting of shareholders.
Colorado law and Internet Communications's bylaws require that shareholders
be provided prior written notice no more than 60 days nor less than ten days
before the date of a meeting of shareholders; provided that if the number of
authorized shares is to be increased, at least 30 days' notice must be given.
SHAREHOLDER CONSENT IN LIEU OF MEETING
Under Delaware law, unless otherwise provided in the certificate of
incorporation, any action required to be taken or which may be taken at an
annual or special meeting of shareholders may be taken without a meeting if a
consent in writing is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize such
action at a meeting at which all shares entitled to vote were present and voted.
RMI's certificate of incorporation does not prohibit shareholder action by
written consent and the RMI bylaws explicitly permit shareholder action without
a meeting if a consent in writing is signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize such action at a meeting at which all shares entitled to vote were
present and voted.
Under Colorado law, unless otherwise provided in the articles of
incorporation, any action required to be taken or which may be taken at an
annual or special meeting of shareholders may be taken without a meeting if a
consent in writing is signed by the holders of all of the outstanding stock
entitled to vote. Internet Communications's articles of incorporation and bylaws
do not prohibit such action.
INDEMNIFICATION AND LIMITATION OF LIABILITY
Delaware and Colorado have similar laws respecting indemnification by a
corporation of its officers, directors, employees and other agents. The laws of
both states permit, with certain exceptions, a corporation to adopt a provision
in its articles of incorporation or certificate of incorporation, as the case
may be, eliminating the liability of a director to the corporation or its
shareholders for monetary damages for breach of the director's fiduciary duty.
There are nonetheless certain differences between the laws of the two states
respecting indemnification and limitation of liability.
Delaware law generally permits a corporation to indemnify its directors and
officers against expenses, judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with a third-party action, other
than a derivative action, and against expenses actually and reasonably incurred
in the defense or settlement of a derivative action, provided that there is a
determination that the individual acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation. No
indemnification will be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless the court in which such action or suit was brought determines that, in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses as the court shall deem proper.
The RMI bylaws provide that RMI's officers and directors shall be
indemnified by RMI to the full extent permitted by Delaware law and advance all
reasonable expenses incurred by or on behalf of any such officer or director.
RMI's certificate of incorporation provides that no director of RMI shall be
personally liable to RMI or its shareholders for monetary damages for breach of
fiduciary duty except as to liability (a) for any breach of the director's duty
of loyalty to the corporation or its shareholders, (b) for violations of Section
187 of the General Corporation Law of the State of Delaware, and (d) for any
transaction in which the director received an improper personal benefit.
Internet Communications's articles of incorporation eliminate the liability
of directors to the corporation to the fullest extent permissible under Colorado
law and, if consistent with Colorado law, to a greater extent if authorized by
resolution of the board of directors and shareholders. Colorado law does not
permit the elimination of monetary liability where such liability is based on
(a) conduct or knowing and culpable violation of law, (b) acts or omissions that
a director believes to be contrary to the best interests of the corporation or
its shareholders, or that involve the absence of good faith on the part of the
director, (c) receipt of an improper personal benefit, (d) acts or omissions
that show reckless disregard for the director's duty to the corporation or its
shareholders, where the director in the ordinary course of performing a
director's duties should be aware of a risk of serious injury to the corporation
or its shareholders, (e) acts or omissions that constitute an unexcused pattern
of inattention that amounts to an abdication of the director's duty to the
corporation and its shareholders, (f) interested transactions between the
corporation and a director in which a director has a material financial
interest, and (g) liability for improper distributions, loans or guarantees.
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Both Delaware and Colorado law require indemnification by the corporation
when the individual has defended successfully the action on the merits or
otherwise. Expenses incurred by an officer or director in defending an action
may be paid in advance under Delaware law and Colorado law if such director or
officer undertakes to repay such amounts if it is ultimately determined that he
or she is not entitled to indemnification. In addition, the laws of both states
authorize a corporation's purchase of indemnity insurance for the benefit of its
officers, directors, employees and agents whether or not the corporation would
have the power to indemnify against the liability covered by the policy.
DISSENTERS' RIGHTS
Under both Delaware and Colorado law, holders of shares of any class or
series, who neither vote in favor of a merger or consolidation nor consent
thereto in writing, have the right, in certain circumstances, to dissent from a
merger or consolidation by demanding payment in cash for their shares equal to
the fair value (excluding any appreciation or depreciation as a consequence or
in expectation of the transaction) of such shares. Delaware grants dissenters'
appraisal rights only in the case of mergers or consolidations and not in the
case of a sale or transfer of assets or a purchase of assets for stock
regardless of the number of shares being issued. Colorado grants dissenters'
appraisal rights for mergers, share exchanges, sales or transfers of all or
substantially all of a corporation's assets for which a shareholder vote is
required and sales or transfers of all or substantially all of the assets of an
entity controlled by the corporation for which a shareholder vote is required.
Under both Delaware and Colorado law, no appraisal rights are available for
shares of any class or series listed on a national securities exchange or
designated as a national market system security on the Nasdaq National Market or
held of record by more than 2,000 shareholders, unless the agreement of merger
or consolidation converts such shares into anything other than (a) stock of the
surviving corporation, (b) stock of another corporation which is either listed
on a national securities exchange or designated as a national market system
security on the Nasdaq National Market or held of record by more than 2,000
shareholders, (c) cash in lieu of fractional shares, or (d) some combination of
the above. In addition, dissenters' rights are not available for any shares of
the surviving corporation if the merger did not require the vote of the
shareholders of the surviving corporation.
INSPECTION OF SHAREHOLDER LIST
Both Delaware law and Colorado law allow any shareholder to inspect the
accounting books and records and minutes of proceedings of the shareholders and
the board of directors and to inspect the shareholders' list at any reasonable
time during usual business hours, for a purpose reasonably related to such
shareholder's interests as a shareholder of the corporation.
SHAREHOLDER APPROVAL OF EXTRAORDINARY TRANSACTIONS
Delaware law requires the affirmative vote of a majority of the outstanding
stock entitled to vote thereon to authorize any merger or consolidation of a
corporation, except that, unless required by its certificate of incorporation,
no authorizing shareholder vote is required of a corporation surviving a merger
if (a) such corporation's certificate of incorporation is not amended in any
respect by the merger, (b) each share of stock of such corporation outstanding
immediately prior to the effective date of the merger will be an identical
outstanding or treasury share of the surviving corporation after the effective
date of the merger, and (c) the number of shares to be issued in the merger does
not exceed 20% of such corporation's outstanding common stock immediately prior
to the effective date of the merger. Shareholder approval is also not required
under Delaware law for mergers or consolidations in which a parent corporation
merges or consolidates with a subsidiary of which it owns at least 90% of the
outstanding shares of each class of stock. Delaware law provides that a sale of
all or substantially all of the assets of a corporation be approved by a
majority of the outstanding voting shares of the corporation transferring such
assets. RMI's certificate of incorporation does not require a greater percentage
vote for such actions.
Colorado law provides that for certain changes in the fundamental nature of
the corporation, such as mergers, sales of all or substantially all the property
of the corporation not in the ordinary course of business and dissolutions, the
affirmative vote of the majority of the votes entitled to be cast on the
proposal by each voting group entitled to vote thereon, rather than by a
majority of the shares voting at a meeting at which a quorum is present, is
required.
ANTI-TAKEOVER PROVISIONS AND INTERESTED SHAREHOLDER TRANSACTIONS
Delaware law prohibits, in certain circumstances, a "business combination"
between the corporation and an "interested shareholder" within three years of
the shareholder becoming an "interested shareholder." An "interested
shareholder" is a holder who, directly or indirectly, controls 15% or more of
the outstanding voting stock or is an affiliate of the corporation and was the
owner of
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15% or more of the outstanding voting stock at any time within the prior three
year period. A "business combination" includes a merger or consolidation
involving the corporation and the interested shareholder, a sale or other
disposition of assets having an aggregate market value equal to 10% or more of
the consolidated assets of the corporation or the aggregate market value of the
outstanding stock of the corporation involving the corporation and the
interested shareholder, certain transactions that would increase the interested
shareholder's proportionate share ownership in the corporation and the receipt
by the interested shareholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation.
This provision does not apply where (a) either the business combination or
the transaction which resulted in the shareholder becoming an interested
shareholder is approved by the corporation's board of directors prior to the
date the interested shareholder acquired such 15% interest, (b) upon the
consummation of the transaction which resulted in the shareholder becoming an
interested shareholder, the interested shareholder owned at least 85% of the
outstanding voting stock of the corporation excluding for the purposes of
determining the number of shares outstanding shares held by persons who are
directors and also officers and by employee stock plans in which participants do
not have the right to determine confidentially whether shares held subject to
the plan will be tendered, (c) the business combination is approved by a
majority of the board of directors and the affirmative vote of two-thirds of the
outstanding votes entitled to be cast by disinterested shareholders at an annual
or special meeting, (d) the corporation does not have a class of voting stock
that is listed on a national securities exchange, authorized for quotation on an
inter-dealer quotation system of a registered national securities association,
or held of record by more than 2,000 shareholders unless any of the foregoing
results from action taken, directly or indirectly, by an interested shareholder
or from a transaction in which a person becomes an interested shareholder, (e)
the shareholder acquires a 15% interest inadvertently and divests itself of such
ownership and would not have been a 15% shareholder in the preceding three years
but for the inadvertent acquisition of ownership, (f) the shareholder acquired
the 15% interest when these restrictions did not apply, or (g) the corporation
has opted out of this provision. RMI has not opted out of this provision.
Colorado law does not contain an equivalent business combination provision.
SHAREHOLDER DERIVATIVE SUITS
Derivative actions may be brought in Delaware by a shareholder on behalf of,
and for the benefit of, a Delaware corporation. Delaware law provides that a
shareholder must state in the complaint that he or she was a shareholder of the
corporation at the time of the transaction of which he or she complains. A
shareholder may not sue derivatively unless he or she first makes demand on the
corporation that it bring suit and such demand has been refused, unless the
shareholder can demonstrate that such demand would have been futile.
Derivative actions may also be brought in Colorado by a shareholder on
behalf of, and for the benefit of, a Colorado corporation. Colorado law provides
that a shareholder must be a shareholder of the corporation at the time of the
transaction of which the shareholder complains. If the shareholder bringing the
derivative action holds less than 5% of the outstanding shares of any class of
the corporation, unless such shares have a market value in excess of $25,000,
the corporation is entitled to require the shareholder to post a bond for the
costs and reasonable expenses, excluding attorneys' fees, which may be directly
attributable to and incurred by the corporation in defense of the derivative
action or may be incurred by other parties named as defendant in such action for
which the corporation may become legally liable. A shareholder may not sue
derivatively unless the shareholder first makes demand on the board of directors
to bring the suit and such demand has been refused, unless the shareholder can
demonstrate that such demand would have been futile.
SELLING SHAREHOLDER PLAN OF DISTRIBUTION
Interwest Group will receive ______ shares of RMI common stock in connection
with the merger and may receive additional shares of RMI upon exercise of the
Interwest Group warrant. This proxy statement/prospectus covers the reoffering
and resale by Interwest Group of these shares of RMI common stock during the
period ________, 2001 through ______________, 2002. These shares may be sold
from time to time by Interwest in one or more of the following transactions:
o Block transactions;
o Transactions on the Nasdaq National Market or on such other market on which
RMI common stock may trade from time to time;
o Privately negotiated transactions;
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o Through the writing of options on the shares;
o Short sales; or
o Any combination of these transactions.
The sale price to the public in these transactions may be:
o The market price prevailing at the time of sale;
o A price related to the prevailing market price;
o Negotiated prices; or
o Such other price as Interwest Group determines from time to time.
In the event RMI permits or causes this proxy statement/prospectus to lapse,
Interwest Group may sell shares of RMI common stock pursuant to Rule 144 under
the Securities Act.
Interwest Group may also sell its shares of RMI common stock directly to
market makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers. These broker-dealers may receive compensation in
the form of discounts, concessions or commissions from Interwest Group and/or
the purchasers of these shares of RMI common stock for whom such broker-dealers
may act as agents or to whom they sell as principal, or both. As to a particular
broker-dealer, this compensation might be in excess of customary commissions.
Market makers and block purchasers purchasing these shares of RMI common stock
will do so for their own account and at their own risk. It is possible that
Interwest Group will attempt to sell shares of RMI common stock in block
transactions to market makers or other purchasers at a price per share that may
be below the prevailing market price of RMI common stock.
Interwest Group may sell all or any part of its shares of RMI common stock
offered hereby through an underwriter. Interwest Group has not entered into any
agreement with a prospective underwriter and there is no assurance that any such
agreement will be entered into. If Interwest Group enters into an agreement or
agreements with an underwriter, then the relevant details will be set forth in a
supplement or revision to this proxy statement/prospectus.
Interwest Group and any other persons participating in the sale or
distribution of its shares of RMI common stock will be subject to applicable
provisions of the Securities Exchange Act and the rules and regulations
thereunder including, without limitation, Regulation M. These provisions may
restrict activities of, and limit the timing of purchases and sales of any of
these shares of RMI common stock by, Interwest Group. Furthermore, pursuant to
Regulation M, persons engaged in a distribution of securities are prohibited
from simultaneously engaging in market making and other activities with respect
to the securities for a specified period of time prior to the commencement of
the distributions, subject to specified exceptions or exemptions. These
regulations may affect the marketability of these shares of RMI common stock.
RMI will pay substantially all expenses incident to the reoffering of the
resale shares by Interwest Group to the public, other than commissions and
discounts of underwriters, dealers or agents. RMI will receive no proceeds from
any sales of such shares under this proxy statement/prospectus by Interwest
Group.
As of the date of this proxy statement/prospectus, Interwest Group does not
own any RMI common stock.
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EXPERTS
Ernst & Young LLP, independent auditors, have audited RMI's consolidated
financial statements and schedule included in RMI's Annual Report on Form 10-K
as of December 31, 1999 and 1998 and for each of the two years in the period
ended December 31, 1999, as set forth in their report, which is incorporated in
this proxy statement/prospectus by reference. Baird, Kurtz & Dobson, independent
accountants, have audited RMI's consolidated financial statements and schedule
for the year ended December 31, 1997 included in RMI's Annual Report on Form
10-K for the year ended December 31, 1999, as set forth in their report, which
is incorporated in this prospectus/proxy statement by reference. RMI's
consolidated 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.
KPMG LLP, independent auditors, have audited Internet Communications's
consolidated financial statements and schedules included in Internet
Communications's Annual Report on Form 10-K for the year ended December 31,
1999, as set forth in their report, which is incorporated in this proxy
statement/prospectus by reference. Internet Communications's consolidated
financial statements are incorporated by reference in reliance on their report,
given on their authority as experts in accounting and auditing.
LEGAL MATTERS
The validity of the shares of RMI common stock offered by this proxy
statement/prospectus will be passed upon for RMI by its general counsel.
PROXY SOLICITATION COSTS
The proxies being solicited hereby are being solicited by RMI and Internet
Communications. The cost of soliciting proxies in the enclosed form will be
borne equally by RMI and Internet Communications. RMI has retained Regan &
Associates, Inc., 90 West Street, New York, NY 10006, to aid in its
solicitation. For these services, RMI will pay Regan & Associates a fee of
$15,000, which includes out-of-pocket disbursements and expenses. Officers and
regular employees of RMI and Internet Communications may, but without
compensation other than their regular compensation, solicit proxies by further
mailing or personal conversations, or by telephone, telex, facsimile or
electronic means. RMI and Internet Communications will, upon request, reimburse
brokerage firms and others for their reasonable expenses in forwarding
solicitation material to the beneficial owners of stock.
WHERE YOU CAN FIND MORE INFORMATION
RMI and Internet Communications file annual, quarterly and special reports,
proxy statements and other information with the Securities and Exchange
Commission. RMI common stock is listed on the Nasdaq National Market and
Internet Communications common stock is listed on the Nasdaq SmallCap System.
Our reports, proxy statements, prospectuses and other information we file with
the Securities and Exchange Commission can be reviewed at the offices of Nasdaq
Operations, 1735 "K" Street, N.W., Washington, D.C. 20006. You may also read and
copy any reports, statements or other information we file at the Securities and
Exchange Commission's public reference rooms in Washington, D.C., New York, New
York and Chicago, Illinois. Please call the
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Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the public reference rooms. In addition, our Securities and Exchange Commission
filings are also available to the public from commercial document retrieval
services and at the Internet Web site maintained by the Securities and Exchange
Commission at http://www.sec.gov.
The Securities and Exchange Commission allows RMI and Internet
Communications to "incorporate by reference" the information each of us files
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 proxy statement/prospectus and is deemed to be a part
of this proxy statement/prospectus, except for information superseded by
information contained directly in this proxy statement/prospectus. We
incorporate by reference the documents listed below and, in the case of RMI, any
future filings made with the SEC under Sections 13(a), 13(c), 14, or 15(d) of
the Securities Exchange Act of 1934 through the closing date of the merger and,
with respect to the resale of the RMI common stock issued to Interwest Group,
through [____________], 2002:
o RMI's Annual Report on Form 10-K for the year ended December 31, 1999;
o RMI's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000 and
the amendment thereto on Form 10Q-A filed on August 14, 2000;
o RMI's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000;
o RMI's Current Reports on Form 8-K and 8K-A filed on January 7, February 2,
February 3, April 3, July 7, September 21 and October 5, 2000;
o RMI's Definitive Proxy Statement for the 2000 Annual Meeting of
Stockholders;
o the description of RMI's common stock contained in RMI's registration
statement on Form 8-A, filed August 14, 1996;
o Internet Communications's Annual Report on Form 10-K for the year ended
December 31, 1999 and the amendment thereto on Form 10K-A filed on April 28,
2000;
o Internet Communications's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2000;
o Internet Communications's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000; and
o Internet Communications's Current Report on Form 8-K filed on March 31,
2000.
The documents incorporated by reference by Internet Communications are included
with this proxy statement/prospectus.
RMI filed a Registration Statement on Form S-4 to register with the
Securities and Exchange Commission RMI common stock to be issued to Internet
Communications shareholders in the merger. This proxy statement/prospectus is a
part of that registration statement and constitutes the prospectus of RMI as
well as being a proxy statement of Internet Communications for the Internet
Communications special meeting.
RMI has supplied all the information contained in this proxy
statement/prospectus relating to RMI and Internet Communications has supplied
all such information relating to Internet Communications. As allowed by
Securities and Exchange Commission rules, this proxy statement/prospectus does
not contain all of the information relating to RMI and Internet Communications
you can find in the registration statement or the exhibits to the registration
statement.
You can obtain any of the documents incorporated by reference through RMI,
Internet Communications or the Securities and Exchange Commission. Documents
incorporated by reference are available from RMI or Internet Communications
without charge, excluding all exhibits. You may obtain documents incorporated by
reference in this proxy statement/prospectus by requesting them orally or in
writing from the following addresses or by telephone:
RMI.NET, Inc. Internet Communications Corporation
Christopher J. Melcher Thomas C. Galley
Vice President and General President and Chief Executive
Counsel Officer
999 Eighteenth Street, 7100 East Belleview Avenue,
Suite 2300 Suite 201
Denver, Colorado 80202 Greenwood Village, Colorado 80111
(303) 672-0700 (303) 770-7600
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You may also want to refer to RMI's web site at www.rmi.net or Internet
Communications's web site at www.incc.net.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO VOTE ON THE MERGER. RMI AND
INTERNET COMMUNICATIONS HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT/
PROSPECTUS. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THE PROXY
STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE HEREOF, AND
NEITHER THE MAILING OF THIS PROXY STATEMENT/PROSPECTUS TO INTERNET
COMMUNICATIONS'S SHAREHOLDERS NOR THE ISSUANCE OF RMI COMMON STOCK IN THE MERGER
SHALL CREATE ANY IMPLICATION TO THE CONTRARY.
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APPENDIX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMONG
RMI.NET, INC., A DELAWARE CORPORATION ("PARENT"),
INTERNET ACQUISITION CORPORATION, A COLORADO CORPORATION ("SUB")
AND
INTERNET COMMUNICATIONS CORPORATION, A COLORADO CORPORATION
("COMPANY")
DATED AS OF OCTOBER 18, 2000
<PAGE> 69
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Article 1 THE MERGER..........................................................................................2
Section 1.1 The Merger............................................................................2
Section 1.2 Effective Time........................................................................2
Section 1.3 Effects of the Merger.................................................................2
Section 1.4 Charter and By-laws; Directors and Officers...........................................2
Section 1.5 Conversion of Securities..............................................................3
Section 1.6 Parent to Make Certificates Available.................................................4
Section 1.7 Dividends; Transfer Taxes; Withholding................................................5
Section 1.8 No Fractional Securities..............................................................6
Section 1.9 Return of Exchange Fund...............................................................6
Section 1.10 No Further Ownership Rights in Company Common Stock...................................6
Section 1.11 Closing of Company Transfer Books.....................................................7
Section 1.12 Lost Certificates.....................................................................7
Section 1.13 Dissenters' Rights....................................................................7
Section 1.14 Further Assurances....................................................................8
Section 1.15 Closing...............................................................................8
Article 2 REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB....................................................8
Section 2.1 Organization, Standing and Power......................................................8
Section 2.2 Capital Structure.....................................................................8
Section 2.3 Authority.............................................................................9
Section 2.4 Consents and Approvals; No Violation.................................................10
Section 2.5 Parent Common Stock to be Issued in the Merger.......................................11
Section 2.6 SEC Documents and Other Reports......................................................11
Section 2.7 Absence of Certain Changes or Events.................................................12
Section 2.8 Reorganization.......................................................................12
Section 2.9 Permits and Compliance...............................................................12
Section 2.10 Tax Matters..........................................................................13
Section 2.11 Actions and Proceedings..............................................................14
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Section 2.12 Liabilities..........................................................................14
Section 2.13 Intellectual Property................................................................14
Section 2.14 Environmental Matters................................................................15
Section 2.15 Suppliers and Distributors...........................................................16
Section 2.16 Insurance............................................................................16
Section 2.17 Transactions with Affiliates.........................................................17
Section 2.18 Brokers..............................................................................17
Article 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................................17
Section 3.1 Organization, Standing and Power.....................................................17
Section 3.2 Capital Structure....................................................................18
Section 3.3 Authority............................................................................19
Section 3.4 Consents and Approvals; No Violation.................................................20
Section 3.5 SEC Documents and Other Reports......................................................21
Section 3.6 Absence of Certain Changes or Events.................................................21
Section 3.7 Permits and Compliance...............................................................22
Section 3.8 Tax Matters..........................................................................22
Section 3.9 Actions and Proceedings..............................................................23
Section 3.10 Certain Agreements...................................................................24
Section 3.11 ERISA................................................................................25
Section 3.12 No Undisclosed Material Liabilities..................................................27
Section 3.13 Labor Matters........................................................................27
Section 3.14 Intellectual Property................................................................27
Section 3.15 Opinion of Financial Advisor.........................................................28
Section 3.16 Required Vote of Company Shareholders................................................28
Section 3.17 Reorganization.......................................................................28
Section 3.18 Environmental Matters................................................................28
Section 3.19 Suppliers and Distributors...........................................................29
Section 3.20 Insurance............................................................................29
Section 3.21 Transactions with Affiliates.........................................................30
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Section 3.22 Title to and Sufficiency of Assets...................................................30
Section 3.23 Brokers..............................................................................31
Section 3.24 Books and Records....................................................................31
Section 3.25 Bank Accounts........................................................................31
Section 3.26 Litigation...........................................................................31
Article 4 COVENANTS RELATING TO CONDUCT OF BUSINESS..........................................................31
Section 4.1 Conduct of Business by the Company Pending the Merger................................31
Section 4.2 Procedures for Parent Approval; Cure.................................................35
Section 4.3 No Solicitation......................................................................36
Section 4.4 Third Party Standstill Agreements....................................................38
Section 4.5 Company Significant Contracts........................................................38
Section 4.6 Key Employees........................................................................38
Section 4.7 Reorganization.......................................................................38
Section 4.8 Controlling Shareholder Loan.........................................................38
Section 4.9 Indebtedness.........................................................................39
Section 4.10 Observer Rights......................................................................40
Article 5 ADDITIONAL AGREEMENTS..............................................................................40
Section 5.1 Shareholder Meetings.................................................................40
Section 5.2 Preparation of the Registration Statement and the Proxy Statement....................41
Section 5.3 Access to Information................................................................43
Section 5.4 Rule 145 Letters.....................................................................43
Section 5.5 Stock Exchange Listings..............................................................43
Section 5.6 Fees and Expenses....................................................................43
Section 5.7 Company Stock Options................................................................44
Section 5.8 Conversion of Current Company Preferred Stock........................................45
Section 5.9 Warrant Agreement....................................................................45
Section 5.10 Premerger Notification to Federal Trade Commission...................................45
Section 5.11 Efforts Required.....................................................................46
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Section 5.12 Public Announcements.................................................................47
Section 5.13 State Takeover Laws..................................................................47
Section 5.14 Indemnification; Directors and Officers Insurance....................................47
Section 5.15 Notification of Certain Matters......................................................47
Section 5.16 Repayment/Conversion of Controlling Shareholder Loan.................................48
Section 5.17 Escrow of Funds and Shares by Parent.................................................48
Section 5.18 Controlling Shareholder Warrant Agreement............................................48
Article 6 CONDITIONS PRECEDENT TO THE MERGER.................................................................49
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger...........................49
Section 6.2 Conditions to Obligation of the Company to Effect the Merger.........................50
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the Merger.....................51
Article 7 TERMINATION, AMENDMENT AND WAIVER..................................................................52
Section 7.1 Termination..........................................................................52
Section 7.2 Effect of Termination................................................................54
Section 7.3 Amendment............................................................................54
Section 7.4 Waiver...............................................................................55
Article 8 GENERAL PROVISIONS.................................................................................55
Section 8.1 Notices..............................................................................55
Section 8.2 Interpretation.......................................................................56
Section 8.3 Counterparts.........................................................................56
Section 8.4 Entire Agreement; No Third-Party Beneficiaries.......................................56
Section 8.5 Governing Law........................................................................56
Section 8.6 Assignment...........................................................................57
Section 8.7 Severability.........................................................................57
Section 8.8 Enforcement of this Agreement........................................................57
Section 8.9 Defined Terms........................................................................57
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
This AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated
as of October 18, 2000 (this "Agreement"), is among RMI.NET, Inc., a Delaware
corporation ("Parent"), INTERNET ACQUISITION CORPORATION, a Colorado corporation
and a wholly-owned subsidiary of Parent ("Sub"), and INTERNET COMMUNICATIONS
CORPORATION, a Colorado corporation (the "Company") (Sub and the Company being
hereinafter collectively referred to as the "Constituent Corporations").
RECITALS:
A. The respective Boards of Directors of Parent, Sub and the
Company have approved and declared advisable the merger of the Sub with and into
the Company upon the terms and subject to the conditions of this Agreement (the
"Merger"), and the respective Boards of Directors of Parent, Sub, the Company
and Interwest Group, Inc., a Colorado corporation and the controlling
shareholder of the Company (the "Controlling Shareholder") have approved and
adopted this Agreement;
B. The respective Boards of Directors of Parent and the
Company have determined that the Merger is in the best interest of their
respective Shareholders;
C. Parent, Sub and the Company entered into an Agreement and
Plan of Merger, dated March 17, 2000 (the "Original Agreement");
D. In order to induce Parent and Sub to enter into the
Original Agreement, concurrently therewith Parent, the Company and the
Controlling Shareholder, entered into the Shareholder Agreement dated March 17,
2000 (the "Original Shareholder Agreement");
E. In order to induce the Company to enter into the Original
Agreement, concurrently therewith Parent and the Company entered into the
Exchange Agreement dated March 17, 2000 (the "Original Exchange Agreement");
F. Simultaneously herewith, and in order to induce Parent and
Sub to enter into this Agreement, the Original Shareholder Agreement is amended,
restated and superseded in its entirety by a Shareholder Agreement by and
between Parent, the Company and the Controlling Shareholder, dated October 18,
2000 (the "Shareholder Agreement"), in the form of the attached Exhibit A;
G. Simultaneously herewith, and in order to induce the Company
to enter into this Agreement, the Original Exchange Agreement is amended,
restated and superseded in its entirety by an Exchange Agreement between Parent
and the Company, dated October 18, 2000 (the "Exchange Agreement"), in the form
of the attached Exhibit B;
<PAGE> 74
H. For federal income tax purposes, it is intended by the
parties hereto that the Merger qualify as a "reorganization" within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and that by executing this Agreement, the parties intend to adopt a plan of
reorganization within the meaning of Section 368 of the Code and the regulations
promulgated thereunder; and
I. This Agreement amends, restates and supersedes in its
entirety the Original Agreement among Parent, Sub and the Company.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises,
representations, warranties and agreements herein contained, the parties agree
as follows:
ARTICLE 1
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the
conditions hereof, and in accordance with the Colorado Business Corporations
Act, as amended (the "CBCA"), the Sub shall be merged with and into the Company
at the Effective Time (as defined in Section 1.2). Following the Merger, the
separate corporate existence of Sub shall cease and the Company shall continue
as the surviving corporation (the Company shall sometimes hereinafter be
referred to as the "Surviving Corporation") and as a wholly-owned subsidiary of
Parent.
Section 1.2 Effective Time. The Merger shall become effective
when the Articles of Merger (the "Articles of Merger"), executed in accordance
with the relevant provisions of the CBCA, are filed with the Secretary of State
of the State of Colorado; provided, however, that, upon mutual consent of the
Constituent Corporations, the Articles of Merger may provide for a later date of
effectiveness of the Merger not more than thirty (30) days after the date the
Articles of Merger are filed. When used in this Agreement, the term "Effective
Time" shall mean the date and time at which the Articles of Merger are accepted
for filing or such later time established by the Articles of Merger. The
Articles of Merger shall be filed on the Closing Date (as defined in Section
1.15).
Section 1.3 Effects of the Merger. The Merger shall have the
effects set forth in Section 7-111-106 of the CBCA.
Section 1.4 Charter and By-laws; Directors and Officers.
(a) Articles of Incorporation and Bylaws. The
Articles of Incorporation of Company in effect at the Effective Time
shall be the Articles of Incorporation of the Surviving Corporation
until thereafter changed or amended as provided therein or by
applicable law. The By-laws of Company in effect at the Effective Time
will be the By-laws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
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(b) Directors/Officers. The directors of the Sub at
the Effective Time shall continue to be, without further action, the
directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly
elected and qualified, as the case may be. The officers of the Sub at
the Effective Time shall continue to be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or until
their respective successors are duly elected and qualified, as the case
may be.
Section 1.5 Conversion of Securities. As of the Effective
Time, by virtue of the Merger and without any action on the part of Sub, the
Company or the holders of any securities of the Constituent Corporations:
(a) Stock of Sub. Each issued and outstanding share
of common stock, no par value per share, of Sub shall be converted into
one (1) share of Company Common Stock (as hereinafter defined).
(b) Certain Company Common Stock Cancelled. All
shares of Company Common Stock that are held in the treasury (if any)
of the Company and any shares of Company Common Stock owned by Parent
or Sub shall automatically be canceled and retired and shall cease to
exist and no capital stock of Parent or other consideration shall be
delivered in exchange therefor.
(c) Conversion. Subject to the provisions of Section
1.8 and Section 1.13 hereof, (A) each share of common stock, no par
value per share, of the Company ("Company Common Stock") issued and
outstanding immediately prior to the Effective Time (other than shares
to be canceled in accordance with Section 1.5(b) and shares held by the
Controlling Shareholder and/or any affiliate, transferee or assignee of
the Controlling Shareholder, but including shares outstanding as a
result of Section 5.7(a)) shall be converted into the right to receive
(i) 0.55 shares of Parent's common stock, $0.001 par value per share
("Parent Common Stock"), and (ii) except for the directors of the
Company, a warrant to purchase one share of Parent Common Stock,
subject to the terms and conditions of the Warrant Agreement (as
hereinafter defined), and (B) each issued and outstanding share of
Company Common Stock (i) held by the Controlling Shareholder or any
affiliate, transferee or assignee of the Controlling Shareholder
immediately prior to the Effective Time (including the shares
outstanding as a result of Section 5.8 and Section 5.16) shall be
converted into the right to receive 0.45 shares of Parent Common Stock,
and (ii) held by the Controlling Shareholder as a result of Section
5.16 shall also be converted into the right to receive a warrant to
purchase additional shares of Parent Common Stock (the "Controlling
Shareholder Warrant"), subject to the terms and conditions of that
certain Common Stock Purchase and Adjustment Warrant Agreement, a copy
of which is attached hereto as Exhibit E (the "Controlling Shareholder
Warrant Agreement") (such consideration, described in clauses (A) and
(B) above, shall be referred to herein as the "Merger Consideration");
provided, however, that if prior to the Effective Time, the outstanding
shares of Parent Common Stock shall have been changed into a different
number of shares or a different class, by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or
exchange of shares, the Merger Consideration shall be correspondingly
adjusted to the extent
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appropriate to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of
shares. All such shares of Company Common Stock, when so converted,
shall no longer be outstanding and shall automatically be canceled and
retired and each holder of a certificate representing any such shares
shall cease to have any rights with respect thereto, except the right
to receive the Merger Consideration and any dividends and other
distributions in accordance with Section 1.7 and any cash, without
interest, in lieu of fractional shares to be issued or paid in
consideration therefor upon the surrender of such certificate in
accordance with Section 1.6.
Section 1.6 Parent to Make Certificates Available.
(a) Exchange of Certificates. Parent shall, at its
sole cost and expense, authorize a bank, trust company, or such other
person or persons as shall be reasonably acceptable to Parent and the
Company, to act as Exchange Agent hereunder (the "Exchange Agent"). As
soon as practicable after the Effective Time, Parent shall deposit with
the Exchange Agent, in trust for the holders of shares of Company
Common Stock converted in the Merger, (i) Warrant Agreements, duly
executed by Parent, providing for the issuance of the Parent Warrants
(as defined in Section 5.9) to those shareholders entitled to receive
such Parent Warrants pursuant to Section 1.5(c), (ii) certificates
representing the shares and warrants to purchase shares of Parent
Common Stock issuable pursuant to Section 1.5(c) in exchange for
outstanding shares of Company Common Stock, and (iii) cash, as required
to make payments in lieu of any fractional shares pursuant to Section
1.8 (such Warrant Agreements, certificates representing shares and
warrants to purchase shares of Parent Common Stock and cash, together
with any dividends or distributions with respect thereto, being
hereinafter collectively referred to as the "Exchange Fund"). The
Exchange Agent shall deliver to the holders of outstanding shares of
Company Common Stock at the Effective Time the Merger Consideration
contemplated to be issued pursuant to Section 1.5(c) out of the
Exchange Fund. Except as contemplated by Section 1.9, the Exchange Fund
shall not be used for any other purpose.
(b) Exchange Procedures. As soon as practicable, but
in no event later than ten (10) trading days after the Effective Time,
the Exchange Agent shall mail to each record holder of a certificate or
certificates that immediately prior to the Effective Time represented
outstanding shares of Company Common Stock converted in the Merger (the
"Certificates") a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon actual delivery of the Certificates
to the Exchange Agent, and shall contain instructions for use in
effecting the surrender of the Certificates in exchange for
certificates representing shares and warrants to purchase shares of
Parent Common Stock and cash in lieu of fractional shares); provided,
however, that no such letter shall be delivered to any record holder
that prior to Closing perfected dissenter's rights under the CBCA. Upon
surrender for cancellation to the Exchange Agent of a Certificate held
by any record holder of a Certificate, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor (i) a certificate representing
that number of whole shares of Parent Common Stock into which the
shares represented by the surrendered Certificate shall have been
converted at the Effective Time pursuant to this Article 1, (ii)
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unless such holder is a director of the Company or the Controlling
Shareholder and/or an affiliate, transferee or assignee of the
Controlling Shareholder, a certificate representing a warrant to
purchase that number of shares of Parent Common Stock equal to the
number of shares of Company Common Stock held by such record holder
immediately prior to the Effective Time, (iii) cash in lieu of any
fractional share in accordance with Section 1.8, and (iv) certain
dividends and other distributions in accordance with Section 1.7, and
any Certificate so surrendered shall forthwith be canceled.
(c) Stock Options. Company Stock Options (as defined
in Section 3.2(b)) shall be governed by Section 5.7(a) hereof.
(d) Parent Warrants. Parent Warrants to be issued at
the Closing shall be governed by the terms of the Warrant Agreement.
(e) Controlling Shareholder Warrant. The Controlling
Shareholder Warrant to be issued by Parent to the Controlling
Shareholder at the Closing shall be governed by the terms of the
Controlling Shareholder Warrant Agreement.
(f) NTB Warrant. The warrants previously issued to
Neidiger Tucker Bruner, Inc. to purchase an aggregate of 100,000 shares
of Company Common Stock (the "NTB Warrants") shall be governed by the
terms of the NTB Warrants; accordingly, the NTB Warrants shall be
converted at the Effective Time into the Rollover Warrants (as defined
in Section 5.7(b)) as set forth in Section 5.7(b) hereof.
Section 1.7 Dividends; Transfer Taxes; Withholding. No
dividends or other distributions that are declared on or after the Effective
Time on Parent Common Stock, or are payable to the holders of record thereof on
or after the Effective Time, will be paid to any person entitled by reason of
the Merger to receive a certificate representing Parent Common Stock until such
person surrenders the related Certificate or Certificates, as provided in
Section 1.6, and no cash payment in lieu of fractional shares will be paid to
any such person pursuant to Section 1.8 until such person shall so surrender the
related Certificate or Certificates. Subject to the effect of applicable law,
there shall be paid to each record holder of a new certificate representing such
Parent Common Stock: (i) at the time of such surrender or as promptly as
practicable thereafter, the amount of any dividends or other distributions
theretofore paid with respect to the shares of Parent Common Stock represented
by such new certificate and having a record date on or after the Effective Time
and a payment date prior to such surrender; (ii) at the appropriate payment date
or as promptly as practicable thereafter, the amount of any dividends or other
distributions payable with respect to such shares of Parent Common Stock and
having a record date on or after the Effective Time but prior to such surrender
and a payment date on or subsequent to such surrender; and (iii) at the time of
such surrender or as promptly as practicable thereafter, the amount of any cash
payable with respect to a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 1.8. In no event shall the person
entitled to receive such dividends or other distributions be entitled to receive
interest on such dividends or other distributions. If any cash or certificate
representing shares of Parent Common Stock is to be paid to or issued in a name
other than that in which the Certificate surrendered in exchange therefor is
registered, it shall be a condition of such exchange that the Certificate so
surrendered shall be properly endorsed and otherwise in proper form for transfer
and that the person requesting such
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exchange shall pay to the Exchange Agent any transfer or other taxes required by
reason of the issuance of certificates for such shares of Parent Common Stock in
a name other than that of the registered holder of the Certificate surrendered,
or shall establish to the satisfaction of the Exchange Agent that such tax has
been paid or is not applicable. Parent or the Exchange Agent shall be entitled
to deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of shares of Company Common Stock such amounts as Parent
or the Exchange Agent is required to deduct and withhold with respect to the
making of such payment under the Code or under any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by Parent or the
Exchange Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Company Common
Stock in respect of which such deduction and withholding was made by Parent or
the Exchange Agent.
Section 1.8 No Fractional Securities. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates pursuant to this Article 1, and no Parent
dividend or other distribution or stock split shall relate to any fractional
share, and no fractional share shall entitle the owner thereof to vote or to any
other rights of a security holder of Parent. In lieu of any such fractional
share, each holder of Company Common Stock who would otherwise have been
entitled to a fraction of a share of Parent Common Stock upon surrender of
Certificates for exchange pursuant to this Article 1 will be paid an amount in
cash (without interest), rounded to the nearest cent, determined by multiplying
(i) the closing price per share of the Parent Common Stock as quoted on the
Nasdaq National Market on the Closing Date by (ii) the fractional interest to
which such holder would otherwise be entitled. As promptly as practicable after
the determination of the amount of cash, if any, to be paid to holders of
fractional share interests, the Exchange Agent shall so notify Parent, and
Parent shall deposit such amount with the Exchange Agent and shall cause the
Exchange Agent to forward payments to such holders of fractional share interests
subject to and in accordance with the terms of Section 1.6 and this Section 1.8.
Section 1.9 Return of Exchange Fund. Any portion of the
Exchange Fund (including any interest earned thereon) which remains
undistributed to the former shareholders of the Company for six (6) months after
the Effective Time shall be delivered to Parent, upon demand of Parent, and any
such former shareholders who have not theretofore complied with this Article 1
shall thereafter look only to Parent for payment of their claim for shares and
warrants to purchase shares of Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock and any dividends or distributions with
respect to Parent Common Stock. Neither Parent nor the Surviving Corporation
shall be liable to any former holder of Company Common Stock for any such shares
of Parent Common Stock, cash and dividends and distributions held in the
Exchange Fund which is delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
Section 1.10 No Further Ownership Rights in Company Common
Stock. The Merger Consideration issued upon the surrender for exchange of
Certificates in accordance with the terms hereof (including any cash paid
pursuant to Section 1.6, Section 1.7 and Section 1.8) shall be deemed to have
been issued in full satisfaction of all rights pertaining to the shares of
Company Common Stock represented by such Certificates.
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Section 1.11 Closing of Company Transfer Books. At the
Effective Time, the stock transfer books of the Company shall be closed and no
transfer of shares of Company Common Stock shall thereafter be made on the
records of the Company. If, after the Effective Time, Certificates are presented
to the Surviving Corporation, the Exchange Agent or Parent, such Certificates
shall be canceled and exchanged as provided in this Article 1.
Section 1.12 Lost Certificates. If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent or the Exchange Agent, the posting by such person of a bond,
in such reasonable amount as Parent or the Exchange Agent may direct as
indemnity against any claim that may be made against them with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the shares of Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock to which the holders thereof are
entitled pursuant to Section 1.8 and any dividends or other distributions to
which the holders thereof are entitled pursuant to Section 1.6 and Section 1.7.
Section 1.13 Dissenters' Rights.
(a) No Merger Consideration. Notwithstanding anything
to the contrary contained in this Agreement, any holder of shares of
capital stock of the Company with respect to which dissenters' rights,
if any, are granted by reason of the Merger under the CBCA and who does
not vote in favor of the Merger and who otherwise complies with the
provisions of the CBCA relating to the exercise of dissenters' rights
("Company Dissenting Shares") shall not be entitled to receive any
Merger Consideration pursuant to Section 1.5(c); rather, such Company
Dissenting Shares shall be converted into the right to receive payment
from the Surviving Corporation with respect thereto in accordance with
the relevant provisions of the CBCA, unless such holder fails to
perfect, effectively withdraws or loses his or her right to dissent
from the Merger under the CBCA. If any such holder so fails to perfect,
effectively withdraws or loses his or her dissenters' rights under the
CBCA, each Company Dissenting Share of such holder shall thereupon be
deemed to have been converted, as of the Effective Time, into the right
to receive the Merger Consideration pursuant to Section 1.5(c).
(b) Payments. Any payments relating to Company
Dissenting Shares shall be made solely by the Surviving Corporation and
no funds or other property have been or will be provided by Parent, Sub
or Parent's other direct or indirect Subsidiaries for such payment, nor
shall the Company make any payment with respect to, or settle or offer
to settle, any such demands.
(c) Notice. The Company shall give Parent prompt
notice of any demands received by the Company for the payment of fair
value for shares, and Parent shall have the right to participate in all
negotiations and proceedings with respect to such demands. The Company
shall not, except with the prior written consent of Parent, make any
payment with respect to, or settle or offer to settle, such demands.
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Section 1.14 Further Assurances. If at any time after the
Effective Time the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Corporations, or (b) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Corporations, all such
deeds, bills of sale, assignments and assurances and to do, in the name and on
behalf of either Constituent Corporation, all such other acts and things as may
be necessary, desirable or proper to vest, perfect or confirm the Surviving
Corporation's right, title or interest in, to or under any of the rights,
privileges, powers, franchises, properties or assets of such Constituent
Corporation and otherwise to carry out the purposes of this Agreement.
Section 1.15 Closing. Unless earlier terminated as expressly
permitted hereunder, the closing of the transactions contemplated by this
Agreement (the "Closing") and all actions specified in this Agreement to occur
at the Closing shall take place at the offices of Perkins Coie, LLP, 1899
Wynkoop Street, Suite 700, Denver, Colorado 80202, at 10:00 a.m., local time, no
later than the second (2nd) business day following the day on which the last of
the conditions set forth in Article 6 shall have been fulfilled or waived (if
permissible) (the "Closing Date"), or at such other time and place as Parent and
the Company shall agree.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as
follows:
Section 2.1 Organization, Standing and Power. Each of Parent
and Sub is a corporation duly organized, validly existing and in good standing
under the laws of its respective place of incorporation and has the requisite
corporate power and authority to carry on its business as now being conducted.
Each of Parent and Sub is duly qualified to do business, and is in good
standing, in each jurisdiction where the character of its respective properties
owned or held under lease or the nature of its respective activities makes such
qualification necessary, except where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect on Parent. For
purposes of this Agreement, "Material Adverse Change" or "Material Adverse
Effect" means, when used with respect to Parent or Sub, any change or effect
that is or could reasonably be expected (as far as can be reasonably foreseen at
the time) to be materially adverse to the business, assets, liabilities, results
of operations, or the financial condition of Parent and its Subsidiaries, taken
as a whole.
Section 2.2 Capital Structure.
(a) Stock. As of the date hereof, the authorized
capital stock of Parent consists of 100,000,000 shares of Parent Common
Stock, $.001 par value per share, and 750,000 shares of preferred
stock, $0.001 par value per share ("Parent Preferred Stock"). At the
close of business on the date of execution hereof, (i) 23,351,781
shares of Parent
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Common Stock were issued and outstanding, all of which were validly
issued, fully paid and nonassessable and free of preemptive rights,
(ii) 36,832 shares of Parent Common Stock were held in the treasury;
(iii) 2,587,101 shares of Parent Common Stock were reserved for future
issuance pursuant to the stock option plans of Parent (collectively,
the "Parent Stock Option Plans"), (iv) 4,438,455 shares of Parent
Common Stock were reserved for future issuance pursuant to outstanding
warrant rights, prior acquisitions, and other matters. No shares of
Parent Preferred Stock are outstanding. No shares of Parent Common
Stock are held by any Subsidiary of Parent.
(b) Options. The Parent SEC Documents filed prior to
the date of this Agreement, together with Section 2.2(b) of the letter
dated the date hereof and delivered on the date hereof by Parent to the
Company, which relates to this Agreement and is designated therein as
the Parent Letter (the "Parent Letter"), contain a materially correct
description of the outstanding options, warrants or other rights to
purchase shares of Parent Common Stock, whether issued under the Parent
Stock Option Plans (collectively, the "Parent Stock Options") or
otherwise. Except (i) as disclosed in the Parent SEC Documents filed
prior to the date of this Agreement (ii) as set forth on Section 2.2(b)
of the Parent Letter and (iii) for the Parent Stock Options and the
outstanding shares of Parent Preferred Stock, there are no options,
warrants, calls, rights or agreements to which Parent or any of its
Subsidiaries is a party or by which any of them is bound obligating
Parent or any of its Subsidiaries to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of capital stock of
Parent or any of its Subsidiaries or obligating Parent or any of its
Subsidiaries to grant, extend or enter into any such option, warrant,
call, right or agreement.
(c) Repurchase Obligations. Except as set forth in
Section 2.2 of the Parent Letter, there are no outstanding contractual
obligations of Parent or any of its Subsidiaries to repurchase, redeem
or otherwise acquire any shares of Parent Common Stock or any capital
stock of or any equity interests in Parent or any Subsidiary. Each
outstanding share of capital stock of each Subsidiary of Parent is duly
authorized, validly issued, fully paid and nonassessable and, except as
disclosed in the Parent SEC Documents filed prior to the date of this
Agreement, each such share is owned by Parent or another Subsidiary of
Parent, free and clear of all Liens (as hereinafter defined). Parent
does not have any outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or are
convertible into or exercisable for securities having the right to
vote) with the shareholders of Parent on any matter. Section 2.2(c) of
the Parent Letter contains a correct and complete list as of the date
of this Agreement of each of Parent's Subsidiaries. Except as set forth
on Section 2.2(c) of the Parent Letter, as of the date hereof, neither
Parent nor any of its Subsidiaries is party to or bound by (x) any
agreement or commitment pursuant to which Parent or any Subsidiary of
Parent is or could be required to register any securities under the
Securities Act or (y) any debt agreements or instruments which grant
any rights to vote (contingent or otherwise) on matters on which
shareholders of Parent may vote.
Section 2.3 Authority. On or prior to the date of this
Agreement, the respective Boards of Directors of Parent and Sub have declared
the Merger advisable and have approved and adopted this Agreement in accordance
with the CBCA. Each of Parent and Sub
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has all requisite corporate power and authority to enter into this Agreement,
and, subject to approval and adoption by the shareholders of Parent of this
Agreement, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Parent and Sub and the consummation by Parent and
Sub of the transactions contemplated hereby have been duly authorized by all
necessary corporate action (including all Board action) on the part of Parent
and Sub, subject in the case of this Agreement to approval and adoption of this
Agreement by the shareholders of the Company and of the filing of an appropriate
Articles of Merger as required by the CBCA. This Agreement has been duly
executed and delivered by Parent and Sub, and (assuming the valid authorization,
execution and delivery of this Agreement by the Company and the validity and
binding effect hereof on the Company) this Agreement constitutes the valid and
binding obligation of Parent and Sub enforceable against each of them in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws relating to
or affecting creditors generally and by general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
The filing of a registration statement on Form S-4 with the Securities and
Exchange Commission (the "SEC") by Parent under the Securities Act of 1933, as
amended (together with the rules and regulations promulgated thereunder, the
"Securities Act"), for the purpose of registering the shares of Parent Common
Stock to be issued in connection with the Merger (together with any amendments
or supplements thereto, whether prior to or after the effective date thereof,
the "Registration Statement") has been duly authorized by Parent's Board of
Directors.
Section 2.4 Consents and Approvals; No Violation. Assuming
that all consents, approvals, authorizations and other actions described in this
Section 2.4 have been obtained and all filings and obligations described in this
Section 2.4 have been made, the execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated hereby and compliance with
the provisions hereof will not, result in any violation of, or material default
(with or without notice or lapse of time, or both) under, or give to others a
right of termination, cancellation or acceleration of any obligation or result
in the loss of a material benefit under, or result in the creation of any
material lien, security interest, charge or encumbrance upon any of the
properties or assets of Parent or any of its Subsidiaries under, any provision
of (i) the Certificate of Incorporation or the By-laws of Parent, each as
amended to date, (ii) any provision of the comparable charter or organization
documents of any of Parent's Subsidiaries, (iii) any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to Parent or any of its Subsidiaries
or (iv) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or any of its Subsidiaries or any of their respective
properties or assets. No filing or registration with, or authorization, consent
or approval of, any domestic (federal and state), foreign or supranational
court, commission, governmental body, regulatory agency, authority or tribunal,
including without limitation the Federal Communications Commission ("FCC"),
state public service or utility commissions (or comparable state Governmental
Authorities) or foreign telephone administrations (a "Governmental Entity") is
required by or with respect to Parent or any of its Subsidiaries in connection
with the execution and delivery of this Agreement by Parent or Sub or is
necessary for the consummation of the Merger and the other transactions
contemplated by this Agreement, except for (i) in connection, or in compliance,
with the provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), if applicable, the Securities Act and the Securities
Exchange Act
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of 1934, as amended (together with the rules and regulations promulgated
thereunder, the "Exchange Act"), (ii) the filing of the Articles of Merger with
the Secretary of State of the State of Colorado and appropriate documents with
the relevant authorities of other states in which the Company or any of its
Subsidiaries is qualified to do business, (iii) such filings and consents as may
be required under any environmental, health or safety law or regulation
pertaining to any notification, disclosure or required approval triggered by the
Merger or by the transactions contemplated by this Agreement, (iv) such filings,
authorizations, orders and approvals as may be required by state takeover laws,
if any (the "State Takeover Approvals"), (v) applicable requirements, if any, of
state securities or "blue sky" laws ("Blue Sky Laws") and the National
Association of Securities Dealers, Inc. or the NASDR, Inc. (collectively, the
"NASD"), (vi) as may be required under foreign laws and (vii) such other
consents, orders, authorizations, registrations, declarations, approvals and
filings the failure of which to be obtained or made would not, individually or
in the aggregate, have a Material Adverse Effect on Parent, materially impair
the ability of Parent or Sub to perform its obligations hereunder or prevent the
consummation of any of the transactions contemplated.
Section 2.5 Parent Common Stock to be Issued in the Merger.
All of the shares of Parent Common Stock issuable in exchange for Company Common
Stock at the Effective Time in accordance with this Agreement, and the shares of
Parent Common Stock issuable upon exercise of the Parent Warrants and the
Controlling Shareholder Warrant, will be, when so issued, duly authorized,
validly issued, fully paid and nonassessable and free and clear of any Liens (as
hereinafter defined), including without limitation, those created by statute,
Parent's Certificate of Incorporation or By-laws or any agreement to which
Parent is a party or by which Parent is bound and such shares of Parent Common
Stock (including the shares of Parent Common Stock issuable upon exercise of the
Parent Warrants and the Controlling Shareholder Warrant) will, when issued, be
registered under the Securities Act and the Exchange Act and registered or
exempt from registration under applicable Blue Sky laws.
Section 2.6 SEC Documents and Other Reports. Parent has filed
as of the date hereof all documents required to be filed with the SEC pursuant
to the Exchange Act for reporting periods up to and including the end of the
second quarter of 2000 (the "Parent SEC Documents"). As of their respective
dates, the Parent SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and,
at the respective times they were filed, none of the Parent SEC Documents
contained any 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 light of the circumstances under which they were made, not misleading. The
consolidated financial statements (including, in each case, any notes thereto)
of Parent included in the Parent SEC Documents complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with United States generally accepted accounting principles (except,
in the case of the unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto) and fairly presented in all material
respects the consolidated financial position of Parent and its consolidated
Subsidiaries as at the respective dates thereof and the consolidated results of
their operations and their consolidated cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein). Except as disclosed
in the Parent
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SEC Documents or as required by generally accepted accounting principles, Parent
has not, since June 30, 2000, made any material change in the accounting
practices or policies applied in the preparation of financial statements.
Section 2.7 Absence of Certain Changes or Events. Except as
disclosed in the Parent SEC Documents filed with the SEC prior to the date of
this Agreement, prior to the date hereof there has been no event causing a
Material Adverse Effect on Parent, nor any development that would, individually
or in the aggregate, result in a Material Adverse Effect on Parent.
Section 2.8 Reorganization. To the Knowledge of Parent (as
hereinafter defined), (i) neither Parent nor any of its Subsidiaries has taken
any action or failed to take any action which action or failure would jeopardize
the qualification of the Merger as a reorganization within the meaning of
Section 368(a) of the Code, and (ii) there are no facts that would prevent the
Merger from qualifying as a reorganization within the meaning of Section 368(a)
of the Code.
Section 2.9 Permits and Compliance. Each of Parent and its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, tariffs, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Entity necessary for
Parent or any of its Subsidiaries to own, lease and operate its properties or to
carry on its business as it is now being conducted (the "Parent Permits"),
except where the failure to have any of the Parent Permits would not,
individually or in the aggregate, have a Material Adverse Effect on Parent, and
no suspension or cancellation of any of the Parent Permits is pending or, to the
Knowledge of Parent, threatened, except where the suspension or cancellation of
any of the Parent Permits would not, individually or in the aggregate, have a
Material Adverse Effect on Parent. Except as set forth on Section 2.9 of the
Parent Letter, neither Parent nor any of its Subsidiaries is in violation of, or
has taken any action or omitted to take any action which, with the passage of
time, would result in a violation of (A) its charter, by-laws or other
organizational documents, (B) any applicable tariff, law, ordinance,
administrative, or governmental rule or regulation, including without limitation
the rules and regulations of the Federal Communications Commissions or any state
public utilities commission having jurisdiction over the business and operations
of Parent or any of its Subsidiaries, or other tariffs, laws, rules or
regulation applicable to the regulation of the provision of communications
services including, but not limited to, information service providers and
competitive local exchange, exchange access, inter-exchange and international
telecommunications services, (C) any order, decree or judgment of any
Governmental Entity having jurisdiction over Parent or any of its Subsidiaries
or (D) any Parent Permits. Without limiting the generality of the foregoing,
neither Parent nor any of its Subsidiaries has knowingly or intentionally
engaged in carrying transit or indirect traffic in violation of applicable laws,
tariffs, rules and regulations in any jurisdiction, foreign or domestic. Except
as disclosed in the Parent SEC Documents filed prior to the date of this
Agreement, there are no contracts or agreements of Parent or its Subsidiaries
having terms or conditions which would have a Material Adverse Effect on Parent
having covenants not to compete that materially impair the ability of Parent to
conduct its business as currently conducted or would reasonably be expected to
materially impair Parent's ability to conduct its businesses. "Knowledge" or
"Knowledge of Parent" means, with respect to the Parent, the actual knowledge of
the directors and officers of Parent.
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Section 2.10 Tax Matters. Except as set forth in Section 2.10
of the Parent Letter, (i) the Parent and each of its Subsidiaries have timely
filed (taking account of extensions to file that have been properly obtained)
all Tax Returns (as hereinafter defined) required to have been filed by it, and
such Tax Returns are correct and complete in all material respects and do not
contain a disclosure statement under Section 6662 of the Code (or any
predecessor provision or comparable provision of state, local or foreign laws);
(ii) the Parent and each of its Subsidiaries have timely paid (taking account of
extensions to pay that have been properly obtained) all Taxes required to be
paid by it and that have been due and will timely pay (taking account of such
extensions) all Taxes required to be paid by it and that will be due on or prior
to the Effective Time (other than Taxes that are being timely and properly
contested in good faith), or where payment is not yet due or is being contested
in good faith, has established in accordance with generally accepted accounting
principles an adequate reserve for the payment of such Taxes; (iii) the Parent
and each of its Subsidiaries have complied in all material respects with all
rules and regulations relating to the withholding of Taxes and the remittance of
withheld Taxes; (iv) neither the Parent nor any of its Subsidiaries has waived
any statute of limitations in respect of its Taxes, which remains open; (v) no
federal, state, local, or foreign audits or administrative proceedings, of which
the Parent or its Subsidiaries has written notice, are pending with regard to
any Taxes or Tax Returns (as hereinafter defined) of the Parent or its
Subsidiaries and none of them has received a written notice of any proposed
audit or proceeding from the Internal Revenue Service (the "IRS") or any other
taxing authority; (vi) no issues that have been raised by the relevant taxing
authority in connection with the examination of Tax Returns required to have
been filed by or with respect to the Parent and each of its Subsidiaries are
currently pending; (vii) all deficiencies asserted or assessments made as a
result of any examination of such Tax Returns by any taxing authority have been
paid in full; (viii) neither the Parent nor any of its Subsidiaries has been a
member of an affiliated group of corporations (within the meaning of Section
1504(a) of the Code) filing a consolidated federal income tax return (or a group
of corporations filing a consolidated, combined, or unitary income tax return
under comparable provisions of state, local, or foreign tax law) for any taxable
period, other than a group the common parent of which is the Parent; (ix)
neither the Parent nor any of its Subsidiaries has any obligation under any
agreement or arrangement with any other person with respect to Taxes of such
other person (including pursuant to Treasury Regulations Section 1.1502-6 or
comparable provision of state, local or foreign tax law) including any liability
for Taxes of any predecessor entity; (x) neither the Parent nor any of its
Subsidiaries has filed any consent agreement under Section 341(f) of the Code or
agreed to have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as defined in Section 341(f)(4) of the Code) owned by the
Parent; (xi) neither the Parent nor any of its Subsidiaries is party to or has
any obligation under any tax-sharing, tax indemnity or tax allocation agreement
or arrangement; (xii) except as may be required as a result of the Merger, the
Parent and its Subsidiaries have not been and will not be required to include
any adjustment in taxable income for any tax period (or portion thereof)
pursuant to Section 481 or Section 263A of the Code or any comparable provision
under state or foreign tax laws as a result of transactions, events or
accounting methods employed prior to the Closing; (xiii) none of the Parent's or
its Subsidiaries' assets are tax exempt use property within the meaning of
Section 168(h) of the Code; (xiv) the Parent is not subject to (A) any foreign
tax holidays, (B) any intercompany transfer pricing agreements, or other
arrangements that have been established by the Parent or any of its Subsidiaries
with any tax authority and (C) any expatriate programs or policies affecting the
Parent or any of its Subsidiaries; (xv) the Parent is
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not, and has not been at any time, a "United States real property holding
corporation" within the meaning of Section 897(c)(2) of the Code; (xvi) neither
the Parent nor any of its Subsidiaries has ever made, or been required to make,
an election under Section 338 of the Code. For purposes of this Agreement: (i)
"Taxes" means any federal, state, local, foreign or provincial income, gross
receipts, property, sales, use, license, franchise, employment, payroll,
withholding, recapture, alternative or added minimum, ad valorem, value-added,
transfer, excise, capital, or net worth tax, or other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any statutory additions including interest thereon or penalty
imposed with respect thereto by any Governmental Entity, whether computed on a
separate, consolidated, unitary, combined, or any other basis, and shall include
any transferee or secondary liability in respect of any tax (whether imposed by
law, contractual agreement, or otherwise), and (ii) "Tax Return" means any
return, report or similar statement (including the attached schedules) required
to be filed with respect to any Tax, including any information return, claim for
refund, amended return or declaration of estimated Tax.
Section 2.11 Actions and Proceedings. Except as set forth in
the Parent SEC Documents filed prior to the date of this Agreement, there are no
outstanding material orders, judgments, injunctions, awards or decrees of any
Governmental Entity against or involving Parent or any of its Subsidiaries, or
against or involving any of the present or former directors, officers,
employees, consultants or agents of Parent or any of its Subsidiaries, as such,
any of its or their properties, assets or business or any Parent Plan. The term
"Parent Plan" shall have the same meaning as given to the term "Company Plan"
under Section 3.11(c) except that such definition shall apply only to the
Parent. Except as set forth in Section 2.11 of the Parent Letter, there are no
material actions, suits or claims or legal, administrative or arbitrative
proceedings or investigations (including claims for workers' compensation)
pending or, to the Knowledge of Parent, threatened against or involving Parent
or any of its Subsidiaries or any of its or their present or former directors,
officers, employees, consultants or agents, as such, or any properties, assets
or business of Parent or its Subsidiaries or any Parent Plan.
Section 2.12 Liabilities. Except as fully reflected or
reserved against in the financial statements included in the Parent SEC
Documents filed with the SEC prior to the date hereof or disclosed in the
footnotes thereto or as disclosed in Section 2.12 of the Parent Letter, Parent
and its Subsidiaries had no material liabilities (including Tax liabilities) at
the date of such financial statements, absolute or contingent, and had no
material liabilities (including Tax liabilities) that were not incurred in the
ordinary course of business.
Section 2.13 Intellectual Property. "Parent Intellectual
Property" means all United States and foreign trademarks, trademark
registrations, trademark rights and renewals thereof, trade names, trade name
rights, trade dress, patents, patent rights, patent applications, industrial
models, inventions, invention disclosures, author's rights, designs, utility
models, inventor rights, software, copyrights, copyright registrations and
renewals thereof, servicemarks, servicemark registrations and renewals thereof,
servicemark rights, trade secrets, applications for trademark and servicemark
registrations, know-how, data, market information, confidential information and
other proprietary rights, and any data and information of any nature or form
used or held for use in connection with the businesses of Parent and/or its
Subsidiaries as currently conducted or as currently contemplated by Parent,
together with all applications currently pending or in process for any of the
foregoing. Except as disclosed in the Parent SEC
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Documents filed with the SEC prior to the date hereof, Parent and its
Subsidiaries own, or possess adequate licenses or other valid rights to use
(including the right to sublicense to customers, suppliers or others as needed),
all of the material Parent Intellectual Property that is necessary for the
conduct or contemplated conduct of Parent's or Subsidiaries' businesses. There
are no pending, or to the Knowledge of Parent, threatened interferences,
re-examinations, oppositions or cancellation proceedings involving any patents
or patent rights, trademarks or trademark rights, or applications therefor, of
Parent or any Subsidiary. To the Knowledge of Parent, there has been no
unauthorized disclosure or use of confidential information, trade secret rights,
processes and formulas, research and development results and other know-how of
Parent or any Subsidiary, the value of which to Parent and its Subsidiaries is
dependent upon the maintenance of the confidentiality thereof.
Section 2.14 Environmental Matters.
(a) Defined Terms. For purposes of this Agreement,
the following terms shall have the following meanings: (i) "Hazardous
Substances" means (A) petroleum and petroleum products, by-products or
breakdown products, radioactive materials, asbestos-containing
materials and polychlorinated biphenyls, and (B) any other chemicals,
materials or substances regulated as toxic or hazardous or as a
pollutant, contaminant or waste under any applicable Environmental Law;
(ii) "Environmental Law" means any law, past, present or future (up
until the Effective Time) and as amended, and any judicial or
administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, or common law,
relating to pollution or protection of the environment, health or
safety or natural resources, including those relating to the use,
handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Substances; and (iii) "Environmental Permit"
means any permit, approval, identification number, license or other
authorization required under any applicable Environmental Law.
(b) In Compliance. To the Knowledge of Parent, Parent
and its Subsidiaries are and have been in compliance with all
applicable Environmental Laws, have obtained all Environmental Permits
and are in compliance with their requirements, and have resolved all
past non-compliance with Environmental Laws and Environmental Permits
without any pending, on-going or future obligation, cost or liability,
except in each case for the notices set forth in Section 2.14 of the
Parent Letter.
(c) No Release. To the Knowledge of Parent, neither
Parent nor any of its Subsidiaries has (i) placed, held, located,
released, transported or disposed of any Hazardous Substances on,
under, from or at any of Parent's or any of its Subsidiaries'
properties or any other properties, (ii) any Knowledge or reason to
know of the presence of any Hazardous Substances on, under, emanating
from, or at any of Parent's or any of its Subsidiaries' properties or
any other property but arising from Parent's or any of its
Subsidiaries' current or former properties or operations, or (iii) any
Knowledge or reason to know, nor has it received any written notice (A)
of any violation of or liability under any Environmental Laws, (B) of
the institution or pendency of any suit, action, claim, proceeding or
investigation by any Governmental Entity or any third party in
connection with any such violation or liability, (C) requiring the
investigation of, response to or
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remediation of Hazardous Substances at or arising from any of Parent's
or any of its Subsidiaries' current or former properties or operations
or any other properties, (D) alleging noncompliance by Parent or any of
its Subsidiaries with the terms of any Environmental Permit in any
manner reasonably likely to require material expenditures or to result
in material liability or (E) demanding payment for response to or
remediation of Hazardous Substances at or arising from any of Parent's
or any of its Subsidiaries' current or former properties or operations
or any other properties, except in each case for the notices set forth
in Section 2.14 of the Parent Letter.
(d) No Obligation. To the Knowledge of Parent, no
Environmental Law imposes any obligation upon Parent or any of its
Subsidiaries arising out of or as a condition to any transaction
contemplated by this Agreement, including any requirement to modify or
to transfer any permit or license, any requirement to file any notice
or other submission with any Governmental Entity, the placement of any
notice, acknowledgment or covenant in any land records, or the
modification of or provision of notice under any agreement, consent
order or consent decree.
(e) No Assessments. There are no environmental
assessments or audit reports or other similar studies or analyses in
the possession or control of Parent or any of its Subsidiaries relating
to any real property currently or formerly owned, leased or occupied by
Parent or any of its Subsidiaries.
Section 2.15 Suppliers and Distributors.
(a) No Notice - Suppliers. Neither Parent nor any of
its Subsidiaries has received any notice, oral or written, or has any
reason to believe that any significant supplier (including suppliers of
data or information, which may include customers), including without
limitation any sole source supplier, will not supply to Parent or any
Subsidiary at any time after the Effective Time on terms and conditions
substantially similar to those currently in place, subject only to
general and customary price increases, unless comparable supplies,
data, information or other items are readily available from other
sources on comparable terms and conditions.
(b) No Notice - Distributors. Neither Parent nor any
of its Subsidiaries has received any notice, oral or written, or has
any reason to believe that any distributors, sales representatives,
sales agents, or other third party sellers, will not sell or market the
products or services of Parent or any of its Subsidiaries at any time
after the Effective Time on terms and conditions substantially similar
to those used in the current sales and distribution contracts of Parent
and its Subsidiaries.
Section 2.16 Insurance. All material fire and casualty,
general liability, business interruption, product liability, and sprinkler and
water damage insurance policies maintained by Parent or any of its Subsidiaries
are with reputable insurance carriers, provide full and adequate coverage for
all normal risks incident to the business of Parent and its Subsidiaries and
their respective properties and assets, and are in character and amount similar
to that carried by persons engaged in similar businesses and subject to the same
or similar perils or hazards. Parent and each of its Subsidiaries have made any
and all payments required to maintain such
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policies in full force and effect. Neither Parent nor any of its Subsidiaries
has received notice of default under any such policy, and has not received
written notice or, to the Knowledge of Parent, oral notice of any pending or
threatened termination or cancellation, coverage limitation or reduction or
material premium increase with respect to such policy.
Section 2.17 Transactions with Affiliates. Except as set forth
in the Parent SEC Documents filed with the SEC prior to the date hereof, Section
2.17 of the ParentLetter or as otherwise contemplated by this Agreement, (a) no
beneficial owner of 5% or more of Parent's outstanding capital stock, (b) no
officer or director of Parent and (c) no Person (other than Parent) in which any
such beneficial owner, officer or director owns any beneficial interest (other
than a publicly held corporation whose stock is traded on a national securities
exchange or in the over-the-counter market and less than 1% of the stock of
which is beneficially owned by all such Persons) has any interest in: (i) any
contract, arrangement or understanding with, or relating to, the business or
operations of, Parent or any of its Subsidiaries; (ii) any loan, arrangement,
understanding, agreement or contract for or relating to indebtedness of Parent
or any of its Subsidiaries; or (iii) any property (real, personal or mixed),
tangible or intangible, used in the business or operations of Parent or any of
its Subsidiaries, excluding any such contract, arrangement, understanding or
agreement constituting a Parent Plan or relating to terms of employment.
Section 2.18 Brokers. No broker, investment banker or other
person is entitled to any broker's, finder's or other similar fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as
follows:
Section 3.1 Organization, Standing and Power. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Colorado and has the requisite corporate power and authority to
carry on its business as now being conducted. Each Subsidiary of the Company is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is organized and has the requisite
corporate power and authority to carry on its business as now being conducted.
The Company and each of its Subsidiaries are duly qualified to do business, and
are in good standing, in each jurisdiction where the character of their
properties owned or held under lease or the nature of their activities makes
such qualification necessary, except where the failure to be so qualified would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company. For purposes of this Agreement, "Material Adverse Change" or "Material
Adverse Effect" mean, when used with respect to the Company, any change or
effect that is or could reasonably be expected (as far as can be reasonably
foreseen at the time) to be materially adverse to the business, assets,
liabilities, results of operations, or the financial condition of the Company
and its Subsidiaries, taken as a whole.
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Section 3.2 Capital Structure.
(a) Stock. Section 3.2(a) of the letter dated the
date hereof and delivered on the date hereof by the Company to Parent,
which relates to this Agreement and is designated therein as the
Company Letter (the "Company Letter") contains a true and complete list
of all of the following:
(i) as of the date hereof, the number of shares
of authorized, issued, and outstanding Company Common Stock,
as well as the number of shares of authorized, issued, and
outstanding preferred stock of the Company (the "Company
Preferred Stock"), all of which shares of Company Common Stock
and Company Preferred Stock were validly issued, fully paid
and nonassessable and free of preemptive rights as of the date
hereof. All of the Series A and Series B Preferred Stock
issued and outstanding as of the date hereof, as listed in
Section 3.2(a) of the Company Letter, are referred to herein
as the "Current Company Preferred Stock". All of the Current
Company Preferred Stock is issued to the Controlling
Shareholder. No shares of Company Common Stock are held by any
Subsidiary of the Company;
(ii) as of the date hereof, the number of shares
of Company Common Stock reserved for future issuance pursuant
to (i) the Company's 1995 Non-Employee Stock Option Plan, as
amended, and the 1996 Incentive Stock Option Plan, as amended
(collectively, the "Company Stock Option Plans"); (ii) the
Company's 1999 Employee Stock Purchase Plan, as amended (the
"Company Stock Purchase Plan") (collectively, the Company
Stock Option Plans and the Company Stock Purchase Plan may be
referred to herein as the "Company Stock Plans"); and
(iii) to the Knowledge of the Company, and
subject to the assumptions set forth in Section 3.2(a) of the
Company Letter, the total number of shares of Company Common
Stock, on a fully diluted basis and including all applicable
shares under the Company Stock Plans, as well as the rate of
accrual and all accrued and unpaid dividends on the Current
Company Preferred Stock, that the Company anticipates will be
issued and outstanding as of the Closing Date or will
otherwise be convertible into Parent Common Stock at the
Closing.
Other than the Company Stock Plans listed in Section 3.2(a) of
the Company Letter, there are no other plans relating to options, warrants, or
other interests in the Company, that are operated by the Company or assumed by
the Company in connection with any acquisition, business combination or similar
transaction.
(b) Options, Etc. Section 3.2(b) of the Company
Letter contains a materially correct and complete list as of the date
of this Agreement of each outstanding option, warrant or other right to
purchase shares of Company Common Stock, whether issued under the
Company Stock Plans (collectively, the "Company Stock Options") or
otherwise, including the holder, date of grant, term, acceleration of
vesting or exercisability, if any, exercise price and number of shares
of Company Common Stock
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subject thereto. Except as set forth in Section 3.2(b) of the Company
Letter and except for the Company Stock Options, the rights to purchase
shares of Company Common Stock pursuant to the Employee Stock Purchase
Plan, the outstanding shares of Preferred Stock and the Controlling
Shareholder Loan, there are no options, warrants, calls, rights or
agreements to which the Company or any of its Subsidiaries is a party
or by which any of them is bound obligating the Company or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock of the Company or
any of its Subsidiaries or obligating the Company or any of its
Subsidiaries to grant, extend or enter into any such option, warrant,
call, right or agreement.
(c) Contractual Obligations. Except as set forth in
Section 3.2 of the Company Letter, there are no outstanding contractual
obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares of Company Common Stock or any
capital stock of or any equity interests in the Company or any
Subsidiary. Each outstanding share of capital stock of each Subsidiary
of the Company is duly authorized, validly issued, fully paid and
nonassessable and, except as disclosed in the Company SEC Documents (as
hereinafter defined) filed prior to the date of this Agreement, each
such share is owned by the Company or another Subsidiary of the
Company, free and clear of all Liens. Except as set forth in Section
3.2 of the Company Letter, the Company does not have any outstanding
bonds, debentures, notes or other obligations the holders of which have
the right to vote (or are convertible into or exercisable for
securities having the right to vote) with the shareholders of the
Company on any matter. Section 3.2(c) of the Company Letter contains a
correct and complete list as of the date of this Agreement of each of
the Company's Subsidiaries. Except as set forth on Section 3.2(c) of
the Company Letter, as of the date hereof, neither the Company nor any
of its Subsidiaries is party to or bound by (x) any agreement or
commitment pursuant to which the Company or any Subsidiary of the
Company is or could be required to register any securities under the
Securities Act or (y) any debt agreements or instruments which grant
any rights to vote (contingent or otherwise) on matters on which
shareholders of the Company may vote.
(d) Entities. Section 3.2(d) of the Company Letter
contains a correct and complete list as of the date of this Agreement
of each entity in which the Company owns an equity interest (other than
a Subsidiary), including the number of outstanding shares of the stock
of each such entity and the percentage interest represented by the
Company's ownership in the entity.
Section 3.3 Authority. On or prior to the date of this
Agreement, the Board of Directors of the Company has declared the Merger
advisable and in the best interest of the Company and its shareholders, approved
and adopted this Agreement in accordance with the CBCA, resolved to recommend
the adoption of this Agreement by the Company's shareholders and directed that
this Agreement be submitted to the Company's shareholders for adoption. The
Company has all requisite corporate power and authority to enter into this
Agreement, subject to approval and adoption by the shareholders of the Company
of this Agreement, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of the Company, subject, in
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<PAGE> 92
the case of this Agreement, to (x) approval and adoption of this Agreement by
the shareholders of the Company and (y) the filing of the Articles of Merger as
required by the CBCA. This Agreement has been duly executed and delivered by the
Company and (assuming the valid authorization, execution and delivery of this
Agreement by Parent and Sub and the validity and binding effect of the Agreement
on Parent and Sub) constitutes the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and similar laws relating to or affecting creditors generally and by
general equity principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law). The filing of the Proxy
Statement (as hereinafter defined) with the SEC has been duly authorized by all
necessary corporate action on the part of the Company.
Section 3.4 Consents and Approvals; No Violation. Assuming
that all consents, approvals, authorizations and other actions described in this
Section 3.4 have been obtained and all filings and obligations described in this
Section 3.4 have been made, except as set forth in Section 3.4 of the Company
Letter, the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, result in any violation of, or material default
(with or without notice or lapse of time, or both) under, or give to others a
right of termination, cancellation or acceleration of any obligation or result
in the loss of a material benefit under, or result in the creation of any
material lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company or any of its Subsidiaries under, any
provision of (i) the Articles of Incorporation of the Company (as amended from
time to time, the "Company Charter") or the By-laws of the Company, (ii) any
provision of the comparable charter or organization documents of any of the
Company's Subsidiaries, (iii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to the Company or any of its Subsidiaries or
(iv) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries or any of their respective
properties or assets, other than any such violations, defaults, rights, losses,
liens, security interests, charges or encumbrances that, individually or in the
aggregate, would not have a Material Adverse Effect on the Company, materially
impair the ability of the Company to perform its obligations hereunder or
prevent the consummation of any of the transactions contemplated hereby. No
filing or registration with, or authorization, consent or approval of, any
Governmental Entity is required by or with respect to the Company or any of its
Subsidiaries in connection with the execution and delivery of this Agreement by
the Company or is necessary for the consummation of the Merger and the other
transactions contemplated by this Agreement, except for (i) in connection, or in
compliance, with the provisions of the HSR Act, if applicable, the Securities
Act and the Exchange Act, (ii) the filing of the Articles of Merger with the
Secretary of State of the State of Colorado and appropriate documents with the
relevant authorities of other states in which the Company or any of its
Subsidiaries is qualified to do business, (iii) such filings and consents as may
be required under any environmental, health or safety law or regulation
pertaining to any notification, disclosure or required approval triggered by the
Merger or by the transactions contemplated by this Agreement, (iv) such filings,
authorizations, orders and approvals as may be required to obtain the State
Takeover Approvals, if any, (v) applicable requirements, if any, of Blue Sky
Laws or the Nasdaq National Market, (vi) as may be required under foreign laws
and (vii) such other consents, orders, authorizations, registrations,
declarations, approvals and filings the failure of which to be obtained or made
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<PAGE> 93
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company, materially impair the ability of the Company to perform its
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby or thereby.
Section 3.5 SEC Documents and Other Reports. The Company has
filed as of the date hereof all documents required to be filed with the SEC
pursuant to the Exchange Act for reporting periods up to and including the end
of the second quarter of 2000 (the "Company SEC Documents"). Except as set forth
in Section 3.5 of the Company Letter, as of their respective dates, the Company
SEC Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and, at the respective
times they were filed, none of the Company SEC Documents contained any 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 light of the
circumstances under which they were made, not misleading. The consolidated
financial statements (including, in each case, any notes thereto) of the Company
included in the Company SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
United States generally accepted accounting principles (except, in the case of
the unaudited statements, to the extent permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto) and fairly presented in all material
respects the consolidated financial position of the Company and its consolidated
Subsidiaries as at the respective dates thereof and the consolidated results of
their operations and their consolidated cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein). Except as disclosed
in the Company SEC Documents or as required by generally accepted accounting
principles, the Company has not, since June 30, 2000, made any material change
in the accounting practices or policies applied in the preparation of financial
statements.
Section 3.6 Absence of Certain Changes or Events. Except as
set forth in Section 3.6 of the Company Letter or as disclosed in the Company
SEC Documents filed with the SEC prior to the date of this Agreement (i) except
for the Controlling Shareholder Loan ( as hereinafter defined), the Company and
its Subsidiaries have not incurred any material liability or obligation
(indirect, direct or contingent), or entered into any material oral or written
agreement or other transaction, that is not in the ordinary course of business
or that would result in a Material Adverse Effect, (ii) there has been no change
in the capital stock of the Company except for the issuance of shares of the
Company Common Stock pursuant to the Company Stock Plans, upon conversion of the
Current Company Preferred Stock and repayment of the Controlling Shareholder
Loan, and no dividend or distribution of any kind declared, paid or made (except
for payment of in-kind dividends of Company Common Stock on the Current Company
Preferred Stock) by the Company on any class of its stock, (iii) there has not
been (A) any adoption of a new Company Plan (as hereinafter defined), (B) any
amendment to a Company Plan materially increasing benefits thereunder, (C) any
granting by the Company or any of its Subsidiaries to any executive officer or
other key employee of the Company or any of its Subsidiaries of any increase in
compensation, except in the ordinary course of business consistent with past
practice or as was required under employment agreements in effect as of the date
of the most recent audited financial statements included in the Company SEC
Documents, (D) any granting by the Company or any of its Subsidiaries to any
such executive officer or other
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<PAGE> 94
key employee of any increase in severance or termination agreements in effect as
of the date of the most recent audited financial statements included in the
Company SEC Documents or (E) any entry by the Company or any of its Subsidiaries
into any employment, severance or termination agreement with any such executive
officer or other key employee, (iv) there has not been any material changes in
the amount or terms of the indebtedness of the Company and its Subsidiaries from
that described in the 1999 Company Annual Report, except for the Controlling
Shareholder Loan and (v) there has been no event causing a Material Adverse
Effect on the Company, nor any development that would, individually or in the
aggregate, result in a Material Adverse Effect on the Company.
Section 3.7 Permits and Compliance. Each of the Company and
its Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, tariffs, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Entity necessary for the
Company or any of its Subsidiaries to own, lease and operate its properties or
to carry on its business as it is now being conducted (the "Company Permits"),
except where the failure to have any of the Company Permits would not,
individually or in the aggregate, have a Material Adverse Effect on the Company,
and no suspension or cancellation of any of the Company Permits is pending or,
to the Knowledge of the Company (as hereinafter defined), threatened, except
where the suspension or cancellation of any of the Company Permits would not,
individually or in the aggregate, reasonably be likely to have a Material
Adverse Effect on the Company. Except as set forth on Section 3.7 of the Company
Letter, neither the Company nor any of its Subsidiaries is in violation of, or
has taken any action or omitted to take any action which, with the passage of
time, would result in a violation of (A) its charter, by-laws or other
organizational documents, (B) any applicable tariff, law, ordinance,
administrative, or governmental rule or regulation, including without limitation
the rules and regulations of the FCC or any state public utilities commission
having jurisdiction over the business and operations of the Company, or other
tariffs, laws, rules or regulation applicable to the regulation of the provision
of communications services including, but not limited to, information service
providers and competitive local exchange, exchange access, inter-exchange and
international telecommunications services, (C) any order, decree or judgment of
any Governmental Entity having jurisdiction over the Company or any of its
Subsidiaries or (D) any Company Permits. Except as disclosed in the Company SEC
Documents filed prior to the date of this Agreement, there are no contracts or
agreements of the Company containing covenants not to compete that materially
impair the ability of the Company to conduct its business as currently conducted
or would reasonably be expected to materially impair Parent's ability to conduct
its businesses. "Knowledge" or "Knowledge of the Company" means, with respect to
matters regarding the Company, the actual knowledge of the directors and
officers of the Company.
Section 3.8 Tax Matters. Except as set forth in Section 3.8 of
the Company Letter, (i) the Company and each of its Subsidiaries have timely
filed (taking account of extensions to file that have been properly obtained)
all Tax Returns required to have been filed by it, and such Tax Returns are
correct and complete in all material respects and do not contain a disclosure
statement under Section 6662 of the Code (or any predecessor provision or
comparable provision of state, local or foreign laws); (ii) the Company and each
of its Subsidiaries have timely paid (taking account of extensions to pay that
have been properly obtained) all Taxes required to be paid by it and that have
been due and will timely pay (taking
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account of such extensions) all Taxes required to be paid by it and that will be
due on or prior to the Effective Time (other than Taxes that are being timely
and properly contested in good faith), or where payment is not yet due or is
being contested in good faith, has established in accordance with generally
accepted accounting principles an adequate reserve for the payment of such
Taxes; (iii) the Company and each of its Subsidiaries have complied in all
material respects with all rules and regulations relating to the withholding of
Taxes and the remittance of withheld Taxes; (iv) neither the Company nor any of
its Subsidiaries has waived any statute of limitations in respect of its Taxes,
which remains open; (v) no federal, state, local, or foreign audits or
administrative proceedings, of which the Company or its Subsidiaries has written
notice, are pending with regard to any Taxes or Tax Returns (as hereinafter
defined) of the Company or its Subsidiaries and none of them has received a
written notice of any proposed audit or proceeding from the IRS or any other
taxing authority; (vi) no issues that have been raised by the relevant taxing
authority in connection with the examination of Tax Returns required to have
been filed by or with respect to the Company and each of its Subsidiaries are
currently pending; (vii) all deficiencies asserted or assessments made as a
result of any examination of such Tax Returns by any taxing authority have been
paid in full; (viii) neither the Company nor any of its Subsidiaries has been a
member of an affiliated group of corporations (within the meaning of Section
1504(a) of the Code) filing a consolidated federal income tax return (or a group
of corporations filing a consolidated, combined, or unitary income tax return
under comparable provisions of state, local, or foreign tax law) for any taxable
period, other than a group the common parent of which is the Company; (ix)
neither the Company nor any of its Subsidiaries has any obligation under any
agreement or arrangement with any other person with respect to Taxes of such
other person (including pursuant to Treasury Regulations Section 1.1502-6 or
comparable provision of state, local or foreign tax law) including any liability
for Taxes of any predecessor entity; (x) neither the Company nor any of its
Subsidiaries has filed any consent agreement under Section 341(f) of the Code or
agreed to have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as defined in Section 341(f)(4) of the Code) owned by the
Company; (xi) neither the Company nor any of its Subsidiaries is party to or has
any obligation under any tax-sharing, tax indemnity or tax allocation agreement
or arrangement; (xii) except as may be required as a result of the Merger, the
Company and its Subsidiaries have not been and will not be required to include
any adjustment in taxable income for any tax period (or portion thereof)
pursuant to Section 481 or Section 263A of the Code or any comparable provision
under state or foreign tax laws as a result of transactions, events or
accounting methods employed prior to the Closing; (xiii) none of the Company's
or its Subsidiaries' assets are tax exempt use property within the meaning of
Section 168(h) of the Code; (xiv) the Company is not subject to (A) any foreign
tax holidays, (B) any intercompany transfer pricing agreements, or other
arrangements that have been established by the Company or any of its
Subsidiaries with any tax authority and (C) any expatriate programs or policies
affecting the Company or any of its Subsidiaries; (xv) the Company is not, and
has not been at any time, a "United States real property holding corporation"
within the meaning of Section 897(c)(2) of the Code; (xvi) neither the Company
nor any of its Subsidiaries has ever made, or been required to make, an election
under Section 338 of the Code.
Section 3.9 Actions and Proceedings. Except as set forth in
the Company SEC Documents filed prior to the date of this Agreement, there are
no outstanding material orders, judgments, injunctions, awards or decrees of any
Governmental Entity against or involving the Company or any of its Subsidiaries,
or against or involving any of the present or former
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directors, officers, employees, consultants or agents of the Company or any of
its Subsidiaries, as such, any of its or their properties, assets or business or
any Company Plan (as hereinafter defined). Except as set forth in Section 3.9 of
the Company Letter, there are no material actions, suits or claims or legal,
administrative or arbitrative proceedings or investigations (including claims
for workers' compensation) pending or, to the Knowledge of the Company,
threatened against or involving the Company or any of its Subsidiaries or any of
its or their present or former directors, officers, employees, consultants or
agents, as such, or any of the Company or its Subsidiaries properties, assets or
business or any Company Plan.
Section 3.10 Certain Agreements.
(a) Compensation Agreements. Except as set forth in
the Company SEC Documents or Section 3.10(a) of the Company Letter,
neither the Company nor any of its Subsidiaries is a party to any oral
or written agreement or plan relating to the compensation of employees
of the Company or its Subsidiaries, including any employment agreement,
severance agreement, stock option plan, stock appreciation rights plan,
restricted stock plan or stock purchase plan, pension plan (as defined
in Section 3(2) of ERISA) or welfare plan (as defined in Section 3(1)
of ERISA) (collectively the "Compensation Agreements"). No holder of
any option to purchase shares of Company Common Stock, or shares of
Company Common Stock granted in connection with the performance of
services for the Company or its Subsidiaries, is or will be entitled to
receive cash from the Company or any Subsidiary in lieu of or in
exchange for such option or shares as a result of the transactions
contemplated by this Agreement except as provided in Section 5.7.
Section 3.10(a) of the Company Letter sets forth the total amount of
indebtedness owed to the Company or its Subsidiaries from each officer,
director or employee of the Company and its Subsidiaries.
(b) Contracts. Set forth in Section 3.10(b) of the
Company Letter is a list of all contracts (whether oral or written) of
the following categories to which the Company or any of its
Subsidiaries is a party or by which any of them is bound: (i) contracts
requiring annual expenditures by or liabilities of the Company and its
Subsidiaries in excess of One Hundred Thousand Dollars ($100,000) which
have a remaining term in excess of one hundred eighty (180) days or are
not cancelable (without material penalty, cost or other liability)
within one hundred eighty (180) days; (ii) promissory notes, loans,
agreements, indentures, evidences of indebtedness or other instruments
relating to the lending of money, whether as borrower, lender or
guarantor, in excess of One Hundred Thousand Dollars ($100,000); (iii)
contracts containing covenants limiting the freedom of the Company or
any of its Subsidiaries to engage in any line of business (other than
prohibitions against engaging in business relating to specific product
lines) or compete with any person, in any product line or line of
business, or operate at any location; (iv) other contracts in which the
Company or any of its Subsidiaries has granted exclusive marketing
rights relating to any product or service, any group of products or
services or any territory; and (vii) to the Knowledge of the Company,
as of the date hereof any other contract the performance of which could
be reasonably expected to require expenditures by the Company or any of
its Subsidiaries in excess of One Hundred Thousand Dollars ($100,000)
(collectively, "Company
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Significant Contracts"). Prior to the date hereof, the Company has
provided true and complete copies of all such contracts to Parent.
(c) Binding Contract. Except as set forth on Section
3.10(c) of the Company Letter, each Company Significant Contract is a
legal, valid and binding agreement of the Company or its Subsidiaries,
neither the Company nor any of its Subsidiaries (or to the Knowledge of
the Company, any other party thereto) is in default under any Company
Significant Contract, and none of such Company Significant Contracts
has been canceled by the other party thereto; each Company Significant
Contract is in full force and effect and no event has occurred which,
with the passage of time or the giving of notice or both, would
constitute a default, event of default or other breach by the Company
or any Subsidiary party thereto which would entitle the other party to
such Company Significant Contract to terminate the same or declare a
default or event of default thereunder; the Company and its
Subsidiaries are not in receipt of any claim of default under any such
agreement; in each instance.
Section 3.11 ERISA.
(a) Company Plan. Each Company Plan is listed in
Section 3.11(a) of the Company Letter. With respect to each Company
Plan, the Company has made available to Parent a true and correct copy
of (i) the three (3) most recent annual reports (Form 5500) filed with
the IRS, (ii) each such Company Plan that has been reduced to writing
and all amendments thereto, (iii) each trust agreement, insurance
contract, administration agreement or funding arrangement relating to
each such Company Plan, (iv) a written summary of each unwritten
Company Plan, (v) the most recent summary plan description or other
written explanation of each Company Plan provided to participants, (vi)
the most recent determination letter issued by the IRS with respect to
any Company Plan intended to be qualified under section 401(a) of the
Code, (vii) any request for a determination currently pending before
the IRS, and (viii) all correspondence with the IRS, the Department of
Labor, the SEC or Pension Benefit Guaranty Corporation relating to any
outstanding controversy. Each Company Plan complies in all material
respects with the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), the Code and all other applicable statutes and
governmental rules and regulations. No Company Plan is subject to Title
IV of ERISA. Neither the Company nor any of its Subsidiaries or ERISA
Affiliates is a party to, has made any contribution to or otherwise
incurred any obligation under any "multiemployer plan" as defined in
Sections (37) and 4001(a)(3) of ERISA.
(b) Qualification. All Company Plans that are
intended to be qualified under Section 401(a) of the Code have been
determined by the IRS to be so qualified, or a timely application for
such determination is now pending, or the remedial amendment period
under applicable Treasury Regulations or IRS pronouncements has not
expired, and to the Knowledge of the Company, nothing has occurred
since the issuance of each such letter which could reasonably be
expected to cause the loss of the tax-qualified status of any Company
Plan subject to Section 401(a) of the Code. With respect to any Group
Health Plan (as defined in Section 5000(b)(1) of the Code) maintained
by the Company, any of its Subsidiaries, or ERISA Affiliates, each such
plan has been operated
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in material compliance with the provisions of Part 6 of Title I of ERISA and
Sections 4980B, 9801 and 9802 of the Code. Except as disclosed in Section
3.11(b) of the Company Letter, neither the Company nor any of its Subsidiaries
or ERISA Affiliates has any liability or obligation under any welfare plan to
provide benefits after termination of employment to any employee or dependent
other than as required by Section 4980B of the Code.
(c) Defined Terms. As used herein, "Company Plan" means a
"pension plan" (as defined in Section 3(2) of ERISA, a "welfare plan" (as
defined in Section 3(1) of ERISA), or any other written or oral bonus, profit
sharing, deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, restricted stock, stock appreciation
right, holiday pay, vacation, severance, medical, dental, vision, disability,
death benefit, sick leave, fringe benefit, personnel policy, insurance or other
plan, arrangement or understanding, in each case established or maintained by
the Company or any of its Subsidiaries or ERISA Affiliates or as to which the
Company or any of its Subsidiaries or ERISA Affiliates has contributed or
otherwise may have any liability.
(d) Severance and Employment Agreements. Section 3.11(a) and
Section 3.11(b) of the Company Letter collectively contain a list of all (i)
severance and employment agreements with employees of the Company and each
Subsidiary and ERISA Affiliate, (ii) severance programs and policies of the
Company and each Subsidiary and ERISA Affiliate with or relating to its
employees and (iii) plans, programs, agreements and other arrangements of the
Company and each Subsidiary and ERISA Affiliate with or relating to its
employees containing change of control or similar provisions.
(e) Not a Party To Certain Agreements. Neither the Company nor
any of its Subsidiaries is a party to any agreement, contract or arrangement
that could result, separately or in the aggregate, in the payment, acceleration
or enhancement of any benefit as a result of the transactions contemplated
hereby including, without limitation, the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code or any payments not
deductible under Sections 162(m), 280G or 404 of the Code.
(f) Foreign Plans. With respect to each Company Plan not
subject to United States law (a "Company Foreign Benefit Plan"), (i) the fair
market value of the assets of each funded Company Foreign Benefit Plan, the
liability of each insurer for any Company Foreign Benefit Plan funded through
insurance or the reserve shown on the Company's consolidated financial
statements for any unfunded Company Foreign Benefit Plan, together with any
accrued contributions, is sufficient to procure or provide for the projected
benefit obligations with respect to all current and former participants in such
plan according reasonable, country specific actuarial assumptions and valuations
and no transaction contemplated by this Agreement shall cause such assets or
insurance obligations or book reserve to be less than such projected benefit
obligations; and (ii) each Company Foreign Benefit Plan required to be
registered has been registered and has been maintained in good standing with the
appropriate regulatory authorities.
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Section 3.12 No Undisclosed Material Liabilities. There are no
liabilities of the Company or any of its Subsidiaries of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
which would be required by generally accepted accounting principles to be
reflected on a consolidated balance sheet of the Company (including the notes
thereto), other than liabilities and obligations which, individual or in the
aggregate, will not have a Material Adverse Effect on the Company, and other
than:
(i) liabilities disclosed in the Company SEC Reports
filed prior to the date hereof;
(ii) liabilities incurred in the ordinary course of
business consistent with past practices; and
(iii) liabilities incurred in the performance of or
as contemplated by this Agreement.
Section 3.13 Labor Matters. Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or labor
contract. Neither the Company nor any of its Subsidiaries has engaged in any
unfair labor practice with respect to their respective employees (the "Company
Employees"), and, to the Knowledge of the Company, there is no unfair labor
practice complaint or grievance against the Company or any of its Subsidiaries
by any person pursuant to the National Labor Relations Act or any comparable
state agency or foreign law pending or threatened in writing with respect to any
Company Employees. There is no labor strike, dispute, slowdown or stoppage
pending or, to the Knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries which may interfere with the respective
business activities of the Company or any of its Subsidiaries.
Section 3.14 Intellectual Property. "Company Intellectual
Property" means all United States and foreign trademarks, trademark
registrations, trademark rights and renewals thereof, trade names, trade name
rights, trade dress, patents, patent rights, patent applications, industrial
models, inventions, invention disclosures, author's rights, designs, utility
models, inventor rights, software, copyrights, copyright registrations and
renewals thereof, servicemarks, servicemark registrations and renewals thereof,
servicemark rights, trade secrets, applications for trademark and servicemark
registrations, know-how, data, market information, confidential information and
other proprietary rights, and any data and information of any nature or form
used or held for use in connection with the businesses of the Company and/or its
Subsidiaries as currently conducted or as currently contemplated by the Company,
together with all applications currently pending or in process for any of the
foregoing. Except as disclosed in the Company SEC Documents filed with the SEC
prior to the date hereof, the Company and its Subsidiaries own, or possess
adequate licenses or other valid rights to use (including the right to
sublicense to customers, suppliers or others as needed), all of the material
Company Intellectual Property that is necessary for the conduct or contemplated
conduct of the Company's or Subsidiaries' businesses. Section 3.14 of the
Company Letter lists each material license or other agreement pursuant to which
the Company or any Subsidiary has the right to use Company Intellectual Property
utilized in connection with any product of, or service provided by, the Company
and its Subsidiaries (the "Company Licenses"). There are no pending or to the
Knowledge of the Company, threatened interferences, re-examinations, oppositions
or cancellation proceedings
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involving any patents or patent rights, trademarks or trademark rights, or
applications therefor, of the Company or any Subsidiary. There is no breach or
violation by the Company or by any Subsidiary under, and, to the Knowledge of
the Company, there is no breach or violation by any other party to, any Company
License that is reasonably likely to give rise to any termination or any loss of
rights thereunder. To the Knowledge of the Company, there has been no
unauthorized disclosure or use of confidential information, trade secret rights,
processes and formulas, research and development results and other know-how of
the Company or any Subsidiary, the value of which to the Company and its
Subsidiaries is dependent upon the maintenance of the confidentiality thereof.
Section 3.15 Opinion of Financial Advisor. The Company has
received the written opinion from its financial advisor dated the date hereof to
the effect that, as of the date hereof, the Merger Consideration is fair to the
Company's shareholders from a financial point of view, a copy of which opinion
has been delivered to Parent.
Section 3.16 Required Vote of Company Shareholders. The
affirmative vote of the holders of a majority of the outstanding shares of
Company Common Stock and Company Preferred Stock is required to adopt this
Agreement. No other vote of the security holders of the Company is required by
law, the Company Charter or the By-laws of the Company or otherwise in order for
the Company to consummate the Merger and the transactions contemplated hereby.
Section 3.17 Reorganization. To the Knowledge of the Company,
(i) neither it nor any of its Subsidiaries has taken any action or failed to
take any action which action or failure would jeopardize the qualification of
the Merger as a reorganization within the meaning of Section 368(a) of the Code,
and (ii) there are no facts that would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
Section 3.18 Environmental Matters.
(a) In Compliance. To the Knowledge of the Company,
the Company and its Subsidiaries are and have been in compliance with
all applicable Environmental Laws, have obtained all Environmental
Permits and are in compliance with their requirements, and have
resolved all past non-compliance with Environmental Laws and
Environmental Permits without any pending, on-going or future
obligation, cost or liability, except in each case for the notices set
forth in Section 3.18 of the Company Letter.
(b) No Release. To the Knowledge of the Company,
neither the Company nor any of its Subsidiaries has (i) placed, held,
located, released, transported or disposed of any Hazardous Substances
on, under, from or at any of the Company's or any of its Subsidiaries'
properties or any other properties, (ii) any Knowledge or reason to
know of the presence of any Hazardous Substances on, under, emanating
from, or at any of the Company's or any of its Subsidiaries' properties
or any other property but arising from the Company's or any of its
Subsidiaries' current or former properties or operations, or (iii) any
Knowledge or reason to know, nor has it received any written notice (A)
of any violation of or liability under any Environmental Laws, (B) of
the institution or pendency of any suit, action, claim, proceeding or
investigation by any Governmental
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Entity or any third party in connection with any such violation or
liability, (C) requiring the investigation of, response to or
remediation of Hazardous Substances at or arising from any of the
Company's or any of its Subsidiaries' current or former properties or
operations or any other properties, (D) alleging noncompliance by the
Company or any of its Subsidiaries with the terms of any Environmental
Permit in any manner reasonably likely to require material expenditures
or to result in material liability or (E) demanding payment for
response to or remediation of Hazardous Substances at or arising from
any of the Company's or any of its Subsidiaries' current or former
properties or operations or any other properties, except in each case
for the notices set forth in Section 3.18 of the Company Letter.
(c) No Obligation. To the Knowledge of the Company, no
Environmental Law imposes any obligation upon the Company or any of its
Subsidiaries arising out of or as a condition to any transaction
contemplated by this Agreement, including any requirement to modify or
to transfer any permit or license, any requirement to file any notice
or other submission with any Governmental Entity, the placement of any
notice, acknowledgment or covenant in any land records, or the
modification of or provision of notice under any agreement, consent
order or consent decree.
(d) No Assessments. There are no environmental
assessments or audit reports or other similar studies or analyses in
the possession or control of the Company or any of its Subsidiaries
relating to any real property currently or formerly owned, leased or
occupied by the Company or any of its Subsidiaries.
Section 3.19 Suppliers and Distributors.
(a) No-Notice Suppliers. Neither the Company nor any
of its Subsidiaries has received any notice, oral or written, or has
any reason to believe that any significant supplier (including
suppliers of data or information, which may include customers),
including without limitation any sole source supplier, will not supply
to the Company or any of its Subsidiaries at any time after the
Effective Time on terms and conditions substantially similar to those
currently in place, subject only to general and customary price
increases, unless comparable supplies, data, information or other items
are readily available from other sources on comparable terms and
conditions.
(b) No-Notice Distributors. Neither the Company nor
any of its Subsidiaries has received any notice, oral or written, or
has any reason to believe that any distributors, sales representatives,
sales agents, or other third party sellers, will not sell or market the
products or services of the Company or any of its Subsidiaries at any
time after the Effective Time on terms and conditions substantially
similar to those used in the current sales and distribution contracts
of the Company and its Subsidiaries.
Section 3.20 Insurance. Section 3.20 of the Company Letter
sets forth a complete listing of all material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by the Company or any of its Subsidiaries,
all of which policies are with reputable insurance carriers, provide full and
adequate coverage for all normal risks incident to the business of the Company
and its
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Subsidiaries and their respective properties and assets, and are in character
and amount similar to that carried by persons engaged in similar businesses and
subject to the same or similar perils or hazards. The Company and any of its
Subsidiaries have made any and all payments required to maintain such policies
in full force and effect. Neither the Company nor any of its Subsidiaries has
received notice of default under any such policy, and has not received written
notice or, to the Knowledge of the Company, oral notice of any pending or
threatened termination or cancellation, coverage limitation or reduction or
material premium increase with respect to such policy.
Section 3.21 Transactions with Affiliates. Except as set forth
in the Company SEC Documents filed with the SEC prior to the date hereof,
Section 3.21 of the Company Letter or as otherwise contemplated by this
Agreement, (a) no beneficial owner of 5% or more of the Company's outstanding
capital stock, or (b) officer or director of the Company or (c) any Person
(other than the Company) in which any such beneficial owner, officer or director
owns any beneficial interest (other than a publicly held corporation whose stock
is traded on a national securities exchange or in the over-the-counter market
and less than 1% of the stock of which is beneficially owned by all such
Persons) has any interest in: (i) any contract, arrangement or understanding
with, or relating to, the business or operations of, the Company or any of its
Subsidiaries; (ii) any loan, arrangement, understanding, agreement or contract
for or relating to indebtedness of the Company or any of its Subsidiaries; or
(iii) any property (real, personal or mixed), tangible or intangible, used in
the business or operations of the Company or any of its Subsidiaries, excluding
any such contract, arrangement, understanding or agreement constituting a
Company Plan or relating to terms of employment.
Section 3.22 Title to and Sufficiency of Assets.
(a) Good and Marketable Title. As of the date hereof,
the Company and its Subsidiaries own, and as of the Effective Time the
Company and its Subsidiaries will own, good and marketable title to all
of their assets constituting personal property which is material to
their business (excluding, for purposes of this sentence, assets held
under leases), free and clear of any and all Liens, except as set forth
in the Company SEC Documents filed with the SEC prior to the date
hereof or Section 3.22 of the Company Letter. Such assets, together
with all assets held by the Company and its Subsidiaries under leases,
include all tangible and intangible personal property, contracts and
rights necessary or required for the operation of the businesses of the
Company as presently conducted.
(b) No Real Estate. As of the date hereof, the Company
and its Subsidiaries do not own, and as of the Effective Time the
Company and its Subsidiaries will not own any Real Estate (excluding,
for purposes of this sentence, Real Estate leases). All Real Estate
leases held by the Company and its Subsidiaries, are adequate for the
operation of the businesses of the Company as presently conducted. For
purposes of this Agreement, "Real Estate" (which for this purpose
excludes Real Estate leases) means, with respect to the Company or any
of its Subsidiaries, as applicable, all of the fee, if any, of such
person, in and to all real estate and improvement owned or leased by
any such person and which is used by any such person in connection with
the operation of its business.
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Section 3.23 Brokers. With the exception of fees payable to
Neidiger Tucker Bruner, Inc. for the rendering of a fairness opinion to the
Company in connection with the Merger (which fees shall be paid by the Company,
$50,000 of which has been paid in cash prior to the date hereof, and the balance
of which is to be paid by the Company post-Closing pursuant to the terms of a
written agreement between Neidiger Tucker Bruner, Inc. and the Company, a copy
of which has been furnished to Parent), no broker, investment banker or other
person, other than the individual(s) listed in Section 3.23 of the Company
Letter, the fees and expenses of which will not exceed $400,000 and will be paid
by the Company in cash at or prior to the Closing (as reflected in a written
agreement between the individual(s) listed in Section 3.23 of the Company Letter
and the Company, a copy of which has been furnished to Parent), is entitled to
any broker's, finder's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
Section 3.24 Books and Records. To the Knowledge of the
Company, the books and records of the Company and each of its Subsidiaries are
complete and accurate in all material respects.
Section 3.25 Bank Accounts. Section 3.25 of the Company Letter
lists all material bank, money market, savings and similar accounts and safe
deposit boxes of the Company and each Subsidiary specifying the account numbers
and the authorized signatories of persons having access to them.
Section 3.26 Litigation. Except as set forth in the Company
SEC Documents filed with the SEC prior to the date hereof and except as set
forth in Section 3.26 of the Company Letter, there are no actions, suits,
investigations or proceedings pending or, to the Knowledge of the Company,
threatened against the Company or any Subsidiary before any federal, state,
municipal, foreign or other governmental department, commission, board, bureau,
agency or instrumentality, and neither the Company nor any Subsidiary has
received any written notice of, or any written threats concerning the possible
commencement of, any such actions, suits or proceedings with respect to the
business of the Company or any Subsidiary, as the case may be, any of which
actions, suits, investigations or proceedings, if decided adversely to the
Company, would be reasonably likely to have a Material Adverse Effect on the
Company or any Subsidiary.
ARTICLE 4
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business by the Company Pending the
Merger.
(a) Limitations. Except as expressly permitted by this
Section 4.1 and subject to the fiduciary obligations of the Company's
directors and officers, during the period from the date of this
Agreement through the Effective Time, the Company shall, and shall
cause each of its Subsidiaries to, in all material respects, carry on
its business in the ordinary course of its business as currently
conducted and, to the extent consistent therewith, use commercially
reasonable efforts to preserve intact its current business
organizations, keep available the services of its current officers and
key employees and
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preserve its relationships with customers, suppliers and others having
business dealings with it. Without limiting the generality of the
foregoing, and except as otherwise expressly contemplated by this
Agreement or as set forth in the Company Letter (with specific
reference to the applicable subsection below), the Company shall not,
and shall not permit any of its Subsidiaries to, without the prior
written consent of Parent pursuant to the procedures set forth in
Section 4.2:
(i) except for payment of in-kind dividends
of Company Common Stock on the Current Company Preferred
Stock, (A) declare, set aside or pay any dividends on, or make
any other actual, constructive or deemed distributions in
respect of, any of its capital stock, or otherwise make any
payments to its shareholders in their capacity as such, (B)
other than in the case of any Subsidiary of the Company,
split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital
stock or (C) purchase, redeem or otherwise acquire any shares
of capital stock of the Company or any other securities
thereof or any rights, warrants or options to acquire any such
shares or other securities;
(ii) authorize for issuance (except as
contemplated by the Exchange Agreement), issue, deliver, sell,
pledge, dispose of or otherwise encumber any shares of its
capital stock, any other voting securities or equity
equivalent or any securities convertible into, or any rights,
warrants or options (including options under the Company Stock
Option Plans) to acquire any such shares, voting securities,
equity equivalent or convertible securities, other than the
issuance of shares of Company Common Stock upon the exercise
of Company Stock Options outstanding on the date of this
Agreement and except for payment of in-kind dividends on, and
conversion pursuant to Section 5.8 of, the Current Company
Preferred Stock and repayment of the Controlling Shareholder
Loan, each in accordance with their respective terms as in
effect on the date of this Agreement;
(iii) amend the Company Charter or by-laws;
(iv) acquire or agree to acquire by merging
or consolidating with, or by purchasing a substantial portion
of the assets of or equity in, or by any other manner, any
business or any corporation, limited liability company,
partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any
assets for an amount exceeding $25,000 in the aggregate;
(v) sell, lease or otherwise dispose of, or
agree to sell, lease or otherwise dispose of, any of its
assets, other than in the ordinary course of business
consistent with past practice and not in any event exceeding
$25,000 in the aggregate;
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(vi) except for the Controlling Shareholder
Loan, incur any indebtedness for borrowed money, guarantee any
such indebtedness, incur, assume, guarantee, endorse, or
prepay any material indebtedness (whether directly,
indirectly, contingently or otherwise), or make any loans,
advances or capital contributions to, or other investments in,
any other person, other than (A) in amounts not to exceed
$25,000 in the aggregate; and (B) indebtedness, loans,
advances, capital contributions and investments between the
Company and any of its wholly-owned Subsidiaries or between
any of such wholly-owned Subsidiaries, in each case in the
ordinary course of business consistent with past practices and
not in any event to exceed $25,000 in the aggregate;
(vii) except for conversion of the Current
Company Preferred Stock and repayment of the Controlling
Shareholder Loan, alter (through merger, liquidation,
reorganization, restructuring or in any other fashion) the
corporate structure or ownership of the Company or any of its
Subsidiaries;
(viii) enter into or adopt any, or amend any
existing, severance plan, agreement or arrangement or enter
into or amend any Company Plan, employment agreement, oral or
written employment or at will agreement of any kind
individually equal to or in excess of $80,000 annually, or any
consulting agreement in any amount;
(ix) increase the aggregate compensation
payable or to become payable to its directors, officers or
employees in either (i) the voice division of the Company
beyond the amount set forth in Section 4.1(a)(ix) of the
Company Letter (the "Voice Compensation Pool") (which Voice
Compensation Pool set forth in the Company Letter shall not be
more than 104.2% of current cumulative annualized compensation
levels for the voice division of the Company), or (ii) the
data division of the Company beyond the amount set forth in
Section 4.1(a)(ix) of the Company Letter (the "Data
Compensation Pool") (which Data Compensation Pool set forth in
the Company Letter shall not be more than 104.2% of current
cumulative annualized compensation levels for the voice
division of the Company);
(x) grant any severance or termination pay
to, or enter into any employment or severance agreement with,
any director or officer of the Company or any of its
Subsidiaries, or establish, adopt, enter into, or, except as
may be required to comply with applicable law, amend in any
material respect or take action to enhance in any material
respect or accelerate any rights or benefits under, any labor,
collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or
employee;
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(xi) knowingly violate or knowingly fail to
perform any material obligation or duty imposed upon it or any
of its Subsidiaries by any applicable federal, state or local
law, rule or regulation;
(xii) make any change to accounting policies
or procedures (other than actions required to be taken by
generally accepted accounting principles);
(xiii) prepare or file any material Tax
Return inconsistent with its past practice in preparing or
filing similar Tax Returns in prior periods or, on any such
Tax Return, take any position, make any election, or adopt any
method that is inconsistent with positions taken, elections
made or methods used in preparing or filing similar Tax
Returns in prior periods;
(xiv) make or rescind any express or deemed
material election relating to Taxes or change any of its
methods of reporting income or deductions for Tax purposes;
(xv) commence any litigation or proceeding
with respect to any material Tax liability or settle or
compromise any material Tax liability without Parent's consent
(which consent shall not be unreasonably withheld) or commence
any other litigation or proceedings or settle or compromise
any other material claims or litigation;
(xvi) except in the ordinary course of
business and only if the Company's annual expenditure would
reasonably be expected to be less than $25,000 in the
aggregate, enter into, renew, terminate or amend any agreement
or contract material to the Company and its Subsidiaries,
taken as a whole, including any Company Significant Contract;
or purchase any real property or make or agree to make any new
capital expenditure or expenditures which in the aggregate are
in excess of $25,000;
(xvii) pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction, in the ordinary course of business
consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent financial statements (or the
notes thereto) of the Company included in the Company SEC
Documents or incurred in the ordinary course of business
consistent with past practice;
(xviii) permit any insurance policy naming
the Company or any Subsidiary of the Company as a beneficiary
or a loss payee to be cancelled or terminated, provided that
the Company will provide prior written notice to Parent within
thirty (30) days prior to any termination or cancellation of
any such insurance policy;
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(xix) authorize, recommend, propose or
announce an intention to do any of the foregoing, or enter
into any contract, agreement, commitment or arrangement to do
any of the foregoing; or
(xx) make any individual expenditure in
excess of $25,000 other than by issuance of a check requiring
the signature of the Operations Observer (as defined in
Section 4.10), the signature of which Operations Observer
shall constitute the prior written consent of Parent pursuant
to Section 4.2 hereof, provided, however, that the requirement
set forth in this Section 4.1(a)(xx) shall automatically
expire thirty (30) days after the date hereof unless Parent,
in its sole discretion, provides written notice to the Company
prior to such date directing an extension of such time period
for up to thirty (30) additional days, which extension may be
renewed in writing by Parent for additional thirty (30) (or
shorter) day periods until Closing.
(b) Implementation. The Company shall not take any of
the actions prohibited by Section 4.1(a) except pursuant to Section 4.2
hereof.
Section 4.2 Procedures for Parent Approval; Cure.
(a) Procedures. Prior to taking any action prohibited
by Section 4.1(a) hereof:
(i) the Company shall provide prior written
notice of such action to the Operations Observer; and
(ii) Parent, whether through the Operations
Observer or another authorized party (so designated in
advance) of Parent, may, at its sole option, provide prior
written approval or disapproval of such action, provided,
however, that if Parent or the other authorized party does not
provide written approval or disapproval of such action to the
Company within three (3) days following receipt of such
written notice by the Company, then such action will be deemed
approved by Parent.
Notwithstanding the procedures set forth in this Section
4.2(a) or the restrictions set forth in Section 4.1(a)(viii) above, the Company
may enter into employment agreements individually equal to or in excess of
$80,000 annually by, at its option, (i) complying with the procedures set forth
in this Section 4.2(a) or (ii) receiving prior oral consent to such employment
agreement from the Chief Executive Officer of Parent.
(b) Default. If the Company at any time prior to the
Effective Time takes any action prohibited by Section 4.1(a) hereof (a
"Prohibited Action") without first complying with the procedures set
forth in Section 4.2(a)(i) above and without first receiving Parent's
authorization in a manner provided in Section 4.2(a)(ii), including if
the Company takes such Prohibited Action after receiving written
disapproval from Parent of such Prohibited Action, then Parent shall
deliver written notice of such Prohibited Action to the Company not
later than five (5) business days after the Operations Observer
receives actual knowledge thereof (the "Parental Notice"). Unless
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cured by the Company in the manner specified in Section 4.2(c)
including the failure to take commercially unreasonable steps to cure
under Section 4.2(c)(i), such Prohibited Action shall constitute the
Company's failure to comply in any material respect with any of its
covenants or agreements (provided that such failure to comply in any
material respect shall not independently constitute a willful breach of
a specific representation or warranty or the breach of any specific
covenant contained in this Agreement), thereby entitling the Parent to
terminate this Agreement pursuant to Section 7.1(b) hereof. In addition
to such termination, but only in the event that (i) such Prohibited
Action would give rise to a financial effect on the Company in excess
of $375,000 or (ii) it would be commercially reasonable for the Company
to cure such Prohibited Action, Parent also shall, as its only other
remedy, be entitled to terminate the exchange contemplated by the
Exchange Agreement and receive a return of all of the Parent Common
Stock required to be held in escrow under such Exchange Agreement.
(c) Cure. Notwithstanding the provisions of Section
4.2(b), upon receipt of a Parental Notice, the Company shall have the
shorter of ten (10) business days or the interim period prior to
Closing (provided, however, that the Closing Date will not be extended
in any such event) to cure a default caused by a Prohibited Action,
provided, however, that, (i) the Company must take only commercially
reasonable steps to cure such default; and (ii) unless otherwise
approved in writing by Parent, such cure must take one of the following
forms, which form may be selected by Parent in its sole and absolute
discretion (subject to (ii) below if the parties are unable to agree on
the amount described in (i) below):
(i) to cause the Controlling Shareholder to
advance funds, in addition to any amounts specified in Section
4.8, in an amount agreed upon by Parent and the Company,
sufficient to cause such Prohibited Action to have no
financial effect on the Company, provided, however, that such
additional funds will, at the time such funds are actually
advanced, be deemed a part of the Controlling Shareholder Loan
and shall be converted at the Closing into Company Common
Stock and subsequently Parent Common Stock in accordance with
Section 5.16, and provided, further, that such additional
funds will not be included in the determination of the Maximum
Amount (as defined in Section 4.8 hereof); or
(ii) to cause the complete rescission of
such Prohibited Action, without penalty or other adverse
financial effect to the Company caused by such rescission,
which rescission shall be required if directed by the Parent
or if the parties are unable to agree on an amount as required
under subsection (c)(i) above within ten (10) business days,
but in no event longer than the interim period prior to
Closing.
Section 4.3 No Solicitation.
(a) Takeover Proposal. During the term of this
Agreement, the Company shall not, and shall not authorize or permit any
of its Subsidiaries or any of its or its Subsidiaries' directors,
officers, employees, agents or representatives, directly or
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indirectly, to solicit or initiate, or furnish or disclose non-public
information in furtherance of, any inquiries or the making of any
proposal with respect to any recapitalization, merger, consolidation or
other business combination involving the Company, or the acquisition of
the outstanding capital stock of the Company (other than upon exercise
of options or warrants which are outstanding as of the date hereof) or
any Subsidiary of the Company or the acquisition of any substantial
portion of the assets of the Company and its Subsidiaries, taken as a
whole, in a single transaction or a series of related transactions, or
any combination of the foregoing (a "Takeover Proposal"), or negotiate
or otherwise engage in discussions with any person (other than Parent,
Sub or their respective directors, officers, employees, agents or
representatives) with respect to any Takeover Proposal or enter into
any agreement, arrangement or understanding requiring it to abandon,
terminate or fail to consummate the Merger or any other transactions
contemplated by this Agreement, and will immediately cease all existing
activities, discussions and negotiations with any parties conducted
heretofore with respect to any proposal for a Takeover Proposal;
provided that, the Company may furnish information to, and negotiate or
otherwise engage in discussions with but only to the extent required by
the fiduciary duties of the Company directors under applicable law, any
party (a "Company Third Party") who (x) delivers a bona fide written
proposal for a Takeover Proposal which was not solicited or initiated
by the Company, directly or indirectly, after the date of this
Agreement and (y) enters into an appropriate confidentiality agreement
with the Company (which agreement shall be no less favorable to the
Company than the Confidentiality Agreement), if, but only if, the Board
of Directors of the Company determines in good faith by a majority vote
that such proposal could reasonably be expected to lead to a Superior
Transaction (as hereinafter defined); provided further, that nothing in
this Agreement shall prevent the Company from complying with the
provisions of Rule 14e-2 promulgated under the Exchange Act with
respect to a Takeover Proposal.
(b) Notice and Termination. If, prior to the approval
of the Merger by the shareholders of the Company, the Board of
Directors of the Company determines in good faith by a majority vote,
with respect to any written proposal from a Company Third Party for a
Takeover Proposal received after the date hereof that was not solicited
or initiated by the Company, directly or indirectly, after the date of
this Agreement, that such Takeover Proposal is a Superior Transaction
and is in the best interest of the Company and its shareholders, then
the Company may terminate this Agreement and enter into an acquisition
agreement for the Superior Transaction; provided that, prior to any
such termination, and in order for such termination to be effective,
(i) the Company shall provide Parent two (2) business days' written
notice that it intends to terminate this Agreement pursuant to this
Section 4.3(b), identifying the Superior Transaction and delivering an
accurate description of all material terms of the Superior Transaction
to be entered into and (ii) on the date of termination, the Company
shall deliver to Parent a written notice of termination of this
Agreement pursuant to this Section 4.3(b). The Company acknowledges
that, upon any such termination, Parent shall have all legal and
equitable rights and remedies against the Controlling Shareholder as
are provided in the Shareholder Agreement.
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(c) "Superior Transaction" shall mean a Takeover
Proposal which the Board of Directors of the Company reasonably
determines, in the exercise of its fiduciary duty, based on the written
advice of its outside legal counsel, is more favorable to the Company
and its shareholders than the Merger. Reference in the foregoing
definition to the "Merger" shall include any proposed alteration of the
terms of this Agreement committed to in writing by Parent in response
to such Takeover Proposal.
Section 4.4 Third Party Standstill Agreements. During the
period from the date of this Agreement through the Effective Time, the Company
shall not terminate, amend, modify or waive any provision of any confidentiality
or standstill agreement to which the Company or any of its Subsidiaries is a
party (other than any involving Parent). During such period, the Company agrees
to enforce, to the fullest extent permitted under applicable law, the provisions
of any such agreements, including, but not limited to, obtaining injunctions to
prevent any breaches of such agreements and to enforce specifically the terms
and provisions thereof in any court of the United States or any state thereof
having jurisdiction.
Section 4.5 Company Significant Contracts. The Company shall
use its commercially reasonable efforts to cause the renewal (for a period of at
least one (1) year following the Closing Date) of all of the five (5) most
significant of the Company Significant Contracts, as measured by gross annual
revenue to the Company and as specifically listed in Section 4.5 of the Company
Letter.
Section 4.6 Key Employees. The Company shall use its best
efforts (subject to commercial reasonableness) to ensure that the individual
occupying the position of Chief Executive Officer of the Company as of the date
hereof remains in such position up to and at the Effective Time. Parent shall
not take any action to discourage such individual from occupying the foregoing
position up to and at the Effective Time.
Section 4.7 Reorganization. During the period from the date of
this Agreement through the Effective Time, unless the other party shall
otherwise agree in writing, none of Parent, the Company or any of their
respective Subsidiaries shall take or fail to take any action with the actual
knowledge of those taking or failing to take such action (or those directing
such action or failure to take action) that such action or failure would
jeopardize the qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code.
Section 4.8 Controlling Shareholder Loan. The Controlling
Shareholder, or affiliates thereof, shall:
(a) on or prior to the mutual execution of this
Agreement, have loaned cash to the Company in an amount equal to
$4,100,000 (all of which has been loaned to the Company prior to the
date hereof), and
(b) between the date hereof and Closing, be obligated
to loan as-needed cash (excluding any amounts allocated to the Company
in respect of the Parent Printing and Filing Fees) to the Company, in
such amounts and, except as expressly provided below, promptly upon
written request of the Company (provided that in no event shall such
amounts, when added to the amounts loaned under Section 4.8(a) hereof
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(collectively, the "Controlling Shareholder Loan"), exceed $5,000,000
in principal amount, excluding any interest paid or accrued on such
Controlling Shareholder Loan (the "Maximum Amount")),
all of which cash (i) has been used by the Company to satisfy any indebtedness
owing by the Company to Norwest Bank National Association ("Norwest") under its
credit facility agreement described more particularly in Section 4.8 of the
Company Letter; and (ii) has been or shall be (x) used by the Company to fund
the Company's Working Capital Needs (as hereinafter defined) following the date
of the Original Agreement, subject, however, to the terms and conditions of
Article 4 hereof, (y) thereafter used by the Company to pay all Company
Transactional Costs and Company Printing and Filing Fees (as such terms are
defined in Section 5.6(b) hereof); and (z) thereafter used by the Company to pay
all Third Party Debt (as hereinafter defined); provided that in no event shall
such Controlling Shareholder Loan exceed the Maximum Amount. Notwithstanding
anything to the contrary herein, Parent shall be entitled, by delivery of
written notice to the Controlling Shareholder, to cause the Controlling
Shareholder to advance unfunded amounts from the Controlling Shareholder Loan,
up to the Maximum Amount, to pay at the Closing all amounts described in
subsections (i) and (ii) above.
Notwithstanding anything to the contrary herein, the
Controlling Shareholder may, in its sole and absolute discretion, advance funds
to the Company in excess of the Maximum Amount to fund the Working Capital Needs
of the Company after the date hereof and prior to the Closing, and any such
additional funds advanced will, at the time such funds are actually advanced, be
deemed a part of the Controlling Shareholder Loan and shall be converted
(together with all accrued and unpaid interest thereon) at the Closing into
Company Common Stock and subsequently Parent Common Stock and, to the extent
applicable, the Controlling Shareholder Warrant, in accordance with Section
5.16.
For purposes hereof, "Working Capital Needs" shall mean all
funding needs of the Company that may be required to continue to operate all
aspects of the Company's business in the ordinary course of business in
accordance with past practices. The Company will use its best efforts, subject
to commercial reasonableness, not to increase the Working Capital Needs of the
Company prior to the Effective Time. The Controlling Shareholder Loan shall be
evidenced by one or more interest bearing demand promissory notes of the Company
payable in the form of or otherwise convertible into Company Common Stock, which
interest shall be converted at the Closing into Parent Common Stock in the same
manner as the Controlling Shareholder Loan, provided, however, that such notes
shall not bear interest in excess of 12% per annum.
For purposes hereof, "Third Party Debt" shall mean all
outstanding indebtedness of the Company and all accrued interest thereon as of
the Closing Date owing to any third parties other than Norwest and Neidiger
Tucker Bruner, Inc. (as referenced in Section 3.23), which Third Party Debt,
however, shall not include (i) trade payables shown on Section 4.9 to the
Company Letter or (ii) other trade payables incurred prior to Closing in the
ordinary course of the Company's business consistent with past practice and
pursuant to Section 4.1 and Section 4.2 (collectively, the "Trade Payables").
Section 4.9 Indebtedness. Subject to and in accordance with
Section 4.8 above, prior to or effective at Closing, and as directed in writing
by Parent at Parent's sole
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discretion, the Company shall repay (which repayment need not comply with the
procedures specified in Article 4 hereof) (i) all fees required to be borne by
the Company under Section 5.6 hereof; (ii) all Third Party Debt; and (iii) in
the manner described in Section 5.16 hereof, the Controlling Shareholder Loan
(including all accrued and unpaid interest on the Controlling Shareholder Loan);
provided, however, that nothing herein shall obligate the Company, and Parent
shall not require the Company, to pay Neidiger Tucker Bruner, Inc. for any fees
referenced in Section 3.23 at or prior to Closing. Parent acknowledges that the
Company is not required to pay all of the Third Party Debt if, as of the Closing
Date, the Controlling Shareholder Loan has been advanced up to and including the
Maximum Amount, and that, regardless of such continued Third Party Debt, the
parties shall continue to be obligated to complete the Closing pursuant to the
terms and conditions of this Agreement.
Section 4.10 Observer Rights. During the period from the date
of this Agreement through the Effective Time Parent shall be entitled to
designate in writing to the Company: (i) one non-voting board observer who shall
have access (whether telephonic, electronic, or in-person, as reasonably
requested by such observer) to all meetings, formal or informal, and all
materials pertaining to such meetings (including, without limitation, agendas
and minutes thereof), of the Board of Directors of the Company and any
committees or subcommittees thereof, and who shall receive prior notice of all
such meetings to the same extent as any director (or any member of any committee
or subcommittee) is entitled to such notice; and (ii) one operations observer
(the "Operations Observer") who shall have free and open access to all
operational and managerial aspects of the Company, and the Company shall provide
such information and access to information of any aspect of the Company's
business and operations, including day-to-day personal access to management and
employees and meetings thereof, as is reasonably requested by the Operations
Observer, whether orally or in writing. Promptly after the mutual execution
hereof, the Company shall cause the Operations Observer to become a required
signatory on all accounts of the Company for single payments in excess of
$25,000 for the period of time specified in Section 4.1(a)(xx) and for any
extension thereof.
ARTICLE 5
ADDITIONAL AGREEMENTS
Section 5.1 Shareholder Meetings.
(a) The Company. The Company will, as soon as
practicable following the date of this Agreement, duly call, give
notice of, convene and hold a meeting of its shareholders (the "Company
Shareholder Meeting") for the purpose of considering the approval and
adoption of this Agreement and at such meeting call for a vote and
cause proxies to be voted in respect of the approval and adoption of
this Agreement. The Company will, through its Board of Directors,
recommend to its shareholders the adoption and approval of this
Agreement and subject to the fiduciary obligations of the Company's
officers and directors, shall not withdraw, modify or change such
recommendation.
(b) Parent. Parent will, as soon as practicable
following the date of this Agreement, duly call, give notice of,
convene and hold a meeting of its shareholders (the
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"Parent Shareholder Meeting") for the purpose of considering the
approval and adoption of this Agreement and at such meeting call for a
vote and cause proxies to be voted in respect of the approval and
adoption of this Agreement. Parent will, through its Board of
Directors, recommend to its shareholders the adoption and approval of
this Agreement and subject to the fiduciary obligations of Parent's
officers and directors, shall not withdraw, modify or change such
recommendation.
Section 5.2 Preparation of the Registration Statement and the
Proxy Statement.
(a) Preparation and Filing. The Company and Parent
shall promptly prepare and file with the SEC an amendment to the Proxy
Statement and Parent shall prepare and file with the SEC an amendment
to the Registration Statement, in which the Proxy Statement will be
included as a prospectus, covering the issuance and sale of the Parent
Common Stock in the Merger, the Parent Warrants, the Parent Common
Stock issuable upon exercise of the Parent Warrants, the Controlling
Shareholder Warrant, the Parent Common Stock issuable upon exercise of
the Controlling Shareholder Warrant, and the resale by the Controlling
Shareholder of its Parent Common Stock acquired in the Merger and upon
exercise of the Controlling Shareholder Warrant. Each of Parent and the
Company shall use its commercially reasonable efforts to have the
Registration Statement declared effective under the Securities Act as
promptly as practicable after such filing. Parent shall use its
commercially reasonable efforts to maintain the effectiveness of the
Registration Statement continuously for a period of the shorter of (i)
two years after the Effective Time or (ii) the first date upon which
there are no Registrable Securities (as such term is defined in the
Registration Rights Agreement dated as of the date hereof between
Parent and the Controlling Shareholder). As promptly as practicable
after the Registration Statement shall have become effective, the
Company shall mail the Proxy Statement to its shareholders and Parent
shall mail the Proxy Statement to its shareholders. Parent shall also
take any action (other than qualifying to do business in any
jurisdiction in which it is now not so qualified) required to be taken
under any applicable state securities laws in connection with the
issuance of Parent Common Stock in the Merger and the Company shall
furnish all information concerning the Company and the holders of
Company Common Stock as may be reasonably requested in connection with
any such action.
(b) Comments. Parent and the Company will promptly
notify each other of the receipt of comments from the SEC and of any
request by the SEC for amendments or supplements to the Registration
Statement or the Proxy Statement or for additional information, and
promptly will supply each other with copies of all correspondence
between the parties and the SEC with respect thereto. If, at any time
prior to the Company Shareholder Meeting or Parent Shareholder Meeting,
any event should occur relating to or affecting the Company, Parent or
Sub, or to their respective Subsidiaries, officers or directors, which
event should be described in an amendment or supplement to the
Registration Statement or the Proxy Statement, the parties promptly
will inform each other and cooperate in preparing, filing and having
declared effective or clearing with the SEC and, if required by
applicable state securities laws, distributing to the Company's and
Parent's shareholders such amendment or supplement.
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(c) Information - Parent and Sub. None of the
information to be supplied in writing by Parent or Sub for inclusion or
incorporation by reference in the Registration Statement or the joint
proxy statement/prospectus included therein (together with any
amendments or supplements thereto, the "Proxy Statement") relating to
the Company Shareholder Meeting and Parent Shareholder Meeting will (i)
in the case of the Registration Statement, at the time it becomes
effective, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading or (ii) in the case
of the Proxy Statement, at the time of the mailing of the Proxy
Statement, at the time of each of the Company Shareholder Meeting and
Parent Company Meeting and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are
made, not misleading. If at any time prior to the Effective Time any
event with respect to Parent, its officers and directors or any of its
Subsidiaries shall occur which is required to be described in the Proxy
Statement or the Registration Statement, such event shall be so
described, and an appropriate amendment or supplement shall be promptly
filed with the SEC and, as required by law, disseminated to the
shareholders of Parent and the Company. The Registration Statement will
comply (with respect to Parent) as to form in all material respects
with the provisions of the Securities Act, and the Proxy Statement will
comply (with respect to Parent) as to form in all material respects
with the provisions of the Exchange Act. Notwithstanding the foregoing
provisions of this Section 5.2(c), no representation or warranty is
made by Parent or Sub with respect to statements made or incorporated
by reference in the Proxy Statement or the Registration Statement based
on information supplied in writing by the Company for inclusion or
incorporation by reference therein.
(d) Information - Company. None of the information to
be supplied in writing by the Company for inclusion or incorporation by
reference in the Registration Statement or the Proxy Statement will (i)
in the case of the Registration Statement, at the time it becomes
effective, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading or (ii) in the case
of the Proxy Statement, at the time of the mailing of the Proxy
Statement, at the time of each of the Company Shareholder Meeting and
Parent Company Meeting and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are
made, not misleading. If at any time prior to the Effective Time any
event with respect to the Company, its officers and directors or any of
its Subsidiaries shall occur which is required to be described in the
Proxy Statement or the Registration Statement, such event shall be so
described, and an appropriate amendment or supplement shall be promptly
filed with the SEC and, as required by law, disseminated to the
shareholders of the Company and Parent. The Registration Statement will
comply (with respect to the Company) as to form in all material
respects with the provisions of the Securities Act, and the Proxy
Statement will comply (with respect to the Company) as to form in all
material respects with the provisions of the Exchange Act.
Notwithstanding the foregoing provisions of this Section 5.2(d), no
representation or warranty is made by the Company with respect to
statements made or incorporated by
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reference in the Proxy Statement or the Registration Statement based on
information supplied in writing by Parent or Sub for inclusion or
incorporation by reference therein.
Section 5.3 Access to Information. Subject to currently
existing contractual and legal restrictions applicable to the Company or any of
its Subsidiaries, the Company shall, and shall cause each of its Subsidiaries
to, afford to Parent and its Subsidiaries and each of their accountants,
counsel, financial advisors and other representatives of Parent reasonable
access during normal business hours to, and permit them to make such inspections
as they may reasonably require of, during the period from the date of this
Agreement through the Effective Time, all of their respective properties, books,
contracts, commitments and records (including engineering records and Tax
Returns and the work papers of independent accountants, if available and subject
to the consent of such independent accountants) and, during such period, the
Company shall, and shall cause each of its Subsidiaries to (i) furnish promptly
to Parent a copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of federal
or state securities laws, (ii) consistent with its legal obligations, furnish
promptly to Parent all other information concerning its business, properties and
personnel as Parent may reasonably request, (iii) promptly make available to
Parent all personnel of the Company and its Subsidiaries knowledgeable about
matters relevant to such inspections as reasonably requested by Parent and (iv)
provide reasonable access to the Company's facilities and operations to enable
Parent to conduct a health and safety review of the business, including the
right to take samples. No investigation pursuant to this Section 5.3 shall
affect any representation or warranty in this Agreement of any party hereto or
any condition to the obligations of the parties hereto. All information obtained
by Parent pursuant to this Section 5.3 shall be kept confidential in accordance
with the Confidentiality Agreement currently existing and in effect between
Parent and the Company (the "Confidentiality Agreement").
Section 5.4 Rule 145 Letters. On the date hereof, the Company
shall cause to be prepared and delivered to Parent a list (reasonably
satisfactory to counsel for Parent) identifying all persons who, at the time of
the Company Shareholder Meeting, may be deemed to be "affiliates" of the Company
as that term is used in paragraphs (c) and (d) of Rule 145 under the Securities
Act (the "Rule 145 Affiliates"). The Company shall use its commercially
reasonable efforts to cause each person who is identified as a Rule 145
Affiliate in such list to deliver to Parent within 30 days of the date hereof a
written agreement in substantially the form of Exhibit C hereto, executed by
each of such persons identified in the foregoing list.
Section 5.5 Stock Exchange Listings. Parent shall use its commercially
reasonable efforts to list on the Nasdaq National Market, upon official notice
of issuance, any and all shares of Parent Common Stock (including shares of
Parent Common Stock to be issued upon exercise of the Parent Warrants and the
Controlling Shareholder Warrant) to be issued in connection with the Merger.
Parent shall not be obligated to list the Parent Warrants or the Controlling
Shareholder Warrant on the Nasdaq National Market.
Section 5.6 Fees and Expenses.
(a) Transactional Costs and Expenses. Whether or not
the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated
hereby, including the fees and disbursements of counsel,
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brokers (including the broker fees described in Section 3.23),
financial advisors and accountants, shall be paid by the party
incurring such costs and expenses (such costs and expenses being
referred to herein, respectively, as the "Company Transactional Costs"
and the "Parent Transactional Costs"), provided, however, that such
Company Transactional Costs and Parent Transactional Costs shall not
include the fees described in Section 5.6(b) hereof.
(b) Printing and Filing Fees, Etc.
(i) If the Merger is not consummated, all
printing expenses, all expenses associated with obtaining
shareholder approval, underwriter fees, if any, fees
associated with obtaining fairness opinions or "comfort
letters," and all filing fees (including filing fees under the
Securities Act, the Exchange Act and the HSR Act (if
applicable), as well as applicable NASDAQ fees) shall be
divided and borne equally between Parent and the Company (each
half of such fees being referred to herein, respectively, as
the "Company Printing and Filing Fees" and the "Parent
Printing and Filing Fees").
(ii) If the Merger is consummated, all
Company Printing and Filing Fees and Parent Printing and
Filing Fees shall be allocated to the Company, provided,
however, that the Parent Printing and Filing Fees shall not be
funded, directly or indirectly through the transfer or
reallocation of obligations, under the Controlling Shareholder
Loan.
Section 5.7 Company Stock Options.
(a) Cancellation and Conversion. Immediately prior to
the Effective Time, each unexpired and unexercised outstanding Company
Stock Option, whether or not then vested or exercisable in accordance
with its terms, to purchase shares of Company Common Stock previously
granted by the Company or any of its Subsidiaries under the Company's
Stock Option Plans shall be cancelled and converted into the right to
receive at the Effective Time, shares of Company Common Stock in an
amount equal to (a) the product of (X) the excess, if any, of $2.50
over the exercise price per share of such Company Stock Option, times
(Y) the number of shares of Company Common Stock which may be purchased
upon exercise of such Company Stock Option (but only to the extent then
exercisable, including any acceleration of vesting required by the
terms of such Company Stock Option in effect as of the date hereof),
divided by (b) $2.50. At the Effective Time, such shares of Company
Common Stock shall be converted into shares of Parent Common Stock
pursuant to Section 1.5 hereof. Prior to (but effective at) the
Effective Time, the Company shall use its commercially reasonable
efforts to (i) obtain any consents from all holders of Company Stock
Options and (ii) make any amendments to the terms of such stock option
or compensation plans or arrangements that, in the case of either
clause (i) or (ii), are necessary to give effect to the transactions
contemplated by this Section 5.7. All applicable withholding taxes
attributable to the payments made hereunder or to distributions
contemplated hereby shall be deducted from the amounts payable under
this Section 5.7 and all such taxes attributable to the exercise of
Company Stock Options shall be withheld from the proceeds received in
respect of the shares of
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Common Stock issuable upon such exercise. Any taxes withheld may be
withheld in the form of cancellation of shares of Company Common Stock
otherwise issuable, valued at $2.50 per share. Notwithstanding the
foregoing, any Company Stock Option with an exercise price greater than
$2.50 that is not exercised at or prior to the Effective Time shall
expire in accordance with its terms.
(b) Neidiger Tucker Bruner, Inc. Warrants. At the
Closing and pursuant to the terms of the NTB Warrants, Parent shall
deliver to Neidiger Tucker Bruner, Inc. Rollover Warrant Agreements,
each duly executed by Parent and each in the form attached hereto as
Exhibit F (the "NTB Warrant Agreements"), which NTB Warrant Agreements
shall provide for the issuance to Neidiger Tucker Bruner, Inc. of
warrants to purchase shares of Parent Common Stock (the "Rollover
Warrants").
(c) Termination. Prior to the Effective Time, the
Company shall have taken all actions reasonably necessary or
appropriate to ensure that all stock option, stock appreciation right
or other equity-based plans maintained with respect to the Company
Common Stock, including the Company Stock Plans, shall terminate as of
the Effective Time and the provisions in any other compensation or
benefit plan providing for the issuance, transfer or grant of any
capital stock of the Company or any interest in respect of any capital
stock of the Company shall be terminated as of the Effective Time, and
the Company shall use its commercially reasonable efforts to ensure
that following the Effective Time neither the Company nor any of its
Subsidiaries is or will be bound by any Options which would entitle any
person, other than Sub or its affiliates, to own beneficially, or
receive any payments (other than as otherwise contemplated by Section
1.5 and this Section 5.7) in respect of, any capital stock of the
Company or the Surviving Corporation.
Section 5.8 Conversion of Current Company Preferred Stock.
Immediately prior to the Effective Time, each share of Current Company Preferred
Stock, plus any and all accrued and unpaid dividends on such Current Company
Preferred Stock, shall be converted into shares of Company Common Stock in
accordance with the terms of such Current Company Preferred Stock, which shares
of Company Common Stock subsequently will be converted into the right to receive
Parent Common Stock pursuant to Section 1.5 hereof.
Section 5.9 Warrant Agreement. At the Closing, Parent shall
deliver to the Exchange Agent a Warrant Agreement, duly executed by Parent, in
the form attached hereto as Exhibit D (the "Warrant Agreement") for the benefit
of each shareholder of the Company entitled thereto pursuant to Section 1.5(c),
which Warrant Agreement shall provide for the issuance to each such shareholder
of the Company of warrants to purchase shares of Parent Common Stock (the
"Parent Warrants").
Section 5.10 Premerger Notification to Federal Trade
Commission. The parties shall mutually cooperate with each other in preparing
and filing any and all documentation required to be filed pursuant to the HSR
Act, if applicable, regarding the Merger.
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Section 5.11 Efforts Required.
(a) Mutual Obligation. Upon the terms and subject to
the conditions set forth in this Agreement, each of the parties agrees
to use commercially reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper
or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other transactions contemplated
by this Agreement, including: (i) the obtaining of all necessary
actions or non-actions, waivers, consents and approvals from all
Governmental Entities and the making of all necessary registrations and
filings (including filings with Governmental Entities) and the taking
of all reasonable steps as may be necessary to obtain an approval or
waiver from, or to avoid or vigorously defend an action or proceeding
by, any Governmental Entity (including those in connection with the HSR
Act, if applicable), (ii) the obtaining of all necessary consents,
approvals or waivers from third parties, (iii) the defending of any
lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental
Entity vacated or reversed, and (iv) the execution and delivery of any
additional instruments necessary to consummate the transactions
contemplated by this Agreement. No party to this Agreement shall
consent to any voluntary delay of the consummation of the Merger at the
behest of any Governmental Entity without the consent of the other
parties to this Agreement, which consent shall not be unreasonably
withheld, conditioned or delayed. In addition, the Company shall use
its commercially reasonable efforts to obtain the waiver, cancellation
or voluntary termination of the registration rights listed on Schedule
3.2(b) prior to the Closing by the holders thereof to the extent that
they would otherwise be outstanding after the Merger.
(b) No Adverse Actions. Each party shall use
commercially reasonable efforts to not take any action, or enter into
any transaction, which would cause any of its representations or
warranties contained in this Agreement to be untrue or result in a
breach of any covenant made by it in this Agreement.
(c) Reorganization Status. Each party shall use
commercially reasonable efforts to refrain from taking any action or
failing to take any action, which action or failure to act would cause,
or would be reasonably likely to cause, the Merger to fail to qualify
as a reorganization within the meaning of Section 368(a) of the Code.
(d) No Divestiture. Notwithstanding anything to the
contrary contained in this Agreement, in connection with any filing or
submission required or action to be taken by either Parent or the
Company to effect the Merger and to consummate the other transactions
contemplated hereby, the Company shall not, without Parent's prior
written consent, commit to any divestiture transaction, and neither
Parent nor any of its Affiliates shall be required to divest or hold
separate or otherwise take or commit to take any action that limits its
freedom of action with respect to, or its ability to retain, the
Company or any of the businesses, product lines or assets of Parent or
any of its Subsidiaries or that otherwise would have a Material Adverse
Effect on Parent.
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(e) SEC Documents. From the date hereof through the
Closing Date, Parent and the Company shall have filed all documents
required to be filed with the SEC on or prior to the Closing Date.
Section 5.12 Public Announcements. Parent, Sub and the Company
will not issue any press release with respect to the transactions contemplated
by this Agreement or otherwise issue any written public statements with respect
to such transactions without prior consultation with the other party. If such a
press release or written public statement is required by applicable law or by
obligations pursuant to any listing agreement with or rules of any national
securities exchange, each party agrees to consult with the other party regarding
the form and content of such release or statement prior to issuance thereof.
Section 5.13 State Takeover Laws. If any "fair price,"
"business combination" or "control share acquisition" statute or other similar
statute or regulation shall become applicable to the transactions contemplated
hereby, Parent and the Company and their respective Boards of Directors shall
use their commercially reasonable efforts to grant such approvals and take such
actions as are necessary so that the transactions contemplated hereby and
thereby may be consummated as promptly as practicable on the terms contemplated
hereby and thereby and otherwise act to minimize the effects of any such statute
or regulation on the transactions contemplated hereby and thereby.
Section 5.14 Indemnification; Directors and Officers
Insurance.
(a) Company Officers and Directors. From and after the
Effective Time, Parent shall cause the Surviving Corporation to
indemnify and hold harmless all past and present officers and directors
of the Company and of its Subsidiaries to the same extent and in the
same manner such persons are indemnified as of the date of this
Agreement by the Company pursuant to the CBCA, the Company Charter, the
Company's By-laws and in any agreement with the Company listed on
Section 5.14 of the Company Letter for acts or omissions occurring at
or prior to the Effective Time (including indemnifying and holding
harmless such persons for acts or omissions occurring at or prior to
the Effective Time in respect of the Merger and the transactions
contemplated thereby).
(b) D&O Insurance. Parent shall cause the Surviving
Corporation to provide, for an aggregate period of not less than six
(6) years from the Effective Time, the Company's current directors and
officers an insurance and indemnification policy that provides coverage
for events occurring prior to the Effective Time (the "D&O Insurance")
that is substantially similar to the Company's existing policy at the
Effective Time or, if substantially equivalent insurance coverage is
unavailable, the best available coverage.
Section 5.15 Notification of Certain Matters. Parent shall use
its commercially reasonable efforts to give prompt notice to the Company, and
the Company shall use its commercially reasonable efforts to give prompt notice
to Parent, of: (i) the occurrence, or non-occurrence, of any condition or event
the occurrence, or non-occurrence, of which it is aware and which would be
reasonably likely (x) to cause any representation or warranty
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<PAGE> 120
contained in this Agreement and made by it to be untrue or inaccurate in any
material respect, (y) any covenant, condition or agreement contained in this
Agreement and made by it not to be complied with or satisfied in all material
respects, (ii) to cause any failure of Parent or the Company, as the case may
be, to comply in a timely manner with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder, or (z) to prevent
the consummation of the Merger and other transactions contemplated hereby; (iii)
any change or event which would be reasonably likely to have a Material Adverse
Effect on Parent or the Company, as the case may be; provided, however, that the
delivery of any notice pursuant to this Section 5.15 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
Section 5.16 Repayment/Conversion of Controlling Shareholder
Loan. Immediately prior to the Effective Time, the Company shall repay or
convert the Controlling Shareholder Loan in full (including accrued interest)
with or into that number of shares of Company Common Stock equal to the quotient
of (i) the aggregate outstanding amount of the Controlling Shareholder Loan
(including accrued interest), divided by (ii) $2.50, which shares of Company
Common Stock shall be converted, at the Effective Time, into the right to
receive the Merger Consideration pursuant to Section 1.5 hereof.
Section 5.17 Escrow of Funds and Shares by Parent.
(a) Deposit. Not later than four business days after
the execution of this Agreement and pursuant to the Exchange Agreement,
Parent shall deposit into escrow that number of shares of Parent Common
Stock sufficient to purchase newly issued shares of Company Common
Stock (the "Company Exchange Shares") equal to 19.9% of the shares of
Company Common Stock (excluding the shares of Company Common Stock
contemplated to be issued pursuant to the terms of the Exchange
Agreement) outstanding on the date hereof at a per share price of 0.715
shares of Parent Common Stock.
(b) Disposition of Company Exchange Shares. The terms
and conditions regarding the release or exchange of the Parent Common
Stock held in escrow and the Company Exchange Shares are set forth in
the Exchange Agreement.
(c) Voting and Transfer. The rights and obligations of
Parent and the Company with respect to voting or transferring any
Company Exchange Shares or Parent Common Stock received by Parent or
the Company, as applicable, under this Section 5.17 are set forth in
the Exchange Agreement.
Section 5.18 Controlling Shareholder Warrant Agreement. At the
Closing, Parent shall deliver to the Controlling Shareholder the Controlling
Shareholder Warrant Agreement, duly executed by Parent, which Controlling
Shareholder Warrant Agreement shall provide for the issuance to the Controlling
Shareholder of the Controlling Shareholder Warrant.
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ARTICLE 6
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect
the Merger. The respective obligations of each party to effect the Merger shall
be subject to the fulfillment at or prior to the Effective Time of each of the
following conditions:
(a) Shareholder Approval. This Agreement shall have
been duly approved by the requisite vote of (i) the shareholders of the
Company in accordance with applicable law, the Company Charter and the
Company's Bylaws and (ii) the shareholders of Parent in accordance with
applicable law, the Certificate of Incorporation of Parent and Parent's
By-laws.
(b) Stock Listing. The Parent Common Stock issuable in
the Merger (including the shares of Parent Common Stock issuable upon
exercise of the Parent Warrants and the Controlling Shareholder
Warrant) and not previously listed shall have been authorized for
listing on the Nasdaq National Market, subject to official notice of
issuance.
(c) HSR and Other Approvals/Consents or Waivers. The
waiting period (and any extension thereof) applicable, if any, to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
(d) Consents. All authorizations, consents, orders,
declarations or approvals of, or filings with, or terminations or
expirations of waiting periods imposed by any Governmental Entity or
any other third party, shall have been obtained, shall have been made
or shall have occurred.
(e) Registration Statement. The Registration Statement
shall have become effective in accordance with the provisions of the
Securities Act. No stop order suspending the effectiveness of the
Registration Statement shall have been issued by the SEC and no
proceedings for that purpose shall have been initiated or, to the
Knowledge of Parent or the Company, threatened by the SEC. All
necessary state securities or blue sky authorizations shall have been
received.
(f) No Order. No court or other Governmental Entity
having jurisdiction over the Company or Parent, or any of their
respective Subsidiaries, shall have enacted, issued, promulgated,
enforced or entered any law, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent)
which is then in effect and has the effect of, directly or indirectly,
restraining, prohibiting or restricting the Merger or any of the
transactions contemplated hereby; provided, however, that the
provisions of this Section 6.1(f) shall not be available to any party
whose failure to fulfill its obligations pursuant to Section 5.11 shall
have been the cause of, or shall have resulted in, the enforcement or
entering into of any such law, rule, regulation, executive order,
decree, injunction or other order.
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<PAGE> 122
Section 6.2 Conditions to Obligation of the Company to Effect
the Merger. The obligation of the Company to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of each of the following
additional conditions:
(a) Performance of Obligations; Representations and
Warranties. (i) Each of Parent and Sub shall have performed in all
material respects each of its agreements and covenants contained in
this Agreement required to be performed on or prior to the Effective
Time, (ii) each of the representations and warranties of Parent and Sub
contained in this Agreement that is qualified by materiality shall have
been true and correct when made, and shall be true and correct on and
as of the Effective Time as if made on and as of such date (other than
representations and warranties which address matters only as of a
certain date which shall be true and correct as of such certain date)
and (iii) each of the representations and warranties that is not so
qualified shall have been true and correct in all material respects
when made, and shall be true and correct in all material respects on
and as of the Effective Time as if made on and as of such date (other
than representations and warranties which address matters only as of a
certain date which shall be true and correct in all material respects
as of such certain date), in each case except as contemplated or
permitted by this Agreement, and the Company shall have received
certificates signed on behalf of each of Parent and Sub by one of its
officers to such effect.
(b) Material Adverse Change. Since the date of this
Agreement, there shall have been no Material Adverse Change with
respect to Parent. The Company shall have received a certificate signed
on behalf of Parent by an officer of Parent to such effect.
(c) Consents.
(i) Each of Parent and Sub shall have
obtained the consent or approval of each person or
Governmental Entity whose consent or approval shall be
required in connection with the transactions contemplated
hereby under any loan or credit agreement, note, mortgage,
indenture, lease or other agreement or instrument; and
(ii) In obtaining any approval or consent
required to consummate any of the transactions contemplated
herein, no Governmental Entity shall have imposed or shall
have sought to impose any condition, penalty or requirement.
(d) Fairness Opinion. The fairness opinion described
in Section 3.15 shall not have been adversely modified or withdrawn
prior to the Effective Time.
(e) Parent Warrants. At the Closing, Parent shall have
delivered to the Exchange Agent for the benefit of each Company
shareholder, other than the Controlling Shareholder or any director of
the Company, one Parent Warrant for each share of Company Common Stock
held by each such Company shareholder immediately prior to
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<PAGE> 123
the Effective Time, which Parent Warrants shall be governed by and
subject to the terms and conditions of the Warrant Agreement.
(f) Controlling Shareholder Warrant. At the Closing,
Parent shall have delivered to the Controlling Shareholder the
Controlling Shareholder Warrant, which Controlling Shareholder Warrant
shall be governed by and subject to the terms and conditions of the
Controlling Shareholder Warrant Agreement.
(g) Rollover Warrants. At the Closing, Parent shall
have delivered to Neidiger Tucker Bruner, Inc. the Rollover Warrants,
which Rollover Warrants shall be governed by and subject to the terms
and conditions of the NTB Warrant Agreement.
(h) Board Approval. The Board of Directors of the
Company shall be satisfied in its reasonable discretion that, based
upon the price per share of the Parent Common Stock on the Nasdaq
National Market, the merger is in the best interests of the Company's
shareholders.
Section 6.3 Conditions to Obligations of Parent and Sub to
Effect the Merger. The obligations of Parent and Sub to effect the Merger shall
be subject to the fulfillment at or prior to the Effective Time of each of the
following additional conditions:
(a) Performance of Obligations; Representations and
Warranties. The Company and the Controlling Shareholder shall have
performed in all material respects each of its covenants and agreements
contained in this Agreement required to be performed on or prior to the
Effective Time. Each of the representations and warranties of the
Company contained in this Agreement that is qualified by materiality
shall have been true and correct when made, and shall be true and
correct on and as of the Effective Time as if made on and as of such
date (other than representations and warranties which address matters
only as of a certain date which shall be true and correct as of such
certain date), and each of the representations and warranties that is
not so qualified shall have been true and correct in all material
respects when made, and shall be true and correct in all material
respects on and as of the Effective Time as if made on and as of such
date (other than representations and warranties which address matters
only as of a certain date which shall be true and correct in all
material respects as of such certain date), in each case except as
contemplated or permitted by this Agreement. Parent shall have received
a certificate signed on behalf of the Company by one of its officers to
such effect.
(b) Consents.
(i) The Company shall have obtained the
consent or approval of each person or Governmental Entity
whose consent or approval shall be required in connection with
the transactions contemplated hereby under any loan or credit
agreement, note, mortgage, indenture, lease or other agreement
or instrument; and
(ii) In obtaining any approval or consent
required to consummate any of the transactions contemplated
herein, no Governmental Entity
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<PAGE> 124
shall have imposed or shall have sought to impose any
condition, penalty or requirement.
(c) Affiliate Agreements. Parent shall have received
the written agreements from Rule 145 Affiliates of the Company
described in Section 5.4.
(d) Material Adverse Change. Since the date of this
Agreement, there shall have been no Material Adverse Change with
respect to the Company. Parent shall have received a certificate signed
on behalf of the Company by one of its officers to such effect.
(e) Company Stock Plans; Preferred Stock. The Company
shall have taken all action required to be taken by it to implement the
provisions of Section 5.7. All preferred stock, warrants, options or
other securities convertible into capital stock of the Company shall
either have been converted into Company Common Stock prior to or at the
Effective Time, or shall have been otherwise cancelled, exchanged or
converted as provided in Section 5.7.
(f) Director and Officer Resignations. All of the
Directors of the Company and its Subsidiaries and any officers thereof
designated by Parent, shall have tendered their resignation in form and
substance satisfactory to Parent.
(g) Commitments. At Closing, the Company shall not be
obligated under any volume purchase commitments or minimum traffic
volume commitments pursuant to any carrier agreements binding the
Company, other than agreements listed in Section 6.3(g) of the Company
Letter.
(h) Balloon Payments. At Closing, the Company shall
not be obligated under any balloon or other extraordinary payments due
or payable (or paid) by the Company, Parent or Sub as severance,
change-of-control or other "parachute" provisions.
(i) Limit on Dissenters. As of the Effective Time,
Parent shall have confirmed that the holders of shares representing no
more than 300,000 shares of outstanding Company Common Stock have
provided notice of their intent to exercise dissenter's rights under
the CBCA prior to the Effective Time.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated at
any time prior to the Effective Time, whether before or after any approval of
the matters presented in connection with the Merger by the shareholders of the
Company only in the following manner and upon the following events:
(a) by either Parent or Company:
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<PAGE> 125
(i) if both of Parent and the Company
mutually consent in writing to such termination; or
(ii) if: (A) the Merger has not been
effected on or prior to the close of business on November 30,
2000 (the "Termination Date"); provided, however, that the
right to terminate this Agreement pursuant to this Section
7.1(a)(ii) shall not be available to any party whose failure
to fulfill any of its obligations contained in this Agreement
has been the cause of, or resulted in, the failure of the
Merger to have occurred on or prior to the aforesaid date; or
(B) any court or other Governmental Entity having jurisdiction
over a party hereto shall have issued an order, decree or
ruling or taken any other action (which order, decree, ruling
or other action the parties shall have used their commercially
reasonable efforts to resist, resolve or lift, as applicable,
subject to the provisions of Section 5.11) permanently
enjoining, restraining or otherwise prohibiting the
transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and
nonappealable; and
(b) by Parent:
(i) if the Company or the Controlling
Shareholder shall have failed to comply in any material
respect with any of either of their covenants or agreements
contained in this Agreement required to be complied with prior
to the date of such termination, which failure to comply has
not been cured within ten (10) business days following receipt
by such other party of written notice of such failure to
comply, or such shorter period as may otherwise be specified
herein;
(ii) if there has been a breach of a
representation, warranty, covenant or obligation of the
Company or the Controlling Shareholder that gives rise to a
failure of the fulfillment of a condition of Parent's and
Sub's obligations to effect the Merger pursuant to Section
6.3(a), including the failure of the Controlling Shareholder
to make the Controlling Shareholder Loan up to and including
the Maximum Amount on an ongoing basis to fund the Working
Capital Needs of the Company prior to Closing, in accordance
with Section 4.8(b), which breach has not been cured within
ten (10) business days following receipt by the Company of
written notice of the breach;
(iii) if the shareholders of the Company do
not approve this Agreement at the Company Shareholder Meeting
or at any adjournment or postponement thereof; or
(iv) if (A) the Board of Directors of the
Company shall not have recommended, or shall have resolved not
to recommend, or shall have qualified, changed, modified or
withdrawn its recommendation of the Merger or declaration that
the Merger is advisable and fair to and in the best interest
of the Company and its shareholders, or shall have resolved to
do so, (B) the Board of Directors of the Company, shall have
recommended to the shareholders of the Company any Takeover
Proposal or shall have resolved to do so or (C) a tender offer
or
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<PAGE> 126
exchange offer for 20% or more of the outstanding stocks of
capital stock of the Company is commenced by a third party
that is not an Affiliate of Parent, and the Board of Directors
of the Company fails to recommend against acceptance of such
tender offer or exchange offer by its shareholders (including
by taking no position with respect to the acceptance of such
tender offer or exchange offer by its shareholders); and
(c) by the Company:
(i) if either Parent or Sub shall have
failed to comply in any material respect with any of its
covenants or agreements contained in this Agreement required
to be complied with prior to the date of such termination,
which failure to comply has not been cured within ten (10)
business days following receipt by such other party of written
notice of such failure to comply; provided, however, that
neither Parent nor Sub shall be entitled to any cure period
for failure to comply in any material respect with its
obligations set forth in Section 5.17 hereof;
(ii) if there has been a breach of a
representation, warranty, covenant or obligation of either
Parent or Sub that gives rise to a failure of the fulfillment
of a condition of the Company's obligations to effect the
Merger pursuant to Section 6.2(a), which breach has not been
cured within ten business days following receipt by Parent of
written notice of the breach; or
(iii) if the shareholders of Parent do not
approve this Agreement at the Parent Shareholder Meeting or at
any adjournment or postponement thereof.
The right of any party hereto to terminate this Agreement
pursuant to this Section 7.1 shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any party hereto, any
person controlling any such party or any of their respective officers or
directors, whether prior to or after the execution of this Agreement.
Section 7.2 Effect of Termination. In the event of termination
of this Agreement by either Parent or the Company as provided in Section 7.1,
this Agreement shall forthwith become void and there shall be no liability
hereunder on the part of the Company, Parent, Sub or their respective officers
or directors (except for the last sentence of Section 5.3, the entirety of
Section 5.6 and the entirety of Section 5.17, which shall survive the
termination); provided, however, that nothing contained in this Section 7.2
shall relieve any party hereto from any liability for any willful breach of a
representation or warranty contained in this Agreement or the willful breach of
any covenant contained in this Agreement.
Section 7.3 Amendment. This Agreement may be amended by the
parties hereto, by or pursuant to action taken by their respective Boards of
Directors, at any time before or after approval of the matters presented in
connection with the Merger by the shareholders of the Company or Parent, but,
after any such approval, no amendment shall be made which by law or the rules of
the Nasdaq National Market, with respect to Parent, or the rules of the Nasdaq
Small Cap Market, with respect to the Company, requires further approval by such
shareholders
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<PAGE> 127
without such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
Section 7.4 Waiver. At any time prior to the Effective Time,
the parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein which may legally be waived. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party. No delay on the part of any party hereto in exercising any right, power
or privilege hereunder shall operate as a waiver thereof, nor shall any waiver
on the part of any party hereto of any right, power or privilege hereunder
operate as a waiver of any other right, power or privilege hereunder, nor shall
any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder. Unless otherwise provided, the rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies which the parties hereto may otherwise have at law or in equity. The
failure of any party to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of those rights.
ARTICLE 8
GENERAL PROVISIONS
Section 8.1 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given when delivered
personally, one day after being delivered to an overnight courier to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) Parent or Sub. If to Parent or Sub, to:
RMI.NET, Inc.
988 18th Street, Suite 2201
Denver, Colorado 80202
Attention: Chris J. Melcher, Vice President and
General Counsel
with a copy to:
Perkins Coie LLP
1899 Wynkoop Street
Suite 700
Denver, Colorado 80202
Attention: Neil M. Goff, Esq.
Brownstein, Hyatt & Farber, P.C.
410 17th Street, 22nd Floor
Denver, Colorado 80202
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Attention: Jeffrey M. Knetsch, Esq.
(b) Company. If to the Company, to:
Internet Communications Corporation
7100 East Belleview Avenue
Greenwood Village, Colorado 80111
with a copy to:
Hogan & Hartson L.L.P.
One Tabor Center
1200 Seventeenth Street, Suite 1500
Denver, Colorado 80202
Attention: Steven A. Cohen, Esq.
Section 8.2 Interpretation.
(a) Headings. When a reference is made in this
Agreement to a Section, such reference shall be to a Section of this
Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the
words "without limitation."
(b) "Subsidiary(ies)" means any corporation,
partnership, limited liability company, joint venture or other legal
entity of which Parent or Company, as the case may be (either alone or
through or together with any other Subsidiary), owns or controls,
directly or indirectly, 50% or more of the stock or other equity
interests the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such
corporation, partnership, limited liability company, joint venture or
other legal entity.
Section 8.3 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 8.4 Entire Agreement; No Third-Party Beneficiaries.
This Agreement and the Exhibits attached hereto and executed in connection
herewith constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof. This Agreement is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
Section 8.5 Governing Law. This Agreement shall be governed
by, and construed in accordance with, the internal laws of the State of
Colorado, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
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Section 8.6 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors or assigns.
Section 8.7 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other terms, conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic and legal substance of the transactions contemplated hereby are not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as possible in a
mutually acceptable manner in order that the transactions contemplated by this
Agreement may be consummated as originally contemplated to the fullest extent
possible.
Section 8.8 Enforcement of this Agreement. The parties hereto
agree that irreparable damage would occur if any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties hereto shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof such remedy being in
addition to any other remedy to which any party is entitled at law or in equity.
Each party hereto irrevocably submits to the exclusive jurisdiction of the
United States District Court for Colorado. Each party hereto waives any
objection based on forum non conveniens or any other objection to venue thereof.
Section 8.9 Defined Terms. Each of the following terms is
defined in the Section identified below:
<TABLE>
<S> <C>
Agreement..............................................................Preamble
Articles of Merger..................................................Section 1.2
Blue Sky Laws.......................................................Section 2.4
CBCA................................................................Section 1.1
Certificates.....................................................Section 1.6(b)
Closing............................................................Section 1.15
Closing Date.......................................................Section 1.15
Code...................................................................Recitals
Company................................................................Preamble
Company Charter.....................................................Section 3.4
Company Common Stock.............................................Section 1.5(c)
Company Dissenting Shares.......................................Section 1.13(a)
Company Employees..................................................Section 3.13
Company Exchange Shares............................................Section 5.17
Company Foreign Benefit Plan....................................Section 3.11(f)
Company Intellectual Property......................................Section 3.14
Company Letter...................................................Section 3.2(a)
</TABLE>
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<PAGE> 130
<TABLE>
<S> <C>
Company Licenses...................................................Section 3.14
Company Permits.....................................................Section 3.7
Company Plan....................................................Section 3.11(c)
Company Preferred Stock..........................................Section 3.2(a)
Company Printing and Filing Fees..............................Section 5.6(b)(i)
Company SEC Documents...............................................Section 3.5
Company Shareholder Meeting......................................Section 5.1(a)
Company Significant Contracts...................................Section 3.10(b)
Company Stock Purchase Plan......................................Section 3.2(a)
Company Stock Option Plans.......................................Section 3.2(a)
Company Stock Options............................................Section 3.2(b)
Company Stock Plans..............................................Section 3.2(a)
Company Third Party..............................................Section 4.3(a)
Company Transactional Costs......................................Section 5.6(a)
Compensation Agreements.........................................Section 3.10(a)
Confidentiality Agreement...........................................Section 5.3
Constituent Corporations...............................................Preamble
Controlling Shareholder................................................Recitals
Controlling Shareholder Loan........................................Section 4.8
Controlling Shareholder Warrant..................................Section 1.5(c)
Controlling Shareholder Warrant Agreement........................Section 1.5(c)
Current Company Preferred Stock..................................Section 3.2(a)
Data Compensation Pool.......................................Section 4.1(a)(ix)
D&O Insurance...................................................Section 5.14(b)
Effective Time......................................................Section 1.2
Environmental Law...............................................Section 2.14(a)
Environmental Permit............................................Section 2.14(a)
ERISA..............................................................Section 3.11
Exchange Act........................................................Section 2.4
Exchange Agent...................................................Section 1.6(a)
Exchange Agreement....................................................Recital D
Exchange Fund....................................................Section 1.6(a)
FCC.................................................Section 2.4 and Section 2.9
Governmental Entity.................................................Section 2.4
Hazardous Substances............................................Section 2.14(a)
HSR Act.............................................................Section 2.4
IRS................................................................Section 2.10
Knowledge of the Company............................................Section 3.7
Knowledge of Parent.................................................Section 2.9
Material Adverse Change................................Section 2.1, Section 3.1
Material Adverse Effect................................Section 2.1, Section 3.1
Maximum Amount......................................................Section 4.8
Merger.................................................................Recitals
Merger Consideration.............................................Section 1.5(c)
NASD................................................................Section 2.4
Norwest.............................................................Section 4.8
</TABLE>
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<TABLE>
<S> <C>
NTB Warrant Agreements...........................................Section 5.7(b)
NTB Warrants.....................................................Section 1.6(f)
Operations Observer................................................Section 4.10
Original Agreement.....................................................Recitals
Original Exchange Agreement............................................Recitals
Original Shareholder Agreement.........................................Recitals
Parent.................................................................Preamble
Parent Common Stock..............................................Section 1.5(c)
Parent Intellectual Property.......................................Section 2.13
Parent Letter....................................................Section 2.2(b)
Parent Permits......................................................Section 2.9
Parent Plan........................................................Section 2.11
Parent Preferred Stock...........................................Section 2.2(a)
Parent Printing and Filing Fees...............................Section 5.6(b)(i)
Parent SEC Documents................................................Section 2.6
Parent Shareholder Meeting.......................................Section 5.1(b)
Parent Stock Option Plans........................................Section 2.2(a)
Parent Stock Options.............................................Section 2.2(b)
Parent Transactional Costs.......................................Section 5.6(a)
Parent Warrants.....................................................Section 5.9
Parental Notice..................................................Section 4.2(b)
Prohibited Action................................................Section 4.2(b)
Proxy Statement..................................................Section 5.2(c)
Real Estate.....................................................Section 3.22(b)
Registration Statement..............................................Section 2.3
Reorganization.........................................................Recitals
Rollover Warrants................................................Section 5.7(b)
Rule 145 Affiliates.................................................Section 5.4
SEC.................................................................Section 2.3
Securities Act......................................................Section 2.3
Shareholder Agreement..................................................Recitals
State Takeover Approvals............................................Section 2.4
Sub....................................................................Preamble
Subsidiary(ies)..................................................Section 8.2(b)
Superior Transaction.............................................Section 4.3(c)
Surviving Corporation...............................................Section 1.1
Takeover Proposal................................................Section 4.3(a)
Tax Return.........................................................Section 2.10
Taxes..............................................................Section 2.10
Termination Date.............................................Section 7.1(a)(ii)
Third Party Debt....................................................Section 4.8
Trade Payables......................................................Section 4.8
Voice Compensation Pool......................................Section 4.1(a)(ix)
Warrant Agreement...................................................Section 5.9
Working Capital Needs...............................................Section 4.8
</TABLE>
59
<PAGE> 132
IN WITNESS WHEREOF, Parent, Sub and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized all as of the date first above written.
RMI.NET, INC., a Delaware Corporation
By: /s/ DOUGLAS HANSON
----------------------------------
Name: Douglas Hanson
--------------------------------
Title: Cheif Executive Officer and
-------------------------------
President
---------
INTERNET ACQUISITION CORPORATION,
a Colorado Corporation
By: /s/ CHRISTOPHER MELCHER
----------------------------------
Name: Christopher Melcher
--------------------------------
Title: Vice President and General
-------------------------------
President
---------
INTERNET COMMUNICATIONS
CORPORATION, a Colorado Corporation
By: /s/ THOMAS GOLLEY
----------------------------------
Name: Thomas Golley
--------------------------------
Title: Cheif Executive Officer and
-------------------------------
President
---------
60
<PAGE> 133
The Controlling Shareholder is agreeing to execute this Agreement and the
Shareholder Agreement to evidence its unconditional and irrevocable obligation
to be bound solely by the provisions of the Shareholder Agreement and Section
4.8, Section 5.8, and Section 5.16 hereof.
INTERWEST GROUP, INC., a Colorado
Corporation
By: /s/ CLIFFORD HICKEY
----------------------------------
Name: Clifford Hickey
--------------------------------
Title:
-------------------------------
61
<PAGE> 134
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
A Amended and Restated Shareholder Agreement
B Amended and Restated Exchange Agreement
C Rule 145 Letters
D Warrant Agreement
E Controlling Shareholder Warrant Agreement
F NTB Warrant Agreements
</TABLE>
62
<PAGE> 135
EXHIBIT A
AMENDED AND RESTATED SHAREHOLDER AGREEMENT
SEE ATTACHED.
<PAGE> 136
EXHIBIT B
AMENDED AND RESTATED EXCHANGE AGREEMENT
SEE ATTACHED.
<PAGE> 137
EXHIBIT C
RULE 145 LETTERS
SEE ATTACHED.
<PAGE> 138
EXHIBIT D
WARRANT AGREEMENT
SEE ATTACHED.
<PAGE> 139
EXHIBIT E
CONTROLLING SHAREHOLDER WARRANT AGREEMENT
SEE ATTACHED.
<PAGE> 140
EXHIBIT F
NTB WARRANT AGREEMENTS
SEE ATTACHED.
<PAGE> 141
APPENDIX B
FORM OF WARRANT AGREEMENT
Warrant Agreement, dated as of _________________________, 2000 (this
"Agreement"), between RMI.NET, INC., a Delaware corporation (the "Company"), and
Computershare Trust Company, as warrant agent (the "Warrant Agent").
RECITALS
WHEREAS, the Company proposes to issue and deliver warrant certificates
(the "Warrant Certificates") evidencing warrants (the "Warrants") to purchase up
to an aggregate of [__________] shares of its Common Stock (as hereinafter
defined) to holders (the "Warrant Recipients") of the common stock, no par value
per share ("INCC Common Stock"), of Internet Communications Corporation, a
Colorado corporation ("INCC"), in connection with the consummation of the merger
contemplated by the Amended and Restated Agreement and Plan of Merger, dated as
of October 18, 2000 (the "Merger Agreement"), by and among the Company, INCC and
Internet Acquisition Corporation, a Delaware corporation and a wholly-owned
subsidiary of the Company ("IAC"); and
WHEREAS, each Warrant will entitle the registered holder thereof to
purchase one fully paid and non-assessable share of Common Stock of the Company,
par value $0.001 per share (the "Common Stock"), at a purchase price per share
equal to the Exercise Price (as hereinafter defined).
AGREEMENT
In consideration of the foregoing and for the purpose of defining the
terms and provisions of the Warrants and the respective rights and obligations
thereunder of the Company and the Holders (as hereinafter defined), the Company
and the Warrant Agent each agree as follows:
Section 1. Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
"Affiliate" shall have the meaning given to such term in Rule 12b-2
promulgated under the Securities and Exchange Act of 1934, as amended.
"Agreement" shall have the meaning set forth in the Preamble.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in Denver, Colorado or New York, New York are authorized
by law to close.
"Call Price" means a price per Warrant Share equal to $8.00.
"Call Trigger Event" means any date prior to the Termination Date after
which the daily closing prices per share of Common Stock on NASDAQ for each of
the five (5) consecutive trading days prior thereto is greater than or equal to
the Call Price.
<PAGE> 142
"Certificate of Incorporation" means the Certificate of Incorporation
of the Company.
"Closing Price" on any day means (i) if the shares of Common Stock then
are listed and traded on the NYSE, the Closing Price on such day as reported on
the NYSE Composite Transactions Tape; (ii) if shares of Common Stock then are
not listed and traded on the NYSE, the Closing Price on such day as reported by
the principal national securities exchange on which the shares of Common Stock
are listed and traded; (iii) if the shares of Common Stock then are not listed
and traded on any such securities exchange, the last reported sale price on such
day on the NASDAQ; or (iv) if the shares of Common Stock then are not traded on
the NASDAQ, the average of the highest reported bid and the lowest reported
asked price on such day as reported by the NASDAQ Quotation System.
"Common Share Equivalent" means, with respect to any security of the
Company and as of a given date, a number which is, (i) in the case of a share of
Common Stock, one, (ii) in the case of all or a portion of any right, warrant or
other security which may be exercised for a share or shares of Common Stock, the
number of shares of Common Stock receivable upon exercise of such security (or
such portion of such security), and (iii) in the case of any security
convertible or exchangeable into a share or shares of Common Stock, the number
of shares of Common Stock that would be received if such security were converted
or exchanged on such date.
"Common Stock" shall have the meaning set forth in the Recitals to this
Agreement.
"Company" shall have the meaning set forth in the Preamble to this
Agreement.
"Convertible Securities" shall have the meaning set forth in Section
8(d).
"Determination Date" shall have the meaning set forth in Section 8(f).
"Effective Time" means the date of the filing of a certificate of
merger with the Secretary of State of the State of Delaware in connection with
the merger of IAC with and into INCC pursuant to the Merger Agreement.
"Exercise Date" shall mean, as to any Warrants, the date on which the
Warrant Agent shall have received both (a) the Warrant Certificate representing
such Warrants, with the Exercise Forms therein duly executed by the Holder
thereof or his attorney duly authorized in writing, and (b) payment in cash
(including wire transfer of immediately available funds) or by certified or
official bank check or bank cashier's check payable to the Company, of an amount
in lawful money of the United States of America equal to the applicable Exercise
Price (as hereinafter defined).
"Exercise Price" means a price per Warrant Share equal to $7.00,
subject to adjustment from time to time pursuant to Section 8.
"Expiration Date" means 5:00 p.m. New York City time on [__________],
2002. [Insert date that is the second anniversary of the Closing Date].
2
<PAGE> 143
"Fair Market Value" as at any date of determination means, as to shares
of the Common Stock, if the Common Stock is publicly traded at such time, the
average of the daily Closing Prices of a share of Common Stock for the five (5)
consecutive trading days ending on the most recent trading day prior to the date
of determination. If the shares of Common Stock are not publicly traded at such
time, and as to all things other than the Common Stock, Fair Market Value shall
be determined in good faith by an independent nationally recognized investment
banking firm selected by the Company and acceptable to a majority of the Holders
and which shall have no other substantial relationship with the Company.
"Holder" means, with respect to any Warrant Certificate, the Person in
whose name such Warrant Certificate is registered upon the books to be
maintained by the Warrant Agent pursuant to Section 3.
"IAC" shall have the meaning set forth in the Recitals to this
Agreement.
"INCC" shall have the meaning set forth in the Recitals to this
Agreement.
"INCC Common Stock" shall have the meaning set forth in the Recitals to
this Agreement.
"Merger Agreement" shall have the meaning set forth in the first
Recital to this Agreement.
"NASDAQ" means the Nasdaq Stock Market, National Market System.
"NYSE" means The New York Stock Exchange, Inc.
"Options" shall have the meaning set forth in Section 8(d).
"Person" means an individual, partnership, corporation, limited
liability company, trust, joint stock company, association, joint venture, or
any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Register" shall have the meaning set forth in Section 3(a) of this
Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which a majority of the capital stock or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by such Person.
"Termination Date" shall have the meaning set forth in Section 20 of
this Agreement.
3
<PAGE> 144
"Warrant Agent" shall have the meaning set forth in the Preamble to
this Agreement or the successor or successors of such Warrant Agent duly
appointed in accordance with the terms hereof.
"Warrant Certificates" shall have the meaning set forth in the Recitals
to this Agreement.
"Warrant Recipients" shall have the meaning set forth in the Recitals
to this Agreement.
"Warrant Shares" means the shares of Common Stock deliverable upon
exercise of the Warrants, as adjusted from time to time.
"Warrants" shall have the meaning set forth in the Recitals to this
Agreement.
Section 2. The Warrant Certificates. (a) Upon issuance, each Warrant
Certificate shall evidence one or more Warrants. The Warrant Certificates shall
be in registered form only and substantially in the form attached hereto as
Exhibit A. The Warrant Certificates shall be dated the date on which they are
countersigned by the Warrant Agent and may have such legends and endorsements
typed, stamped, printed, lithographed or engraved thereon as the Company may
deem appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with applicable laws, rules or
regulations including any rule or regulation of any securities exchange on which
the Warrants may be listed.
(b) Warrant Certificates substantially in the form of Exhibit
A hereto and evidencing Warrants to purchase an aggregate of up to [_________]
shares of Common Stock (subject to adjustment pursuant to Sections 8 and 9)
shall be executed, on or after the date of this Agreement, by the Company and
delivered to the Warrant Agent for countersignature, and the Warrant Agent shall
thereupon countersign and deliver such Warrant Certificates upon the order and
at the direction of the Company. The names and addresses of the Warrant
Recipients shall be specified by the Company pursuant to a list of Warrant
Recipients provided to the Warrant Agent by the Company, which shall consist of
the names of those Persons who were stockholders of record of INCC (excluding
however Interwest Group, Inc., a Colorado corporation ("Interwest"), any
affiliate thereof and any director of INCC) as of the Effective Time (as defined
in the Merger Agreement) , subject only to the elimination of the names of (i)
any such Persons as are entitled to receive only a payment in lieu of a
fractional Warrant in accordance with the terms of this Agreement and (ii) any
such Persons who have perfected their right to have the fair value of their
shares of INCC Common Stock judicially appraised and paid to them in cash. The
Warrant Agent is hereby authorized to countersign and deliver Warrant
Certificates as required by this Section 2(b) or by Section 3(b), 4(f) or 6
hereof. The Warrant Certificates shall be executed on behalf of the Company by
any of its duly authorized officers, either manually or by facsimile signature
printed thereon, and shall be dated the date of issuance. The Warrant Agent
shall countersign the Warrant Certificates either manually or by facsimile
signature printed thereon, and the Warrant Certificates shall not be valid for
any purpose until so countersigned. In case any duly authorized officer of the
Company whose signature shall have been placed upon any of the Warrant
Certificates shall cease to be such officer of the Company
4
<PAGE> 145
before countersignature by the Warrant Agent and issue and delivery thereof,
such Warrant Certificates may, nevertheless, be countersigned by the Warrant
Agent and issued and delivered with the same force and effect as though such
person had not ceased to be such officer of the Company.
Section 3. Registration, Exchange and Transfer of Warrants. (a) The
Warrant Agent shall keep at the principal corporate trust office of the Warrant
Agent, specified in or pursuant to Section 4(d), a register (the "Register") in
which, subject to such regulations as the Company may reasonably prescribe, the
Warrant Agent shall provide for the registration of Warrant Certificates and of
transfers or exchanges of Warrant Certificates as herein provided.
(b) At the option of the Holder, Warrant Certificates may be
exchanged at such office and upon payment of the charges hereinafter provided.
Whenever any Warrant Certificates are so surrendered for exchange, the Company
shall execute, and the Warrant Agent shall countersign and deliver, the Warrant
Certificates that the Holder making the exchange is entitled to receive;
provided, however, that the Company shall not be required to issue and deliver
Warrant Certificates representing fractional warrants.
(c) Each Warrant Certificate issued upon any registration of
transfer or exchange of Warrant Certificates shall be the valid obligation of
the Company, evidencing the same obligations, and entitled to the same benefits
under this Agreement as the Warrant Certificates surrendered for such
registration of transfer or exchange.
(d) Each Warrant Certificate surrendered for registration of
transfer or exchange shall (if so required by the Company or the Warrant Agent)
be duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Warrant Agent, duly executed by the Holder
thereof or his attorney duly authorized in writing.
(e) No service charge shall be made for any registration of
transfer or exchange of Warrant Certificates. The Company may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of Warrant
Certificates.
(f) Each Warrant Certificate when duly endorsed in blank shall
be negotiable and when a Warrant Certificate shall have been so endorsed, the
Holder thereof may be treated by the Company, the Warrant Agent and all other
persons dealing therewith as the sole and absolute owner thereof for any purpose
and as the person solely entitled to exercise the rights represented thereby or
to request the Warrant Agent to record the transfer thereof on the Register any
notice to the contrary notwithstanding; but until such transfer on such
Register, the Company and the Warrant Agent may treat the Holder thereof as the
owner for all purposes.
Section 4. Exercise Price, Payment of The Exercise Price, Duration And
Exercise of Warrants Generally, Company's Call Right. (a) Each Warrant
Certificate shall, when countersigned by the Warrant Agent, entitle the Holder
thereof, upon payment of the Exercise
5
<PAGE> 146
Price and subject to the provisions of this Agreement, to receive one share of
Common Stock for each whole Warrant represented thereby, subject to adjustment
as herein provided, upon payment of the Exercise Price for each of such shares.
(b) Subject to the terms and conditions set forth herein, the
Warrants shall be exercisable beginning on the date that is thirty (30) days
after the date hereof, at any time, or from time to time, until the Expiration
Date or, if such day is not a Business Day, then on the next succeeding day that
shall be a Business Day.
(c) The Warrants shall terminate and become void as of 5:00
P.M. (Denver time) on the Expiration Date or, if such day is not a Business Day,
then as of 5:00 P.M. on the next succeeding day that shall be a Business Day,
and all rights of any Holder of a Warrant Certificate evidencing such Warrants
under this Agreement or otherwise shall cease.
(d) Subject to Sections 5 and 10 hereof, in order to exercise
a Warrant, the Holder thereof must surrender the Warrant Certificate evidencing
such Warrant, with one of the forms on the reverse of or attached to the Warrant
Certificates duly executed (with signature guaranteed), to the Warrant Agent at
its office at ________________________________, or at such other address as the
Warrant Agent may specify in writing to the Holders at their respective
addresses specified in the Register, together with payment-in-full of the
Exercise Price thereof. Upon such delivery and payment, the Holder shall be
deemed to be the holder of record of the number of shares of Common Stock
issuable upon exercise of the Warrant (or, in the case of a partial exercise of
this Warrant, the number of such shares as to which the Warrant has been
exercised), notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares shall not then be
actually delivered to the Holder.
(e) The Exercise Price must be paid in cash (including by wire
transfer of immediately available funds) or by certified or official bank check
or bank cashier's check payable to the order of the Company or by any
combination of such cash or check.
(f) The Warrants evidenced by a Warrant Certificate shall be
exercisable either as an entirety or, from time to time, for part only of the
number of whole Warrants evidenced thereby. If fewer than all of the Warrants
evidenced by a Warrant Certificate are exercised at any time, the Warrant
Certificate representing such Warrants shall be surrendered and a new Warrant
Certificate of the same tenor and for the number of Warrants that were not
exercised shall be issued by the Company. The Warrant Agent shall countersign
the new Warrant Certificate, register it in such name or names as may be
directed in writing by the Holder and deliver the new Warrant Certificate to the
person or persons entitled to receive the same.
(g) As soon as practicable on or after the Exercise Date, the
Warrant Agent shall notify the Company, and the Warrant Agent shall, within five
Business Days of the Exercise Date, deliver or cause to be delivered to or upon
any written order of any Holder appropriate evidence of ownership of any shares
of Common Stock issuable upon exercise of the
6
<PAGE> 147
Warrants or other securities or property (including any cash, subject to any
required withholding) to which the Holder is entitled hereunder, subject to
Section 5. All funds received upon the exercise of Warrants shall be deposited
by the Warrant Agent for the account of the Company, unless otherwise instructed
in writing by the Company.
(h) Notwithstanding anything contained herein or in the Merger
Agreement to the contrary, the Company shall have the right to call a Warrant at
any time prior to the expiration of such Warrant upon the occurrence of the Call
Trigger Event, subject to the provisions of this Section. The Company shall
provide written notice of the occurrence of the Call Trigger Event to each
Holder. Each Holder shall then have thirty (30) days after the date of such
notice to exercise the Warrants held by such Holder pursuant to the terms
hereof. If no action is taken by a Holder within thirty (30) days after receipt
of notice of a Call Trigger Event, then the Warrants held by such Holder shall,
without any further action by any party hereto or any Holder, be immediately and
automatically cancelled and terminated.
Section 5. Payment of Taxes. The Company shall pay any and all
documentary, or similar issue or transfer taxes payable in respect of the
issuance or delivery of the Warrant Shares. The Company shall not, however, be
required to pay any transfer tax which may be payable in respect of any transfer
involved in the issue or delivery of Warrants or Warrant Shares (or other
securities or assets) in a name other than that in which the Warrants so
exercised were registered, and no such issue or delivery shall be made unless
and until the Person requesting such issue has paid to the Company the amount of
such transfer tax or has established, to the satisfaction of the Company, that
such transfer tax has been paid.
Section 6. Mutilated or Missing Warrant Certificates. If (a) any
mutilated Warrant Certificate is surrendered to the Warrant Agent or (b) the
Company and the Warrant Agent receive evidence to their satisfaction of the
destruction, loss or theft of any Warrant Certificate, and there is delivered to
the Company and the Warrant Agent (in the case of destruction, loss or theft)
such security or indemnity as may be required by them to save each of them
harmless, then, in the absence of notice to the Company or the Warrant Agent
that such Warrant Certificate has been acquired by a bona fide purchaser, the
Company shall execute and the Warrant Agent shall countersign and deliver, in
exchange for any such mutilated Warrant Certificate or in lieu of any such
destroyed, lost or stolen Warrant Certificate, a new Warrant Certificate of like
tenor and for a like aggregate number of Warrants. Upon the issuance of any new
Warrant Certificate under this Section 6, the Company may require the payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and other expenses in connection therewith. Every
new Warrant Certificate executed and delivered pursuant to this Section 6 in
lieu of any destroyed, lost or stolen Warrant Certificate shall constitute an
original contractual obligation of the Company, whether or not the destroyed,
lost or stolen Warrant Certificate shall be at any time enforceable by anyone,
and shall be entitled to the benefits of this Agreement equally and
proportionately with any and all other Warrant Certificates duly executed and
delivered hereunder. The provisions of this Section 6 are exclusive and shall
preclude (to the extent lawful) all other rights or remedies with respect to the
replacement of mutilated, destroyed, lost or stolen Warrant Certificates.
7
<PAGE> 148
Section 7. Reservation of Shares; Listing. The Company shall at all
times reserve and keep available, free from preemptive rights, and out of its
authorized but unissued Common Stock, solely for the purpose of issuance upon
exercise of Warrants as herein provided, such number of shares of Common Stock
as shall then be issuable upon exercise of all outstanding Warrants. The Company
covenants that all shares of Common Stock which shall be issuable upon exercise
of the Warrants shall, upon issue in accordance with the terms of this
Agreement, be duly and validly issued and fully paid and non-assessable and free
from all taxes, liens, and charges with respect to the issue thereof and that
upon issuance, such shares shall be listed on NASDAQ, if other shares of the
Common Stock are then listed for quotation on NASDAQ, and on each national
securities exchange on which any other shares of outstanding Common Stock are
then listed.
Section 8. Anti-dilution Provisions. So long as any Warrants are
outstanding, the Exercise Price and the number of shares of Common Stock
issuable upon exercise of each whole Warrant shall be subject to adjustment from
time to time as follows:
(a) COMMON STOCK DIVIDENDS, SUBDIVISIONS, COMBINATIONS. In case the
Company shall (i) pay or make a dividend or other distribution to all holders of
its Common Stock in shares of Common Stock, (ii) subdivide or split the
outstanding shares of its Common Stock into a larger number of shares, or (iii)
combine the outstanding shares of its Common Stock into a smaller number of
shares, then in each such case the number of Warrant Shares issuable upon
exercise of each whole Warrant shall be adjusted to equal the number of such
shares to which the Holder of the Warrant would have been entitled upon the
occurrence of such event had the Warrant been exercised immediately prior to the
happening of such event or, in the case of a stock dividend or other
distribution, prior to the record date for determination of stockholders
entitled thereto. An adjustment made pursuant to this Section 8(a) shall become
effective immediately after the effective date of such event retroactive to the
record date, if any, for such event.
(b) REORGANIZATION OR RECLASSIFICATION. In case of any capital
reorganization or any reclassification of the capital stock of the Company
(whether pursuant to a merger or consolidation or otherwise), or in the event of
any similar transaction, each whole Warrant shall thereafter be exercisable for
the number of shares of stock or other securities or property receivable upon
such capital reorganization or reclassification of capital stock or other
transaction, as the case may be, by a holder of the number of shares of Common
Stock into which such Warrant was exercisable immediately prior to such capital
reorganization or reclassification of capital stock; and, in any case,
appropriate adjustment (as determined in good faith by the Board of Directors of
the Company) shall be made for the application of the provisions herein set
forth with respect to the rights and interests thereafter of the Holders of the
Warrants to the end that the provisions set forth herein shall thereafter be
applicable, as nearly as reasonably practicable, in relation to any shares of
stock or other securities or property thereafter deliverable upon the exercise
of the Warrants. An adjustment made pursuant to this Section 8(b) shall become
effective immediately after the effective date of such event retroactive to the
record date, if any, for such event.
8
<PAGE> 149
(c) DISTRIBUTIONS OF ASSETS OR SECURITIES OTHER THAN COMMON
STOCK. In case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock shares of any class of its capital stock (other than
Common Stock), or other debt or equity securities or evidences of indebtedness
of the Company, or options, rights or warrants to purchase any of such
securities, cash or other assets, then in each such case the number of Warrant
Shares issuable upon exercise of each whole Warrant shall be adjusted by
multiplying the number of Warrant Shares issuable upon exercise of each whole
Warrant immediately prior to the date of such dividend or distribution by a
fraction, of which the numerator shall be the Fair Market Value per share of
Common Stock at the record date for determining share holders entitled to such
dividend or distribution, and of which the denominator shall be such Fair Market
Value per share less the Fair Market Value of the portion of the securities,
cash, other assets or evidences of indebtedness so distributed applicable to one
share of Common Stock. An adjustment made pursuant to this Section 8(c) shall
become effective immediately after the effective date of such event retroactive
to the record date, if any, for such event.
(d) BELOW MARKET ISSUANCES OF COMMON STOCK AND CONVERTIBLE
SECURITIES. In case the Company shall issue Common Stock (or options, rights or
warrants to purchase shares of Common Stock (collectively, "Options") or other
securities convertible into or exchangeable or exercisable for shares of Common
Stock (such other securities, collectively, "Convertible Securities")) at a
price per share (or having an effective exercise, exchange or conversion price
per share together with the purchase price thereof) less than the Fair Market
Value per share of Common Stock on the date such Common Stock (or Options or
Convertible Securities), is sold or issued (provided that no sale of securities
pursuant to an underwritten public offering shall be deemed to be for less than
Fair Market Value), then in each such case the number of Warrant Shares issuable
upon exercise of each whole Warrant shall thereafter be adjusted by multiplying
the number of Warrant Shares issuable upon exercise of each whole Warrant
immediately prior to the date of issuance of such Common Stock (or Options or
Convertible Securities) by a fraction, the numerator of which shall be (x) the
sum of (i) the number of Common Share Equivalents represented by all securities
outstanding immediately prior to such issuance and (ii) the number of additional
Common Share Equivalents represented by all securities so issued multiplied by
(y) the Fair Market Value of a share of Common Stock immediately prior to the
date of such issuance, and the denominator of which shall be (x) the product of
(A) the Fair Market Value of a share of Common Stock immediately prior to the
date of such issuance and (B) the number of Common Share Equivalents represented
by all securities outstanding immediately prior to such issuance plus (y) the
aggregate consideration received by the Company for the total number of
securities so issued plus, (z) in the case of Options or Convertible Securities,
the additional consideration required to be received by the Company upon the
exercise, exchange or conversion of such securities; provided, however, that no
adjustment shall be required in respect of issuances of Common Stock (or options
to purchase Common Stock) pursuant to stock option or other employee benefit
plans in effect on the date hereof, or approved by the Board of Directors of the
Company after the date hereof. Notwithstanding anything herein to the contrary,
(1) no further adjustment to the number of Warrant Shares issuable upon exercise
of each whole Warrant shall be made upon the issuance or sale of Common Stock
pursuant to (x) the exercise of any Options or (y) the conversion or
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<PAGE> 150
exchange of any Convertible Securities, if in each case the adjustment in the
number of Warrant Shares issuable upon exercise of each whole Warrant was made
as required hereby upon the issuance or sale of such Options or Convertible
Securities or no adjustment was required hereby at the time such Option or
Convertible Security was issued, and (2) no adjustment to the number of Warrant
Shares issuable upon exercise of each whole Warrant shall be made upon the
issuance or sale of Common Stock upon the exercise of any Options existing on
the original issue date hereof, without regard to the exercise price thereof.
Notwithstanding the foregoing, no adjustment to the number of Warrant Shares
issuable upon exercise of each whole Warrant shall be made pursuant to this
paragraph upon the issuance or sale of Common Stock, Options, or Convertible
Securities in a bona fide arm's-length transaction to any Person or group that,
at the time of such issuance or sale, is not an Affiliate of the Company. An
adjustment made pursuant to this Section 8(d) shall become effective immediately
after such Common Stock, Options or Convertible Securities are sold.
(e) BELOW MARKET DISTRIBUTIONS OR ISSUANCES OF PREFERRED STOCK
OR OTHER SECURITIES. In case the Company shall issue non-convertible and
non-exchangeable preferred stock (or other debt or equity securities or
evidences of indebtedness of the Company (other than Common Stock or Options or
Convertible Securities) or options, rights or warrants to purchase any of such
securities) at a price per share (or other similar unit) less than the Fair
Market Value per share (or other similar unit) of such preferred stock (or other
security) on the date such preferred stock (or other security) is sold (provided
that no sale of preferred stock or other security pursuant to an underwritten
public offering shall be deemed to be for less than its fair market value), then
in each such case the number of Warrant Shares issuable upon exercise of each
whole Warrant shall thereafter be adjusted by multiplying the number of Warrant
Shares issuable upon exercise of each whole Warrant immediately prior to the
date of issuance of such preferred stock (or other security) by a fraction, the
numerator of which shall be the product of (i) the number of Common Share
Equivalents represented by all securities outstanding immediately prior to such
issuance and (ii) the Fair Market Value of a share of Common Stock immediately
prior to the date of such issuance, and the denominator of which shall be (x)
the product of (A) the number of Common Share Equivalents represented by all
securities outstanding immediately prior to such issuance and (B) the Fair
Market Value of a share of the Common Stock immediately prior to the date of
such issuance minus (y) the difference between (1) the aggregate Fair Market
Value of such preferred stock (or other security) and (2) the aggregate
consideration received by the Company for such preferred stock (or other
security). Notwithstanding the foregoing, no adjustment to the number of Warrant
Shares issuable upon exercise of each whole Warrant shall be made pursuant to
this paragraph upon the issuance or sale of preferred stock (or other securities
of the Company other than Common Stock or Options or Convertible Securities) in
a bona fide arm's-length transaction to any Person or group that, at the time of
such issuance or sale, is not an Affiliate of the Company. An adjustment made
pursuant to this Section 8(e) shall become effective immediately after such
preferred stock (or other security) is sold.
(f) ABOVE MARKET REPURCHASES OF COMMON STOCK. If at any time
or from time to time the Company or any Subsidiary thereof shall repurchase, by
self-tender offer or
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otherwise, any shares of Common Stock of the Company (or any Options or
Convertible Securities) at a purchase price in excess of the Fair Market Value
thereof, on the Business Day immediately prior to the earliest of (i) the date
of such repurchase, (ii) the commencement of an offer to repurchase, or (iii)
the public announcement of either (such date being referred to as the
"Determination Date"), the number of Warrant Shares issuable upon exercise of
each whole Warrant shall be adjusted by multiplying the number of Warrant Shares
issuable upon exercise of each whole Warrant immediately prior to such
Determination Date by a fraction, the numerator of which shall be the product of
(1) the number of Common Share Equivalents represented by all securities
outstanding immediately prior to such Determination Date minus the number of
Common Share Equivalents represented by the securities repurchased or to be
purchased by the Company or any Subsidiary thereof in such repurchase and (2)
the Fair Market Value of a share of Common Stock immediately prior to such
Determination Date, and the denominator of which shall be (x) the product of (A)
the number of Common Share Equivalents represented by all securities outstanding
immediately prior to the Determination Date and (B) the Fair Market Value of a
share of Common Stock immediately prior to such Determination Date minus (y) the
sum of (1) the aggregate consideration paid by the Company in connection with
such repurchase and (2) in the case of Options or Convertible Securities, the
additional consideration required to be received by the Company upon the
exercise, exchange or conversion of such securities. Notwithstanding the
foregoing, no adjustment to the number of Warrant Shares issuable upon exercise
of each whole Warrant shall be made pursuant to this paragraph upon the
repurchase, by self-tender offer or otherwise, of Common Stock (or any Options
or Convertible Security) in a bona fide arm's-length transaction from any Person
or group that, at the time of such repurchase, is not an Affiliate of the
Company.
(g) ABOVE MARKET REPURCHASES OF PREFERRED STOCK OR OTHER
SECURITIES. If at any time or from time to time the Company or any Subsidiary
thereof shall repurchase, by self-tender offer or otherwise, any shares of
non-convertible and non-exchangeable preferred stock (or other debt or equity
securities or evidences of indebtedness of the Company (other than Common Stock
or Options or Convertible Securities) or options, rights or warrants to purchase
any of such securities), at a purchase price in excess of the Fair Market Value
thereof, on the Business Day immediately prior to the Determination Date, the
number of Warrant Shares issuable upon exercise of each whole Warrant shall be
adjusted by multiplying the number of Warrant Shares issuable upon exercise of
each whole Warrant immediately prior to the Determination Date by a fraction,
the numerator of which shall be the product of (i) the number of Common Share
Equivalents represented by all securities outstanding immediately prior to such
Determination Date and (ii) the Fair Market Value of a share of Common Stock
immediately prior to such Determination Date, and the denominator of which shall
be (x) the product of (A) the number of Common Share Equivalents represented by
all securities outstanding immediately prior to such Determination Date and (B)
the Fair Market Value of a share of Common Stock immediately prior to such
Determination Date minus (y) the difference between (1) the aggregate
consideration paid by the Company in connection with such repurchase and (2) the
aggregate Fair Market Value of such preferred stock (or other security).
Notwithstanding the foregoing, no adjustment to the number of Warrant Shares
issuable upon exercise of each whole Warrant shall be made pursuant to this
paragraph upon the repurchase, by
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self-tender offer or otherwise, of non-convertible and non-exchangeable
preferred stock (or other securities of the Company other than Common Stock or
Options or Convertible Securities) in a bona fide arm's-length transaction from
any Person or group that, at the time of such repurchase, is not an Affiliate of
the Company.
(h) READJUSTMENT OF THE NUMBER OF WARRANT SHARES ISSUABLE UPON
EXERCISE OF EACH WHOLE WARRANT. If (i) the purchase price provided for in any
Option or the additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities or the rate at which any Convertible
Securities, in each case as referred to in paragraphs (b) and (f) above, are
convertible into or exchangeable for Common Stock shall change at any time
(other than under or by reason of provisions designed to protect against
dilution upon an event which results in a related adjustment pursuant to this
Section 8), or (ii) any of such Options or Convertible Securities shall have
irrevocably terminated, lapsed or expired, the number of Warrant Shares then
issuable upon exercise of each whole Warrant shall forthwith be readjusted
(effective only with respect to any exercise of Warrants after such
readjustment) to the number of Warrant Shares issuable upon exercise of each
whole Warrant which would then be in effect had the adjustment made upon the
issuance, sale, distribution or grant of such Options or Convertible Securities
been made based upon such changed purchase price, additional consideration or
conversion rate, as the case may be (in the case of any event referred to in
clause (i) of this paragraph (h)) or had such adjustment not been made (in the
case of any event referred to in clause (ii) of this paragraph (h)).
(i) EXERCISE PRICE ADJUSTMENT. Upon each adjustment of the
number of Warrant Shares issuable upon exercise of each whole Warrant pursuant
to this Section 8, the Exercise Price of each Warrant outstanding immediately
prior to such adjustment shall thereafter be equal to an adjusted Exercise Price
per Warrant Share determined (to the nearest cent) by multiplying the Exercise
Price for each whole Warrant immediately prior to such adjustment by a fraction,
the numerator of which shall be the number of Warrant Shares issuable upon
exercise of each whole Warrant immediately prior to such adjustment and the
denominator of which shall be the number of Warrant Shares issuable upon
exercise of each whole Warrant immediately after such adjustment.
(j) CONSIDERATION. If any shares of Common Stock, Options or
Convertible Securities shall be issued, sold or distributed for cash, the
consideration received in respect thereof shall be deemed to be the amount
received by the Company therefor, before deduction therefrom of any reasonable,
customary and adequately documented expenses incurred in connection therewith.
If any shares of Common Stock, Options or Convertible Securities shall be
issued, sold or distributed for a consideration other than cash, the amount of
the consideration other than cash received by the Company shall be deemed to be
the Fair Market Value of such consideration, before deduction of any reasonable,
customary and adequately documented expenses incurred in connection therewith.
If any shares of Common Stock, Options or Convertible Securities shall be issued
in connection with any merger in which the Company is the surviving corporation,
the amount of consideration therefor shall be deemed to be the Fair Market Value
of such portion of the assets and business of the non-surviving corporation as
shall
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be attributable to such Common Stock, Options or Convertible Securities, as the
case may be. If any Options shall be issued in connection with the issuance and
sale of other securities of the Company, together comprising one integral
transaction in which no specific consideration is allocated to such Options by
the parties thereto, such Options shall be deemed to have been issued without
consideration.
(k) NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 8 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the Holders of the
Warrants against impairment. Without limiting the generality of the foregoing,
the Company will not increase the par value of any shares of Common Stock
issuable on the exercise of the Warrants above the amount payable therefor on
such exercise.
(l) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the number of Warrant Shares issuable upon
exercise of each whole Warrant pursuant to this Section 8, the Company, at its
expense, shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to the Warrant Agent a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Company shall, upon the written
request at any time of any Holder of the Warrants, furnish or cause to be
furnished to such Holder a like certificate setting forth (1) such adjustments
and readjustments and (2) the number of Warrant Shares and the amount, if any,
of other property which at the time would be received upon the exercise of this
Warrant.
(m) PROCEEDINGS PRIOR TO ANY ACTION REQUIRING ADJUSTMENT. As a
condition precedent to the taking of any action which would require an
adjustment pursuant to this Section 8, the Company shall take any action which
may be necessary, including obtaining regulatory approvals or exemptions, in
order that the Company may thereafter validly and legally issue as fully paid
and nonassessable all Warrant Shares which the Holders are entitled to receive
upon exercise thereof.
(n) NOTICE OF ADJUSTMENT. Upon the record date or effective
date, as the case may be, of any action which requires or might require an
adjustment or readjustment pursuant to this Section 8, the Company shall
forthwith file in the custody of its Secretary or an Assistant Secretary at its
principal executive office and with its transfer agent and the Warrant Agent, an
officers' certificate showing the adjusted number of Warrant Shares determined
as herein provided, setting forth in reasonable detail the facts requiring such
adjustment and the manner of computing such adjustment. Each such officers'
certificate shall be signed by the chairman, president or chief financial
officer of the Company and by the secretary or any assistant secretary of the
Company. Each such officers' certificate shall be made available at all
reasonable times
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for inspection by the Holder or any Holder of a Warrant executed and delivered
pursuant to Section 3(b) and the Company shall, forthwith after each such
adjustment, mail a copy, by first-class mail, of such certificate to the Holder
or any such Holder.
(o) PAYMENTS IN LIEU OF ADJUSTMENT. The Holder shall, at its
option, be entitled to receive, in lieu of the adjustment pursuant to Section
8(c) otherwise required thereof, on (but not prior to) the date of exercise of
the Warrants, the evidences of indebtedness, other securities, cash, property or
other assets which such Holder would have been entitled to receive if it had
exercised its Warrants for Warrant Shares immediately prior to the record date
with respect to such distribution. Any Holder may exercise its option under this
Section 8(o) by delivering to the Company a written notice of such exercise
simultaneously with its notice of exercise of this Warrant.
Section 9. Consolidation, Merger or Sale of Assets. In case of any
consolidation of the Company with, or merger of the Company into, any other
Person, any merger of another Person into the Company (other than a merger which
does not result in any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock) or any sale or transfer of all or
substantially all of the assets of the Company to the Person formed by such
consolidation or resulting from such merger or which acquires such assets, as
the case may be, each Holder of Warrants shall have the right thereafter to
exercise its Warrants for the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer by a
holder of the number of shares of Common Stock for which such Holder's Warrants
may have been exercised immediately prior to such consolidation, merger, sale or
transfer. Adjustments for events subsequent to the effective date of such a
consolidation, merger, sale or transfer of assets shall be as nearly equivalent
as may be practicable to the adjustments provided for herein. In any such event,
effective provisions shall be made in the certificate or articles of
incorporation of the resulting or surviving corporation, in any contract of
sale, merger, conveyance, lease, transfer or otherwise so that the provisions
set forth herein for the protection of the rights of the Holders of the Warrants
shall thereafter continue to be applicable; and any such resulting or surviving
corporation shall expressly assume the obligation to deliver, upon exercise,
such shares of stock, other securities, cash and property. The provisions of
this Section 9 shall similarly apply to successive consolidations, mergers,
sales, leases or transfers.
Section 10. Fractional Shares. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of the Warrants
and in lieu of delivery of any such fractional share upon any exercise thereof,
the Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the Fair Market Value thereof; provided, however, that, in the
event that the Company combines or reclassifies the outstanding shares of its
Common Stock into a smaller number of shares, it shall be required to issue
fractional shares to a Holder if the Holder exercises all or any part of its
Warrants, unless the Holder has consented in writing to such reduction and
provided the Company with a written waiver of its right to receive fractional
shares in accordance with this Section 10. If more than one Warrant shall be
presented for exercise in full at the same time by the same Holder, the number
of full shares of Common Stock that shall be issuable upon such exercise thereof
shall be computed on the basis of the aggregate
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number of shares of Common Stock acquirable on exercise of the Warrants so
presented. The Holders, by their acceptance of the Warrant Certificates,
expressly waive any and all rights to receive any fraction of a share of Common
Stock or a stock certificate representing a fraction of a share of Common Stock.
Section 11. No Stock Rights. Prior to the exercise of the Warrants, no
Holder of a Warrant Certificate, as such, shall be entitled to vote or be deemed
the holder of shares of Common Stock or any other securities of the Company that
may at any time be issuable on the exercise thereof, nor shall anything
contained herein be construed to confer upon any Holder of a Warrant
Certificate, as such, the rights of a stockholder of the Company or the right to
vote for the election of directors or upon any matter submitted to stockholders
at any meeting thereof, or to give or withhold consent to any corporate action,
to exercise any preemptive right, to receive notice of meetings or other actions
affecting stockholders (except as provided herein), or to receive dividends or
subscription rights or otherwise.
Section 12. The Warrant Agent. (a) The Company hereby appoints the
Warrant Agent to act as agent of the Company as set forth in this Agreement. The
Warrant Agent hereby accepts the appointment as agent of the Company and agrees
to perform that agency upon the terms and conditions herein set forth, by all of
which the Company and the Holders of Warrants, by their acceptance thereof,
shall be bound. No implied duties or obligations shall be read into this
Agreement against the Warrant Agent. The Warrant Agent shall not by
countersigning Warrant Certificates or by any other act hereunder be deemed to
make any representation as to validity or authorization of the Warrants or the
Warrant Certificates (except as to its countersignature thereon) or of any
securities or other property delivered upon exercise of any Warrant, or as to
the number or kind or amount of stock or other securities or other property
deliverable upon exercise of any Warrant. The Warrant Agent shall not have any
duty to calculate or determine any adjustments with respect either to the kind
and amount of shares or other securities or any property receivable by Holders
upon the exercise or tender of Warrants required from time to time, and the
Warrant Agent shall have no duty or responsibility in determining the accuracy
or correctness of any such calculation, other than to apply any adjustment,
notice of which is given by the Company to the Warrant Agent to be mailed to the
Holders in accordance with Section 8(i). The Warrant Agent shall not (i) be
liable for any recital or statement of fact contained herein or in the Warrant
Certificates or for any action taken, suffered or omitted by it in good faith on
the belief that any Warrant Certificate or any other documents or any signatures
are genuine or properly authorized, (ii) be responsible for any failure on the
part of the Company to comply with any of its covenants and obligations
contained in this Agreement or in the Warrant Certificates, or (iii) be liable
for any act or omission in connection with this Agreement except for its own
negligence or willful misconduct. The Warrant Agent is hereby authorized to
accept instructions with respect to the performance of its duties hereunder from
any officer of the Company and to apply to any such officer for instructions
(which instructions will be promptly given in writing when requested) and the
Warrant Agent shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with the instructions of any such officer,
except for its own negligence or willful
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misconduct, but in its discretion the Warrant Agent may in lieu thereof accept
other evidence of such or may require such further or additional evidence as it
may deem reasonable.
(b) The Warrant Agent shall not be under any obligation or
duty to institute, appear in or defend any action, suit or legal proceeding in
respect hereof, unless first indemnified to its satisfaction, but this provision
shall not affect the power of the Warrant Agent to take such action as the
Warrant Agent may consider proper, whether with or without such indemnity. The
Warrant Agent shall promptly notify the Company in writing of any claim made or
action, suit or proceeding instituted against it arising out of or in connection
with this Agreement.
(c) The Company will perform, execute, acknowledge and deliver
or cause to be performed, executed, acknowledged and delivered all such further
acts, instruments and assurances as may reasonably be required by the Warrant
Agent in order to enable it to carry out or perform its duties under this
Agreement.
(d) The Company agrees to pay to the Warrant Agent
compensation for all services rendered by it hereunder as the Company and the
Warrant Agent may agree from time to time, and to reimburse the Warrant Agent
for reasonable expenses and disbursements incurred in connection with the
execution and administration of this Agreement (including the reasonable
compensation and the expenses of its counsel), and further agrees to indemnify
the Warrant Agent for, and to hold it harmless against any loss, liability or
expense incurred without gross negligence or bad faith on its part, arising out
of or in connection with the acceptance and administration of this Agreement,
including the reasonable costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of its
powers or duties hereunder.
(e) The Warrant Agent and any stockholder, director, officer
or employee of the Warrant Agent may buy, sell and deal in any of the Warrants
or other securities of the Company or its Affiliates or become pecuniarily
interested in transactions in which the Company or its Affiliates may be
interested, or contract with or lend money to the Company or its Affiliates or
otherwise act as fully and freely as though it were not the Warrant Agent under
this Agreement. Nothing herein shall preclude the Warrant Agent from acting in
any other capacity for the Company or for any other legal entity.
(f) Anything in this Agreement to the contrary
notwithstanding, in no event shall the Warrant Agent be liable for special,
indirect or consequential loss or damage of any kind whatsoever (including but
not limited to loss of profits), even if the Warrant Agent has been advised of
the form of action.
Section 13. Resignation And Removal of Warrant Agent; Appointment of
Successor. (a) No resignation or removal of the Warrant Agent and no appointment
of a successor warrant agent shall become effective until the acceptance of
appointment by the successor warrant agent provided herein. The Warrant Agent
may resign its duties and be discharged from all further duties and liability
hereunder (except liability arising as a result of the Warrant Agent's own
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<PAGE> 157
negligence, bad faith or willful misconduct) after giving written notice to the
Company. The Company may remove the Warrant Agent upon written notice, and the
Warrant Agent thereupon in like manner be discharged from all further duties and
liabilities hereunder, except as aforesaid. Upon such resignation or removal,
the Company shall appoint in writing a new warrant agent. If the Company shall
fail to make such appointment within a period of 60 days after it has been
notified in writing of such resignation by the resigning Warrant Agent or after
such removal, then a Holder may apply to any court of competent jurisdiction for
the appointment of a new warrant agent. Any new warrant agent, whether appointed
by the Company or by such a court, shall be a corporation doing business under
the laws of the United States or any State thereof, in good standing and having
a combined capital and surplus of not less than $50,000,000. The combined
capital and surplus of any such new warrant agent shall be deemed to be the
combined capital and surplus as set forth in the most recent annual report of
its condition published by such warrant agent prior to its appointment, provided
that such reports are published at least annually pursuant to law or to the
requirements of a Federal or state supervising or examining authority. After
acceptance in writing of such appointment by the new warrant agent, it shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named herein as the Warrant Agent, without any further
assurance, conveyance, act or deed; but if for any reason it shall be necessary
or expedient to execute and deliver any further assurance, conveyance, act or
deed, the same shall be done at the expense of the Company and shall be legally
and validly executed and delivered by the resigning or removed Warrant Agent.
Not later than the effective date of any such appointment, the Company shall
give notice thereof to the resigning or removed Warrant Agent. Failure to give
any notice provided for in this Section, however, or any defect therein, shall
not affect the legality or validity of the resignation of the Warrant Agent or
the appointment of a new warrant agent, as the case may be.
(b) Any corporation into which the Warrant Agent or any new
warrant agent may be merged or any corporation resulting from any consolidation
to which the Warrant Agent or any new warrant agent shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Warrant Agent, shall be a successor Warrant Agent under this
Agreement without any further act, provided that such corporation (i) would be
eligible for appointment as successor to the Warrant Agent under the provisions
of Section 12(a) or (ii) is a wholly owned subsidiary of the Warrant Agent. Any
such successor Warrant Agent shall promptly cause notice of its succession as
Warrant Agent to be mailed first-class mail, postage prepaid) to each Holder at
such Holder's last address as shown on the Register.
Section 14. Money And Other Property Deposited With The Warrant Agent.
Any moneys, securities or other property that at any time shall be deposited on
behalf of the Company with the Warrant Agent pursuant to this Agreement shall be
and are hereby assigned, transferred and set over to the Warrant Agent in trust
for the purpose for which such moneys, securities or other property shall have
been deposited; provided, however, such moneys, securities or other property
need not be segregated from other funds, securities or other property except to
the extent required by law.
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Section 15. NOTICES. (a) Except as otherwise provided in Section 15
(b), any notice, demand or delivery authorized by this agreement shall be
sufficiently given or made when mailed if sent by first-class mail, postage
prepaid, addressed to any Holder at such Holder's address shown on the Register
and to the Company or the Warrant Agent as follows:
If to the Company: RMI.NET, Inc.
999 18th Street, Suite 2201
Denver, Colorado 80202
Attention: Chris J. Melcher, Vice President
and General Counsel
with a copy to:
Perkins Coie LLP
1899 Wynkoop Street, Suite 700
Denver, Colorado 80202
Attention: Neil M. Goff, Esq.
Brownstein, Hyatt & Farber, P.C.
410 17th Street, 22nd Floor
Denver, Colorado 80202
Attention: Jeffrey M. Knetsch, Esq.
If to the Warrant Agent: Computershare Trust Company
12039 West Alameda Parkway, Suite Z-2
Lakewood, Colorado 80228
Attention: Ms. Tammy Davis
or such other address as shall have been furnished to the party giving or making
such notice, demand or delivery.
(b) Any notice required to be given by the Company to the
Holders shall be made by mailing by registered mail, return receipt requested,
to the Holders at their respective addresses shown on the Register. The Company
hereby irrevocably authorizes the Warrant Agent, in the name and at the expense
of the Company, to mail any such notice upon receipt thereof from the Company.
Any notice that is mailed in the manner herein provided shall be conclusively
presumed to have been duly given when mailed, whether or not the Holder receives
the notice.
SECTION 16. Amendments; Waivers. (a) The Company may from time to time
supplement or amend this Agreement without the consent of any Holder, in order
to (i) cure any ambiguity or correct or supplement any provision herein that may
be defective or inconsistent with any other provision herein or (ii) add to the
covenants and agreements of the Company for
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the benefit of the Holders, or surrender any rights or powers reserved to or
conferred upon the Company in this Agreement. Upon the delivery of a certificate
from an appropriate officer of the Company which states that the proposed
supplement or amendment is in compliance with the terms of this Section 16, the
Warrant Agent shall join with the Company in the execution and delivery of any
such supplemental agreements unless it affects the Warrant Agent's own rights,
duties or immunities hereunder in which case such party may, but shall not be
required to, join in such execution and delivery.
(b) With the consent of the registered Holders of at least a
majority in number of the Warrants at the time outstanding, the Company and the
Warrant Agent may at any time and from time to time by supplemental agreement or
amendment add any provisions to or change in any manner or eliminate any of the
provisions of this Agreement or of any supplemental agreement or modify in any
manner the rights and obligations of the Warrant holders and of the Company;
provided, however, that no such supplemental agreement or amendment shall,
without the consent of the registered Holder of each outstanding Warrant
affected thereby:
(i) alter the provisions of this Agreement so as to affect
adversely the terms upon which the Warrants are exercisable; or
(ii) reduce the number of Warrants outstanding the consent
of whose Holders is required for any such supplemental agreement
or amendment.
Upon the delivery of a certificate from an appropriate officer of the Company
which states that the proposed supplement or amendment is in compliance with the
terms of this section, the Warrant Agent shall join with the Company in the
execution and delivery of any such supplemental agreements unless it affects the
Warrant Agent's own rights, duties or immunities hereunder in which case such
party may, but shall not be required to, join in such execution and delivery.
(c) No failure or delay by either party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
Section 17. Persons Benefitting. This Agreement shall be binding upon
and inure to the benefit of the Company and the Warrant Agent, and their
respective successors, assigns, beneficiaries, executors and administrators, and
each registered Holder of the Warrants. Nothing in this Agreement is intended or
shall be construed to confer upon any person, other than the Company, the
Warrant Agent and the Holders of the Warrants, any right, remedy or claim under
or by reason of this Agreement or any part hereof.
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Section 18. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together constitute one and the same instrument.
Section 19. Surrender of Certificates. Any Warrant Certificate
surrendered for exercise or purchase or otherwise acquired by the Company shall,
if surrendered to the Company, be delivered to the Warrant Agent, and all
Warrant Certificates surrendered or so delivered to the Warrant Agent shall be
promptly cancelled by such Warrant Agent and shall not be reissued by the
Company. The Warrant Agent shall deliver such cancelled Warrant Certificates to
the Company.
Section 20. Termination of Agreement. This Agreement shall terminate
and be of no further force and effect on the earlier of (a) the Expiration Date
or (b) the date on which all of the Warrants have been exercised, except that
the provisions of Sections 11 and 13 shall continue in full force and effect
after such termination date (the "Termination Date").
Section 21. Governing Law. This Agreement and the Warrants issued
hereunder and all rights arising hereunder and thereunder shall be construed and
determined in accordance with the internal laws of the state of Delaware, and
the performance hereof and thereof shall be governed and enforced in accordance
with such laws.
Section 22. Interpretation. When a reference is made in this Agreement
to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words "include", "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation". The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such term. References to a Person are also to its permitted
successors and assigns and, in the case of an individual, to his heirs and
estate, as applicable.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by its officer thereunto duly authorized as of the date first above
written.
RMI.NET, INC.
By:
----------------------------
Name:
Title:
COMPUTERSHARE TRUST COMPANY,
as Warrant Agent
By:
----------------------------
Name:
Title:
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EXHIBIT A
FORM OF FACE OF WARRANT CERTIFICATE
WARRANTS TO PURCHASE COMMON STOCK
OF RMI.NET, INC.
No.__________ Certificate for Warrants _____
This certifies that ______________________, or registered assigns, is
the registered holder of the number of Warrants set forth above (the
"Warrants"). Each Warrant entitles the holder thereof (a "Holder"), subject to
the provisions contained herein and in the Warrant Agreement referred to below,
to purchase from RMI.NET, Inc., a Delaware corporation (the "Company"), one
share of Common Stock, par value $0.001 per share, of the Company ("Common
Stock"), at the exercise price (the "Exercise Price") of $7.00 per share,
subject to adjustment upon the occurrence of certain events. This Warrant
Certificate shall terminate and become void as of the close of business on [DATE
THAT IS 2 YEARS AFTER CLOSING DATE] (the "Expiration Date"); provided, however,
that if the last day for the exercise of the Warrants shall not be a Business
Day, then the Warrants may be exercised on the next succeeding Business Day (as
defined in the Warrant Agreement) following the Expiration Date.
This Warrant Certificate is issued under and in accordance with the
Warrant Agreement, dated as of ____________, 2000 (the "Warrant Agreement"),
between the Company and Computershare Trust Company, as warrant agent (the
"Warrant Agent", which term includes any successor Warrant Agent under the
Warrant Agreement), and is subject to the terms and provisions contained in the
Warrant Agreement, to all of which terms and provisions the Holder of this
Warrant Certificate consents by acceptance hereof. The Warrant Agreement is
hereby incorporated herein by reference and made a part hereof. Reference is
hereby made to the Warrant Agreement for a full statement of the respective
rights, limitations of rights, duties, obligations and immunities thereunder of
the Company, the Warrant Agent and the Holders of the Warrants. As provided in
the Warrant Agreement and subject to the terms and conditions therein set forth,
the Warrants are exercisable on the date that is thirty days after the date
hereof. At 5:00 P.M. (New York City time) on the Expiration Date, each Warrant
not exercised prior thereto shall terminate and become void and of no value;
provided, however, that if the last day for the exercise of the Warrants shall
not be a Business Day, then the Warrants may be exercised until 5:00 P.M. (New
York City time) on the next succeeding Business Day following the Expiration
Date.
The Company shall have the right to call a Warrant at any time prior to
the expiration of such Warrant upon the occurrence of a Call Trigger Event. A
"Call Trigger Event" means any date prior to the Expiration Date (or earlier
date of exercise) after which the daily closing prices per share of Common Stock
on NASDAQ for each of the five (5) consecutive trading days prior thereto is
greater than or equal to $8.00. The Company shall provide written notice of the
occurrence of the Call Trigger Event to each Holder. Each Holder shall then have
thirty (30) days after the date of such notice to exercise the Warrants held by
such Holder pursuant to the
1
<PAGE> 163
terms hereof. If no action is taken by a Holder within thirty (30) days after
receipt of notice of a Call Trigger Event, then the Warrants held by such Holder
shall, without any further action by the Company or any Holder, be immediately
and automatically cancelled and terminated.
The Exercise Price and the number of shares of Common Stock issuable
upon the exercise of each whole Warrant are subject to adjustment as provided in
the Warrant Agreement.
In order to exercise a Warrant, the registered holder hereof must
surrender this Warrant Certificate at the office of the Warrant Agent, with the
Exercise Subscription Form on the reverse hereof duly executed by the Holder
hereof, with signature guaranteed as therein specified, together with any
required payment in full of the Exercise Price then in effect or the share(s) of
Common Stock as to which the Warrant(s) represented by this Warrant Certificate
are submitted for exercise, all subject to the terms and conditions hereof and
of the Warrant Agreement. Any such payment of the Exercise Price shall be paid
in cash (including by wire transfer of immediately available funds) or by
certified or official bank check or bank cashier's check payable to the order of
the Company or by any combination of such cash or check.
The Company will pay all documentary stamp taxes, if any, attributable
to the initial issuance of Common Stock upon the exercise of Warrants; provided,
however, that the Company shall not be required to pay any tax or other
governmental charge which may be payable in respect of any transfer involved in
the issue or delivery of any Warrant Certificates or certificates for Common
Stock issued upon the exercise of Warrants in a name other than that of the
registered Holder of such Warrants, and the Company shall not register any such
transfer or issue any such certificate until such tax or governmental charge, if
required, shall have been paid.
This Warrant Certificate and all rights hereunder are transferable by
the registered holder hereof, in whole or in part, on the register of the
Company, upon surrender of this Warrant Certificate for registration of transfer
at the principal corporate trust office of the Warrant Agent maintained for such
purpose in the City of Denver, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Warrant Agent
duly executed by the Holder hereof, or his attorney duly authorized in writing,
with signature guaranteed as specified in the attached Form of Assignment. Upon
any partial transfer, the Company will issue and deliver to such holder a new
Warrant Certificate or Certificates with respect to any portion not so
transferred; provided, however, that the Company shall not be required to issue
and deliver Warrant Certificates representing fractional warrants.
No service charge shall be made for any registration of transfer or
exchange of the Warrant Certificates, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
This Warrant Certificate and the Warrant Agreement are subject to
amendment as provided in the Warrant Agreement.
2
<PAGE> 164
All terms used in this Warrant Certificate that are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
Copies of the Warrant Agreement are on file at the office of the
Warrant Agent and may be obtained by writing to the Warrant Agent at the
following address: 12039 West Alameda Parkway, Suite Z-2, Lakewood, Colorado
80228, Attention: Ms. Tammy Davis
3
<PAGE> 165
This Warrant Certificate shall not be valid for any purpose until it
shall have been countersigned by the Warrant Agent.
Dated:
--------------, ------
RMI.NET, INC.
By:
--------------------------------
Name:
Title:
Countersigned:
COMPUTERSHARE TRUST COMPANY, as Warrant Agent
By:
------------------------------
Name:
Title:
4
<PAGE> 166
FORM OF REVERSE OF WARRANT CERTIFICATE
EXERCISE SUBSCRIPTION FORM
(To be executed only upon exercise of Warrants)
To: RMI.NET, Inc.
The undersigned irrevocably exercises __________________ of the
Warrants for the purchase of one share per Warrant (subject to adjustment) of
Common Stock, par value $0.001 per share, of RMI.NET, Inc. represented by this
Warrant Certificate hereof and herewith makes payment of $_____________ (such
amount shall be paid in cash (including by wire transfer of immediately
available funds) or by certified or official bank check or bank cashier's check
payable to the order of RMI.NET, Inc. or by any combination of such cash or
check), representing the Exercise Price for such Warrants so exercised. On the
terms and conditions specified in this Warrant Certificate and the Warrant
Agreement therein referred to, the undersigned hereby surrenders this Warrant
Certificate and all right, title and interest therein to and directs that the
shares of Common Stock deliverable upon the exercise of such Warrants be
registered or placed in the name and at the address specified below and
delivered thereto.
Date:______________, _____ _______________________________
(Name - Please Print)
_______________________________
(Signature of Owner)(1)
_______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
_______________________________
(Signature Guaranteed by)
(1) The signature must correspond with the name as written upon the face of
the within Warrant Certificate in every particular, without alteration
or enlargement or any change whatever, and must be guaranteed.
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<PAGE> 167
Securities and/or check to be issued to:
----------------------------------------
Please insert social security or identifying number:
----------------------------
Name:
---------------------------------------------------------------------------
Street Address:
-----------------------------------------------------------------
City, State and Zip Code:
-------------------------------------------------------
Any unexercised Warrants evidenced by the within Warrant Certificate to be
issued to:
----------------------------------------------------------------------
--------------------------------------------------------------------------------
Please insert social security or identifying number:
----------------------------
Name:
---------------------------------------------------------------------------
Street Address:
-----------------------------------------------------------------
City, State and Zip Code:
-------------------------------------------------------
6
<PAGE> 168
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned registered holder of the within
Warrant Certificate hereby sells, assigns, and transfers unto the Assignee(s)
named below (including the undersigned with respect to any Warrants constituting
a part of the Warrants evidenced by the within Warrant Certificate not being
assigned hereby) all of the right of the undersigned under the within Warrant
Certificate, with respect to the number of whole Warrants set forth below:
<TABLE>
<CAPTION>
Social Security Number
or Other Identifying
Name of Assignees Address Number of Assignees Number of Warrants
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
</TABLE>
and does hereby irrevocably constitute and appoint ________________________ the
undersigned's attorney to make such transfer on the books of the Warrant Agent
maintained for that purpose, with full power of substitution in the premises.
Date:_______________, _____
____________________________________
(Signature of Owner) (2)
____________________________________
(Street Address)
____________________________________
(City) (State) (Zip Code)
____________________________________
(Signature Guaranteed by)
7
<PAGE> 169
(2) The signature must correspond with the name as written upon the face of
the within Warrant Certificate in every particular, without alteration
or enlargement or any change whatever, and must be guaranteed.
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<PAGE> 170
APPENDIX C
AMENDED AND RESTATED
EXCHANGE AGREEMENT
BETWEEN
RMI.NET, INC.
AND
INTERNET COMMUNICATIONS CORPORATION
DATED AS OF OCTOBER 18, 2000
<PAGE> 171
AMENDED AND RESTATED EXCHANGE AGREEMENT
This AMENDED AND RESTATED EXCHANGE AGREEMENT, dated as of
October 18, 2000 (this "Agreement"), is made and entered into by and between
RMI.NET, Inc., a Delaware corporation ("RMI"), and Internet Communications
Corporation, a Colorado corporation (the "Company").
RECITALS
A. Concurrently herewith RMI, Internet Acquisition Corporation ("IAC"),
a Colorado corporation and wholly-owned subsidiary of RMI, and the Company are
entering into an Amended and Restated Agreement and Plan of Merger (the "Merger
Agreement") pursuant to which IAC will be merged (the "Merger") with and into
the Company, with the Company as the surviving entity.
B. As a condition to their willingness to enter into the Merger
Agreement, each of RMI and the Company has required the other party to enter
into this Agreement.
C. Capitalized terms used herein and not otherwise defined shall have
the respective meanings ascribed to them in the Merger Agreement.
D. This Agreement amends, restates and supersedes in its entirety the
Exchange Agreement (the "Original Exchange Agreement") dated March 17, 2000 made
and entered into by and between RMI and the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the premises,
representations, warranties and agreements herein contained and as contained in
the Merger Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties, the parties hereto
hereby agree as follows:
ARTICLE 1
THE EXCHANGE; ESCROW OF SHARES; CLOSING
1.1 Signing.
(a) Timing. The execution of this Agreement (the "Signing") shall take
place at the offices of Perkins Coie LLP, 1899 Wynkoop Street, Suite 700,
Denver, Colorado 80202, at 10:00 a.m., local time, on the date on which the
Merger Agreement is executed by all parties thereto (the "Signing Date"),
or at such other time and place as RMI and the Company shall mutually agree
upon in writing.
(b) Delivery of RMI Exchange Shares. At or within four (4) business
days after the Signing, pursuant to an amended and restated escrow
agreement substantially in the form of Exhibit A attached hereto (the
"Escrow Agreement"), RMI shall deposit in escrow with Norwest Bank,
Colorado, National Association (the "Escrow Agent") a duly-executed stock
certificate representing the RMI Exchange Shares (as defined herein)
<PAGE> 172
issued in the name of the Company, which shares shall be held by the Escrow
Agent until released in accordance with the terms hereof and of the Escrow
Agreement. The period of time during which such shares are held in escrow
shall be referred to herein as the "Escrow Period"
(c) Legal Opinion. At the Signing, RMI shall deliver to the Company a
legal opinion regarding the validity of this Agreement, the share exchange
contemplated herein and the issuance of the RMI Exchange Shares, in form
and substance reasonably satisfactory to the Company and its legal counsel.
1.2 Closing.
(a) Timing. If no Reversion has occurred, the Escrow Agent shall cause
the RMI Exchange Shares to be released and delivered to the Company in
exchange for the issuance and delivery to RMI of Company Exchange Shares
(as defined herein) (the "Exchange"). The Exchange shall take place (the
"Closing") at the offices of Perkins Coie LLP, 1899 Wynkoop Street, Suite
700, Denver, Colorado 80202, at 10:00 a.m., local time, on the date that is
two (2) business days following the termination of the Escrow Period (the
"Closing Date") or at such other time and place as RMI and the Company
shall mutually agree upon in writing.
(b) Share Exchange.
(i) At the Closing, the Company shall deliver or cause to be
delivered to RMI or to the Escrow Agent, and shall issue and sell to
RMI and RMI shall purchase from the Company, that number of
newly-issued shares of common stock, no par value per share, of the
Company (the "Company Common Stock") equal to 19.9% of the Company
Common Stock outstanding on the Signing Date (the "Company Exchange
Shares").
(ii) The purchase price (the "RMI Exchange Shares") to be paid
for the Company Exchange Shares shall be released by the Escrow Agent
and paid at Closing with the number of shares of RMI Common Stock (as
hereinafter defined) equal to the product of (A) 19.9% of the Company
Common Stock outstanding on the Signing Date multiplied by (B) 0.715
"RMI Common Stock" means the common stock, par value $0.001 per
share, of RMI.
(c) Legal Opinion. At the Closing, and as an express condition to the
occurrence of an Exchange hereunder, the Company shall deliver to RMI a
legal opinion regarding the validity of this Agreement, the share exchange
contemplated herein and the issuance of the Company Exchange Shares, in
form and substance substantially similar in all material respects to the
legal opinion delivered by RMI pursuant to Section 1.1(c) hereof.
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<PAGE> 173
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF RMI
RMI represents and warrants to the Company as follows:
2.1 Organization, Standing and Power. RMI is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to carry on its
business as now being conducted. Each Subsidiary of RMI is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate power and
authority to carry on its business as now being conducted. RMI and each of its
Subsidiaries is duly qualified to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary, except where
the failure to be so qualified would not, individually or in the aggregate, have
a Material Adverse Effect on RMI. For purposes of this Agreement, "Material
Adverse Change" or "Material Adverse Effect" means, when used with respect to
RMI, any change or effect that is or could reasonably be expected (as far as can
be reasonably foreseen at the time) to be materially adverse to the business,
assets, liabilities, results of operations, or the financial condition of RMI
and its Subsidiaries, taken as a whole.
2.2 Authority. RMI has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by RMI, the consummation by
RMI of the transactions contemplated hereby and the performance by RMI of its
obligations hereunder have been duly authorized by all necessary corporate
action on the part of RMI. This Agreement has been duly executed and delivered
by RMI and (assuming the valid authorization, execution and delivery of this
Agreement by the Company and the validity and binding effect hereof on the
Company) constitutes the valid and binding obligation of RMI enforceable against
it in accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws relating to
or affecting creditors rights generally and by general equity principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
2.3 Consents and Approvals; No Violation. The execution and delivery of
this Agreement by RMI does not, and the consummation by RMI of the transactions
contemplated hereby will not, conflict with, or result in any violation of or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination under, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge, increase in
liability or other encumbrance upon the RMI Common Stock or any of the assets of
RMI under any provision of:
(a) Law. Any law, statute, rule, regulation or judicial or
administrative decision,
(b) Governing Documents. The certificate of incorporation,
by-laws or any other governing document of RMI or any of its
Subsidiaries,
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<PAGE> 174
(c) Other Agreements. Any mortgage, deed of trust, lease, note,
shareholders' agreement, bond, indenture, contract or other instrument
or agreement, or
(d) Legal Order. Any judgment, order, writ, injunction or decree
of any court, governmental body, administrative agency or arbitrator
relating to RMI or any of its Subsidiaries,
other than conflicts, violations, defaults, rights of termination or Liens which
could not reasonably be expected to have a Material Adverse Effect or could not
reasonably be expected to affect materially and adversely the enforceability or
validity of this Agreement.
2.4 RMI Common Stock to be Issued in the Exchange. All of the shares of
RMI Common Stock issuable in exchange for Company Common Stock at the Closing in
accordance with this and subject to the terms of this Agreement will be, when so
issued, duly authorized, validly issued, fully paid and nonassessable and free
and clear of any and all Liens, including Liens created by statute, RMI's
certificate of incorporation or by-laws or any agreement to which RMI is a party
or by which RMI is bound.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to RMI as follows:
3.1 Organization, Standing and Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado and has the requisite corporate power and authority to carry on its
business as now being conducted. Each Subsidiary of the Company is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate power and
authority to carry on its business as now being conducted. The Company and each
of its Subsidiaries is duly qualified to do business, and is in good standing,
in each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary, except
where the failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. For purposes of this
Agreement, "Material Adverse Change" or "Material Adverse Effect" means, when
used with respect to the Company, any change or effect that is or could
reasonably be expected (as far as can be reasonably foreseen at the time) to be
materially adverse to the business, assets, liabilities, results of operations,
or the financial condition of the Company and its Subsidiaries, taken as a
whole.
3.2 Authority. The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Company, the consummation by the Company of the transactions contemplated hereby
and the performance by the Company of its obligations hereunder have been duly
authorized by all necessary corporate action on the part of the Company. This
Agreement has been duly executed and delivered by the Company and (assuming the
valid authorization, execution and delivery of this Agreement by RMI and the
validity and binding effect of the Agreement on RMI) constitutes the valid and
binding
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<PAGE> 175
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting creditors
rights generally and by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
3.3 Consents and Approvals; No Violation. The execution and delivery of
this Agreement by the Company does not, and the consummation by the Company of
the transactions contemplated hereby will not, conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination under, or accelerate the
performance required by, or result in the creation of any lien, security
interest, charge, increase in liability or other encumbrance upon the Company
Common Stock or any of the assets of the Company under any provision of:
(a) Law. Any law, statute, rule, regulation or judicial or
administrative decision,
(b) Governing Documents. The articles of incorporation, by-laws
or any other governing document of the Company or any of its
Subsidiaries,
(c) Other Agreements. Any mortgage, deed of trust, lease, note,
shareholders' agreement, bond, indenture, contract or other instrument
or agreement, or
(d) Legal Order. Any judgment, order, writ, injunction or decree
of any court, governmental body, administrative agency or arbitrator
relating to the Company or any of its Subsidiaries,
other than conflicts, violations, defaults, rights of termination or Liens which
could not reasonably be expected to have a Material Adverse Effect or could not
reasonably be expected to affect materially and adversely the enforceability or
validity of this Agreement.
3.4 Company Common Stock to be Issued in the Exchange. All of the
shares of Company Common Stock issuable in exchange for RMI Common Stock in
accordance with and subject to the terms of this Agreement will be, when so
issued, duly authorized, validly issued, fully paid and nonassessable and free
and clear of any Liens, including Liens created by statute, the Company's
articles of incorporation or by-laws or any agreement to which the Company is a
party or by which the Company is bound.
ARTICLE 4
OWNERSHIP AND EXPENSES
4.1 Ownership During Escrow Period. During the Escrow Period, the RMI
Exchange Shares shall continue to be owned by and held in the name of RMI, and
the Company shall not be permitted to vote, sell, assign, transfer, pledge or
otherwise dispose of, encumber or exercise any rights with respect to the RMI
Exchange Shares.
4.2 Fees and Expenses. Except for the costs and expenses of the Escrow
Agent (which shall be borne equally between RMI and the Company), all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby, including the fees
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<PAGE> 176
and disbursements of counsel, financial advisors and accountants, shall be paid
by the party incurring such costs and expenses.
ARTICLE 5
TERMINATION OF ESCROW, AMENDMENT AND WAIVER
5.1 Termination of Escrow Period. The Escrow Period shall automatically
expire and terminate upon the earlier to occur of (i) the expiration or
termination of the Merger Agreement for any reason, (ii) the consummation of the
Merger, or (iii) either of the events described in Section 5.2(a) or Section
5.2(b). In any of these events, on or before the Closing Date the Escrow Agent
shall effect the Exchange or Reversion, as applicable, in accordance with this
Article 5.
5.2 Escrowed Shares Returned; No Exchange. If the Escrow Period expires
or is terminated as a result of and only as a result of any of the following
events, the Escrow Agent shall immediately cause the RMI Exchange Shares to be
returned to RMI, whereupon no Company Exchange Shares will be issued or
delivered to RMI, no Closing shall occur, and the Exchange shall not be effected
(a "Reversion"):
(a) Both RMI and the Company provide mutual or simultaneous
written notice to the Escrow Agent to cause a Reversion;
(b) The Company, at its sole discretion, independently provides
written notice to the Escrow Agent directing the Escrow Agent to
effect a Reversion hereunder;
(c) The Company, rather than RMI, terminates the Merger Agreement
for any or for no reason other than as expressly provided below, and
provides written notice to RMI thereof, provided that RMI or the
Company subsequently provides such written notice of termination of
the Merger Agreement to the Escrow Agent. Notwithstanding the
foregoing, however, a Reversion shall not occur under this Section
5.2(c) if the notice of termination states that the Company has
terminated the Merger Agreement pursuant to Section 7.1(c) of the
Merger Agreement, due to a material uncured breach of a
representation, warranty, covenant or obligations of RMI under the
Merger Agreement.
(d) RMI, rather than the Company, terminates the Merger Agreement
upon an uncured default by the Company under Section 4.2(b) of the
Merger Agreement when (i) the Prohibited Action (as defined therein)
would give rise to a financial effect on the Company in excess of
$375,000; or (ii) it would be commercially reasonable for the Company
to cure the default caused by such Prohibited Action; and RMI or the
Company provides the Escrow Agent with a copy of such notice of
termination; or
(e) The Merger contemplated by the Merger Agreement is
consummated.
5.3 Closing; Release and Exchange of Escrowed Shares. Unless the Escrow
Agent has effected a Reversion hereunder, in which event the provisions of
Section 5.2 will apply, on the Closing Date the Closing will proceed as
described in Section 1.2 hereof. Upon the occurrence or nonoccurrence of any
event that causes a termination of the Escrow Period but
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<PAGE> 177
does not result in a Reversion pursuant to Section 5.2, either party may provide
written notification to the Escrow Agent of such event, which notice shall set
forth specifically the date upon which the Closing of the Exchange shall occur.
5.4 Voting and Transfer Rights Following Exchange. If the Exchange is
consummated in accordance with the provisions of this Agreement, the following
voting and transfer rights and restrictions will apply to the RMI Exchange
Shares and the Company Exchange Shares:
(a) Voting Restrictions on RMI Exchange Shares. The Company
hereby grants to the board of directors of RMI, acting by majority in
interest, the Company's irrevocable proxy and hereby appoints such
board of directors as its attorney-in-fact to vote all of the RMI
Exchange Shares until such shares are sold or otherwise transferred in
a manner expressly permitted hereunder to a party other than the
Company or the Controlling Shareholder or an affiliate of the Company
or the Controlling Shareholder, any shareholder, officer, director,
employee, consultant, or agent of the Company or the Controlling
Shareholder or an affiliate of the Company or the Controlling
Shareholder, or any child, spouse, parent, grandparent, or issue or
nominee of any of them. The Company acknowledges that this proxy is
coupled with an interest and irrevocable and agrees to take such
further action and execute such other instruments as may be necessary
to effectuate the intent of this irrevocable proxy.
(b) Voting Restrictions on Company Exchange Shares. RMI hereby
grants to the board of directors of the Company, acting by majority in
interest, RMI's irrevocable proxy and hereby appoints such board of
directors as its attorney-in-fact to vote all shares of Company
Exchange Shares until such shares are sold or otherwise transferred in
a manner expressly permitted hereunder to a party other than RMI or an
affiliate of RMI, any shareholder, officer, director, employee,
consultant, or agent of RMI or an affiliate of RMI, or any child,
spouse, parent, grandparent, or issue or nominee of any of them. RMI
acknowledges that this proxy is coupled with an interest and
irrevocable and agrees to take such further action and execute such
other instruments as may be necessary to effectuate the intent of this
irrevocable proxy.
(c) Transfer Restrictions on RMI Exchange Shares. The Company
agrees that during the 365-day period immediately following such
Exchange (the "Restricted Period") it shall not and shall have no
right to sell, assign, transfer, pledge or otherwise dispose of or
encumber any RMI Exchange Shares at any time or in any manner without
the prior written consent of RMI, provided, however, that, subject to
the volume restrictions in subsection (e) below, the Company shall
have the right during such Restricted Period, and without RMI's prior
written consent, to sell up to and including:
(i) 200,000 shares of RMI Common Stock if (X) the average of
the daily closing prices per share of RMI Common Stock on the
Nasdaq National Market for each of any fifteen (15) consecutive
trading days prior to any such sale is greater than or equal to
150% of the RMI Share Price and (Y) the sale price for such sale
is greater than or equal to 150% of the RMI Share Price; and
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<PAGE> 178
(ii) an additional 100,000 shares of RMI Common Stock if (X)
the average of the daily closing prices per share of RMI Common
Stock on the Nasdaq National Market for each of any fifteen (15)
CONSECUTIVE trading days prior to any such sale is greater than
or equal to 200% of the RMI Share Price and (Y) the sale price
for such sale is greater than or equal to 200% of the RMI Share
Price.
If the Closing of the Exchange occurs hereunder, RMI shall grant
to the Company certain demand and piggy-back registration rights
relating to the RMI Exchange Shares pursuant to a registration rights
agreement substantially in the form of Exhibit C attached hereto (the
"Company Registration Rights Agreement"). The "RMI Share Price" means
the average of the daily closing prices per share of RMI Common Stock
on the Nasdaq National Market for the fifteen (15) consecutive trading
days ending on the trading day that is one (1) day prior to the
Signing Date.
(d) Transfer Restrictions on Company Exchange Shares.
(i) Definitions. For purposes of this Section 5.4(d), the
term "Base Ratio" shall mean the ratio of 200,000 over the total
number of RMI Exchange Shares; and the term "Ceiling Ratio" shall
mean the ratio of 100,000 over the total number of RMI Exchange
Shares.
(ii) Restrictions. RMI agrees that during the Restricted
Period immediately following such Exchange it shall not and shall
have no right to sell, assign, transfer, pledge or otherwise
dispose of or encumber any Company Exchange Shares at any time or
in any manner without the prior written consent of the Company;
provided, however, that, subject to the volume restrictions in
subsection (e) below, RMI shall have the right during such
Restricted Period and without the Company's prior written consent
to sell up to and including:
a) that number of shares of Company Common Stock equal
to the product of the Base Ratio times the total number of
Company Exchange Shares; provided, however, that RMI may
only sell such Company Common Stock under this subsection
(ii)(a) if (X) the average of the daily closing prices per
share of Company Common Stock on the Nasdaq SmallCap Market
for each of any fifteen (15) consecutive trading days prior
to any such sale is greater than or equal to $1.20, and (Y)
the sale price for such sale is greater than or equal to
$1.20; and
b) an additional number of shares of Company Common
Stock equal to the product of the Ceiling Ratio times the
total number of Company Exchange Shares; provided, however,
that RMI may only sell such Company Common Stock under this
subsection (ii)(b) if (X) the average of the daily closing
prices per share of Company Common Stock on the Nasdaq
SmallCap Market for each of any fifteen (15) consecutive
trading days prior to any such sale is greater than or equal
to $1.60, and (Y) the sale price for such sale is greater
than or equal to $1.60.
If the Closing of the Exchange occurs hereunder, the Company shall
grant to RMI certain demand and piggy-back registration rights relating to
the Company Exchange
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Shares pursuant to a registration rights agreement substantially in the
form of Exhibit B hereto (the "RMI Registration Rights Agreement").
(e) Volume Restrictions. Notwithstanding anything to the contrary
herein, during the Restricted Period immediately following an
Exchange, the Company shall not at any time sell RMI Exchange Shares,
and RMI shall not sell Company Exchange Shares, on any single trading
day in amounts in excess of five percent 5% of the average daily
trading volume of RMI Common Stock on the Nasdaq National Market, or
Company Common Stock on the Nasdaq SmallCap Market, as applicable, for
the five (5) consecutive trading days prior to the date of any such
sale.
5.5 Amendment. This Agreement may be amended by the parties hereto only
by an instrument in writing signed on behalf of each of the parties hereto.
5.6 Waiver. The failure of either party hereto to enforce at any time
any of the provisions of this Agreement shall in no way be construed to be a
waiver of any such provision, nor in any way to affect the validity of this
Agreement or any part hereof or the right of such party thereafter to enforce
each and every such provision. No waiver of any breach of or non-compliance with
this Agreement shall be held to be a waiver of any other or subsequent breach or
non-compliance.
5.7 Survival. The terms and conditions of this Article 5 will survive
the expiration or termination of the Escrow Period for any reason.
ARTICLE 6
GENERAL PROVISIONS
6.1 Survival of Representations and Warranties; No Other
Representations and Warranties. The representations and warranties in this
Agreement or in any instrument delivered pursuant to this Agreement shall
terminate upon the expiration or termination of the Escrow Period pursuant to
Section 5.1 hereof. Each party hereto agrees that, except for the
representations and warranties contained in this Agreement, neither the Company
nor RMI makes any other representations and warranties, and each hereby
disclaims any other representations and warranties made by itself or any of its
officers, directors, employees, agents, financial and legal advisors or other
representatives, with respect to the execution and delivery of this Agreement,
the documents and the instruments referred to herein, or the transactions
contemplated hereby or thereby, notwithstanding the delivery or disclosure to
the other party or the other party's representatives of any documentation or
other information with respect to any one or more of the foregoing.
6.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given when delivered personally, one day after being
delivered to an overnight courier to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
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(a) RMI. If to RMI, to:
RMI.NET, Inc.
988 - 18th Street, suite 2201
Denver, Colorado 80202
Attention: Chris J. Melcher, Vice President and General
Counsel
with a copy to:
Perkins Coie LLP
1899 Wynkoop Street, Suite 700
Denver, Colorado 80202
Attention: Neil M. Goff, Esq.
Brownstein, Hyatt & Farber, P.C.
410 - 17th Street, 22nd Floor
Denver, Colorado 80202
Attention: Jeffrey M. Knetsch, Esq.
(b) Company. If to the Company, to:
Internet Communications Corporation
7100 East Bellview Avenue, Suite 201
Greenwood Village, Colorado 80111
Attention: President
with a copy to:
Hogan & Hartson L.L.P.
One Tabor Center, Suite 1500
1200 Seventeenth Street
Denver, Colorado 80202
Attention: Steven A. Cohen, Esq.
6.3 Interpretation.
(a) Headings. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in
this Agreement are for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words
"without limitation."
(b) "Subsidiary" means any corporation, partnership, limited
liability company, joint venture or other legal entity of which RMI or
Company, as the case may be (either alone or through or together with
any other Subsidiary), owns or controls, directly or indirectly, 50%
or more of the stock or other equity interests the holders of which
are generally entitled to vote for the election of the board of
directors or other
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governing body of such corporation, partnership, limited liability
company, joint venture or other legal entity.
6.4 Counterparts. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
6.5 Entire Agreement; No Third-Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof. This Agreement is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
6.6 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the internal laws of the State of Colorado, without regard
to conflicts of law principles thereof.
6.7 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder may be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors or assigns.
6.8 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other terms, conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
6.9 Enforcement of this Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties hereto shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof, such remedy being
in addition to any other remedy to which any party is entitled at law or in
equity. Each party hereto irrevocably submits to the exclusive jurisdiction of
the United States District Court for the District of Colorado. Each party hereto
waives any right to a trial by jury in connection with any such action, suit or
proceeding and waives any objection based on forum non conveniens or any other
objection to venue thereof.
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6.10 Defined Terms. Each of the following terms is defined in the
Section identified below:
<TABLE>
<S> <C>
Agreement .......................................................Preamble
Base Ratio ................................................Section 5.4(d)
Ceiling Ratio .............................................Section 5.4(d)
Closing ...................................................Section 1.2(a)
Closing Date ..............................................Section 1.2(a)
Company .........................................................Preamble
Company Common Stock ......................................Section 1.2(b)
Company Exchange Shares ...................................Section 1.2(b)
Company Registration Rights Agreement .....................Section 5.4(c)
Escrow Agent ..............................................Section 1.1(b)
Escrow Agreement ..........................................Section 1.1(b)
Escrow Period .............................................Section 1.1(b)
Exchange ..................................................Section 1.2(a)
Material Adverse Change .................................Section 2.1, 3.1
Material Adverse Effect .................................Section 2.1, 3.1
Merger ..........................................................Recitals
Merger Agreement ................................................Recitals
Restricted Period .........................................Section 5.4(c)
Reversion ....................................................Section 5.2
RMI .............................................................Preamble
RMI Common Stock ..........................................Section 1.2(b)
RMI Exchange Shares .......................................Section 1.2(b)
RMI Registration Rights Agreement .........................Section 5.4(d)
RMI Share Price ...........................................Section 1.2(b)
Signing Date ..............................................Section 1.1(a)
Signing ...................................................Section 1.1(a)
Subsidiary ................................................Section 6.3(b)
</TABLE>
IN WITNESS WHEREOF, RMI and the Company have caused this Agreement to
be signed by their respective officers thereunto duly authorized as of the date
first above written.
RMI.NET, INC., a Delaware corporation
By: /s/ Douglas Hanson
----------------------------------
Name: Douglas Hanson
--------------------------------
Title: Chief Executive Officer and
-------------------------------
President
-------------------------------
INTERNET COMMUNICATIONS CORPORATION,
a Colorado corporation
By: /s/ Thomas Galley
----------------------------------
Name: Thomas Galley
--------------------------------
Title: Chief Executive Officer and
-------------------------------
President
-------------------------------
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Appendix D
AMENDED AND RESTATED SHAREHOLDER AGREEMENT
THIS AMENDED AND RESTATED SHAREHOLDER AGREEMENT, dated as of
October 18, 2000 (this "Agreement"), is by and among RMI.NET, Inc., a Delaware
corporation ("Parent"), Internet Communications Corporation, a Colorado
corporation (the "Company"), and Interwest Group, Inc., a Colorado corporation
("Interwest").
RECITALS
A. Parent, Internet Acquisition Corporation, a Colorado corporation and
wholly-owned subsidiary of Parent ("Sub"), and the Company entered into an
Agreement and Plan of Merger dated as of March 17, 2000 (the "Original Merger
Agreement"), pursuant to which Sub was to be merged with and into the Company
(the "Merger");
B. As an inducement and a condition to entering into the Original
Merger Agreement, Parent required that Interwest agree, and Interwest agreed, to
enter into a Shareholder Agreement dated as of March 17, 2000 (the "Original
Shareholder Agreement");
C. Simultaneously herewith, Parent, Sub and the Company have agreed to
amend and restate the Original Merger Agreement by entering into an Amended and
Restated Agreement and Plan of Merger (the "Amended and Restated Merger
Agreement");
D. As an inducement and a condition to entering into the Amended and
Restated Merger Agreement, Parent has required that Interwest agree, and
Interwest has agreed, to amend and restate the Original Shareholder Agreement;
and
E. This Agreement amends, restates and supersedes in its entirety the
Original Shareholder Agreement between Parent, the Company and Interwest.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound hereby, agree as
follows:
1. CERTAIN DEFINITIONS. In addition to the terms defined
elsewhere herein, capitalized terms used and not defined herein have the
respective meanings ascribed to them in the Amended and Restated Merger
Agreement. For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with
respect to any securities means having "beneficial ownership" of such securities
as determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). Without duplicative counting of the same
securities by the same holder, securities Beneficially Owned by
<PAGE> 184
a person includes securities Beneficially Owned by all other persons with whom
such person would constitute a "group" within the meaning of Section 13(d) of
the Exchange Act with respect to the securities of the same issuer.
(b) "Existing Shares" means shares of Company Common Stock
and Company Preferred Stock Beneficially Owned by Interwest as of the date
hereof.
(c) "Securities" means the Existing Shares together with
any shares of Company Common Stock or other securities of the Company acquired
by Interwest in any capacity after the date hereof and prior to the termination
of this Agreement whether upon the exercise of options, warrants or rights, the
conversion or exchange of convertible or exchangeable securities, or by means of
purchase, dividend, distribution, split-up, recapitalization, combination,
exchange of shares or the like, gift, bequest, inheritance or as a successor in
interest in any capacity or otherwise.
2. DISCLOSURE. Interwest hereby agrees to permit the Company
and Parent to publish and disclose in the Registration Statement and the Proxy
Statement (including all documents and schedules filed with the SEC), and any
press release or other disclosure document which Parent, in its sole discretion,
determines to be necessary or desirable in connection with the Merger and any
transactions related thereto, Interwest's identity and ownership of Company
Common Stock and Company Preferred Stock and the nature of Interwest's
commitments, arrangements and understandings under this Agreement. Parent will
provide Interwest with a copy of any proposed disclosure and will provide
Interwest with a reasonable opportunity to comment thereon.
3. VOTING OF SECURITIES PRIOR TO EFFECTIVE TIME. Interwest
hereby agrees that, during the period commencing on the date hereof and
continuing until the first to occur of (a) the Effective Time or (b) the date
that the Amended and Restated Merger Agreement is terminated, at any meeting
(whether annual or special and whether or not an adjourned or postponed meeting)
of the holders of Company Common Stock or Company Preferred Stock, however
called, or in connection with any written consent of the holders of Company
Common Stock or Company Preferred Stock, Interwest will appear at the meeting or
otherwise cause the Securities to be counted as present thereat for purposes of
establishing a quorum and vote or consent (or cause to be voted or consented)
the Securities (x) in favor of the adoption of the Amended and Restated Merger
Agreement and the approval of other actions contemplated by the Amended and
Restated Merger Agreement and this Agreement and any actions required in
furtherance thereof and hereof; (y) against any action or agreement that would
result in a breach in any respect of any covenant, representation or warranty or
any other obligation or agreement of the Company under the Amended and Restated
Merger Agreement or this Agreement; and (z) except as otherwise agreed to in
writing in advance by Parent in its sole discretion, against the following
actions: (i) any Takeover Proposal or Superior Transaction, (ii) any change in a
majority of the persons who constitute the Board of Directors of the Company;
(iii) any material change in the present capitalization of the Company,
including without limitation any proposal to sell a substantial equity interest
in the Company or its Subsidiaries; (iv) any amendment of the Company's
Certificate of Incorporation or By-laws; (v) any other change in the Company's
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corporate structure or business; or (vi) any other action that is intended, or
could reasonably be expected, to impede, interfere with, delay, postpone or
materially adversely affect the Merger and the transactions contemplated by this
Agreement and the Amended and Restated Merger Agreement. Interwest may not enter
into any agreement or understanding with any person the effect of which would be
inconsistent with or violative of any provision contained in this Section 3.
4. SUBSEQUENT ACTIONS BY INTERWEST.
(a) Following the Effective Time, for so long as Interwest
holds or Beneficially Owns any Parent Common Stock, at any meeting (whether
annual or special or whether or not an adjourned or postponed meeting of the
holders of Parent Common Stock) or in connection with any written consent of the
holders of Parent Common Stock, Interwest will vote or consent (or cause to be
voted or consented) all shares of Parent Common Stock howsoever acquired then
held or Beneficially Owned by Interwest (or any affiliates of Interwest) as
directed by a majority of the Board of Directors of Parent.
(b) If the Amended and Restated Merger Agreement is
terminated or the Merger is not consummated for any reason other than
termination of the Amended and Restated Merger Agreement (i) by Parent, (ii) by
the Company if the shareholders of Parent fail to approve the Amended and
Restated Merger Agreement, or the Merger contemplated thereby, at the Parent
Shareholder Meeting, (iii) by the Company pursuant to Section 7.1(a)(ii) of the
Amended and Restated Merger Agreement if the condition contained in either
Section 6.2(d) or Section 6.2(h) thereof has not been satisfied, or (iv) by the
Company because of a material breach by Parent, and a Takeover Proposal or a
Superior Transaction with any other party is consummated during the 12 months
following the Termination Date, with respect to Securities for which Interwest
receives consideration pursuant to the Takeover Proposal or Superior
Transaction, Interwest will, subject to Section 4(d) below, immediately upon the
receipt thereof pay to Parent an amount in cash (if positive) (the "Differential
Amount") equal to (x) the excess of the net pre-tax proceeds received by
Interwest with respect to the Securities over the net pre-tax proceeds Interwest
would have received with respect to such Securities if the Merger had been
consummated, including any shares of Company Common Stock into or for which any
Securities are convertible, exchangeable or exercisable, of Interwest (such
Securities, the "Subject Shares") in such transaction, or in any sale of any
Subject Shares to a third party that was initiated by Interwest, directly or
indirectly, within 12 months after the Termination Date plus (y) the product of
(A) $1.00 (the "Share Value"), subject to adjustment as set forth in Section
4(e) below, times (B) the number of Subject Shares.
(c) If the Amended and Restated Merger Agreement is
terminated or the Merger is not consummated as a result of a material breach by
Parent, and a Takeover Proposal or a Superior Transaction with any other party
is consummated during the six months following the Termination Date, with
respect to Securities for which Interwest receives consideration pursuant to the
Takeover Proposal or Superior Transaction, Interwest will, subject to Section
4(d) below, immediately upon the receipt thereof pay to Parent an amount in cash
(if positive) equal to the Differential Amount, calculated as described in
Section 4(b) above with
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respect to the Subject Shares in such transaction, or in any sale of any Subject
Shares to a third party that was initiated by Interwest, directly or indirectly,
within six months after the Termination Date.
(d) If a Differential Amount is payable pursuant to Section
4(b) or 4(c) hereof and Interwest receives any non-cash consideration in the
Takeover Proposal or Superior Transaction as part of the net proceeds ("Other
Consideration") that consists of securities listed on a national securities
exchange or the Nasdaq National Market ("Marketable Securities"), Interwest
shall deliver immediately to Parent an amount of Marketable Securities whose
aggregate value, calculated on the basis of the closing price for such
Marketable Securities on the exchange where such Marketable Securities are
listed, equals the Differential Amount. To the extent the Other Consideration
consists of non-Marketable Securities or other assets, such Other Consideration
will be held by Interwest until Interwest shall have sold or otherwise disposed
of such Other Consideration for cash or Marketable Securities, or has otherwise
actually realized value, directly or indirectly, from such sale or disposition,
at which time the Differential Amount, to the extent not previously paid, will
be immediately paid to Parent in cash or such Marketable Securities.
(e) The Share Value used in Section 4(b) or 4(c) above
shall be adjusted as appropriate and equitable to reflect any reorganization,
recapitalization, stock dividend or split, or combination or other change in the
Company's capital structure after the date hereof.
5. COVENANTS, REPRESENTATIONS AND WARRANTIES OF INTERWEST.
Interwest hereby represents and warrants to, and agrees with, Parent as follows:
(a) Ownership of Shares. Interwest is the sole record and
beneficial owner of Existing Shares consisting of 3,100,631 shares of Company
Common Stock and all of the issued and outstanding shares of Company Preferred
Stock, consisting 50,000 shares of preferred stock designated as Series A
Preferred and 19,000 shares of preferred stock designated as Series B Preferred.
On the date hereof, the Existing Shares constitute all of the Shares owned of
record or beneficially owned by Interwest. Interwest has sole voting power and
sole power to issue instructions with respect to the matters set forth in
Sections 3 and 4 hereof, sole power of disposition, sole power of conversion,
sole power to demand appraisal rights and sole power to agree to all of the
matters set forth in this Agreement, in each case with respect to all of the
Existing Shares with no limitations, qualifications or restrictions on such
rights, subject to applicable securities laws, and the terms of this Agreement.
(b) Organization. Interwest is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado, has all requisite corporate power or other power and authority to
execute and deliver this Agreement and perform its obligations hereunder. The
execution and delivery by Interwest of this Agreement and the performance by it
of its obligations hereunder have been duly and validly authorized by the Board
of Directors of Interwest and no other corporate proceedings on the part of
Interwest are
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necessary to authorize the execution, delivery and performance of this Agreement
or the consummation of the transactions contemplated hereby by Interwest.
(c) Corporate Authorization. This Agreement has been duly
and validly executed and delivered by Interwest and constitutes a valid and
binding agreement enforceable against Interwest in accordance with its terms
except (i) as may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance or similar laws affecting creditors rights and (ii) that the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
(d) No Conflicts. Except for filings, authorizations,
consents and approvals as may be required under the HSR Act, the Exchange Act
and the Securities Act, (i) no filing with, and no permit, authorization,
consent or approval of, any state or federal Governmental Entity is necessary
for the execution of this Agreement by Interwest and the consummation by
Interwest of the transactions contemplated hereby and (ii) none of the execution
and delivery of this Agreement by Interwest, the consummation by Interwest of
the transaction contemplated hereby or compliance by Interwest with any of the
provisions hereof will (x) conflict with or result in any breach of the
organizational documents of Interwest, (y) result in a violation or breach of,
or constitute (with or without notice or lapse of time or both) a default (or
give rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or provisions
of any note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which Interwest is a party or by which Interwest or
any of their properties or assets may be bound, or (z) violate any order, writ,
injunction, decree, judgment, statute, rule or regulation applicable to
Interwest or any of its properties or assets.
(e) No Encumbrances. Except as applicable in connection
with the transactions contemplated by Sections 3 and 4 hereof, the Existing
Shares at all times during the term hereof will be beneficially owned by
Interwest, free and clear of all liens, claims, security interests, proxies,
voting trusts or agreements, understandings or arrangements or any other
encumbrances whatsoever, except for any such encumbrances or proxies arising
hereunder.
(f) Finder's Fees. Other than as contemplated by the
Amended and Restated Merger Agreement, no broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
adviser's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Interwest.
(g) No Solicitation. During the term of this Agreement,
Interwest shall not, and shall not authorize or permit any of its directors,
officers, employees, agents or representatives, directly or indirectly, to
solicit or initiate, or furnish or disclose non-public information in
furtherance of, any inquiries or the making of any proposal with respect to any
Takeover Proposal, or negotiate or otherwise engage in discussions with any
person (other than Parent, Sub or their respective directors, officers,
employees, agents or representatives) with
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respect to any Takeover Proposal or enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transactions contemplated by the Amended and Restated Merger
Agreement, and will immediately cease all existing activities, discussions and
negotiations with any parties conducted heretofore with respect to any proposal
for a Takeover Proposal.
(h) Restriction on Transfer, Proxies and Non-Interference
Prior to Effective Date. Interwest will not, directly or indirectly, prior to
the Effective Date or the Termination Date, (i) offer for sale, sell, transfer,
tender, pledge, encumber, assign or otherwise dispose of, or enter into any
contract, option or other arrangement or understanding with respect to or
consent to the offer for sale, sale, transfer, tender, pledge, encumbrance,
assignment or other disposition of, any or all of the Securities or any interest
therein except as provided in Section 4(b) and (c); (ii) grant any proxies or
powers of attorney, deposit the Securities into a voting trust or enter into a
voting agreement with respect to the Securities; or (iii) take any action that
would make any representation or warranty of Interwest contained herein untrue
or incorrect or would result in a breach by Interwest of its obligations under
this Agreement.
(i) Restriction on Transfer Following the Effective Date.
Interwest will not, directly or indirectly, for the one year period commencing
on the Effective Date, offer for sale, sell, transfer, tender, pledge, encumber,
assign or otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to or consent to the offer for sale,
sale, transfer, tender, pledge, encumbrance, assignment or other disposition of,
any or all of the Parent Common Stock received by it in the Merger or any
interest therein, except that Interwest shall have the right during such
one-year period, without Parent's prior written consent, to sell up to and
including:
(i) 200,000 shares of Parent Common Stock (or such greater
number of shares as provided in clause (iii) below) if (x) the
average of the daily closing prices per share of Parent Common
Stock on the Nasdaq National Market for each of any 15
consecutive trading days prior to any such sale is greater than
or equal to 150% of the RMI Share Price (as defined below) and
(y) the sale price for such sale is greater than or equal to 150%
of the RMI Share Price;
(ii) an additional 100,000 shares of Parent Common Stock
(or such greater number of shares as provided in clause (iii)
below) if (x) the average of the daily closing prices per share
of Parent Common Stock on the Nasdaq National Market for each of
any 15 consecutive trading days prior to any such sale is greater
than or equal to 200% of the RMI Share Price and (y) the sale
price for such sale is greater than or equal to 200% of the RMI
Share Price;
(iii) in the event that the aggregate amount of the
Controlling Shareholder Loan at the Effective Time exceeds the
Maximum Amount, the number of shares permitted to be sold
pursuant to clauses (i) and (ii) above shall be increased by an
amount equal to such share number (200,000 and 100,000,
respectively) multiplied by the actual amount of the Controlling
Shareholder Loan at the Effective time and divided by the Maximum
Amount; and
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(iv) notwithstanding anything to the contrary herein,
during the one-year period commencing on the Effective Date,
Interwest shall not at any time sell shares of Parent Common
Stock in amounts in excess of five percent of the average daily
trading volume of Parent Common Stock on the Nasdaq National
Market for the five consecutive trading days prior to the date of
any such sale.
The "RMI Share Price" means the average of the daily closing price per share of
Parent Common Stock on the Nasdaq National Market for the 15 consecutive trading
days ending on the trading day that is one day prior to the date hereof.
(j) Reliance by Parent. Interwest understands and
acknowledges that Parent is entering into the Amended and Restated Merger
Agreement in reliance upon Interwest's execution and delivery of this Agreement.
(k) Furtherance of Parent's Observer Rights. Interwest will
cooperate fully, and take all actions reasonably requested by Parent, to ensure
that the provisions of Section 4.10 of the Amended and Restated Merger Agreement
are fully complied with.
(l) Further Assurances. From time to time, at Parent's
request and without further consideration, Interwest will execute and deliver
such additional documents and take all such further lawful action as may be
necessary or desirable to consummate and make effective, in the most expeditious
manner practicable, the transactions contemplated by this Agreement.
6. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent hereby
represents and warrants to Interwest and the Company as follows:
(a) Organization. Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
has all requisite corporate power or other power and authority to execute and
deliver this Agreement and perform its obligations hereunder. The execution and
delivery by Parent of this Agreement and the performance by Parent of its
obligations hereunder have been duly and validly authorized by the Board of
Directors of Parent and no other corporate proceedings on the part of Parent are
necessary to authorize the execution, delivery and performance of this Agreement
or the consummation of the transactions contemplated hereby by Parent.
(b) Corporate Authorization. This Agreement has been duly
and validly executed and delivered by Parent and constitutes a valid and binding
agreement of Parent enforceable against Parent in accordance with its terms,
except (i) as may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance or similar laws affecting creditors rights and (ii) that the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
(c) No Conflicts. Except for filings, authorizations,
consents and approvals as may be required under the HSR Act, the Exchange Act
and the Securities Act, (i) no
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filing with, and no permit, authorization, consent or approval of, any state or
federal Governmental Entity is necessary for the execution of this Agreement by
Parent and the consummation by Parent of the transactions contemplated hereby
and (ii) none of the execution and delivery of this Agreement by Parent, the
consummation by Parent of the transactions contemplated hereby or compliance by
Parent with any of the provisions hereof will (x) conflict with or result in any
breach of the certificate of incorporation or by-laws of Parent, (y) result in a
violation or breach of, or constitute (with or without notice or lapse of time
or both) a default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the terms,
conditions or provisions of any note, loan agreement, bond, mortgage, indenture,
license, contract, commitment, arrangement, understanding, agreement or other
instrument or obligation of any kind to which Parent is a party or by which
Parent or any of its properties or assets may be bound, or (z) violate any
order, writ, injunction, decree, judgment, statute, rule or regulation
applicable to Parent or any of their respective properties or assets.
(d) No Finder's Fee. No broker, investment banker,
financial adviser or other person is entitled to any broker's, finder's,
financial adviser's or other similar fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
Parent.
(e) Registration Rights. Upon the Closing contemplated by
the Amended and Restated Merger Agreement, Parent will enter into a Registration
Rights Agreement with Interwest in the form of Exhibit A hereto.
7. STOP TRANSFER; LEGEND.
(a) Interwest agrees with and covenants to Parent that
Interwest will not request that the Company register the transfer (book-entry or
otherwise) of any certificate or uncertificated interest representing any of the
Securities, unless such transfer is made in compliance with this Agreement.
(b) In the event of a stock dividend or distribution, or
any change in the Company Common Stock or Company Preferred Stock by reason of
any stock dividend, split-up, recapitalization, combination, exchange of shares
or the like other than pursuant to the Merger, the terms "Shares" and
"Securities" will be deemed to refer to and include the shares of Company Common
Stock or Company Preferred Stock as well as all such stock dividends and
distributions and any shares into which or for which any or all of the
Securities may be changed or exchanged and appropriate adjustments shall be made
to the terms and provisions of this Agreement.
(c) Interwest will promptly after the date hereof surrender
to the Company all certificates representing the Securities, and the Company
will place the following legend on such certificates in addition to any other
legend required thereon:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER
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PURSUANT TO AND OTHER PROVISIONS OF AN AMENDED AND RESTATED
SHAREHOLDER AGREEMENT, DATED AS OF OCTOBER __, 2000, BY
RMI.NET, INC., INTERNET COMMUNICATIONS CORPORATION AND
INTERWEST GROUP, INC.
8. TERMINATION. This Agreement will terminate upon the
earlier of (i) the consummation of the Merger or (ii) the termination of the
Amended and Restated Merger Agreement in accordance with its terms, except that
the covenants and agreements set forth in Sections 4(b) through 4(e) hereof will
survive any termination of this Agreement for the terms specified therein and
the terms of Sections 4(a) and 5(i) will survive the consummation of the Merger.
9. MISCELLANEOUS.
(a) Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
(b) Binding Agreement. Interwest agrees that this Agreement
and the obligations hereunder will attach to the Securities and will be binding
upon any person or entity to which legal or beneficial ownership of such
Securities shall pass, whether by operation of law or otherwise, including
without limitation, Interwest's successors or other transferees (for value or
otherwise) and any other successors in interest. Notwithstanding the foregoing,
this Agreement will not apply to any transferee of Interwest that is not an
affiliate controlled by Interwest provided that such transferee becomes such in
a transaction not in breach of this Agreement.
(c) Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder will be assigned or delegated
(whether by operation of law or otherwise) without the prior written consent of
the other parties, provided that Parent may assign, in its sole discretion, its
rights, interests and obligations hereunder to any direct or indirect wholly
owned Subsidiary of Parent, but no such assignment will relieve Parent from any
of its obligations hereunder if such assignee does not perform such obligations.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns.
(d) Amendment and Modification. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(e) Notices. All notices and other communications hereunder
will be in writing and will be deemed given if delivered personally, telecopied
(which is confirmed) or
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sent by an overnight courier service, such as FedEx, to the parties at the
following addresses (or at such other address for a party as will be specified
by like notice):
If to Interwest:
Interwest Group, Inc.
2400 Anaconda Tower
555 Seventeenth Street
Denver, Colorado 80202
Attention: President
Facsimile No.: (303) 299-1333
with a copy to:
Hogan & Hartson, L.L.P.
One Tabor Center
1200 Seventeenth Street, Suite 1500
Denver, Colorado 80202
Attention: Steven A. Cohen, Esq.
Facsimile No.: (303) 899-7333
If to the Company:
Internet Communications Corporation
7100 East Belleview Avenue, Suite 201
Greenwood Village, Colorado 80111
Attention: President
Facsimile No.: (303) 770-2706
with a copy to:
Hogan & Hartson, L.L.P.
One Tabor Center
1200 Seventeenth Street, Suite 1500
Denver, Colorado 80202
Attention: Steven A. Cohen, Esq.
Facsimile No.: (303) 899-7333
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If to Parent:
RMI.NET, Inc.
988 18th Street, Suite 2201
Denver, Colorado 80202
Attention: Christopher J. Melcher, Vice
President & General Counsel
Facsimile No.: (303) 313-0821
with a copy to:
Perkins Coie LLP
1899 Wynkoop Street, Suite 700
Denver, Colorado 80202
Attention: Neil M. Goff, Esq.
Facsimile No.: (303) 291-2400
Brownstein, Hyatt & Farber, P.C.
410 17th Street, 22nd Floor
Denver, Colorado 80202
Attention: Jeffrey M. Knetsch, Esq.
Facsimile No.: (303) 223-1111
(f) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement will remain in full force and effect and will in no way be
affected, impaired or invalidated.
(g) Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties will be
entitled to the remedy of specific performance of the terms hereof, in addition
to any other remedy at law or equity.
(h) No Waiver. The failure of any party hereto to exercise
any right, power or remedy provided under this Agreement or otherwise available
in respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, will not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
(i) No Third Party Beneficiaries. This Agreement is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
(j) Governing Law. This Agreement will be governed and
construed in accordance with the laws of the State of Colorado, without giving
effect to the principles of conflict of laws thereof.
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(k) Description Headings. The description headings used
herein are for reference purposes only and will not affect in any way the
meaning or interpretation of this Agreement.
(l) Counterparts. This Agreement may be executed in
counterparts, each of which will be considered one and the same agreement and
will become effective when such counterparts have been signed by each of the
parties and delivered to the other parties, it being understood that all parties
need not sign the same counterpart.
IN WITNESS WHEREOF, Parent, the Company and Interwest have caused this
Agreement to be duly executed as of the day and year first above written.
RMI.NET, INC., a Delaware Corporation
By: /s/ Douglas Hanson
------------------------------------------
Name: Douglas Hanson
Title: Chief Executive Officer and
President
INTERNET COMMUNICATIONS
CORPORATION, a Colorado Corporation
By: /s/ Thomas Galley
------------------------------------------
Name: Thomas Galley
Title: Chief Executive Officer and
President
INTERWEST GROUP, INC., a Colorado
Corporation
By: /s/ Clifford Hickey
------------------------------------------
Name: Clifford Hickey
Title:
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<PAGE> 195
Appendix E
RMI.NET, INC.
COMMON STOCK PURCHASE AND ADJUSTMENT WARRANT AGREEMENT
Common Stock Purchase and Adjustment Warrant Agreement, dated as of
________________________________, 2000 (this "Agreement"), between RMI.NET,
Inc., a Delaware corporation (the "Company"), and Interwest Group, Inc., a
Colorado corporation ("IWG").
RECITALS
A. The Company, INTERNET ACQUISITION CORPORATION, a Colorado
corporation and a wholly-owned subsidiary of the Company ("IAC"), and INTERNET
COMMUNICATIONS CORPORATION, a Colorado corporation ("INCC") entered into an
Amended and Restated Agreement and Plan of Merger dated October 18, 2000 (the
"Merger Agreement"), pursuant to which IAC will be merged (the "Merger") with
and into INCC with INCC as the surviving entity.
B. The respective Boards of Directors of the Company, IAC, INCC and IWG
have approved and adopted the Merger Agreement and the transactions contemplated
thereby.
C. Pursuant to the terms of the Merger Agreement and immediately prior
to the Closing (as hereinafter defined), the aggregate amount of all loans (the
"Controlling Shareholder Loan") made by IWG to INCC, including all accrued and
unpaid interest thereon through the Effective Time, shall be converted into
shares of common stock, no par value, of INCC at a rate of $2.50 per share, and,
thereafter, IWG shall be entitled to receive in exchange for such shares the
merger consideration (the "Merger Consideration") provided for in the Merger
Agreement (the Merger Consideration received by IWG in exchange for such shares
is referred to herein as the "Converted Loan Merger Shares").
D. Three hundred and sixty-six (366) days following the Closing (the
"Adjustment Date"), IWG may be entitled to shares of Common Stock (as
hereinafter defined) in addition to those received by IWG at the Closing.
E. The Company proposes to issue and deliver to IWG a warrant
certificate (the "Warrant Certificate") evidencing a warrant (the "Warrant") to
purchase the number of shares of Common Stock calculated pursuant to Section 4
hereof and as contemplated by the Merger Agreement.
F. The Warrant will entitle the Holder (as hereinafter defined) to
purchase from the Company at any time or from time to time during the Exercise
Period (as hereinafter defined), a number of fully paid and nonassessable shares
of Common Stock as described herein at a purchase price per share equal to the
Exercise Price (as hereinafter defined). The number of such shares of Common
Stock is subject to adjustment as provided in this Warrant Agreement.
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AGREEMENT
In consideration of the foregoing and for the purpose of defining the
terms and provisions of this Agreement, the Company and IWG each agree as
follows:
Section 1. Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
"Adjustment Date" shall have the meaning set forth in the Recitals to
this Agreement.
"Adjustment Interest" means (i) the dollar amount of the Controlling
Shareholder Loan minus the product of (a) the Closing Price on the Closing Date
multiplied by (b) the number of Converted Loan Merger Shares, multiplied by (ii)
an interest rate of 12% per annum compounded quarterly, which interest shall
accrue from the Closing Date through and including the Adjustment Date.
"Adjustment Value" means the result of the following formula: (i) the
dollar amount of the Controlling Shareholder Loan plus the Adjustment Interest
minus (ii) the sum of (a) the Aggregate Market Value and (b) the Aggregate
Repurchased Share Value.
"Affiliate" shall have the meaning given to such term in Rule 12b-2
promulgated under the Securities and Exchange Act of 1934, as amended.
"Aggregate Market Value" means the product of the number of Converted
Loan Merger Shares (less any of such shares repurchased by the Company pursuant
to Section 5) and the Fair Market Value as of the Adjustment Date.
"Aggregate Repurchased Share Value" means the sum of the Repurchased
Share Values.
"Agreement" shall have the meaning set forth in the Preamble.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in Denver, Colorado or New York, New York are authorized
by law to close.
"Certificate of Incorporation" means the Certificate of Incorporation
of the Company.
"Closing" means the closing of the transactions contemplated by the
Merger Agreement.
"Closing Date" means the date of the Closing.
"Closing Price" on any day means (i) if the shares of Common Stock then
are listed and traded on the NYSE, the Closing Price on such day as reported on
the NYSE Composite Transactions Tape; (ii) if shares of Common Stock then are
not listed and traded on the NYSE, the Closing Price on such day as reported by
the principal national securities exchange on which
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the shares of Common Stock are listed and traded; (iii) if the shares of Common
Stock then are not listed and traded on any such securities exchange, the last
reported sale price on such day on the NASDAQ; or (iv) if the shares of Common
Stock then are not traded on the NASDAQ, the average of the highest reported bid
and the lowest reported asked price on such day as reported by the NASDAQ
Quotation System.
"Common Share Equivalent" means, with respect to any security of the
Company and as of a given date, a number which is, (i) in the case of a share of
Common Stock, one, (ii) in the case of all or a portion of any right, warrant or
other security which may be exercised for a share or shares of Common Stock, the
number of shares of Common Stock receivable upon exercise of such security (or
such portion of such security), and (iii) in the case of any security
convertible or exchangeable into a share or shares of Common Stock, the number
of shares of Common Stock that would be received if such security were converted
or exchanged on such date.
"Common Stock" shall have the meaning set forth in the Recitals to this
Agreement.
"Company" shall have the meaning set forth in the Preamble to this
Agreement.
"Controlling Shareholder Loan" shall have the meaning set forth in the
Recitals to this Agreement.
"Converted Loan Merger Shares" shall have the meaning set forth in the
Recitals to this Agreement.
"Convertible Securities" shall have the meaning set forth in Section
11(d).
"Determination Date" shall have the meaning set forth in Section 11(f).
"Effective Time" means the date of the filing of a certificate of
merger with the Secretary of State of the State of Delaware in connection with
the merger of IAC with and into INCC pursuant to the Merger Agreement.
"Exercise Date" shall mean, as to the Warrant, the date on which the
Company shall have received both (a) the Warrant Certificate representing such
Warrant, with the Exercise Forms therein duly executed by the Holder thereof or
his attorney duly authorized in writing, and (b) payment in cash (including wire
transfer of immediately available funds) or by certified or official bank check
or bank cashier's check payable to the Company, of an amount in lawful money of
the United States of America equal to the applicable Exercise Price (as
hereinafter defined), but in no event earlier than the Adjustment Date.
"Exercise Price" means $0.001 per share of Common Stock, subject to
adjustment from time to time pursuant to Section 11.
"Expiration Date" means the earliest to occur of (a) 5:00 p.m. Denver,
Colorado time on the date that is thirty (30) days after the Adjustment Date,
(b) expiration of the Warrant pursuant
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to Section 4(a), or (c) expiration of the Warrant pursuant to Section 9(c);
provided, however, that in no event shall the Warrant expire prior to the time
that the Company has satisfied all of its obligations contained in Section 9(d).
"Fair Market Value" as at any date of determination means, as to shares
of the Common Stock, if the Common Stock is publicly traded at such time, the
average of the daily Closing Prices of a share of Common Stock for the fifteen
(15) consecutive trading days ending on the most recent trading day prior to the
date of determination. If the shares of Common Stock are not publicly traded at
such time, and as to all things other than the Common Stock, Fair Market Value
shall be determined in good faith by an independent nationally recognized
investment banking firm selected by the Company and acceptable to a majority of
the Holders and which shall have no other substantial relationship with the
Company.
"Holder" means, with respect to the Warrant Certificate, the Person in
whose name the Warrant Certificate is registered upon the books and records of
the Company. The initial Holder shall be IWG.
"IAC" shall have the meaning set forth in the Recitals to this
Agreement.
"INCC" shall have the meaning set forth in the Recitals to this
Agreement.
"Merger Agreement" shall have the meaning set forth in the Recitals to
this Agreement.
"NASD" means the National Association of Securities Dealers, Inc.
"NASDAQ" means the Nasdaq Stock Market, National Market System.
"NYSE" means The New York Stock Exchange, Inc.
"Options" shall have the meaning set forth in Section 11(d).
"Person" means an individual, partnership, corporation, limited
liability company, trust, joint stock company, association, joint venture, or
any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Repurchase Notice" shall have the meaning set forth in Section 5.
"Repurchase Price" shall have the meaning set forth in Section 5.
"Repurchased Share Value" means with respect to any repurchase of
Converted Loan Merger Shares by the Company pursuant to Section 5, the
Repurchase Price multiplied by the number of Converted Loan Merger Shares so
repurchased.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
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"Subsidiary" means, with respect to any Person, any corporation or
other entity of which a majority of the capital stock or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by such Person.
"Termination Date" shall have the meaning set forth in Section 21 of
this Agreement.
"Warrant Certificate" shall mean the have the meaning set forth in the
Recitals to this Agreement.
"Warrant" shall have the meaning set forth in the Recitals to this
Agreement.
"Warrant Shares" shall have the meaning set forth in Section 4.
Section 2. The Warrant Certificate. (a) Upon issuance, the Warrant
Certificate shall be in registered form only and substantially in the form
attached hereto as Exhibit A. The Warrant Certificate shall be dated the date on
which it is issued by the Company and may have such legends and endorsements
typed, stamped, printed, lithographed or engraved thereon as the Company may
deem appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with applicable laws, rules or
regulations including any rule or regulation of any securities exchange on which
the Warrant may be listed.
(b) The Warrant Certificate substantially in the form of
Exhibit A hereto and evidencing a warrant to purchase the number of shares of
Common Stock calculated pursuant to Section 4 below (subject to adjustment
pursuant to Sections 11 and 12) shall be executed, on or after the date of this
Agreement, by the Company and delivered to the Holder. The Warrant Certificate
shall be executed on behalf of the Company by any of its duly authorized
officers, either manually or by facsimile signature printed thereon, and shall
be dated the date of issuance.
Section 3. Registration, Exchange of Warrant Certificate. (a) The
Company shall take all necessary action and proceedings as may be required by
applicable law, rule and regulation for the legal and valid issuance of the
Warrant to the Holder.
(b) At the option of the Holder, the Warrant Certificate may
be exchanged at the principal corporate office of the Company and upon payment
of the charges hereinafter provided. Whenever the Warrant Certificate is so
surrendered for exchange, the Company shall execute and deliver the Warrant
Certificate that the Holder making the exchange is entitled to receive;
provided, however, that the Company shall not be required to issue and deliver
the Warrant Certificate representing fractional warrants.
(c) The Warrant Certificate issued upon any registration or
exchange of Warrant Certificate shall be the valid obligation of the Company,
evidencing the same obligations, and entitled to the same benefits under this
Agreement as the Warrant Certificate surrendered for such registration or
exchange.
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(d) The Warrant Certificate surrendered for registration or
exchange shall (if so required by the Company) be duly endorsed, or be
accompanied by a written instrument of exchange in form satisfactory to the
Company, duly executed by the Holder thereof or his attorney duly authorized in
writing.
(e) No service charge shall be made for any registration or
exchange of Warrant Certificate. The Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration or exchange of Warrant Certificate.
(f) The Warrant Certificate when duly endorsed in blank shall
be negotiable and when a Warrant Certificate shall have been so endorsed, the
Holder thereof may be treated by the Company and all other persons dealing
therewith as the sole and absolute owner thereof for any purpose and as the
person solely entitled to exercise the rights represented.
Section 4. Exercisability. (a) If, on the Adjustment Date, the
Adjustment Value is equal to a positive number, then the Warrant shall become
immediately exercisable and if, on the Adjustment Date, the Adjustment Value is
equal to 0 or a negative number then the Warrant shall immediately expire and be
of no further force or effect.
(b) In the event that the Warrant shall become exercisable
pursuant to Section 4(a), the number of shares of Common Stock (the "Warrant
Shares") for which the Warrant is exercisable shall be equal to the quotient of
the Adjustment Value divided by the Fair Market Value determined on and as of
the Adjustment Date.
Section 5 Common Stock Repurchase Right. During the period beginning on
the date on which the SEC has declared effective the Registration Statement
required to be filed by the Company pursuant to Section 9(b) and ending on the
Adjustment Date, the Company may, at its sole option and discretion and upon
thirty days' prior written notice (the "Repurchase Notice") to IWG, repurchase
any or all of the Converted Loan Merger Shares at a price per share (the
"Repurchase Price") equal to 110% of the greater of (i) the average of the
Closing Prices of the Common Stock for the five days immediately preceding the
date on which the Repurchase Notice is given to IWG in accordance with this
Section 5 and with Section 15, or (ii) the average of the Closing Prices for the
five days immediately preceding the date on which the Company actually
repurchases the Converted Loan Merger Shares in accordance with this Section 5.
Section 6. Exercise Price, Payment of The Exercise Price, Duration And
Exercise of Warrant Generally. (a) The Warrant Certificate shall, entitle the
Holder thereof, upon payment of the Exercise Price and subject to the provisions
of this Agreement, to receive one share of Common Stock for each whole Warrant
represented thereby, subject to adjustment as herein provided, upon payment of
the Exercise Price for each of such shares.
(b) Subject to the terms and conditions set forth herein, the
Warrant shall be exercisable beginning on the Adjustment Date, at any time, or
from time to time, until the
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Expiration Date (the "Exercise Period") or, if such day is not a Business Day,
then on the next succeeding day that shall be a Business Day.
(c) The Warrant shall terminate and become void as of 5:00
P.M. (Denver time) on the Expiration Date or, if such day is not a Business Day,
then as of 5:00 P.M. on the next succeeding day that shall be a Business Day,
and all rights of any Holder of the Warrant Certificate evidencing such Warrant
under this Agreement or otherwise shall cease.
(d) Subject to Section 7 hereof, in order to exercise a
Warrant, the Holder thereof must surrender the Warrant Certificate evidencing
such Warrant, with one of the forms on the reverse of or attached to the Warrant
Certificate duly executed (with signature guaranteed), to the Company at its
address for notices as set forth in Section 15, together with payment-in-full of
the Exercise Price thereof. Upon such delivery and payment, the Holder shall be
deemed to be the holder of record of the number of shares of Common Stock
issuable upon exercise of the Warrant (or, in the case of a partial exercise of
the Warrant, the number of such shares as to which the Warrant has been
exercised), notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares shall not then be
actually delivered to the Holder.
(e) The Exercise Price must be paid in cash (including by wire
transfer of immediately available funds) or by certified or official bank check
or bank cashier's check payable to the order of the Company or by any
combination of such cash or check.
(f) As soon as practicable on or after the Exercise Date, but
in no event later than five Business Days thereafter, the Company, shall deliver
or cause to be delivered to or upon any written order of any Holder appropriate
evidence of ownership of any shares of Common Stock issuable upon exercise of
the Warrant or other securities or property (including any cash, subject to any
required withholding) to which the Holder is entitled hereunder, subject to
Section 7.
Section 7. Payment of Taxes. The Company shall pay any and all
documentary, or similar issue or transfer taxes payable in respect of the
issuance or delivery of the Warrant Shares.
Section 8. Mutilated or Missing Warrant Certificate. If (a) any
mutilated Warrant Certificate is surrendered to the Company or (b) the Company
receives evidence to its satisfaction of the destruction, loss or theft of any
Warrant Certificate, and there is delivered to the Company (in the case of
destruction, loss or theft) such security or indemnity as may be required by
them to save each of them harmless, then, in the absence of notice to the
Company that such Warrant Certificate has been acquired by a bona fide
purchaser, the Company shall execute and deliver in exchange for any such
mutilated Warrant Certificate or in lieu of any such destroyed, lost or stolen
Warrant Certificate, a new Warrant Certificate of like tenor and for a like
aggregate number of Warrant Shares. Upon the issuance of any new Warrant
Certificate under this Section 8, the Company may require the payment of a sum
sufficient to cover any tax
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or other governmental charge that may be imposed in relation thereto and other
expenses in connection therewith. Every new Warrant Certificate executed and
delivered pursuant to this Section 8 in lieu of any destroyed, lost or stolen
Warrant Certificate shall constitute an original contractual obligation of the
Company, whether or not the destroyed, lost or stolen Warrant Certificate shall
be at any time enforceable by anyone, and shall be entitled to the benefits of
this Agreement equally and proportionately with any and all other Warrant
Certificate duly executed and delivered hereunder. The provisions of this
Section 8 are exclusive and shall preclude (to the extent lawful) all other
rights or remedies with respect to the replacement of mutilated, destroyed, lost
or stolen Warrant Certificate.
Section 9. Reservation of Shares; Listing; Registration of Shares; Cash
Payment. (a) The Company shall at all times reserve and keep available, free
from preemptive rights, and out of its authorized but unissued Common Stock,
solely for the purpose of issuance upon exercise of the Warrant as herein
provided, such number of shares of Common Stock as shall then be issuable upon
exercise of all outstanding Warrants. The Company covenants that all shares of
Common Stock which shall be issuable upon exercise of a Warrant shall, upon
issue in accordance with the terms of this Agreement, be duly and validly issued
and fully paid and non-assessable and free from all taxes, liens, and charges
with respect to the issue thereof and that upon issuance, such shares shall be
listed on NASDAQ, if other shares of the Common Stock are then listed for
quotation on NASDAQ, and on each national securities exchange on which any other
shares of outstanding Common Stock are then listed.
(b) Not later than sixty (60) days after the Closing Date, the
Company shall file a registration statement (the "Registration Statement")
registering for resale all of the shares of Common Stock held by IWG and the
Warrant Shares (it being understood and agreed by the parties hereto that the
S-4 registration statement to be filed in connection with the Merger may be used
as the Registration Statement, in which event no additional registration
statement shall be required to be filed). The Company shall use its best efforts
to have the Registration Statement declared effective by the SEC as soon as
possible. In the event that the Registration Statement is not declared effective
by the SEC within two hundred and seventy (270) days (the "Deadline") after the
Closing Date, the Company shall promptly pay to IWG each month (pro-rata, for
partial months) after the Deadline that the Registration Statement is not
effective, an amount equal to 1.5% of the product of the number of shares of
Common Stock held by IWG and the Fair Market Value as of the end of each such
month.
(c) The Company may elect, in its sole discretion, to make a
cash payment to IWG in lieu of delivering Warrant Shares upon exercise of the
Warrant. In the event that the Company elects to make such cash payment, the
Company shall give notice thereof to IWG no later than the Adjustment Date. Such
cash payment shall be equal to the Adjustment Value and shall be made by wire
transfer of immediately available funds to a bank account designated by IWG
within one (1) business day after the Adjustment Date. Upon receipt by IWG of
such cash payment, the Warrant shall terminate and be of no further force or
effect.
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(d) If, on or prior to the Adjustment Date, IWG shall not have
received notice from the Company of its intention to make the cash payment
contemplated by Section 9(c), and on the Adjustment Date, the number of shares
of Common Stock and Warrant Shares issued and/or issuable to IWG would exceed
the number of shares available for issuance without violation of any applicable
securities laws, rules and regulations (including, without limitation, NASD
Marketplace Rule 4460(i), which requires shareholder approval for certain
issuances of common stock or voting stock or securities convertible therefor),
then at IWG's sole discretion, the Company shall (i) upon exericse of the
Warrant issue to IWG the number of Warrant Shares that may be issued without
shareholder approval and (ii) either (a) make a cash payment (the "Cash
Payment") to IWG equal to the number of Warrant Shares issuable to IWG that
could not be issued without shareholder approval, multiplied by the Repurchase
Price as of the Adjustment Date or (b) promptly obtain the required shareholder
approval and, thereafter, issue to IWG the number of Warrant Shares issuable
upon exercise of the Warrant that could not be issued prior to obtaining
shareholder approval. In the event that the Company fails to obtain the
requisite shareholder approval, then the Company shall, within one (1) business
day following such failure, deliver the Cash Payment to IWG.
Section 10. Certain Restrictions; Representations, Warranties and
Covenants of IWG.
(a) The shares of Common Stock owned by the IWG and the
Warrant Shares, if any, shall be subject to the restrictions contained in
Sections 4(a) and 5(i) of the Amended and Restated Shareholder Agreement, dated
October 18, 2000 between the Company and IWG.
(b) IWG hereby represents and warrants that is does not hold,
directly or indirectly, any short position in the Common Stock, and has not
engaged in any other hedging transactions relating to the Common Stock.
(c) IWG hereby covenants and agrees that it shall not engage
in short sales or any other hedging transactions relating to the Common Stock
after the date hereof.
Section 11. Anti-dilution Provisions. The Exercise Price and the number
of shares of Common Stock issuable upon exercise of each whole Warrant shall be
subject to adjustment for the occurrence of any of the following events between
the Adjustment Date and the Expiration Date:
(a) COMMON STOCK DIVIDENDS, SUBDIVISIONS, COMBINATIONS. In
case the Company shall (i) pay or make a dividend or other distribution to all
holders of its Common Stock in shares of Common Stock, (ii) subdivide or split
the outstanding shares of its Common Stock into a larger number of shares, or
(iii) combine the outstanding shares of its Common Stock into a smaller number
of shares, then in each such case the number of Warrant Shares issuable upon
exercise of each whole Warrant shall be adjusted to equal the number of such
shares to which the Holder of the Warrant would have been entitled upon the
occurrence of such event had the Warrant been exercised immediately prior to the
happening of such event or, in the case of a stock dividend or other
distribution, prior to the record date for determination of
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stockholders entitled thereto. An adjustment made pursuant to this Section 11(a)
shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(b) REORGANIZATION OR RECLASSIFICATION. In case of any capital
reorganization or any reclassification of the capital stock of the Company
(whether pursuant to a merger or consolidation or otherwise), or in the event of
any similar transaction, each whole Warrant shall thereafter be exercisable for
the number of shares of stock or other securities or property receivable upon
such capital reorganization or reclassification of capital stock or other
transaction, as the case may be, by a holder of the number of shares of Common
Stock into which such Warrant was exercisable immediately prior to such capital
reorganization or reclassification of capital stock; and, in any case,
appropriate adjustment (as determined in good faith by the Board of Directors of
the Company) shall be made for the application of the provisions herein set
forth with respect to the rights and interests thereafter of the Holder of the
Warrant to the end that the provisions set forth herein shall thereafter be
applicable, as nearly as reasonably practicable, in relation to any shares of
stock or other securities or property thereafter deliverable upon the exercise
of the Warrant. An adjustment made pursuant to this Section 11(b) shall become
effective immediately after the effective date of such event retroactive to the
record date, if any, for such event.
(c) DISTRIBUTIONS OF ASSETS OR SECURITIES OTHER THAN COMMON
STOCK. In case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock shares of any class of its capital stock (other than
Common Stock), or other debt or equity securities or evidences of indebtedness
of the Company, or options, rights or warrants to purchase any of such
securities, cash or other assets, then in each such case the number of Warrant
Shares issuable upon exercise of each whole Warrant shall be adjusted by
multiplying the number of Warrant Shares issuable upon exercise of each whole
Warrant immediately prior to the date of such dividend or distribution by a
fraction, of which the numerator shall be the Fair Market Value per share of
Common Stock at the record date for determining share holders entitled to such
dividend or distribution, and of which the denominator shall be such Fair Market
Value per share less the Fair Market Value of the portion of the securities,
cash, other assets or evidences of indebtedness so distributed applicable to one
share of Common Stock. An adjustment made pursuant to this Section 11(c) shall
become effective immediately after the effective date of such event retroactive
to the record date, if any, for such event.
(d) BELOW MARKET ISSUANCES OF COMMON STOCK AND CONVERTIBLE
SECURITIES. In case the Company shall issue Common Stock (or options, rights or
warrants to purchase shares of Common Stock (collectively, "Options") or other
securities convertible into or exchangeable or exercisable for shares of Common
Stock (such other securities, collectively, "Convertible Securities")) at a
price per share (or having an effective exercise, exchange or conversion price
per share together with the purchase price thereof) less than the Fair Market
Value per share of Common Stock on the date such Common Stock (or Options or
Convertible Securities), is sold or issued (provided that no sale of securities
pursuant to an underwritten public offering shall be deemed to be for less than
Fair Market Value), then in each such case the
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number of Warrant Shares issuable upon exercise of each whole Warrant shall
thereafter be adjusted by multiplying the number of Warrant Shares issuable upon
exercise of each whole Warrant immediately prior to the date of issuance of such
Common Stock (or Options or Convertible Securities) by a fraction, the numerator
of which shall be (x) the sum of (i) the number of Common Share Equivalents
represented by all securities outstanding immediately prior to such issuance and
(ii) the number of additional Common Share Equivalents represented by all
securities so issued multiplied by (y) the Fair Market Value of a share of
Common Stock immediately prior to the date of such issuance, and the denominator
of which shall be (x) the product of (A) the Fair Market Value of a share of
Common Stock immediately prior to the date of such issuance and (B) the number
of Common Share Equivalents represented by all securities outstanding
immediately prior to such issuance plus (y) the aggregate consideration received
by the Company for the total number of securities so issued plus, (z) in the
case of Options or Convertible Securities, the additional consideration required
to be received by the Company upon the exercise, exchange or conversion of such
securities; provided, however, that no adjustment shall be required in respect
of issuances of Common Stock (or options to purchase Common Stock) pursuant to
stock option or other employee benefit plans in effect on the date hereof, or
approved by the Board of Directors of the Company after the date hereof.
Notwithstanding anything herein to the contrary, (1) no further adjustment to
the number of Warrant Shares issuable upon exercise of each whole Warrant shall
be made upon the issuance or sale of Common Stock pursuant to (x) the exercise
of any Options or (y) the conversion or exchange of any Convertible Securities,
if in each case the adjustment in the number of Warrant Shares issuable upon
exercise of each whole Warrant was made as required hereby upon the issuance or
sale of such Options or Convertible Securities or no adjustment was required
hereby at the time such Option or Convertible Security was issued, and (2) no
adjustment to the number of Warrant Shares issuable upon exercise of each whole
Warrant shall be made upon the issuance or sale of Common Stock upon the
exercise of any Options existing on the original issue date hereof, without
regard to the exercise price thereof. Notwithstanding the foregoing, no
adjustment to the number of Warrant Shares issuable upon exercise of each whole
Warrant shall be made pursuant to this paragraph upon the issuance or sale of
Common Stock, Options, or Convertible Securities in a bona fide arm's-length
transaction to any Person or group that, at the time of such issuance or sale,
is not an Affiliate of the Company. An adjustment made pursuant to this Section
11(d) shall become effective immediately after such Common Stock, Options or
Convertible Securities are sold.
(e) BELOW MARKET DISTRIBUTIONS OR ISSUANCES OF PREFERRED STOCK
OR OTHER SECURITIES. In case the Company shall issue non-convertible and
non-exchangeable preferred stock (or other debt or equity securities or
evidences of indebtedness of the Company (other than Common Stock or Options or
Convertible Securities) or options, rights or warrants to purchase any of such
securities) at a price per share (or other similar unit) less than the Fair
Market Value per share (or other similar unit) of such preferred stock (or other
security) on the date such preferred stock (or other security) is sold (provided
that no sale of preferred stock or other security pursuant to an underwritten
public offering shall be deemed to be for less than its fair market value), then
in each such case the number of Warrant Shares issuable upon exercise of each
whole Warrant shall thereafter be adjusted by multiplying the number of Warrant
Shares
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issuable upon exercise of each whole Warrant immediately prior to the date of
issuance of such preferred stock (or other security) by a fraction, the
numerator of which shall be the product of (i) the number of Common Share
Equivalents represented by all securities outstanding immediately prior to such
issuance and (ii) the Fair Market Value of a share of Common Stock immediately
prior to the date of such issuance, and the denominator of which shall be (x)
the product of (A) the number of Common Share Equivalents represented by all
securities outstanding immediately prior to such issuance and (B) the Fair
Market Value of a share of the Common Stock immediately prior to the date of
such issuance minus (y) the difference between (1) the aggregate Fair Market
Value of such preferred stock (or other security) and (2) the aggregate
consideration received by the Company for such preferred stock (or other
security). Notwithstanding the foregoing, no adjustment to the number of Warrant
Shares issuable upon exercise of each whole Warrant shall be made pursuant to
this paragraph upon the issuance or sale of preferred stock (or other securities
of the Company other than Common Stock or Options or Convertible Securities) in
a bona fide arm's-length transaction to any Person or group that, at the time of
such issuance or sale, is not an Affiliate of the Company. An adjustment made
pursuant to this Section 11(e) shall become effective immediately after such
preferred stock (or other security) is sold.
(f) ABOVE MARKET REPURCHASES OF COMMON STOCK. In case the
Company or any Subsidiary thereof shall repurchase, by self-tender offer or
otherwise, any shares of Common Stock of the Company (or any Options or
Convertible Securities) at a purchase price in excess of the Fair Market Value
thereof, on the Business Day immediately prior to the earliest of (i) the date
of such repurchase, (ii) the commencement of an offer to repurchase, or (iii)
the public announcement of either (such date being referred to as the
"Determination Date"), the number of Warrant Shares issuable upon exercise of
each whole Warrant shall be adjusted by multiplying the number of Warrant Shares
issuable upon exercise of each whole Warrant immediately prior to such
Determination Date by a fraction, the numerator of which shall be the product of
(1) the number of Common Share Equivalents represented by all securities
outstanding immediately prior to such Determination Date minus the number of
Common Share Equivalents represented by the securities repurchased or to be
purchased by the Company or any Subsidiary thereof in such repurchase and (2)
the Fair Market Value of a share of Common Stock immediately prior to such
Determination Date, and the denominator of which shall be (x) the product of (A)
the number of Common Share Equivalents represented by all securities outstanding
immediately prior to the Determination Date and (B) the Fair Market Value of a
share of Common Stock immediately prior to such Determination Date minus (y) the
sum of (1) the aggregate consideration paid by the Company in connection with
such repurchase and (2) in the case of Options or Convertible Securities, the
additional consideration required to be received by the Company upon the
exercise, exchange or conversion of such securities. Notwithstanding the
foregoing, no adjustment to the number of Warrant Shares issuable upon exercise
of each whole Warrant shall be made pursuant to this paragraph upon the
repurchase, by self-tender offer or otherwise, of Common Stock (or any Options
or Convertible Security) in a bona fide arm's-length transaction from any Person
or group that, at the time of such repurchase, is not an Affiliate of the
Company.
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(g) ABOVE MARKET REPURCHASES OF PREFERRED STOCK OR OTHER
SECURITIES. In case the Company or any Subsidiary thereof shall repurchase, by
self-tender offer or otherwise, any shares of non-convertible and
non-exchangeable preferred stock (or other debt or equity securities or
evidences of indebtedness of the Company (other than Common Stock or Options or
Convertible Securities) or options, rights or warrants to purchase any of such
securities), at a purchase price in excess of the Fair Market Value thereof, on
the Business Day immediately prior to the Determination Date, the number of
Warrant Shares issuable upon exercise of each whole Warrant shall be adjusted by
multiplying the number of Warrant Shares issuable upon exercise of each whole
Warrant immediately prior to the Determination Date by a fraction, the numerator
of which shall be the product of (i) the number of Common Share Equivalents
represented by all securities outstanding immediately prior to such
Determination Date and (ii) the Fair Market Value of a share of Common Stock
immediately prior to such Determination Date, and the denominator of which shall
be (x) the product of (A) the number of Common Share Equivalents represented by
all securities outstanding immediately prior to such Determination Date and (B)
the Fair Market Value of a share of Common Stock immediately prior to such
Determination Date minus (y) the difference between (1) the aggregate
consideration paid by the Company in connection with such repurchase and (2) the
aggregate Fair Market Value of such preferred stock (or other security).
Notwithstanding the foregoing, no adjustment to the number of Warrant Shares
issuable upon exercise of each whole Warrant shall be made pursuant to this
paragraph upon the repurchase, by self-tender offer or otherwise, of
non-convertible and non-exchangeable preferred stock (or other securities of the
Company other than Common Stock or Options or Convertible Securities) in a bona
fide arm's-length transaction from any Person or group that, at the time of such
repurchase, is not an Affiliate of the Company.
(h) READJUSTMENT OF THE NUMBER OF WARRANT SHARES ISSUABLE UPON
EXERCISE OF EACH WHOLE WARRANT. If (i) the purchase price provided for in any
Option or the additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities or the rate at which any Convertible
Securities, in each case as referred to in paragraphs (b) and (f) above, are
convertible into or exchangeable for Common Stock shall change at any time
(other than under or by reason of provisions designed to protect against
dilution upon an event which results in a related adjustment pursuant to this
Section 11), or (ii) any of such Options or Convertible Securities shall have
irrevocably terminated, lapsed or expired, the number of Warrant Shares then
issuable upon exercise of each whole Warrant shall forthwith be readjusted
(effective only with respect to any exercise of the Warrant after such
readjustment) to the number of Warrant Shares issuable upon exercise of each
whole Warrant which would then be in effect had the adjustment made upon the
issuance, sale, distribution or grant of such Options or Convertible Securities
been made based upon such changed purchase price, additional consideration or
conversion rate, as the case may be (in the case of any event referred to in
clause (i) of this paragraph (h)) or had such adjustment not been made (in the
case of any event referred to in clause (ii) of this paragraph (h)).
(i) EXERCISE PRICE ADJUSTMENT. Upon each adjustment of the
number of Warrant Shares issuable upon exercise of each whole Warrant pursuant
to this Section 11, the Exercise Price of each Warrant outstanding immediately
prior to such adjustment shall thereafter
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be equal to an adjusted Exercise Price per Warrant Share determined (to the
nearest cent) by multiplying the Exercise Price for each whole Warrant
immediately prior to such adjustment by a fraction, the numerator of which shall
be the number of Warrant Shares issuable upon exercise of each whole Warrant
immediately prior to such adjustment and the denominator of which shall be the
number of Warrant Shares issuable upon exercise of each whole Warrant
immediately after such adjustment.
(j) CONSIDERATION. If any shares of Common Stock, Options or
Convertible Securities shall be issued, sold or distributed for cash, the
consideration received in respect thereof shall be deemed to be the amount
received by the Company therefor, before deduction therefrom of any reasonable,
customary and adequately documented expenses incurred in connection therewith.
If any shares of Common Stock, Options or Convertible Securities shall be
issued, sold or distributed for a consideration other than cash, the amount of
the consideration other than cash received by the Company shall be deemed to be
the Fair Market Value of such consideration, before deduction of any reasonable,
customary and adequately documented expenses incurred in connection therewith.
If any shares of Common Stock, Options or Convertible Securities shall be issued
in connection with any merger in which the Company is the surviving corporation,
the amount of consideration therefor shall be deemed to be the Fair Market Value
of such portion of the assets and business of the non-surviving corporation as
shall be attributable to such Common Stock, Options or Convertible Securities,
as the case may be. If any Options shall be issued in connection with the
issuance and sale of other securities of the Company, together comprising one
integral transaction in which no specific consideration is allocated to such
Options by the parties thereto, such Options shall be deemed to have been issued
without consideration.
(k) NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 11 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the Holder of the
Warrant against impairment. Without limiting the generality of the foregoing,
the Company will not increase the par value of any shares of Common Stock
issuable on the exercise of the Warrant above the amount payable therefor on
such exercise.
(l) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the number of Warrant Shares issuable upon
exercise of each whole Warrant pursuant to this Section 11, the Company, at its
expense, shall promptly compute such adjustment or readjustment in accordance
with the terms hereof. The Company shall, upon the written request at any time
of any Holder of the Warrant, furnish or cause to be furnished to such Holder a
like certificate setting forth (1) such adjustments and readjustments and (2)
the number of Warrant Shares and the amount, if any, of other property which at
the time would be received upon the exercise of this Warrant.
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(m) PROCEEDINGS PRIOR TO ANY ACTION REQUIRING ADJUSTMENT. As a
condition precedent to the taking of any action which would require an
adjustment pursuant to this Section 11, the Company shall take any action which
may be necessary, including obtaining regulatory approvals or exemptions, in
order that the Company may thereafter validly and legally issue as fully paid
and nonassessable all Warrant Shares which the Holders are entitled to receive
upon exercise thereof.
(n) NOTICE OF ADJUSTMENT. Upon the record date or effective
date, as the case may be, of any action which requires or might require an
adjustment or readjustment pursuant to this Section 11, the Company shall
forthwith file in the custody of its Secretary or an Assistant Secretary at its
principal executive office and with its transfer agent, an officers' certificate
showing the adjusted number of Warrant Shares determined as herein provided,
setting forth in reasonable detail the facts requiring such adjustment and the
manner of computing such adjustment. Each such officers' certificate shall be
signed by the chairman, president or chief financial officer of the Company and
by the secretary or any assistant secretary of the Company. Each such officers'
certificate shall be made available at all reasonable times for inspection by
the Holder or any Holder of a Warrant executed and delivered pursuant to Section
3(b) and the Company shall, forthwith after each such adjustment, mail a copy,
by first-class mail, of such certificate to the Holder or any such Holder.
(o) PAYMENTS IN LIEU OF ADJUSTMENT. The Holder shall, at its
option, be entitled to receive, in lieu of the adjustment pursuant to Section
11(c) otherwise required thereof, on (but not prior to) the date of exercise of
the Warrant, the evidences of indebtedness, other securities, cash, property or
other assets which such Holder would have been entitled to receive if it had
exercised its Warrant for Warrant Shares immediately prior to the record date
with respect to such distribution. Any Holder may exercise its option under this
Section 11(o) by delivering to the Company a written notice of such exercise
simultaneously with its notice of exercise of this Warrant.
Section 12. Consolidation, Merger or Sale of Assets. In case of any
consolidation of the Company with, or merger of the Company into, any other
Person, any merger of another Person into the Company (other than a merger which
does not result in any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock) or any sale or transfer of all or
substantially all of the assets of the Company to the Person formed by such
consolidation or resulting from such merger or which acquires such assets, as
the case may be, the Holder of the Warrant shall have the right thereafter to
exercise its Warrant for the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer by a
holder of the number of shares of Common Stock for which such Holder's Warrant
may have been exercised immediately prior to such consolidation, merger, sale or
transfer. Adjustments for events subsequent to the effective date of such a
consolidation, merger, sale or transfer of assets shall be as nearly equivalent
as may be practicable to the adjustments provided for herein. In any such event,
effective provisions shall be made in the certificate or articles of
incorporation of the resulting or surviving corporation, in any contract of
sale, merger, conveyance, lease, transfer or otherwise so that the provisions
set forth herein for the protection
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of the rights of the Holder of the Warrant shall thereafter continue to be
applicable; and any such resulting or surviving corporation shall expressly
assume the obligation to deliver, upon exercise, such shares of stock, other
securities, cash and property. The provisions of this Section 12 shall similarly
apply to successive consolidations, mergers, sales, leases or transfers.
Section 13. Fractional Shares. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of the Warrant
and in lieu of delivery of any such fractional share upon any exercise thereof,
the Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the Fair Market Value thereof; provided, however, that, in the
event that the Company combines or reclassifies the outstanding shares of its
Common Stock into a smaller number of shares, it shall be required to issue
fractional shares to a Holder if the Holder exercises all or any part of its
Warrant, unless the Holder has consented in writing to such reduction and
provided the Company with a written waiver of its right to receive fractional
shares in accordance with this Section 13. If more than one Warrant shall be
presented for exercise in full at the same time by the same Holder, the number
of full shares of Common Stock that shall be issuable upon such exercise thereof
shall be computed on the basis of the aggregate number of shares of Common Stock
acquirable on exercise of the Warrant so presented. The Holders, by their
acceptance of the Warrant Certificate, expressly waive any and all rights to
receive any fraction of a share of Common Stock or a stock certificate
representing a fraction of a share of Common Stock.
Section 14. No Stock Rights. Prior to the exercise of the Warrant, no
Holder of the Warrant Certificate, as such, shall be entitled to vote or be
deemed the holder of shares of Common Stock or any other securities of the
Company that may at any time be issuable on the exercise thereof, nor shall
anything contained herein be construed to confer upon any Holder of the Warrant
Certificate, as such, the rights of a stockholder of the Company or the right to
vote for the election of directors or upon any matter submitted to stockholders
at any meeting thereof, or to give or withhold consent to any corporate action,
to exercise any preemptive right, to receive notice of meetings or other actions
affecting stockholders (except as provided herein), or to receive dividends or
subscription rights or otherwise.
Section 15. Warrant Not Transferable. This Warrant and all rights
hereunder are not transferable, in whole or in part, other than to an affiliate
of the Holder, in which case such transfer shall be without charge to the Holder
and effective upon surrender of the Warrant Certificate with a properly executed
assignment (in form reasonably acceptable to the Company) at the principal
office of the Company.
Section 16. Notices. (a) Except as otherwise provided in Section 16
(b), any notice, demand or delivery authorized by this agreement shall be
sufficiently given or made when mailed if sent by first-class mail, postage
prepaid, addressed to any Holder at such Holder's address shown on the books and
records of the Company and to the Company as follows:
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If to the Company: RMI.NET, Inc.
999 18th Street, Suite 2201
Denver, Colorado 80202
Attention: Chris J. Melcher, Vice President and
General Counsel
with a copy to:
Perkins Coie LLP
1899 Wynkoop Street, Suite 700
Denver, Colorado 80202
Attention: Neil M. Goff, Esq.
and
Brownstein, Hyatt & Farber, P.C.
410 17th Street, 22nd Floor
Denver, Colorado 80202
Attention: Jeffrey M. Knetsch, Esq.
or such other address as shall have been furnished to the party giving or making
such notice, demand or delivery.
(b) Any notice required to be given by the Company to the
Holders shall be made by mailing by registered mail, return receipt requested,
to the Holders at their respective addresses shown on the books and records of
the Company. Any notice that is mailed in the manner herein provided shall be
conclusively presumed to have been duly given when mailed, whether or not the
Holder receives the notice.
Section 17. Amendments; Waivers. (a) The Company may from time to time
supplement or amend this Agreement without the consent of any Holder, in order
to (i) cure any ambiguity or correct or supplement any provision herein that may
be defective or inconsistent with any other provision herein or (ii) add to the
covenants and agreements of the Company for the benefit of the Holders, or
surrender any rights or powers reserved to or conferred upon the Company in this
Agreement.
(b) With the consent of the registered Holders of at least a
majority in number of the Warrants at the time outstanding, the Company may at
any time and from time to time by supplemental agreement or amendment add any
provisions to or change in any manner or eliminate any of the provisions of this
Agreement or of any supplemental agreement or modify in any manner the rights
and obligations of the Holders and of the Company; provided, however, that no
such supplemental agreement or amendment shall, without the consent of the
registered Holder of each outstanding Warrant affected thereby:
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(i) alter the provisions of this Agreement so as to affect
adversely the terms upon which the Warrants are exercisable; or
(ii) reduce the number of outstanding Warrants the consent of
whose Holders is required for any such supplemental agreement or
amendment.
(c) No failure or delay by either party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
Section 18. Persons Benefitting. This Agreement shall be binding upon
and inure to the benefit of the Company and IWG, and their respective
successors, assigns, beneficiaries, executors and administrators, and each
registered Holder of the Warrants. Nothing in this Agreement is intended or
shall be construed to confer upon any person, other than the Company, IWG and
the Holders of the Warrants, any right, remedy or claim under or by reason of
this Agreement or any part hereof.
Section 19. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together constitute one and the same instrument.
Section 20. Surrender of Certificates. The Warrant Certificate when
surrendered for exercise or purchase or otherwise acquired by the Company shall
be promptly cancelled by the Company and shall not be reissued by the Company.
Section 21. Termination of Agreement. This Agreement shall terminate
and be of no further force and effect on the earlier of (a) the Expiration Date
or (b) the date on which all of the Warrants have been exercised (the
"Termination Date").
Section 22. Governing Law. This Agreement and the Warrants issued
hereunder and all rights arising hereunder and thereunder shall be construed and
determined in accordance with the internal laws of the state of Delaware, and
the performance hereof and thereof shall be governed and enforced in accordance
with such laws.
Section 23. Interpretation. When a reference is made in this Agreement
to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words "include", "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation". The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such term. References to a Person are
18
<PAGE> 213
also to its permitted successors and assigns and, in the case of an individual,
to his heirs and estate, as applicable.
[SIGNATURE PAGE FOLLOWS]
19
<PAGE> 214
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by its officer thereunto duly authorized as of the date first above
written.
RMI.NET, INC.
By:
------------------------------------
Name:
Title:
INTERWEST GROUP, INC.
By:
------------------------------------
Name:
Title:
20
<PAGE> 215
EXHIBIT A
FORM OF FACE OF WARRANT CERTIFICATE
WARRANTS TO PURCHASE COMMON STOCK
OF RMI.NET, INC.
No.__________
This certifies that INTERWEST GROUP, INC., or its registered assigns,
is the registered holder of a warrant (the "Warrant") to purchase the number of
Warrant Shares (the "Warrant Shares") calculated pursuant to Section 4 of the
Common Stock Purchase and Adjustment Warrant Agreement, dated as of
____________, 2000 (the "Warrant Agreement"), between the Company and Interwest
Group, Inc. This Warrant entitles the holder thereof (a "Holder"), subject to
the provisions contained herein and in the Warrant Agreement, to purchase from
RMI.NET, Inc., a Delaware corporation (the "Company"), one share of Common
Stock, par value $0.001 per share, of the Company ("Common Stock"), at the
exercise price (the "Exercise Price") of $0.001 per share, subject to adjustment
upon the occurrence of certain events. This Warrant Certificate shall terminate
and become void as of the close of business on [DATE THAT IS 396 DAYS AFTER
CLOSING DATE] (the "Expiration Date"); provided, however, that if the last day
for the exercise of this Warrant shall not be a Business Day, then this Warrant
may be exercised on the next succeeding Business Day (as defined in the Warrant
Agreement) following the Expiration Date.
This Warrant Certificate is issued under and in accordance with the
Warrant Agreement and is subject to the terms and provisions contained in the
Warrant Agreement, to all of which terms and provisions the Holder of this
Warrant Certificate consents by acceptance hereof. The Warrant Agreement is
hereby incorporated herein by reference and made a part hereof. Reference is
hereby made to the Warrant Agreement for a full statement of the respective
rights, limitations of rights, duties, obligations and immunities thereunder of
the Company and the Holder of the Warrant. As provided in the Warrant Agreement
and subject to the terms and conditions therein set forth, this Warrant is
exercisable on the date that is thirty days after the date hereof. At 5:00 P.M.
(New York City time) on the Expiration Date, each Warrant not exercised prior
thereto shall terminate and become void and of no value; provided, however, that
if the last day for the exercise of the Warrants shall not be a Business Day,
then the Warrant may be exercised until 5:00 P.M. (New York City time) on the
next succeeding Business Day following the Expiration Date.
In order to exercise the Warrant, the registered holder hereof must
surrender this Warrant Certificate at the office of the Company, with the
Exercise Subscription Form on the reverse hereof duly executed by the Holder
hereof, with signature guaranteed as therein specified, together with any
required payment in full of the Exercise Price then in effect or the share(s) of
Common Stock as to which the Warrant represented by this Warrant Certificate is
submitted for exercise, all subject to the terms and conditions hereof and of
the Warrant Agreement. Any such payment of the Exercise Price shall be paid in
cash (including by wire transfer of immediately
1
<PAGE> 216
available funds) or by certified or official bank check or bank cashier's check
payable to the order of the Company or by any combination of such cash or check.
The Company will pay all documentary stamp taxes, if any, attributable
to the initial issuance of Common Stock upon the exercise of Warrants.
This Warrant Certificate may only be transferred in accordance with the
terms of the Warrant Agreement.
No service charge shall be made for any registration or exchange of the
Warrant Certificate, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
This Warrant Certificate and the Warrant Agreement are subject to
amendment as provided in the Warrant Agreement.
All terms used in this Warrant Certificate that are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
2
<PAGE> 217
RMI.NET, INC.
By:
------------------------------------
Name:
Title:
3
<PAGE> 218
FORM OF REVERSE OF WARRANT CERTIFICATE
EXERCISE SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
To: RMI.NET, Inc.
The undersigned irrevocably exercises the right to purchase
__________________ shares of Common Stock of RMI.NET, Inc. represented by this
Warrant Certificate hereof and herewith makes payment of $_____________ (such
amount shall be paid in cash (including by wire transfer of immediately
available funds) or by certified or official bank check or bank cashier's check
payable to the order of RMI.NET, Inc. or by any combination of such cash or
check), representing the Exercise Price for such Warrant Shares purchased on
such exercise. On the terms and conditions specified in this Warrant Certificate
and the Warrant Agreement therein referred to, the undersigned hereby surrenders
this Warrant Certificate and all right, title and interest therein to and
directs that the shares of Common Stock deliverable upon the exercise of such
Warrant be registered or placed in the name and at the address specified below
and delivered thereto.
Date: ,
-------------- ---- ----------------------------------
(Name - Please Print)
----------------------------------
(Signature of Owner)(1)
----------------------------------
(Street Address)
----------------------------------
(City) (State) (Zip Code)
----------------------------------
(Signature Guaranteed by)
(1) The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed.
4
<PAGE> 219
Securities and/or check to be issued to:
----------------------------------------
Please insert social security or identifying number:
---------------------------
Name:
---------------------------------------------------------------------------
Street Address:
-----------------------------------------------------------------
City, State and Zip Code:
-------------------------------------------------------
Any unexercised Warrants evidenced by the within Warrant Certificate to be
issued to:
--------------------------------------------------------------------------------
Please insert social security or identifying number:
---------------------------
Name:
---------------------------------------------------------------------------
Street Address:
-----------------------------------------------------------------
City, State and Zip Code:
-------------------------------------------------------
5
<PAGE> 220
APPENDIX F
October 12, 2000
Mr. Thomas C. Galley
President
Internet Communications Corporation
7100 East Belleview Avenue, Suite 201
Greenwood Village, CO 80111
Dear Mr. Galley:
Internet Communications Corporation ("INCC" or the "Company") has negotiated an
Agreement and Plan of Merger dated March 17, 2000 and as amended on September 8,
2000 and October 2000 (collectively herein referred to as the "Agreement") among
RMI.Net, Inc., a Delaware Corporation ("RMI") and Internet Communications
Corporation. As more fully described herein and in the Agreement, all
outstanding shares of INCC common stock shall be converted into shares of RMI
common stock. The Board of Directors of INCC requests that Neidiger, Tucker,
Bruner, Inc. ("NTB") render its opinion ("Opinion") as to the fairness of the
merger ("Merger" or "Transaction") from a financial point of view, to the
shareholders of INCC.
Upon completion of the Merger, the Agreement provides for an exchange ratio
among the parties of .55 RMI common shares for each INCC common share held by
any person or entity not associated or affiliated with the Interwest Group, Inc.
or its related parties ("IWG"). Further, the Agreement provides for an exchange
ratio among the parties of .45 RMI common shares for each INCC common share held
by any person or entity that is associated with IWG. Upon completion of the
Merger, RMI and IWG would enter into a Controlling Shareholder Loan as set forth
in the Agreement as amended. Additionally, upon completion of the Merger it is
the obligation of RMI to provide to non-IWG shareholders the Warrant, as
described in the Agreement, such that the "Exercise Price" will mean a price per
Warrant Share of $7.00 and the "Call Price" will mean a price per Warrant Share
of $8.00, as those terms are used in the Agreement.
The Merger is intended by the parties to qualify as a tax-free reorganization of
INCC under the Internal Revenue Code and, therefore, the Merger is anticipated
not to create any tax liabilities for the shareholders of INCC. The Merger is
subject to various conditions to closing as described within the Agreement.
<PAGE> 221
Mr. Thomas C. Galley
October 12, 2000
Page 2
In connection with our examination, we have reviewed, among other things, (i)
the Agreement dated March 17, 2000; (ii) the proposed restructuring of the
Agreement dated September 8, 2000; (iii) the Amended and Restated Agreement and
Plan of Merger dated October 2000; (iv) the form of the certificate relating to
the Warrants; (v) publicly available information for both INCC and RMI
including, but not limited to, the companies' most recent quarterly 10-Qs and
annual 10-Ks; (vi) the financial condition of INCC including, but not limited
to, its debt structure and bank line of credit; (vii) the past operating results
of the Company; and (viii) various other documents and information provided by
INCC and discussions held with the management of INCC and RMI.
In rendering our Opinion, we have relied on the accuracy and completeness of the
audited information provided to us by the Company and RMI, the information
provided to us by the Company's auditors and the information provided by INCC's
management and have made no independent verification of such information.
Neidiger, Tucker, Bruner, Inc., as part of its investment banking services, is
regularly engaged in the valuation of businesses, securities and assets in
connection with mergers, acquisitions, underwritings, sales and distribution of
securities, private placements and valuations for estate, corporate and other
purposes.
Based on the foregoing and such other factors, as we deem relevant, we are of
the opinion that the Merger is fair and reasonable from a financial point of
view to the shareholders of Internet Communications Corporation.
Sincerely,
NEIDIGER, TUCKER, BRUNER, INC.
/s/ Anthony B. Petrelli
Anthony B. Petrelli
Senior Vice President
<PAGE> 222
APPENDIX G
COLORADO REVISED STATUTES
TITLE 7. CORPORATIONS AND ASSOCIATIONS
ARTICLE 113. DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND
OBTAIN PAYMENT FOR SHARES
7-113-101. Definitions.
For purposes of this article:
(1) "Beneficial shareholder" means the beneficial owner of shares held
in a voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring domestic or foreign
corporation, by merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 7-113-102 and who exercises that right at the
time and in the manner required by part 2 of this article.
(4) "Fair value", with respect to a dissenter's shares, means the value
of the shares immediately before the effective date of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action except to the extent that exclusion would
be inequitable.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at the legal rate as
specified in section 5-12-101, C.R.S.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
that are registered in the name of a nominee to the extent such owner is
recognized by the corporation as the shareholder as provided in section
7-107-204.
(7) "Shareholder" means either a record shareholder or a beneficial
shareholder.
7-113-102. Right to dissent.
(1) A shareholder, whether or not entitled to vote, is entitled to
dissent and obtain payment of the fair value of the shareholder's shares in the
event of any of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation
is a party if:
<PAGE> 223
(I) Approval by the shareholders of that corporation
is required for the merger by section 7-111-103 or 7-111-104 or by the articles
of incorporation; or
(II) The corporation is a subsidiary that is merged
with its parent corporation under section 7-111-104;
(b) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be acquired;
(c) Consummation of a sale, lease, exchange, or other
disposition of all, or substantially all, of the property of the corporation for
which a shareholder vote is required under section 7-112-102 (1); and
(d) Consummation of a sale, lease, exchange, or other
disposition of all, or substantially all, of the property of an entity
controlled by the corporation if the shareholders of the corporation were
entitled to vote upon the consent of the corporation to the disposition pursuant
to section 7-112-102 (2).
(1.3) A shareholder is not entitled to dissent and obtain payment,
under subsection (1) of this section, of the fair value of the shares of any
class or series of shares which either were listed on a national securities
exchange registered under the federal "Securities Exchange Act of 1934", as
amended, or on the national market system of the national association of
securities dealers automated quotation system, or were held of record by more
than two thousand shareholders, at the time of:
(a) The record date fixed under section 7-107-107 to determine
the shareholders entitled to receive notice of the shareholders' meeting at
which the corporate action is submitted to a vote;
(b) The record date fixed under section 7-107-104 to determine
shareholders entitled to sign writings consenting to the corporate action; or
(c) The effective date of the corporate action if the
corporate action is authorized other than by a vote of shareholders.
(1.8) The limitation set forth in subsection (1.3) of this section
shall not apply if the shareholder will receive for the shareholder's shares,
pursuant to the corporate action, anything except:
(a) Shares of the corporation surviving the consummation of
the plan of merger or share exchange;
(b) Shares of any other corporation which at the effective
date of the plan of merger or share exchange either will be listed on a national
securities exchange registered under the federal "Securities Exchange Act of
1934", as amended, or on the national market system of the national
<PAGE> 224
association of securities dealers automated quotation system, or will be held of
record by more than two thousand shareholders;
(c) Cash in lieu of fractional shares; or
(d) Any combination of the foregoing described shares or cash
in lieu of fractional shares.
(2) (Deleted by amendment, L. 96, p. 1321, Section 30, effective June
1, 1996.)
(2.5) A shareholder, whether or not entitled to vote, is entitled to
dissent and obtain payment of the fair value of the shareholder's shares in the
event of a reverse split that reduces the number of shares owned by the
shareholder to a fraction of a share or to scrip if the fractional share or
scrip so created is to be acquired for cash or the scrip is to be voided under
section 7-106-104.
(3) A shareholder is entitled to dissent and obtain payment of the fair
value of the shareholder's shares in the event of any corporate action to the
extent provided by the bylaws or a resolution of the board of directors.
(4) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this article may not challenge the corporate action
creating such entitlement unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
7-113-103. Dissent by nominees and beneficial owners.
(1) A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in the record shareholder's name only if the record
shareholder dissents with respect to all shares beneficially owned by any one
person and causes the corporation to receive written notice which states such
dissent and the name, address, and federal taxpayer identification number, if
any, of each person on whose behalf the record shareholder asserts dissenters'
rights. The rights of a record shareholder under this subsection (1) are
determined as if the shares as to which the record shareholder dissents and the
other shares of the record shareholder were registered in the names of different
shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to the
shares held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder causes the corporation to
receive the record shareholder's written consent to the dissent not later than
the time the beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder dissents with respect to all
shares beneficially owned by the beneficial shareholder.
(3) The corporation may require that, when a record shareholder
dissents with respect to the shares held by any one or more beneficial
shareholders, each such beneficial shareholder must
<PAGE> 225
certify to the corporation that the beneficial shareholder and the record
shareholder or record shareholders of all shares owned beneficially by the
beneficial shareholder have asserted, or will timely assert, dissenters' rights
as to all such shares as to which there is no limitation on the ability to
exercise dissenters' rights. Any such requirement shall be stated in the
dissenters' notice given pursuant to section 7-113-203.
PART 2. PROCEDURE FOR EXERCISE OF
DISSENTERS' RIGHTS
7-113-201. Notice of dissenters' rights.
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is submitted to a vote at a shareholders' meeting, the notice
of the meeting shall be given to all shareholders, whether or not entitled to
vote. The notice shall state that shareholders are or may be entitled to assert
dissenters' rights under this article and shall be accompanied by a copy of this
article and the materials, if any, that, under articles 101 to 117 of this
title, are required to be given to shareholders entitled to vote on the proposed
action at the meeting. Failure to give notice as provided by this subsection (1)
shall not affect any action taken at the shareholders' meeting for which the
notice was to have been given, but any shareholder who was entitled to dissent
but who was not given such notice shall not be precluded from demanding payment
for the shareholder's shares under this article by reason of the shareholder's
failure to comply with the provisions of section 7-113-202 (1).
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104, any written or oral solicitation of a shareholder to execute
a writing consenting to such action contemplated in section 7-107-104 shall be
accompanied or preceded by a written notice stating that shareholders are or may
be entitled to assert dissenters' rights under this article, by a copy of this
article, and by the materials, if any, that, under articles 101 to 117 of this
title, would have been required to be given to shareholders entitled to vote on
the proposed action if the proposed action were submitted to a vote at a
shareholders' meeting. Failure to give notice as provided by this subsection (2)
shall not affect any action taken pursuant to section 7-107-104 for which the
notice was to have been given, but any shareholder who was entitled to dissent
but who was not given such notice shall not be precluded from demanding payment
for the shareholder's shares under this article by reason of the shareholder's
failure to comply with the provisions of section 7-113-202 (2).
7-113-202. Notice of intent to demand payment.
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is submitted to a vote at a shareholders' meeting and if
notice of dissenters' rights has been given to such shareholder in connection
with the action pursuant to section 7-113-201 (1), a shareholder who wishes to
assert dissenters' rights shall:
(a) Cause the corporation to receive, before the vote is
taken, written notice of the shareholder's intention to demand payment for the
shareholder's shares if the proposed corporate action is effectuated; and
<PAGE> 226
(b) Not vote the shares in favor of the proposed corporate
action.
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104 and if notice of dissenters' rights has been given to such
shareholder in connection with the action pursuant to section 7-113-201 (2), a
shareholder who wishes to assert dissenters' rights shall not execute a writing
consenting to the proposed corporate action.
(3) A shareholder who does not satisfy the requirements of subsection
(1) or (2) of this section is not entitled to demand payment for the
shareholder's shares under this article.
7-113-203. Dissenters' notice.
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized, the corporation shall give a written
dissenters' notice to all shareholders who are entitled to demand payment for
their shares under this article.
(2) The dissenters' notice required by subsection (1) of this section
shall be given no later than ten days after the effective date of the corporate
action creating dissenters' rights under section 7-113-102 and shall:
(a) State that the corporate action was authorized and state
the effective date or proposed effective date of the corporate action;
(b) State an address at which the corporation will receive
payment demands and the address of a place where certificates for certificated
shares must be deposited;
(c) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment demand is received;
(d) Supply a form for demanding payment, which form shall
request a dissenter to state an address to which payment is to be made;
(e) Set the date by which the corporation must receive the
payment demand and certificates for certificated shares, which date shall not be
less than thirty days after the date the notice required by subsection (1) of
this section is given;
(f) State the requirement contemplated in section 7-113-103
(3), if such requirement is imposed; and
(g) Be accompanied by a copy of this article.
7-113-204. Procedure to demand payment.
<PAGE> 227
(1) A shareholder who is given a dissenters' notice pursuant to section
7-113-203 and who wishes to assert dissenters' rights shall, in accordance with
the terms of the dissenters' notice:
(a) Cause the corporation to receive a payment demand, which
may be the payment demand form contemplated in section 7-113-203 (2) (d), duly
completed, or may be stated in another writing; and
(b) Deposit the shareholder's certificates for certificated
shares.
(2) A shareholder who demands payment in accordance with subsection (1)
of this section retains all rights of a shareholder, except the right to
transfer the shares, until the effective date of the proposed corporate action
giving rise to the shareholder's exercise of dissenters' rights and has only the
right to receive payment for the shares after the effective date of such
corporate action.
(3) Except as provided in section 7-113-207 or 7-113-209 (1) (b), the
demand for payment and deposit of certificates are irrevocable.
(4) A shareholder who does not demand payment and deposit the
shareholder's share certificates as required by the date or dates set in the
dissenters' notice is not entitled to payment for the shares under this article.
7-113-205. Uncertificated shares.
(1) Upon receipt of a demand for payment under section 7-113-204 from a
shareholder holding uncertificated shares, and in lieu of the deposit of
certificates representing the shares, the corporation may restrict the transfer
thereof.
(2) In all other respects, the provisions of section 7-113-204 shall be
applicable to shareholders who own uncertificated shares.
7-113-206. Payment.
(1) Except as provided in section 7-113-208, upon the effective date of
the corporate action creating dissenters' rights under section 7-113-102 or upon
receipt of a payment demand pursuant to section 7-113-204, whichever is later,
the corporation shall pay each dissenter who complied with section 7-113-204, at
the address stated in the payment demand, or if no such address is stated in the
payment demand, at the address shown on the corporation's current record of
shareholders for the record shareholder holding the dissenter's shares, the
amount the corporation estimates to be the fair value of the dissenter's shares,
plus accrued interest.
(2) The payment made pursuant to subsection (1) of this section shall
be accompanied by:
(a) The corporation's balance sheet as of the end of its most
recent fiscal year or, if that is not available, the corporation's balance sheet
as of the end of a fiscal year ending not more than sixteen months before the
date of payment, an income statement for that year, and, if the corporation
customarily provides such statements to shareholders, a statement of changes in
<PAGE> 228
shareholders' equity for that year and a statement of cash flow for that year,
which balance sheet and statements shall have been audited if the corporation
customarily provides audited financial statements to shareholders, as well as
the latest available financial statements, if any, for the interim or full-year
period, which financial statements need not be audited;
(b) A statement of the corporation's estimate of the fair
value of the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment
under section 7-113-209; and
(e) A copy of this article.
7-113-207. Failure to take action.
(1) If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 does not occur within sixty days after the date
set by the corporation by which the corporation must receive the payment demand
as provided in section 7-113-203, the corporation shall return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares.
(2) If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 occurs more than sixty days after the date set by
the corporation by which the corporation must receive the payment demand as
provided in section 7-113-203, then the corporation shall send a new dissenters'
notice, as provided in section 7-113-203, and the provisions of sections
7-113-204 to 7-113-209 shall again be applicable.
7-113-208. Special provisions relating to shares acquired after announcement of
proposed corporate action.
(1) The corporation may, in or with the dissenters' notice given
pursuant to section 7-113-203, state the date of the first announcement to news
media or to shareholders of the terms of the proposed corporate action creating
dissenters' rights under section 7-113-102 and state that the dissenter shall
certify in writing, in or with the dissenter's payment demand under section
7-113-204, whether or not the dissenter (or the person on whose behalf
dissenters' rights are asserted) acquired beneficial ownership of the shares
before that date. With respect to any dissenter who does not so certify in
writing, in or with the payment demand, that the dissenter or the person on
whose behalf the dissenter asserts dissenters' rights acquired beneficial
ownership of the shares before such date, the corporation may, in lieu of making
the payment provided in section 7-113-206, offer to make such payment if the
dissenter agrees to accept it in full satisfaction of the demand.
(2) An offer to make payment under subsection (1) of this section shall
include or be accompanied by the information required by section 7-113-206 (2).
7-113-209. Procedure if dissenter is dissatisfied with payment or offer.
<PAGE> 229
(1) A dissenter may give notice to the corporation in writing of the
dissenter's estimate of the fair value of the dissenter's shares and of the
amount of interest due and may demand payment of such estimate, less any payment
made under section 7-113-206, or reject the corporation's offer under section
7-113-208 and demand payment of the fair value of the shares and interest due,
if:
(a) The dissenter believes that the amount paid under section
7-113-206 or offered under section 7-113-208 is less than the fair value of the
shares or that the interest due was incorrectly calculated;
(b) The corporation fails to make payment under section
7-113-206 within sixty days after the date set by the corporation by which the
corporation must receive the payment demand; or
(c) The corporation does not return the deposited certificates
or release the transfer restrictions imposed on uncertificated shares as
required by section 7-113-207 (1).
(2) A dissenter waives the right to demand payment under this section
unless the dissenter causes the corporation to receive the notice required by
subsection (1) of this section within thirty days after the corporation made or
offered payment for the dissenter's shares.
PART 3. JUDICIAL APPRAISAL OF SHARES
7-113-301. Court action.
(1) If a demand for payment under section 7-113-209 remains unresolved,
the corporation may, within sixty days after receiving the payment demand,
commence a proceeding and petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not commence the proceeding
within the sixty-day period, it shall pay to each dissenter whose demand remains
unresolved the amount demanded.
(2) The corporation shall commence the proceeding described in
subsection (1) of this section in the district court of the county in this state
where the corporation's principal office is located or, if the corporation has
no principal office in this state, in the district court of the county in which
its registered office is located. If the corporation is a foreign corporation
without a registered office, it shall commence the proceeding in the county
where the registered office of the domestic corporation merged into, or whose
shares were acquired by, the foreign corporation was located.
(3) The corporation shall make all dissenters, whether or not residents
of this state, whose demands remain unresolved parties to the proceeding
commenced under subsection (2) of this section as in an action against their
shares, and all parties shall be served with a copy of the petition. Service on
each dissenter shall be by registered or certified mail, to the address stated
in such dissenter's payment demand, or if no such address is stated in the
payment demand, at the address shown on the corporation's current record of
shareholders for the record shareholder holding the dissenter's shares, or as
provided by law.
<PAGE> 230
(4) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend a
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to such order. The parties to
the proceeding are entitled to the same discovery rights as parties in other
civil proceedings.
(5) Each dissenter made a party to the proceeding commenced under
subsection (2) of this section is entitled to judgment for the amount, if any,
by which the court finds the fair value of the dissenter's shares, plus
interest, exceeds the amount paid by the corporation, or for the fair value,
plus interest, of the dissenter's shares for which the corporation elected to
withhold payment under section 7-113-208.
7-113-302. Court costs and counsel fees.
(1) The court in an appraisal proceeding commenced under section
7-113-301 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation; except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under section 7-113-209.
(2) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any dissenters if
the court finds the corporation did not substantially comply with the
requirements of part 2 of this article; or
(b) Against either the corporation or one or more dissenters,
in favor of any other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this article.
(3) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to said counsel reasonable fees to be paid out of the amounts
awarded to the dissenters who were benefited.
<PAGE> 231
PART II. INFORMATION NOT REQUIRED IN PROXY STATEMENT/PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 8 of the Registrant's Amended and Restated Certificate of
Incorporation provides:
"No director of the corporation shall be personally liable to the
corporation or its shareholders 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 shareholders, (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 Delaware law, 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, 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 such
proceeding, whether prior to or after final disposition of such proceeding.
Section 5.8 of the Registrant's 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
Securities and Exchange 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 proxy
statement/prospectus offering to give any information or to make any
representations other than those contained in this proxy statement/prospectus
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Registrant. This proxy
statement/prospectus does not 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
proxy statement/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.
II-1
<PAGE> 232
PART II. INFORMATION NOT REQUIRED IN PROXY STATEMENT/PROSPECTUS
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS. The following exhibits are filed herewith:
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
2.01 Agreement and Plan of Merger, dated March 17, 2000, by and among
Registrant, Internet Acquisition Corporation and Internet
Communications (30)
3.01 Amended and Restated Certificate of Incorporation of Registrant
(15)
3.02 Bylaws of Registrant (1)
3.03 Certificate of Designations of Series B Convertible Preferred Stock
of Registrant (13)
4.01 Form of Common Stock Certificate of Registrant (1)
4.02 Warrant Agreement between Registrant and Douglas H. Hanson dated
October 1, 1997 (5)
4.03 1996 Employees' Stock Option Plan of Registrant (1)
4.04 1996 Non-Employee Directors' Stock Option Plan of Registrant (1)
4.05 1997 Non-Qualified Stock Option Plan of Registrant (4)
4.06 1997 Stock Option Plan of Registrant (6)
4.06.1 First Amendment to Non-Qualified Stock Option Agreement pursuant to
the 1997 Stock Option Plan of Registrant (13)
4.06.2 First Amendment to Incentive Stock Option Agreement pursuant to the
1997 Stock Option Plan of Registrant (13)
4.07 1998 Employees' Stock Option Plan of Registrant (10)
4.08 1998 Non-Employee Directors' Stock Option Plan of Registrant (8)
4.09 Subscription Agreement, dated as of December 10, 1998, by and
between Registrant and Koch Industries, Inc. (12)
4.10 Subscription Agreement, dated as of December 10, 1998, by and
between Registrant and Advantage Fund II Ltd. (12)
4.11 Form of Common Stock Purchase Warrant issued by Registrant to Koch
Industries, Inc., Advantage Fund II Ltd., Wharton Capital Partners
Ltd., Leslie Bines, and Neidiger Tucker Bruner Inc. (12)
4.12 Form of Registration Rights Agreement between Registrant and (i)
Koch Industries, Inc.; and (ii) Advantage Fund II Ltd. (12)
4.13 Form of Registration Rights Agreement between Registrant and (i)
Wharton Capital Partners Ltd.; (ii) Leslie Bines; and (iii)
Neidiger Tucker Bruner Inc. (12)
4.14 Form of Subscription Agreement dated as of December 7, 1999 (28)
4.15 Form of Class A Warrant (Annex I to Subscription Agreement) of
Registrant (28)
4.16 Form of Class B Warrant (Annex II to Subscription Agreement) (28)
4.17 Form of Registration Rights Agreement (Annex IV to Subscription
Agreement) (28)
4.18 2000 1998 Employees' Stock Option Plan of Registrant (29)
4.19 Employees' Stock Purchase Plan of Registrant (29)
4.20 Registration Rights Agreement between Registrant and Interwest
Group, Inc. (31)
4.21 Form of Warrant Agreement (30)
4.22 Form of Warrant to be issued to certain Internet Communications
shareholders (30)
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 Registrant (2)
10.02 Sublease Agreement-February 26, 1997-1800 Glenarm, Denver, CO (3)
10.03 Carrier Services Switchless Agreement Between Frontier
Communications of the West, Inc. and Rocky Mountain Broadband,
Inc.** (12)
10.04 Wholesale Usage Agreement Between PSINet Inc. and Registrant** (12)
10.05 PacNet Reseller Agreement between PacNet Inc. and Registrant** (12)
10.06 Operating Agreement of The Mountain Area EXchange LLC (12)
10.07 Software License and Consulting Services Agreement Between
Registrant and Novazen Inc.** (12)
10.08 Merger Agreement among Registrant, RMI-INI, Internet Now,
Hutchinson Persons, Leslie Kelly, Taufik, Islam, Susan Coupal, and
Gary Kim, dated November 20, 1998 (9)
II-2
<PAGE> 233
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
10.09 Asset Purchase Agreement between Registrant and Unicom
Communications Corporation dated as of November 24, 1998 (9)
10.10 Asset Purchase Agreement among Registrant, Stonehenge Business
Systems Corporation, Todd Keener, and Danette Keener, dated as of
November 30, 1998 (9)
10.11 Agreement and Plan of Reorganization and Liquidation by and Among
Registrant, DataXchange Network, Inc., and Certain of the
Shareholders of DataXchange Network, Inc., dated as of December 8,
1998 (10)
10.12 Commitment letter dated December 10, 1998 from Advantage Fund Ltd.
to Registrant (12)
10.13 Agreement and Plan of Merger by and between Registrant and August
5th Corporation, d/b/a Dave's World dated February 2, 1999 (14)
10.14 Asset Purchase Agreement by and among Registrant, ImageWare
Technologies, L.L.C., and Communication Network Services, L.L.C.
dated February 5, 1999 (14)
10.15 Agreement and Plan of Merger by and among Registrant and IdealDial
Corporation. (16)
10.16 Agreement and Plan of Merger by and among Registrant and Internet
Connect, Inc. (16)
10.17 Agreement and Plan of Merger and Reorganization by and among
Registrant and Colorado Mountain Net, Inc. dated June 16, 1999 (17)
10.18 Stock Exchange Agreement between Registrant and Roger L. Penner
(CommerceGate) dated June 24, 1999 (18)
10.19 Asset Purchase Agreement by and between Registrant and CyberDesic
Communications Corporation, Inc. dated June 28, 1999 (19)
10.20 Asset Purchase Agreement by and among Registrant and Triad
Resources, LLC dated July 30, 1999 (20)
10.21 Asset Purchase Agreement by and among Registrant and ACES Research,
Inc. dated July 30, 1999 (21)
10.22 Asset Purchase Agreement by and among Registrant. and Novo Media
Group, Inc. dated August 30, 1999 (22)
10.23 Asset Purchase Agreement by and among Registrant and Wolfe Internet
Access, LLC dated August 31, 1999 (23)
10.24 Asset Purchase Agreement by and among Registrant and Networld.com,
Inc. and FutureOne, Inc. dated November 19, 1999 (24)
10.25 Asset Purchase Agreement by and among Registrant and Western
Regional Networks, Inc. dated November 24, 1999 (25)
10.26 Asset Purchase Agreement by and among Registrant and AIS Network
Corporation dated December 23, 1999 (26)
10.27 Exchange Agreement, dated March 17, 2000, by and between Registrant
and Internet Communications (30)
10.28 Shareholders Agreement, dated March 17, 2000, by and among
Registrant, Internet Communications and Interwest Group, Inc. (30)
16.01 Letter re change in certifying accountant (11)
21.01 Subsidiaries of the Registrant (27)
23.01 Consent of Ernst & Young LLP *
23.02 Consent of KPMG LLP *
23.03 Consent of Baird, Kurtz & Dobson *
23.04 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")
27.01 Financial Data Schedule (27)
99.01 Internet Communications Proxy Card
99.02 RMI Proxy Card
----------------------
* Filed herewith.
** Portions of these documents have been omitted pursuant to a request for
confidential treatment.
(1) Incorporated by reference to 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 to the Registrant's Quarterly Report on Form
10-QSB for the quarter ended September 30, 1996.
(3) Incorporated by reference to the Registrant's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1996.
II-3
<PAGE> 234
(4) Incorporated by reference to the Registrant's Registration Statement on
Form S-8, as previously filed with the Securities and Exchange Commission
on September 26, 1997.
(5) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated October 6, 1997.
(6) Incorporated by reference to the Registrant's Definitive Proxy Statement
(Appendix A) on Schedule 14A filed on February 13, 1998.
(7) Incorporated by reference to the Registrant's Definitive Proxy Statement
(Appendix B) on Schedule 14A filed on February 13, 1998.
(8) Incorporated by reference to the Registrant's Definitive Proxy Statement
(Appendix C) on Schedule 14A filed on February 13, 1998.
(9) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated November 20, 1998.
(10) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated December 8, 1998.
(11) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated December 9, 1998.
(12) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated December 10, 1998.
(13) 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.
(14) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated February 2, 1999.
(15) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1999.
(16) Incorporated by reference to the Registrant's Current Report on Form 8-K/A
dated June 11, 1999.
(17) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated June 16, 1999.
(18) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated June 23, 1999.
(19) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated June 28, 1999.
(20) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated July 30, 1999.
(21) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated July 30, 1999.
(22) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated August 30, 1999.
(23) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated August 31, 1999.
(24) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated November 19, 1999.
(25) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated November 24, 1999.
(26) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated December 23, 1999.
(27) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1999, as previously filed with the
Securities and Exchange Commission.
(28) Incorporated by reference to the Registrant's Registration Statement on
Form S-3 (Reg. No. 333-95185) and amendments thereto, as previously filed
with the Securities and Exchange Commission.
(29) Incorporated by reference to the Registrant's 2000 Definitive Proxy
Statement on Schedule 14A filed on May 1, 2000.
(30) Incorporated by reference to Internet Communications's Current Report on
Form 8-K dated March 17, 2000.
(31) Incorporated by reference to RMI's Current Report on Form 8K-A dated
May 24, 2000.
II-4
<PAGE> 235
ITEM 22. UNDERTAKINGS.
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 of 1933;
(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 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and
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;
4. That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act), that is incorporated by
reference in this 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 a bona fide
offering thereof;
5. That, prior to any public reoffering of the securities registered
hereunder through use of a proxy statement/prospectus which is a part of this
Registration Statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act, such
reoffering proxy statement/prospectus will contain the information called for by
the applicable registration form with respect to reofferings by persons who may
be deemed underwriters, in addition to the information called for by the other
items of the applicable form;
6. That every proxy statement/prospectus (i) that is filed pursuant to
paragraph (2) immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to this Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, 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;
7. To respond to requests for information that is incorporated by
reference into the proxy statement/prospectus pursuant to Item 4, 10(b), 11 or
13 of Form S-4, within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of this Registration Statement through the date of responding to
the request; and
8. To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in this Registration Statement when it
became effective.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 20 above, 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 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 and will be governed by the final adjudication of such issue.
II-5
<PAGE> 236
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Denver, state of Colorado, on October 20, 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)
Pursuant to the requirements of the Securities Act, this Amendment to
Registration Statement 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 October 20, 2000
----------------------------------------- and Chairman of the Board of
Douglas H. Hanson Directors (Principal Executive
Officer and Principal Financial
Officer and Principal Accounting
Officer)
/s/ * Director October 20, 2000
-----------------------------------------
D.D. Hock
Director October 20, 2000
-----------------------------------------
Michael T. Victor
/s/ * Director October 20, 2000
-----------------------------------------
Robert W. Grabowski
/s/ * Director October 20, 2000
-----------------------------------------
Lewis H. Silverberg
</TABLE>
* By Douglas H. Hanson by power of attorney.
II-6
<PAGE> 237
EXHIBIT INDEX
-------------
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
2.01 Agreement and Plan of Merger, dated March 17, 2000, by and among
Registrant, Internet Acquisition Corporation and Internet
Communications (30)
3.01 Amended and Restated Certificate of Incorporation of Registrant
(15)
3.02 Bylaws of Registrant (1)
3.03 Certificate of Designations of Series B Convertible Preferred Stock
of Registrant (13)
4.01 Form of Common Stock Certificate of Registrant (1)
4.02 Warrant Agreement between Registrant and Douglas H. Hanson dated
October 1, 1997 (5)
4.03 1996 Employees' Stock Option Plan of Registrant (1)
4.04 1996 Non-Employee Directors' Stock Option Plan of Registrant (1)
4.05 1997 Non-Qualified Stock Option Plan of Registrant (4)
4.06 1997 Stock Option Plan of Registrant (6)
4.06.1 First Amendment to Non-Qualified Stock Option Agreement pursuant to
the 1997 Stock Option Plan of Registrant (13)
4.06.2 First Amendment to Incentive Stock Option Agreement pursuant to the
1997 Stock Option Plan of Registrant (13)
4.07 1998 Employees' Stock Option Plan of Registrant (10)
4.08 1998 Non-Employee Directors' Stock Option Plan of Registrant (8)
4.09 Subscription Agreement, dated as of December 10, 1998, by and
between Registrant and Koch Industries, Inc. (12)
4.10 Subscription Agreement, dated as of December 10, 1998, by and
between Registrant and Advantage Fund II Ltd. (12)
4.11 Form of Common Stock Purchase Warrant issued by Registrant to Koch
Industries, Inc., Advantage Fund II Ltd., Wharton Capital Partners
Ltd., Leslie Bines, and Neidiger Tucker Bruner Inc. (12)
4.12 Form of Registration Rights Agreement between Registrant and (i)
Koch Industries, Inc.; and (ii) Advantage Fund II Ltd. (12)
4.13 Form of Registration Rights Agreement between Registrant and (i)
Wharton Capital Partners Ltd.; (ii) Leslie Bines; and (iii)
Neidiger Tucker Bruner Inc. (12)
4.14 Form of Subscription Agreement dated as of December 7, 1999 (28)
4.15 Form of Class A Warrant (Annex I to Subscription Agreement) of
Registrant (28)
4.16 Form of Class B Warrant (Annex II to Subscription Agreement) (28)
4.17 Form of Registration Rights Agreement (Annex IV to Subscription
Agreement) (28)
4.18 2000 1998 Employees' Stock Option Plan of Registrant (29)
4.19 Employees' Stock Purchase Plan of Registrant (29)
4.20 Registration Rights Agreement between Registrant and Interwest
Group, Inc. (31)
4.21 Form of Warrant Agreement (30)
4.22 Form of Warrant to be issued to certain Internet Communications
shareholders (30)
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 Registrant (2)
10.02 Sublease Agreement-February 26, 1997-1800 Glenarm, Denver, CO (3)
10.03 Carrier Services Switchless Agreement Between Frontier
Communications of the West, Inc. and Rocky Mountain Broadband,
Inc.** (12)
10.04 Wholesale Usage Agreement Between PSINet Inc. and Registrant** (12)
10.05 PacNet Reseller Agreement between PacNet Inc. and Registrant** (12)
10.06 Operating Agreement of The Mountain Area EXchange LLC (12)
10.07 Software License and Consulting Services Agreement Between
Registrant and Novazen Inc.** (12)
10.08 Merger Agreement among Registrant, RMI-INI, Internet Now,
Hutchinson Persons, Leslie Kelly, Taufik, Islam, Susan Coupal, and
Gary Kim, dated November 20, 1998 (9)
<PAGE> 238
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
10.09 Asset Purchase Agreement between Registrant and Unicom
Communications Corporation dated as of November 24, 1998 (9)
10.10 Asset Purchase Agreement among Registrant, Stonehenge Business
Systems Corporation, Todd Keener, and Danette Keener, dated as of
November 30, 1998 (9)
10.11 Agreement and Plan of Reorganization and Liquidation by and Among
Registrant, DataXchange Network, Inc., and Certain of the
Shareholders of DataXchange Network, Inc., dated as of December 8,
1998 (10)
10.12 Commitment letter dated December 10, 1998 from Advantage Fund Ltd.
to Registrant (12)
10.13 Agreement and Plan of Merger by and between Registrant and August
5th Corporation, d/b/a Dave's World dated February 2, 1999 (14)
10.14 Asset Purchase Agreement by and among Registrant, ImageWare
Technologies, L.L.C., and Communication Network Services, L.L.C.
dated February 5, 1999 (14)
10.15 Agreement and Plan of Merger by and among Registrant and IdealDial
Corporation. (16)
10.16 Agreement and Plan of Merger by and among Registrant and Internet
Connect, Inc. (16)
10.17 Agreement and Plan of Merger and Reorganization by and among
Registrant and Colorado Mountain Net, Inc. dated June 16, 1999 (17)
10.18 Stock Exchange Agreement between Registrant and Roger L. Penner
(CommerceGate) dated June 24, 1999 (18)
10.19 Asset Purchase Agreement by and between Registrant and CyberDesic
Communications Corporation, Inc. dated June 28, 1999 (19)
10.20 Asset Purchase Agreement by and among Registrant and Triad
Resources, LLC dated July 30, 1999 (20)
10.21 Asset Purchase Agreement by and among Registrant and ACES Research,
Inc. dated July 30, 1999 (21)
10.22 Asset Purchase Agreement by and among Registrant. and Novo Media
Group, Inc. dated August 30, 1999 (22)
10.23 Asset Purchase Agreement by and among Registrant and Wolfe Internet
Access, LLC dated August 31, 1999 (23)
10.24 Asset Purchase Agreement by and among Registrant and Networld.com,
Inc. and FutureOne, Inc. dated November 19, 1999 (24)
10.25 Asset Purchase Agreement by and among Registrant and Western
Regional Networks, Inc. dated November 24, 1999 (25)
10.26 Asset Purchase Agreement by and among Registrant and AIS Network
Corporation dated December 23, 1999 (26)
10.27 Exchange Agreement, dated March 17, 2000, by and between Registrant
and Internet Communications (30)
10.28 Shareholders Agreement, dated March 17, 2000, by and among
Registrant, Internet Communications and Interwest Group, Inc. (30)
16.01 Letter re change in certifying accountant (11)
21.01 Subsidiaries of the Registrant (27)
23.01 Consent of Ernst & Young LLP *
23.02 Consent of KPMG LLP *
23.03 Consent of Baird, Kurtz & Dobson *
23.04 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")
27.01 Financial Data Schedule (27)
99.01 Internet Communications Proxy Card
99.02 RMI Proxy Card
----------------------
* Filed herewith.
** Portions of these documents have been omitted pursuant to a request for
confidential treatment.
(1) Incorporated by reference to 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 to the Registrant's Quarterly Report on Form
10-QSB for the quarter ended September 30, 1996.
(3) Incorporated by reference to the Registrant's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1996.
<PAGE> 239
(4) Incorporated by reference to the Registrant's Registration Statement on
Form S-8, as previously filed with the Securities and Exchange Commission
on September 26, 1997.
(5) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated October 6, 1997.
(6) Incorporated by reference to the Registrant's Definitive Proxy Statement
(Appendix A) on Schedule 14A filed on February 13, 1998.
(7) Incorporated by reference to the Registrant's Definitive Proxy Statement
(Appendix B) on Schedule 14A filed on February 13, 1998.
(8) Incorporated by reference to the Registrant's Definitive Proxy Statement
(Appendix C) on Schedule 14A filed on February 13, 1998.
(9) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated November 20, 1998.
(10) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated December 8, 1998.
(11) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated December 9, 1998.
(12) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated December 10, 1998.
(13) 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.
(14) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated February 2, 1999.
(15) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1999.
(16) Incorporated by reference to the Registrant's Current Report on Form 8-K/A
dated June 11, 1999.
(17) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated June 16, 1999.
(18) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated June 23, 1999.
(19) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated June 28, 1999.
(20) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated July 30, 1999.
(21) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated July 30, 1999.
(22) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated August 30, 1999.
(23) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated August 31, 1999.
(24) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated November 19, 1999.
(25) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated November 24, 1999.
(26) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated December 23, 1999.
(27) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1999, as previously filed with the
Securities and Exchange Commission.
(28) Incorporated by reference to the Registrant's Registration Statement on
Form S-3 (Reg. No. 333-95185) and amendments thereto, as previously filed
with the Securities and Exchange Commission.
(29) Incorporated by reference to the Registrant's 2000 Definitive Proxy
Statement on Schedule 14A filed on May 1, 2000.
(30) Incorporated by reference to Internet Communications's Current Report of
Form 8-K dated March 17, 2000.
(31) Incorporated by reference to RMI's Current Report on Form 8K-A dated May
24, 2000.
