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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 17, 2000
Internet Communications Corporation
-----------------------------------
(Exact name of registrant as specified in its
charter)
Colorado 0-19578 84-1095516
- -------------------------------------- ---------------- ------------------
(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation or organization) Number) Identification No.)
7100 E. Bellview Ave., Suite 201, Englewood, CO 80111
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 770-7600
Not Applicable
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(Former name or former address, if changed since last report)
Exhibit Index is on page 5.
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INTERNET COMMUNICATIONS CORPORATION
Item 5. Other Events.
On March 17, 2000, Internet Communications Corporation ("INCC") executed a
definitive Agreement and Plan of Merger (the "Merger Agreement") pursuant to
which RMI.NET, Inc. ("RMI") will acquire INCC in exchange for RMI common stock
and warrants to purchase shares of RMI common stock.
The acquisition will be effected through a merger (the "Merger") of a wholly
owned subsidiary of RMI with and into INCC, with INCC as the surviving
corporation. Upon consummation of the Merger, INCC shareholders will be entitled
to receive a number of shares of RMI common stock equal to $2.50 divided by the
average of the closing prices of RMI common stock for the fifteen consecutive
trading days ending on the date immediately prior to the closing of the Merger.
For example, if the fifteen-day average closing sales price of RMI were $10.00,
each holder of INCC common stock would receive 0.25 shares of RMI common stock
for each share of INCC common stock. The value attributed to the RMI common
stock will not exceed $12.89, which is 125% of the average closing price of RMI
common stock for the 15 consecutive trading days ending on the day immediately
prior to the signing of the Merger Agreement (the "Signing Price"), nor will the
value attributed to the RMI common stock be less than $6.19, which is 60% of the
Signing Price. It is currently anticipated that up to approximately 11,346,000
shares of INCC common stock will be outstanding on the closing date of the
Merger, including shares of INCC common stock to be issued upon (1) payment of
dividends on INCC preferred stock, (2) conversion of INCC preferred stock to
INCC common stock, (3) repayment of loans made by Interwest Group, Inc. (as
further described below) and (4) the exercise of outstanding options and
warrants. In addition to the shares of RMI common stock, the shareholders of
INCC (excluding Interwest Group, Inc., INCC's largest shareholder, and the
directors of INCC), will be entitled to receive in exchange for each share of
INCC common stock, a warrant exercisable for one share of RMI common stock at
$11.50, and cancellable on 30-day's notice by RMI if RMI's share price exceeds
$13 for five consecutive trading days. The exercise period for each warrant will
begin thirty days after the closing date of the Merger and will expire two years
thereafter.
INCC's board of directors has approved the Merger and has recommended that the
shareholders approve the Merger. Consummation of the Merger remains subject to
shareholder approval and other customary conditions.
In connection with the execution of the Merger Agreement, INCC's largest
shareholder, Interwest Group, Inc., loaned $3 million to INCC. The $3 million
loan was used in part to repay INCC's outstanding line of credit, which matured
on March 1, 2000. The Merger Agreement requires that, under certain
circumstances, Interwest Group, Inc. will be required to lend up to an
additional $600,000 to INCC prior to the closing of the Merger. Under the terms
of the Merger Agreement, the amounts loaned by Interwest Group, Inc. to INCC,
including a $500,000 loan made on February 2, 2000, will be converted into
common stock of
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INCC immediately prior to consummation of the Merger at a price of $2.50 per
share and thereafter be exchanged for RMI common stock on the same basis as the
other shares of INCC common stock, except that Interwest Group, Inc. will not
receive any warrants.
RMI, INCC and Interwest Group, Inc. entered into a shareholders agreement
pursuant to which, among other things, Interwest Group, Inc. agreed to vote its
shares of INCC common stock in favor of the Merger and to refrain from voting
such shares in favor of actions that could reasonably be expected to materially
and adversely affect the Merger.
The shareholder agreement also imposes restrictions on Interwest Group, Inc.'s
ability to sell RMI common stock in the first year following consummation of the
Merger. During such period, Interwest Group, Inc. may sell up to a maximum of
300,000 shares of RMI common stock, subject to certain market and sale price
conditions. However, Interwest Group, Inc. will be entitled to sell an
additional number of shares if, prior to consummation of the Merger, it loans to
INCC an aggregate amount in excess of an additional $600,000.
In connection with the execution of the Merger Agreement, INCC and RMI entered
into an exchange agreement, pursuant to which RMI deposited in escrow a number
of newly-issued shares of its common stock equal in dollar value to 19.9% of the
outstanding shares of INCC common stock (as of the execution date of the
exchange agreement), based on a price of $3.25 per share of INCC common stock.
If the Merger is not consummated for certain reasons, INCC will exchange a
number of newly-issued shares equal to 19.9% of its common stock (based on the
number of shares outstanding as of the execution date of the exchange agreement)
for the shares deposited in escrow by RMI.
INCC and RMI are subject to certain voting and resale restrictions with respect
to the shares received in the share exchange. Each party has granted a proxy in
favor of the board of directors of the other party to vote such shares until
transferred to a third party, other than an affiliate. In addition, during the
first year following the share exchange and provided that certain market and
sale price conditions are satisfied, INCC may sell up to a maximum of 300,000
shares of RMI and RMI may sell an identical percentage of the shares of INCC
that it holds. For example, if in the exchange INCC were to receive 400,000
shares of RMI common stock and RMI were to receive 1,000,000 shares of INCC
common stock, RMI would be permitted to sell up to a maximum of 750,000 INCC
shares, subject to certain market and sale price conditions. INCC and RMI have
agreed to grant registration rights for the resale by the other party of shares
received in the share exchange.
The share exchange will not take place if: (1) the Merger is consummated, (2)
both RMI and INCC mutually agree not to proceed with the exchange, (3) INCC, in
its sole discretion, independently elects not to proceed with the exchange or
(4) INCC or RMI
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terminates the Merger Agreement under certain circumstances.
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Exhibits:
Exhibit
Number Exhibit Description
- ------- -----------------------------
2.1 Agreement and Plan of Merger, dated March 17, 2000, by and among
RMI.NET, Inc., Internet Acquisition Corporation and Internet
Communications Corporation
4.1 Form of Warrant Agreement (including the related Form of Warrant
attached thereto)
10.1 Exchange Agreement, dated March 17, 2000, by and between RMI.NET, Inc.
and Internet Communications Corporation
10.2 Shareholders Agreement, dated March 17, 2000, by and among RMI.NET,
Inc., Internet Communications Corporation and Interwest Group, Inc.
99.1 Press Release dated March 21, 2000
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTERNET COMMUNICATIONS CORPORATION
Date March 31, 2000 By: /s/Thomas Galley
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Thomas Galley
President and CEO
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INDEX TO EXHIBITS
Exhibit
Number Exhibit Description Page
- ------- ------------------------------------------------------------- ----
2.1 Agreement and Plan of Merger, dated March 17, 2000, ___
by and among RMI.NET, Inc., Internet Acquisition Corporation
and Internet Communications Corporation
4.1 Form of Warrant Agreement (including the related Form of warrant
attached thereto) ___
10.1 Exchange Agreement, dated March 17, 2000, by and between ___
RMI.NET, Inc. and Internet Communications Corporation
10.2 Shareholders Agreement, dated March 17, 2000, by and among ___
RMI.NET, Inc., Internet Communications Corporation and Interwest
Group, Inc.
99.1 Press Release dated March 21, 2000 ___
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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
RMI.NET, INC., a Delaware corporation ("Parent"),
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INTERNET ACQUISITION CORPORATION, a Colorado corporation ("Sub")
---
AND
INTERNET COMMUNICATIONS CORPORATION, a Colorado corporation
("Company")
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Dated as of March 17, 2000
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of March 17, 2000 (this
"Agreement"), is among RMI.NET, Inc., a Delaware corporation ("Parent"),
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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
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collectively referred to as the "Constituent Corporations").
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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
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and 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. In order to induce Parent and Sub to enter into this Agreement,
concurrently herewith Parent and Interwest Group, Inc., a Colorado corporation
and the controlling shareholder of the Company (the "Controlling Shareholder"),
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are entering into the Shareholder Agreement dated as of the date hereof (the
"Shareholder Agreement") in the form of the attached Exhibit A;
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D. In order to induce the Company to enter into this Agreement,
concurrently herewith Parent and the Company are entering into the Exchange
Agreement dated as of the date hereof (the "Exchange Agreement") in the form of
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the attached Exhibit B; and
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E. 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.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
<PAGE>
ARTICLE 1
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
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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 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.
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Section 1.2 Effective Time. The Merger shall become effective when
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the Articles of Merger (the "Articles of Merger"), executed in accordance with
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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
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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
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set forth in Section 7-111-106 of the CBCA.
Section 1.4 Charter and By-laws; Directors and Officers.
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(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.
(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
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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
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common stock, no par value per share, of Sub shall be converted into one
(1) share of Company Common Stock.
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(b) Certain Company Common Stock Cancelled. All shares of
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Company Common Stock (as hereinafter defined) 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
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Section 1.13 hereof, 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), but including shares outstanding as a result of
Section 5.7, Section 5.8 and Section 5.16) shall be converted into the
right to receive: (i) the number of shares of common stock, $0.001 par
value per share, of Parent ("Parent Common Stock") determined by dividing
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$2.50 (the "Conversion Rate") by the Closing Share Price (as defined
----------------
below) and rounding the result to the nearest one thousandth of a share,
plus (ii) (except with respect to the Controlling Shareholder) the right to
purchase one share of Parent Common Stock, subject to the terms and
conditions of the Warrant Agreement (as hereafter defined) (such
consideration, described in clauses (i) and (ii) above, shall be referred
to herein as the "Merger Consideration"); provided, however, that if
--------------------
between the first day of the Valuation Period (as hereinafter defined) and
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 appropriate
to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares. The "Closing
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Share Price" means the average of the daily closing prices per share of
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Parent Common Stock on the Nasdaq National Market for the fifteen (15)
consecutive trading days ending on the trading day that is one (1) trading
day prior to the date of Closing (the "Valuation Period"). All such shares
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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,
certificates representing the shares of Parent Common Stock into which such
shares are converted 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.
(d) Collar. Notwithstanding the foregoing, if (i) the
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Closing Share Price is equal to or greater than 125% of the average of the
daily closing prices per share of Parent Common Stock on the Nasdaq
National Market for the fifteen (15) consecutive trading days ending on the
trading day that is one trading day prior to execution of this Agreement
(the "Signing Share Price"), then for purposes of the Conversion Rate the
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Closing Share Price shall be fixed at 125% of the Signing Share Price, or
(ii) the Closing Share Price is equal to or less than 60% of the Signing
Share Price, then (x) for purposes of the Conversion Rate the Closing Share
Price shall be fixed at 60% of the Signing Share Price or (y) either of
Parent or Sub, on the one hand, or the Company, on the other hand, may
terminate this Agreement. By way of example but not limitation, if the
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Signing Share Price for Parent Common Stock is $10.00 per share and (i) the
Closing Share Price is $15.00, then for purposes of the Conversion Rate the
Closing Share Price will be $12.50; or (ii) the Closing Share Price is
$4.00, then Parent, Sub, or the Company may terminate this Agreement, or,
if no such termination occurs, then for purposes of the Conversion Rate the
Closing Share Price shall be $6.00.
Section 1.6 Parent to Make Certificates Available.
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(a) Exchange of Certificates. Parent shall, at its sole cost
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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 representing the Parent Warrants to those
shareholders entitled to receive such Parent Warrants; and (ii)
certificates representing the shares of Parent Common Stock issuable
pursuant to Section 1.5(c) in exchange for outstanding shares of Company
Common Stock and cash, as required to make payments in lieu of any
fractional shares pursuant to Section 1.8 (such cash and shares of Parent
Common Stock, together with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund"). The
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Exchange Agent shall deliver the Parent Common Stock 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
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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
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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 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 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, cash in lieu of any fractional share in accordance with
Section 1.8 and 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 shall be governed
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by Section 5.7 hereof.
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(d) Parent Warrants. Parent Warrants to be issued at the
---------------
Closing shall be governed by the terms of the Warrant Agreement.
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 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,
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determined by multiplying (i) the Closing Share Price 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 1.7 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 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.
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All shares of Parent Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms hereof (including any cash paid
pursuant to 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.
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 1.7.
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
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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
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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.
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
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permitted hereunder, the closing of the transactions contemplated by this
Agreement (the "Closing") and all actions specified in this Agreement to occur
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at the Closing shall take place at the offices of Otten, Johnson, Robinson, Neff
& Ragonetti, P.C., 950 Seventeenth Street, Suite 1600, Denver, Colorado 80202,
at 10:00 a.m., local time, no later than the second (2/nd/) 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
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such other time and place as Parent and the Company shall agree.
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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
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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.
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(a) Stock. As of the date hereof, the authorized capital
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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) 20,142,497 shares of Parent Common Stock
were issued and outstanding, all of which were validly issued, fully paid
and nonassessable and free of preemptive rights, (iii) 52,511 shares of
Parent Common Stock were held in the treasury; (iv) 1,438,334 shares of
Parent Common Stock were reserved for future issuance pursuant to the stock
option plans of Parent (collectively, the "Parent Stock Option Plans"),
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(iv) 5,895,619 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
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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
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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
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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
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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,
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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 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 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 to 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"),
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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.
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Section 2.4 Consents and Approvals; No Violation. Assuming that all
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consents, approvals, authorizations and other actions described in this Section
2.4 have been
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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"), 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
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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
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the shares of Parent Common Stock issuable in exchange for Company Common Stock
at the Effective Time in accordance with this Agreement 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 will, when issued, be registered under the
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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
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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 third
quarter of 1999 (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 SEC
Documents or as required by generally accepted accounting principles, Parent has
not, since September 30, 1999, 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
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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
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"Knowledge of Parent" means, with respect to the Parent, the actual knowledge of
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the directors and officers of Parent.
Section 2.10 Tax Matters. Except as set forth in Section 2.10 of the
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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
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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 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
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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
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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
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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
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against in the financial statements included in the 1998 Parent Annual Report,
as disclosed in the Form 10Q filed with the SEC for the third quarter of 1999 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 Documents filed with the SEC
prior to the date hereof or as disclosed in the Form 10Q filed with the SEC for
the third quarter of 1999, 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.
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(a) Defined Terms. For purposes of this Agreement, the
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following terms shall have the following meanings: (i) "Hazardous
---------
Substances" means (A) petroleum and petroleum products, by-products or
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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
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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
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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 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
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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
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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.
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Section 2.15 Suppliers and Distributors.
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(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 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 Company Letter 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.
16
<PAGE>
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.
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
17
<PAGE>
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 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
18
<PAGE>
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 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 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
19
<PAGE>
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, 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 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
third quarter of 1999 (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
20
<PAGE>
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
September 30, 1999, 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 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 1998
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
21
<PAGE>
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 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
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 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
22
<PAGE>
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 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
23
<PAGE>
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 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
24
<PAGE>
(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 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
25
<PAGE>
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.
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
26
<PAGE>
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 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. This fairness opinion shall not have been
modified or withdrawn prior to the Effective Time.
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.
27
<PAGE>
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 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
28
<PAGE>
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
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
29
<PAGE>
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.
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 in
cash upon delivery of the fairness opinion with the balance to be paid by the
Company post-Closing pursuant to the terms of a written agreement between
Niediger Tucker Bruner, Inc., 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
30
<PAGE>
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 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;
31
<PAGE>
(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;
(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
32
<PAGE>
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;
(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
33
<PAGE>
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;
(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 herein), 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:
34
<PAGE>
(i) the Company shall provide prior written notice of such
action to the Operations Observer (as defined in Section 4.10 hereof);
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 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 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
35
<PAGE>
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 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 recission shall be required
if directed by the Parent or if the parties are unable to agree on an
amount as required under subsection 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 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
36
<PAGE>
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.
(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.
37
<PAGE>
Section 4.6 Key Employees. The Company shall use its and their best
-------------
efforts (subject to commercial reasonableness) to ensure that the individuals
occupying the positions of Chief Executive Officer and Chief Financial Officer
of the Company as of the date hereof remain in such positions up to and at the
Effective Time. The Parent shall not take any action to discourage such
individuals from occupying the foregoing positions 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 $3,500,000 (which
total amount includes $500,000 that 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 (collectively, the
"Controlling Shareholder Loan"), exceed $4,100,000.00 in principal amount,
----------------------------
excluding any interest paid or accrued on such Controlling Shareholder Loan
(the "Maximum Amount")),
--------------
all of which cash shall be used by the Company (i) to satisfy, immediately upon
execution hereof, any indebtedness owing by the Company to Norwest Bank National
Association ("Norwest") under its existing credit facility agreement described
-------
more particularly in Section 4.8 of the Company Letter; (ii) thereafter to fund
the Company's Working Capital Needs (as hereinafter defined) following the date
hereof, subject, however, to the terms and conditions of Article 4 hereof, (iii)
thereafter to pay all Company Transactional Costs and Company Printing and
Filing Fees (as such terms are defined in Section 5.6(b) hereof); and (iv)
thereafter to pay all Third Party Debt (as defined herein); 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 (ii), (iii) and (iv) above.
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
38
<PAGE>
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 Niediger 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 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 Niediger
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.
39
<PAGE>
ARTICLE 5
ADDITIONAL AGREEMENTS
Section 5.1 Shareholder Meeting. 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 "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.
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 the Proxy Statement and Parent shall
prepare and file with the SEC 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, and the
Parent Common Stock issuable upon exercise of the Parent Warrants and the
resale by the Controlling Shareholder of its Parent Common Stock acquired
in the Merger. 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. 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 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
40
<PAGE>
by applicable state securities laws, distributing to the Company's
shareholders such amendment or supplement.
(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 proxy statement/prospectus
included therein (together with any amendments or supplements thereto, the
"Proxy Statement") relating to the 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 the Shareholder
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 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 the Shareholder 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.
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
41
<PAGE>
representation or warranty is made by the Company with respect to
statements made or incorporated by 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 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 shares of Parent Common Stock (including shares
of Parent Common Stock to be issued upon exercise of the Parent Warrants) to be
issued in connection with the Merger. Parent shall not be obligated to list the
Parent Warrants 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
42
<PAGE>
transactions contemplated hereby, including the fees and disbursements of
counsel, 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, 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. At 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 the Conversion Rate 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) the Conversion Rate. 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 Common Stock
43
<PAGE>
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 the Conversion Rate. Notwithstanding the foregoing, any Company
Stock Option with an exercise price greater than the Conversion Rate
immediately prior to the Effective Time shall be cancelled immediately
prior to the Effective Time.
(b) 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. At 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 at the Conversion Rate into the right to receive, at the Effective
Time, shares of Company Common Stock, which 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
-----------------
Warrant Agreements in the form attached hereto as Exhibit D (the "Warrant
--------- -------
Agreement") to the shareholders of the Company regarding the issuance to the
- ---------
shareholders of the Company (other than the Controlling Shareholder or any
directors of the Company) of warrants to purchase 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 regarding the
Merger.
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
44
<PAGE>
(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), (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.
(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
45
<PAGE>
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 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
46
<PAGE>
Section 5.15 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
Section 5.16 Controlling Shareholder Loan. 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 the aggregate outstanding amount of the
Controlling Shareholder Loan divided by the Conversion Rate. At the Effective
Time, such Company Common Stock will be converted into the right to receive
Parent Common Stock at the Conversion Rate as set forth in Section 1.5 hereof.
Section 5.17 Escrow of Funds and Shares by Parent.
------------------------------------
(a) Deposit. Simultaneously with the execution of this
-------
Agreement and pursuant to the Exchange Agreement, Parent shall deposit into
escrow that number of shares of Parent Common Stock (based on the Signing
Share Price) sufficient to purchase newly issued shares of Company Common
Stock (the "Company Exchange Shares") equal to 19.9% of the outstanding
-----------------------
shares of Company Common Stock (without regard to the issuance of such
shares of Company Common Stock pursuant to the terms of the Exchange
Agreement) at a price of $3.25 per share.
(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 will be as 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 Company Common Stock received by Parent or the Company,
as applicable, under this Section 5.17 will be as set forth in the Exchange
Agreement.
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 shareholders of the Company in
accordance with applicable law, the Company Charter and the Company's
Bylaws.
(b) Stock Listing. The Parent Common Stock issuable in the
-------------
Merger and not previously listed shall have been authorized for listing on
the Nasdaq National Market, subject to official notice of issuance.
47
<PAGE>
(c) HSR and Other Approvals/Consents or Waivers. (i) The
-------------------------------------------
waiting period (and any extension thereof) applicable 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.
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 .ies.
----------------------------------------------------
(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.
48
<PAGE>
(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, each Company
---------------
shareholder, other than the Controlling Shareholder or any director of the
Company, shall receive from Parent one Parent Warrant per share of Company
Common Stock held by such Company shareholder, pursuant to the terms and
conditions of the Warrant Agreement.
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.
49
<PAGE>
(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 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
200,000 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.
50
<PAGE>
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:
---------------------------
(i) if both of Parent and the Company mutually consent in
writing to such termination;
(ii) if: (A) the Merger has not been effected on or prior
to the close of business on the date which is 180 days after the date
of this Agreement (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; or
(iii) pursuant to Section 1.5(d)(ii)
(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
51
<PAGE>
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 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 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; or
(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.
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
52
<PAGE>
any liability for any willful breach of a representation or warranty contained
in this Agreement or the 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, but, after any such approval, no
amendment shall be made which by law or the rules of the Nasdaq National Market
requires further approval by such shareholders 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 18/th/ Street, Suite 2201
Denver, Colorado 80202
Attention: Chris J. Melcher, Vice President and General
Counsel
53
<PAGE>
with a copy to:
Otten, Johnson, Robinson, Neff & Ragonetti, P.C.
950 17/th/ Street, Suite 1600
Denver, Colorado 80202
Attention: Neil M. Goff, Esq.
Brownstein, Hyatt & Farber, P.C.
410 17/th/ Street, 22/nd/ Floor
Denver, Colorado 80202
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
54
<PAGE>
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 laws of the State of Colorado, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
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.
55
<PAGE>
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
Closing Share Price........................................... Section 1.5(c)
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)
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 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....................................... Recital C
Controlling Shareholder Loan.................................. Section 4.8
Conversion Rate............................................... Section 1.5(c)
Current Company Preferred Stock............................... Section 3.2(a)
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
</TABLE>
56
<PAGE>
<TABLE>
<S> <C>
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
Intellectual Property.............................. Section 2.13, Section 3.14
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
Operations Observer................................ Section 4.10
Other Company Plans................................ Section 3.2(a)
Parent............................................. Preamble
Parent Plan........................................ Section 2.11
Parent Common Stock................................ Section 1.5(c)
Parent Intellectual Property....................... Section 2.13
Parent Letter...................................... Section 2.2(b)
Parental Notice.................................... Section 4.2(b)
Parent Permits..................................... Section 2.9
Parent Preferred Stock............................. Section 2.2(a)
Parent Printing and Filing Fees.................... Section 5.6(b)(i)
Parent SEC Documents............................... Section 2.6
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
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
Rule 145 Affiliates................................ Section 5.4
SEC................................................ Section 2.3
Securities Act..................................... Section 2.3
Shareholder Agreement.............................. Recitals
Shareholder Meeting................................ Section 5.1
State Takeover Approvals........................... Section 2.4
Sub................................................ Preamble
Subsidiary......................................... Section 8.2(b)
Superior Transaction............................... Section 4.3(c)
</TABLE>
57
<PAGE>
<TABLE>
<S> <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
Valuation Period........................................... Section 1.5(c)
Warrant Agreement.......................................... Section 5.9
Working Capital Needs...................................... Section 4.8
</TABLE>
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 H. Hanson
_____________________________________________
Name: Douglas H. Hanson
___________________________________________
Title: Chairman and CEO
__________________________________________
INTERNET ACQUISITION CORPORATION,
a Colorado Corporation
By: /s/ Douglas H. Hanson
_____________________________________________
Name: Douglas H. Hanson
___________________________________________
Title: Chairman and CEO
__________________________________________
INTERNET COMMUNICATIONS
CORPORATION, a Colorado Corporation
By: /s/ Tom Galley
_____________________________________________
Name: Tom Galley
___________________________________________
Title: President
__________________________________________
58
<PAGE>
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:
________________________________________
Title:
_______________________________________
59
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LIST OF EXHIBITS
----------------
EXHIBIT DESCRIPTION
------- -----------
A Shareholder Agreement
B Exchange Agreement
C Rule 145 Letters
D Warrant Agreement
60
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EXHIBIT A
---------
Shareholder Agreement
See Attached.
<PAGE>
EXHIBIT B
---------
Exchange Agreement
See Attached.
<PAGE>
EXHIBIT C
---------
Rule 145 Letters
See Attached
<PAGE>
EXHIBIT D
---------
Warrant Agreement
See Attached
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TABLE OF CONTENTS
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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......................................... 2
Section 1.6 Parent to Make Certificates Available............................ 4
Section 1.7 Dividends; Transfer Taxes; Withholding........................... 5
Section 1.8 No Fractional Securities......................................... 5
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................................ 6
Section 1.12 Lost Certificates................................................ 6
Section 1.13 Dissenters' Rights............................................... 6
Section 1.14 Further Assurances............................................... 7
Section 1.15 Closing.......................................................... 7
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............................. 9
Section 2.5 Parent Common Stock to be Issued in the Merger................... 10
Section 2.6 SEC Documents and Other Reports.................................. 11
Section 2.7 Absence of Certain Changes or Events............................. 11
Section 2.8 Reorganization................................................... 11
Section 2.9 Permits and Compliance........................................... 11
Section 2.10 Tax Matters...................................................... 12
Section 2.11 Actions and Proceedings.......................................... 13
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(continued)
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Section 2.12 Liabilities...................................................... 14
Section 2.13 Intellectual Property............................................ 14
Section 2.14 Environmental Matters............................................ 14
Section 2.15 Suppliers and Distributors....................................... 16
Section 2.16 Insurance........................................................ 16
Section 2.17 Transactions with Affiliates..................................... 16
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................................................ 17
Section 3.3 Authority........................................................ 19
Section 3.4 Consents and Approvals; No Violation............................. 19
Section 3.5 SEC Documents and Other Reports.................................. 20
Section 3.6 Absence of Certain Changes or Events............................. 21
Section 3.7 Permits and Compliance........................................... 21
Section 3.8 Tax Matters...................................................... 22
Section 3.9 Actions and Proceedings.......................................... 23
Section 3.10 Certain Agreements............................................... 23
Section 3.11 ERISA............................................................ 24
Section 3.12 No Undisclosed Material Liabilities.............................. 26
Section 3.13 Labor Matters.................................................... 26
Section 3.14 Intellectual Property............................................ 27
Section 3.15 Opinion of Financial Advisor..................................... 27
Section 3.16 Required Vote of Company Shareholders............................ 27
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..................................... 29
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(Continued)
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Section 3.22 Title to and Sufficiency of Assets............................... 30
Section 3.23 Brokers.......................................................... 30
Section 3.24 Books and Records................................................ 30
Section 3.25 Bank Accounts.................................................... 30
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............................. 34
Section 4.3 No Solicitation.................................................. 36
Section 4.4 Third Party Standstill Agreements................................ 37
Section 4.5 Company Significant Contracts.................................... 37
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.................................................. 39
ARTICLE 5 ADDITIONAL AGREEMENTS..................................................... 40
Section 5.1 Shareholder Meeting.............................................. 40
Section 5.2 Preparation of the Registration Statement and the Proxy
Statement........................................................ 40
Section 5.3 Access to Information............................................ 42
Section 5.4 Rule 145 Letters................................................. 42
Section 5.5 Stock Exchange Listings.......................................... 42
Section 5.6 Fees and Expenses................................................ 42
Section 5.7 Company Stock Options............................................ 43
Section 5.8 Conversion of Current Company Preferred Stock.................... 44
Section 5.9 Warrant Agreement................................................ 44
Section 5.10 Premerger Notification to Federal Trade Commission............... 44
Section 5.11 Efforts Required................................................. 44
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(continued)
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Section 5.12 Public Announcements............................................. 45
Section 5.13 State Takeover Laws.............................................. 46
Section 5.14 Indemnification; Directors and Officers Insurance................ 46
Section 5.15 Notification of Certain Matters.................................. 46
Section 5.16 Controlling Shareholder Loan..................................... 47
Section 5.17 Escrow of Funds and Shares by Parent............................. 47
ARTICLE 6 CONDITIONS PRECEDENT TO THE MERGER....................................... 47
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger....... 47
Section 6.2 Conditions to Obligation of the Company to Effect the Merger..... 48
Section 6.3 Conditions to Obligations of Parent and Sub to Effect
the Merger....................................................... 49
ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER........................................ 51
Section 7.1 Termination...................................................... 51
Section 7.2 Effect of Termination............................................ 52
Section 7.3 Amendment........................................................ 53
Section 7.4 Waiver........................................................... 53
ARTICLE 8 GENERAL PROVISIONS....................................................... 53
Section 8.1 Notices.......................................................... 53
Section 8.2 Interpretation................................................... 54
Section 8.3 Counterparts..................................................... 54
Section 8.4 Entire Agreement; No Third-Party Beneficiaries................... 55
Section 8.5 Governing Law.................................................... 55
Section 8.6 Assignment....................................................... 55
Section 8.7 Severability..................................................... 55
Section 8.8 Enforcement of this Agreement.................................... 55
Section 8.9 Defined Terms.................................................... 56
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An extra section break has been inserted above this paragraph. Do not delete
this section break if you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause Table of
Contents/Authorities headers and footers to appear on any pages following the
Table of Contents/Authorities.
<PAGE>
EXHIBIT 4.1
FORM OF WARRANT AGREEMENT
Warrant Agreement, dated as of ______________, 2000 (this "Agreement"),
between RMI.NET, INC., a Delaware corporation (the "Company"), and [American
Securities Transfer & Trust Company], a [Delaware] corporation, 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
("INCC Common Stock"), of Internet Communications Corporation, a Colorado
corporation ("INCC"), in connection with the consummation of the merger
contemplated by the Agreement and Plan of Merger, dated as of March 17, 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);
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 Recitals to this
Agreement.
"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 $13.00.
"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>
"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).
"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.
"Determination Date" shall have the meaning set forth in Section 8(f).
"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 $11.50, subject
to adjustment from time to time pursuant to Section 8.
2
<PAGE>
"Expiration Date" means 5:00 p.m. New York City time on [__________],
2002. [Insert date that is the second anniversary of the Closing Date].
"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.
3
<PAGE>
"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 as of the
Effective Time (excluding however Interwest Group, Inc., a Colorado corporation
("Interwest"), any affiliate thereof and any director of INCC), 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 before
countersignature by
4
<PAGE>
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 Price and subject to the provisions of
this Agreement, to receive one share of Common Stock for
5
<PAGE>
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 Warrants or other securities or
property (including any cash, subject to any required withholding)
6
<PAGE>
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 at the Call Price 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 days after
receipt of notice of a Call Trigger Event, then the Warrants held by such Holder
shall be deemed 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>
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)
8
<PAGE>
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 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
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<PAGE>
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
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
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<PAGE>
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 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
11
<PAGE>
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 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
12
<PAGE>
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 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
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<PAGE>
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 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
14
<PAGE>
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 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
15
<PAGE>
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 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
16
<PAGE>
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 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.
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<PAGE>
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.
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 18/th/ Street, Suite 2201
Denver, Colorado 80202
Attention: Chris J. Melcher, Vice President and General
Counsel
with a copy to: Otten, Johnson, Robinson, Neff & Ragonetti, P.C.
950 17/th/ Street, Suite 1600
Denver, Colorado 80202
Attention: Neil M. Goff, Esq.
Brownstein, Hyatt & Farber, P.C.
410 17/th/ Street, 22nd Floor
Denver, Colorado 80202
Attention: Jeffrey M. Knetsch, Esq.
If to the Warrant
Agent: American Securities Transfer & Trust Company
[ADDRESS]
Attention: _________________
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
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<PAGE>
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 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.
19
<PAGE>
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.
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.
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.
[SIGNATURE PAGE FOLLOWS]
20
<PAGE>
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:
AMERICAN SECURITIES TRANSFER & TRUST COMPANY, as
Warrant Agent
By:__________________________________________
Name:
Title:
21
<PAGE>
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 $11.50 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 American Securities Transfer & 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 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
1
<PAGE>
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.
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: [ADDRESS], Attention: _____________________.
2
<PAGE>
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:
AMERICAN SECURITIES TRANSFER & TRUST COMPANY, as Warrant Agent
By:________________________
Name:
Title:
3
<PAGE>
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.
4
<PAGE>
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>
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 Number of Number of
Name of Assignees Address Assignees 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)
6
<PAGE>
(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.
7
<PAGE>
Exhibit 10.1
EXCHANGE AGREEMENT
BETWEEN
RMI.NET, INC.
AND
INTERNET COMMUNICATIONS CORPORATION
Dated as of March 17, 2000
<PAGE>
EXCHANGE AGREEMENT
This EXCHANGE AGREEMENT, dated as of March 17, 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 and the Company are entering into an
Agreement and Plan of Merger (the "Merger Agreement") pursuant to which a
----------------
wholly-owned subsidiary of RMI 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.
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 is 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 Otten, Johnson, Robinson, Neff &
Ragonetti, P.C., 950 Seventeenth Street, Suite 1600, 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 one (1)
-------------------------------
business day after the Signing, pursuant to an 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 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
<PAGE>
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 (as defined herein) 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 Otten, Johnson,
-------
Robinson, Neff & Ragonetti, P.C., 950 Seventeenth Street, Suite 1600,
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) the quotient of (i) $3.25 divided by (ii) the RMI Share Price (as
defined herein) and rounding the result to the nearest one thousandth
of a share.
"RMI Common Stock" means the common stock, par value $0.001 per
----------------
share, of RMI. 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.
(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.
-2-
<PAGE>
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,
-3-
<PAGE>
(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
-4-
<PAGE>
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
-5-
<PAGE>
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:
(i) 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; or
(ii) pursuant to Section 1.5(d) of the Merger Agreement,
because the Closing Share Price is equal to or less than 60% of the
Signing Share Price;
(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.
-6-
<PAGE>
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 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
-7-
<PAGE>
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
(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").
-----------------------------
(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 $4.875, and (Y) the sale price for such sale is
greater than or equal to $4.875; 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
-8-
<PAGE>
trading days prior to any such sale is greater than or equal to
$6.50, and (Y) the sale price for such sale is greater than or
equal to $6.50.
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 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
-9-
<PAGE>
courier to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(a) RMI. If to RMI, to:
---
RMI.NET, Inc.
988 - 18/th/ Street, suite 2201
Denver, Colorado 80202
Attention: Chris J. Melcher, Vice President and General
Counsel
with a copy to:
Otten, Johnson, Robinson, Neff & Ragonetti, P.C.
950 - 17/th/ Street, Suite 1600
Denver, Colorado 80202
Attention: Neil M. Goff, Esq.
Brownstein, Hyatt & Farber, P.C.
410 - 17/th/ Street, 22/nd/ 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."
-10-
<PAGE>
(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 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.
-11-
<PAGE>
6.10 Defined Terms. Each of the following terms is defined in the
-------------
Section identified below:
Agreement.................................................. Preamble
Base Ratio........................................ Section 5.45.4(d)
Ceiling Ratio..................................... Section 5.45.4(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(d)
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)
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 H. Hanson
______________________________________
Name: Douglas H. Hanson
____________________________________
Title: Chairman and CEO
___________________________________
INTERNET COMMUNICATIONS CORPORATION,
a Colorado corporation
By: /s/ Tom Galley
______________________________________
Name: Tom Galley
____________________________________
Title: President
___________________________________
-12-
<PAGE>
EXHIBIT A
ESCROW AGREEMENT
<PAGE>
EXHIBIT B
RMI REGISTRATION RIGHTS AGREEMENT
<PAGE>
EXHIBIT C
COMPANY REGISTRATION RIGHTS AGREEMENT
<PAGE>
Exhibit 10.2
SHAREHOLDER AGREEMENT
AGREEMENT, dated as of March __, 2000, 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. Simultaneously with the execution of this Agreement, Parent, Internet
Acquisition Corporation, a Colorado corporation and wholly-owned subsidiary of
Parent ("Sub"), and the Company have entered into an Agreement and Plan of
Merger (as such agreement may hereafter be amended from time to time, the
"Merger Agreement"), pursuant to which Sub will be merged with and into the
Company (the "Merger"); and
B. As an inducement and a condition to entering into the Merger
Agreement, Parent has required that Interwest agree, and Interwest has agreed,
to enter into this Agreement;
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 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 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,
<PAGE>
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
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 Merger Agreement and the approval of other actions contemplated
by the 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 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 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
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
2
<PAGE>
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 Merger Agreement is terminated or the Merger is not
consummated for any reason other than termination of the Merger Agreement by
Parent, termination of the Merger Agreement by the Company pursuant to Section
7.1(a)(iii) or 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 (i) 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 (ii) 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 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 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.
3
<PAGE>
(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 3,014,312 shares of Company
Common Stock and all of the issued and outstanding shares of Company Preferred
Stock, consisting of 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 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)
4
<PAGE>
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 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 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 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); (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
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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
(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 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 Merger Agreement are fully complied
with.
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(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 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
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<PAGE>
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
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 PURSUANT TO AND OTHER PROVISIONS OF
A SHAREHOLDER AGREEMENT, DATED AS OF MARCH __, 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 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
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<PAGE>
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 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
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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 Bellview 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
If to Parent:
RMI.NET, Inc.
988 18/th/ Street, Suite 2201
Denver, Colorado 80202
Attention: Christopher J. Melcher, Vice President & General
Counsel
Facsimile No.: (303) 313-0821
with a copy to:
Otten, Johnson, Robinson, Neff & Ragonetti, P.C.
950 17/th/ Street, Suite 1600
Denver, Colorado 80202
Attention: Neil M. Goff, Esq.
Facsimile No.: (303) 825-6525
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<PAGE>
Brownstein, Hyatt & Farber, P.C.
410 17/th/ Street, 22/nd/ 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.
(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.
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RMI.NET, INC., a Delaware Corporation
By: /s/ Douglas Hanson
__________________________________________
Name:
Title:
INTERNET COMMUNICATIONS CORPORATION, a Colorado
Corporation
By: /s/ Tom Galley
__________________________________________
Name: Tom Galley
Title: President
INTERWEST GROUP, INC., a Colorado
Corporation
By: /s/ Clifford Hickey
__________________________________________
Name:
Title:
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EXHIBIT 99.1
INCC Secures Interim Financing to Satisfy Mature Credit Line as Part of
Previously Announced Acquisition by RMI.NET, Inc.
DENVER--(BUSINESS WIRE)--March 21, 2000--As previously announced by RMI.NET,
Inc. (NASDAQ:RMII - news), a national e-commerce and connectivity company,
---- ----
Internet Communications Corp. (NASDAQ:INCC - news) has entered into a definitive
---- ----
agreement to be acquired for approximately $28 million in RMI.NET common stock,
as well as warrants. The acquisition of INCC by RMI.NET is subject to approval
by the shareholders of INCC.
As a condition to the transaction, Interwest Group, Inc., INCC's largest
shareholder, loaned an additional $3 million to INCC. The loan was used in
part to repay INCC's outstanding line of credit which matured on March 1, 2000.
Under the terms of the agreement between INCC and RMI.NET, the loan will be
converted to equity of INCC immediately prior to consummation of the proposed
transaction.
INCC is a telecommunications integration and network services company that
specializes in the design, implementation, maintenance and monitoring of premise
and network-based communications for wide area networks. INCC is headquartered
near Denver in Greenwood Village, Colo., and markets its products and services
to Colorado-based middle-market businesses.
Denver-based RMI.NET, formerly Rocky Mountain Internet, is a national commerce
solutions provider focusing on e-business for small and medium-sized businesses.
The company specializes in e-business applications; web solutions, including
design, hosting and marketing; and high-speed Internet access, including digital
subscriber line (DSL).
This press release contains forward-looking statements. These forward-looking
statements include statements of expectations, beliefs, future plans and
strategies, anticipated events or trends and similar expressions concerning
matters that are not historical facts and subject to risks and uncertainties.
Actual results may differ materially from such forward-looking statements.
Readers are cautioned not to place undue reliance on any forward-looking
statements, which reflect opinion and speak only as of the date hereof.
Additionally, INCC's future profitability is subject to significant risks and
uncertainties, including but not limited to liquidity, losses from operations,
changing technology, competition, possible future government regulations and
competition for talented employees.
For more information, contact INCC CEO and President Thomas Galley at
303-414-7111 or INCC CFO and Vice President Tim Kershisnik at 303-414-7188.
Visit
<PAGE>
Internet Communications' Web site at www.incc.net for investor-related
------------
information and a description of the company's products and services.
_____________
Contact:
Internet Communications Corporation
Thomas C. Galley, CEO and President
303/414-7111
or
Tim Kershisnik, CFO and Vice President
303/414-7188
