Purchase Agreement By and Among Internet America, Inc. and The Investors Listed in Schedule 1 hereto Series A Preferred Stock October 17, 2007
EXHIBIT
1
By
and Among
Internet
America,
Inc.
and
The
Investors Listed in
Schedule 1 hereto
Series
A Preferred
Stock
October
17, 2007
TABLE
OF CONTENTS
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Page
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ARTICLE
I
DEFINITIONS
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Section
1.1
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Definitions
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1
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Section
1.2
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References
and Titles
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4
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ARTICLE
II
PURCHASE
OF THE
SHARES
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Section
2.1
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Purchase
of the Shares
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5
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ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
OF THE COMPANY
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Section
3.1
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Organization,
Standing and Power
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5
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Section
3.2
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Subsidiaries
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6
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Section
3.3
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Capital
Structure.
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6
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Section
3.4
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Authority;
No Violations; Approvals
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7
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Section
3.5
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SEC
Documents
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8
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Section
3.6
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Absence
of Certain Changes or Events
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9
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Section
3.7
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No
Undisclosed Material Liabilities
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9
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Section
3.8
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No
Default
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10
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Section
3.9
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Compliance
with Applicable Laws
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10
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Section
3.10
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Litigation
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10
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Section
3.11
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Certain
Agreements
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11
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Section
3.12
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Status
of Shares
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11
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Section
3.13
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Intellectual
Property
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11
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Section
3.14
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Environmental
Matters
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12
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Section
3.15
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No
Brokers or Finders
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12
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Section
3.16
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Vote
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12
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Section
3.17
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Related
Party Transactions
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12
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ARTICLE
IV
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REPRESENTATIONS
AND WARRANTIES
OF THE INVESTORS
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Section
4.1
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Organization,
Standing and Power
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13
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Section
4.2
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Authority;
Approvals
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13
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i
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Section
4.3
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Investment
Intent
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14
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Section
4.4
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Investor
Status
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14
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Section
4.5
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No
Brokers or Finders
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14
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ARTICLE
V
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COVENANTS
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Section
5.1
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Affirmative
Covenants of the Company
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14
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Section
5.2
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Negative
Covenants of the Company
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14
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Section
5.3
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Cooperation;
Approvals
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15
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Section
5.4
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Notification
of Certain Matters
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15
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Section
5.5
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Registration
Rights Agreement
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15
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Section
5.6
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Transfer
Restrictions
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15
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Section
5.7
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Stock
Exchange Listing
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16
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Section
5.8
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Access;
Confidentiality.
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16
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Section
5.9
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Indemnification
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17
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ARTICLE
VI
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CONDITIONS
PRECEDENT TO THE
CLOSING
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Section
6.1
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Conditions
Precedent to Each Party’s Obligation
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18
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Section
6.2
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Conditions
Precedent to Obligation of the Investors
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18
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Section
6.3
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Conditions
Precedent to Obligations of Company
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19
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ARTICLE
VII
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THE
CLOSING
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Section
7.1
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The
Closing
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19
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Section
7.2
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Actions
to Occur at the Closing
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20
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ARTICLE
VIII
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TERMINATION
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Section
8.1
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Termination
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20
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Section
8.2
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Effect
of Termination
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21
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ii
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ARTICLE
IX
RECOVERY
OF
FEES
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ARTICLE
X
MISCELLANEOUS
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Section
10.1
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Survival
of Provisions.
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21
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Section
10.2
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No
Waiver; Modification in Writing
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22
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Section
10.3
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Severability
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22
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Section
10.4
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Fees
and Expenses
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22
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Section
10.5
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Parties
in Interest
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22
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Section
10.6
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Notices
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22
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Section
10.7
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Counterparts
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23
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Section
10.8
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Entire
Agreement; Termination of Confidentiality Agreement
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24
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Section
10.9
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Governing
Law
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24
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Section
10.10
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Assignment
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24
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Section
10.11
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Headings
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24
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iii
This
Purchase Agreement, dated as of October 17, 2007, is made by and among Internet
America, Inc., a Texas corporation (the “Company”), and the investors listed in
Schedule 1 hereto (each, an “Investor”, and collectively, the
“Investors”).
In
consideration of the mutual covenants and agreements set forth herein and for
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE
I
DEFINITIONS
Section
1.1 Definitions. As
used in this Agreement, and unless the context requires a different meaning,
the
following terms have the meanings indicated:
“Affiliate”
means,
with respect
to any Person, any other Person directly, or indirectly through one or more
intermediaries, controlling, controlled by or under common control with such
Person. For purposes of this definition and this Agreement, the term
“control” (and correlative terms “controlling,” “controlled by” and “under
common control with”) means possession of the power, whether by contract, equity
ownership or otherwise, to direct the policies or management of a
Person.
“Agreement”
means
this Purchase
Agreement, as the same may be amended, supplemented or modified from time to
time in accordance with the terms hereof.
“Approval”
means
any approval,
authorization, grant of authority, consent, order, qualification, permit,
license, variance, exemption, franchise, concession, certificate, filing or
registration or any waiver of the foregoing, or any notice, statement or other
communication required to be filed with, delivered to or obtained from any
Governmental Entity or any other Person.
“Articles
of Incorporation”
means the Company’s Articles of Incorporation, as amended from time to
time.
“Board”
means
the Board of
Directors of the Company.
“Business
Combination” means
(i) any consolidation, merger, share exchange or similar business
combination transaction involving the Company with any Person or (ii) the
sale, assignment, conveyance, transfer, lease or other disposition by the
Company of all or substantially all of its assets.
“Business
Day” means any day
except Saturday, Sunday and any day which shall be a legal holiday or a day
on
which banking institutions in Houston, Texas generally are authorized or
required by law or other government actions to close.
1
“Bylaws”
mean
the Company’s
bylaws, as amended from time to time.
“Capital
Stock” means
(i) with respect to any Person that is a corporation or company, any and
all shares, interests, participations or other equivalents (however designated)
of capital or capital stock of such Person and (ii) with respect to any
Person that is not a corporation or company, any and all partnership or other
equity interests of such Person.
“Closing”
has
the meaning set
forth in Section 7.1(b).
“Closing
Date” has the meaning
set forth in Section 7.1(b).
“Code”
means
the Internal
Revenue Code of 1986, as amended, and the rules and regulations thereunder
as in
effect on the date hereof.
“Common
Stock” means the
Company’s common stock, par value $.01 per share, and any Capital Stock for or
into which such Common Stock hereafter is exchanged, converted, reclassified
or
recapitalized by the Company or pursuant to an agreement or Business Combination
to which the Company is a party.
“Company”
has
the meaning set
forth in the introductory paragraph hereof.
“Company
Disclosure Schedule”
has the meaning set forth in Article III.
“Company
Options” has the
meaning set forth in Section 3.3(c).
“Company
SEC Documents” has the
meaning set forth in Section 3.5.
“Contracts”
means
all
agreements, contracts, or other binding commitments, arrangements or plans,
written or oral (including any amendments and other modifications thereto),
to
which the Company or any of its Subsidiaries is a party or is otherwise
bound.
“Current
SEC Reports” means the
Company’s Annual Report on Form 10-KSB for the year ended June 30, 2007,
the Company’s proxy statement its Company’s 2006 annual meeting of shareholders,
and all Company SEC Documents filed by the Company since the time of filing
of
the Company’s Annual Report on Form 10-KSB for the year ended June 30,
2007.
“Environmental
Laws” has the
meaning set forth in Section 3.14.
“Exchange
Act” means the
Securities Exchange Act of 1934, as amended, and the rules and regulations
of
the SEC promulgated thereunder.
“GAAP”
has
the meaning set
forth in Section 3.5(b).
“Governmental
Entity” means any
agency, bureau, commission, court, authority, department, official, political
subdivision, tribunal or other instrumentality of any government, whether
(i) regulatory, administrative or otherwise, (ii) federal, state or
local, or (iii) domestic or foreign.
“Hazardous
Materials” has the
meaning set forth in Section 3.14.
2
“Intellectual
Property” has the
meaning set forth in Section 3.13.
“Investor(s)”
has
the meaning
set forth in the introductory paragraph hereto.
“Investors’
Expenses”
means
all
reasonable out-of-pocket fees, costs and expenses incurred by the Investors
in
connection with the transactions contemplated by this Agreement and the other
Transaction Documents and their due diligence efforts in connection therewith,
including fees, costs and expenses of its accountants, counsel and other similar
advisors.
“Knowledge”
of
any Person means
the actual knowledge of such Person’s executive and financial officers and
directors, in each case after reasonable inquiry of such other officers of
such
Person with direct responsibility for the Person’s business relating to such
knowledge.
“Law”
means
any constitutional
provision, statute or other law, ordinance, rule, regulation or interpretation
of any thereof and any Order of any Governmental Entity (including Environmental
Laws) now in effect.
“Lien”
means
any mortgage,
lien, pledge, encumbrance, easement, charge or security interest of any kind
(including any agreement to give any of the foregoing, any conditional sale
or
other title retention agreement or any lease in the nature
thereof).
“Litigation”
has
the meaning
set forth in Section 3.10.
“Material
Adverse Effect” or
“Material Adverse
Change” means any effect, change, event or occurrence that is materially
adverse to the business, operations, properties, condition (financial or
otherwise), results of operations, assets, liabilities or prospects of the
Company and its Subsidiaries taken as a whole.
“Material
Contracts” has the
meaning set forth in Section 3.11(a).
“Order”
means
any decree,
injunction, judgment, settlement, order, ruling, assessment or writ of a
court.
“Person”
means
an individual or
a corporation, partnership, trust, incorporated or unincorporated association,
limited liability company, joint venture, joint stock company, government (or
an
agency or political subdivision thereof) or other entity of any
kind.
“Purchase
Price” has the
meaning set forth in Section 2.1(b).
“Registration
Rights Agreement”
means the Registration Rights Agreement substantially in the form attached
hereto as Exhibit B.
“SEC”
means
the Securities and
Exchange Commission.
“Securities
Act” means the
Securities Act of 1933, as amended, and the rules and regulations of the SEC
promulgated thereunder.
3
“Series
A Preferred Stock”
means the Company’s Series A Preferred Stock, $.01 par value per share, which
shall have the terms set forth in the Statement of Resolution attached hereto
as
Exhibit A.
“Shares”
has
the meaning set
forth in Section 2.1(a).
“Statement
of Resolution” shall
mean the Statement of Resolution for the Series A Preferred Stock substantially
the form attached hereto as Exhibit A, with such changes as are contemplated
by
the terms thereof or this Agreement.
“Stock
Plans” means the
Company’s stock option, stock incentive, restricted stock, employee stock
purchase or other similar plans.
“Subsidiary”
means,
(i) a
corporation, a majority of whose stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by the Company, by a Subsidiary of the Company or by the Company and another
Subsidiary, or (ii) any other Person (other than a corporation) in which
the Company, a Subsidiary or the Company and a Subsidiary, directly or
indirectly, at the date of determination thereof has at least a majority
ownership interest.
“Transaction
Documents” means
this Agreement, the Statement of Resolution and the Registration Rights
Agreement.
“Transfer”
has
the meaning set
forth in Section 5.5.
“Underlying
Shares” means the
shares of Common Stock issuable upon conversion of the Shares in accordance
with
the terms thereof.
Section
1.2 References
and
Titles. All
references in this Agreement to Exhibits, Schedules, Articles, Sections,
subsections, and other subdivisions refer to the corresponding Exhibits,
Schedules, Articles, Sections, subsections, and other subdivisions of this
Agreement unless expressly provided otherwise. Titles appearing at
the beginning of any Articles, Sections, subsections, or other subdivisions
of
this Agreement are for convenience only, do not constitute any part of such
Articles, Sections, subsections or other subdivisions, and shall be disregarded
in construing the language contained therein. The words “this
Agreement,” “herein,” “hereby,” “hereunder,” and “hereof,” and words of similar
import, refer to this Agreement as a whole and not to any particular subdivision
unless expressly so limited. The words “this Section,” “this
subsection,” and words of similar import, refer only to the Sections or
subsections hereof in which such words occur. The word “including”
(in its various forms) means “including without limitation.” Pronouns in
masculine, feminine, or neuter genders shall be construed to state and include
any other gender and words, terms, and titles (including terms defined herein)
in the singular form shall be construed to include the plural and vice versa,
unless the context otherwise expressly requires. Unless the context
otherwise requires, all defined terms contained herein shall include the
singular and plural forms of such defined terms.
4
ARTICLE
II
PURCHASE
OF THE
SHARES
Section
2.1 Purchase
of the
Shares.
(a) Subject
to the terms and conditions herein set forth, at the Closing, the Company will
sell to the Investors, and each of the Investors will purchase from the Company,
the number of shares of the Series A Preferred Stock set forth opposite such
Investor’s name on Schedule 1 hereto (collectively, the “Shares”).
(b) The
purchase price payable for each Share shall be $.586 per share (the “Purchase Price”).
(c) Delivery
of the Shares shall be made at the Closing by delivery to the Investors, against
payment of the Purchase Price therefor as provided herein, of one or more share
certificates, registered in the name of each Investor, representing the Shares
purchased by such Investor.
(d) Payment
of the Purchase Price for the Shares to be purchased hereunder shall be made
by
or on behalf of the Investors by wire transfer of immediately available funds
to
an account of the Company (the wire transfer instructions for which shall have
been furnished to the Investors at least three Business Days prior to the
Closing Date).
ARTICLE
III
REPRESENTATIONS
AND
WARRANTIES OF THE COMPANY
The
Company represents and warrants to each Investor as follows (in each case as
qualified by matters reflected on the disclosure schedule dated as of the date
of this Agreement by reference to the Section of this Agreement so qualified
and
delivered by the Company to the Investors prior to the date of this Agreement
(the “Company Disclosure
Schedule”) and made a part hereof by reference):
Section
3.1 Organization,
Standing and
Power. Each
of the Company and each of its Subsidiaries is a corporation or other entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated or organized and has the requisite
corporate or other such entity power and authority to own its properties and
carry on its business as now being conducted. Each of the Company and
each of its Subsidiaries is duly qualified or licensed to transact business
and
is in good standing in each jurisdiction in which the nature of its business
or
the ownership or leasing of its properties makes such qualification or licensing
necessary. The Company has delivered to the Investors prior to the
execution of this Agreement complete and correct copies of its Articles of
Incorporation and Bylaws, each as amended to date, and, in the case of the
Company’s Subsidiaries, made available similar organizational documents, in each
case, as in effect on the date of this Agreement.
5
Section
3.2 Subsidiaries. All
the outstanding Capital Stock of each Subsidiary of the Company has been validly
issued and is fully paid and nonassessable (with respect to corporate
Subsidiaries) and is owned directly or indirectly by the Company, free and
clear
of all Liens other than Liens securing obligations for money borrowed by the
Company and not issued in violation of preemptive or similar
rights.
Section
3.3 Capital
Structure.
(a) The
authorized capital stock of the Company consists of 40,000,000 shares of Common
Stock and 5,000,000 shares of preferred stock, $.01 par value per share, which
may be divided into and issued in one or more series upon the creation thereof
by the Board of Directors of the Company (the “Board”). As of the
date of this Agreement, (i) 12,508,914 shares of Common Stock are issued and
outstanding, (ii) 2,317,015 shares of Common Stock have been authorized and
reserved for issuance under Stock Plans; (iii) no shares of Common Stock are
held by the Company in its treasury, (iv) 4,000,000 shares of preferred stock
have been designated as Series A Preferred Stock, (v) 50,000 shares of Common
Stock have been authorized and reserved for issuance pursuant to the Stock
Purchase Agreement (the “SPA”) between the Company
and
TeleShare Communications Services, Inc.; and (vi) up to 360,000 shares of Common
Stock have been authorized and reserved for issuance pursuant to a purchase
price adjustment set forth in the SPA. Except as set forth in this
Section 3.3(a), the Company has no authorized, issued or outstanding stock
as of
the date of this Agreement.
(b) There
are no restrictions or limitations, contractual or otherwise, binding the
Company or any of its Subsidiaries or to which Company or any of its
Subsidiaries is subject that prohibit or limit the enforceability of the terms
and provisions of the Statement of Resolution or will prohibit or limit the
right of a holder of Shares to convert the Shares into shares of Common Stock
in
accordance with their terms; and the conversion of any Shares into shares of
Common Stock will not violate or result in or constitute a default under any
loan or credit agreement, note, bond, mortgage, indenture, lease, permit,
concession, franchise, license or any other contract, agreement, arrangement
or
understanding to which the Company or any of its Subsidiaries is a party or
by
which they or any of their properties or assets are bound.
(c) There
are no outstanding warrants, share or stock options, share or stock appreciation
rights or other rights to receive or purchase any Capital Stock of the Company
or any of its Subsidiaries granted under any stock plans or otherwise except
as
set forth in Section 3.3(c) of the Company Disclosure Schedule (such warrants,
share or stock appreciation rights or other rights disclosed thereon,
collectively, the “Company
Options”). Except for the Company Options and except as
provided in the Transaction Agreements, there are no outstanding securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind 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, any Capital Stock of the Company or of any of its Subsidiaries or
obligating the Company or any of its Subsidiaries to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. There are no outstanding
obligations of the Company or any of its Subsidiaries (contingent or otherwise)
to repurchase, redeem or otherwise acquire any Capital Stock of the Company
or
any of its Subsidiaries or any security exchangeable for or convertible into
such Capital Stock.
6
(d) All
outstanding Capital Stock of the Company are duly authorized, validly issued,
fully paid and nonassessable and not issued in violation of preemptive or
similar rights.
(e) Except
as contemplated hereby or in the other Transaction Documents or as set forth
in
Current SEC Reports, there are not any registration rights agreements,
stockholder agreements, voting agreements or trusts, proxies or other agreements
or contractual obligations to which the Company or any Subsidiary is a party
or
bound with respect to the registration with any Government Entity, or the voting
or disposition of any Capital Stock of the Company or any of its Subsidiaries
and, to the Company’s Knowledge there are no other shareholder agreements,
voting agreements or trusts, proxies or other agreements or contractual
obligations among the shareholders of the Company with respect to the voting
or
disposition of any Capital Stock of the Company or any of its
Subsidiaries.
Section
3.4 Authority;
No Violations;
Approvals.
(a) The
Board has approved this Agreement, the other Transaction Documents and the
transactions contemplated hereby and thereby, and declared this Agreement,
the
other Transaction Documents and the transactions contemplated hereby and thereby
to be in the best interests of the Company. The Board has approved
the issue and sale of the Shares and, upon any conversion of the Shares
hereunder, the issuance of the Common Stock issuable upon such
conversion. The Company has all requisite corporate power and
authority to enter into this Agreement and each of the other Transaction
Documents and to consummate each of the transactions and perform each of the
obligations contemplated hereby and thereby. The execution and
delivery of this Agreement and each of the other Transaction Documents and
the
consummation of each of the transactions and the performance of each of the
obligations contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of the Company. This Agreement
has been, and at or prior to the Closing the other Transaction Documents will
be, duly executed and delivered by the Company and the Statement of Resolution
has been duly adopted by the Board of Directors in accordance with applicable
Law. The Statement of Resolution and, assuming this Agreement and
each of the other Transaction Documents to which such Investor is a party
constitute the valid and binding obligations of such Investor, this Agreement
and each of the other Transaction Documents constitutes a valid and binding
obligation of the Company enforceable in accordance with its terms, subject,
as
to enforceability, to bankruptcy, insolvency, reorganization, moratorium and
other similar laws of general applicability relating to or affecting creditors’
rights and to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(b) The
execution and delivery of this Agreement and each of the other Transaction
Documents does not, and the consummation of the transactions contemplated hereby
and thereby and compliance with the provisions hereof and thereof will not,
conflict with, require the consent of any other Person to 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, cancellation or acceleration
of
any material obligation or to the loss of any material benefit under, or give
rise to a right of
7
purchase
under, result in the creation of any Lien upon any of the properties or assets
of the Company or any of its Subsidiaries under, any provision of (i) the
Articles of Incorporation or Bylaws or any provision of the comparable
organizational documents of any of the Company’s Subsidiaries, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease, instrument, permit,
concession, franchise, license or other contract or agreement, arrangement
or
understanding to which the Company or any of its Subsidiaries is a party or
otherwise is bound or by which any of them or their respective properties are
bound or any existing Approval applicable to the Company or any of its
Subsidiaries, (iii) any joint venture or other ownership arrangement to which
the Company or any of its Subsidiaries is a party or otherwise is bound or
by
which any of them or their respective properties are bound or (iv) assuming
the
Approvals referred to in Section 3.4(c) are duly and timely obtained or
made, any Law or Order applicable to the Company or any of its Subsidiaries
or
any of their respective properties or assets.
(c) No
Approval from 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 or any other Transaction Document by the Company or the
consummation by the Company of the transactions contemplated hereby or thereby,
except for the filing of the Statement of Resolution in accordance with Section
2.13 of the Texas Business Corporations Act.
Section
3.5 SEC
Documents.
(a) The
Company has made available to the Investors a true and complete copy of each
report, schedule, registration statement and definitive proxy statement filed
by
the Company with the SEC since June 30, 2004 (the “Company SEC Documents”)
including the Company’s Annual Report on Form 10-KSB for the year ended June 30,
2007, which are all the documents (other than preliminary materials) that the
Company was required to file with the SEC since June 30,
2004. 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 the rules and regulations of the
SEC thereunder applicable to such Company SEC Documents, and none of the Company
SEC Documents contained as of their respective dates 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.
(b) The
financial statements of the Company included in the Company SEC Documents,
including the notes and schedules thereto, complied as to form in all material
respects with the rules and regulations of the SEC with respect thereto, were
prepared in accordance with United States generally accepted accounting
principles (“GAAP”)
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited statements,
as
permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly present the
consolidated financial position of the Company and its consolidated Subsidiaries
as of their respective dates and the consolidated results of operations and
the
consolidated cash flows of the Company and its consolidated Subsidiaries for
the
periods presented therein in accordance with applicable requirements of GAAP
(subject, in the case of the unaudited statements, to normal, recurring
adjustments, none of which are material) applied on a consistent basis during
the periods presented.
8
Section
3.6 Absence
of Certain Changes
or Events.
(a) Except
as disclosed in the Current SEC Reports filed prior to the date of this
Agreement or Section 3.6 of the Company Disclosure Schedule, or except as
contemplated by this Agreement, since June 30, 2007, each of the Company and
its
Subsidiaries has conducted its business only in the ordinary course of business
consistent with past practice, and there has not been: (i) any declaration,
setting aside or payment of any dividend or other distribution (whether in
cash,
stock or property) with respect to any Capital Stock of the Company;
(ii) any split, combination, reclassification or amendment of any term
of any outstanding Capital Stock or other security of the Company or any of
its
Subsidiaries or (other than issuance of Common Stock upon the exercise of any
Company Options) any issuance or the authorization of the issuance of any
securities of the Company or any of its Subsidiaries, other than in connection
with the transactions contemplated hereby; (iii) any repurchase, redemption
or other acquisition by the Company or any Subsidiary of the Company of any
outstanding Capital Stock or other securities of the Company or any Subsidiary
of the Company, except as contemplated by the Stock Plans;
(iv) (A) any grant by the Company or any of its Subsidiaries to any
officer of the Company or any of its Subsidiaries of any increase in
compensation, except for increases in the ordinary course of business
consistent with past practice or as required under employment or other
agreements or benefit arrangements in effect as of June 30, 2007, or
(B) any grant by the Company or any of its Subsidiaries to any such officer
of any increase in severance or termination pay, except as was required or
provided for under any employment, severance, termination or other agreements
or
benefit arrangements in effect as of June 30, 2007; (v) except as required
by a change in GAAP, any material change in accounting methods, principles
or
practices by the Company or any of its Subsidiaries; and (vi) any material
casualties affecting the Company and its Subsidiaries, taken as a whole, or
any
material loss, damage or destruction to any of their properties or assets,
whether covered by insurance or not.
(b) Except
as disclosed in the Company’s consolidated financial statements included in the
Company’s Annual Report on Form 10-KSB for the year ended June 30, 2007, and the
notes thereto, or as disclosed in the other Current SEC Reports, since June
30,
2007, there has not been any event, circumstance or fact that (i) has had
or could reasonably be expected to have a Material Adverse Effect, (ii) has
impaired or could reasonably be expected to impair the ability of the Company
to
perform its obligations under any of the Transaction Documents in any material
respect, or (iii) could reasonably be expected to delay in any material
respect or prevent the consummation of any of the transactions contemplated
by
any of the Transaction Documents.
Section
3.7 No
Undisclosed Material
Liabilities. Except
as disclosed in Section 3.7 of the Company Disclosure Schedule or the Company’s
financial statements included in the Company’s Annual Report on Form 10-KSB for
the year ended June 30, 2007, and the notes thereto, or as disclosed in the
other Current SEC Reports, there are no liabilities or obligations of the
Company or any of its Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, other than:
(i) liabilities incurred in the ordinary course of business consistent with
past practice since June 30, 2007, which liabilities, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect;
(ii) liabilities arising under the Transaction Documents; and
(iii) liabilities not required by GAAP to be recognized or disclosed on a
consolidated balance sheet of the Company and its
9
consolidated
Subsidiaries or in the notes thereto, which liabilities, individually or in
the
aggregate, could not reasonably be expected to have a Material Adverse
Effect.
Section
3.8 No
Default. Except
as disclosed in Section 3.8 of the Company Disclosure Schedule or in the Current
SEC Reports, neither the Company nor any of its Subsidiaries is in default
or
violation (and no event has occurred which, with notice or the lapse of time
or
both, would constitute a default or violation) of any term, condition or
provision of (i) the Articles of Incorporation or Bylaws of the Company or
the comparable organizational documents of any of its Subsidiaries,
(ii) any loan or credit agreement, note, bond, mortgage, indenture, lease,
instrument, permit, concession, franchise, license or any other contract,
agreement, arrangement or understanding to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries
or
any of their respective properties or assets is bound, or (iii) any Order
or Law applicable to the Company or any of its Subsidiaries. Except
as disclosed in Section 3.8 of the Company Disclosure Schedule or in the Current
SEC Reports, the Company and its Subsidiaries (i) are not in breach of or
default under any covenant, including financial covenants, under agreements
relating to money borrowed in excess of $5 million, and (ii) do not believe
that it is reasonably likely that they will be in breach of or default under
any
covenant under any such agreement as of the next date on which they are required
to be in compliance with any such covenants.
Section
3.9 Compliance
with Applicable
Laws.
(a) The
Company and each of its Subsidiaries has in effect all Approvals of all
Governmental Entities necessary for the lawful conduct of their respective
businesses, and there has occurred no default or violation (and no event has
occurred which, with notice or the lapse of time or both, would constitute
a
default or violation) under any such Approval.
(b) Except
as otherwise disclosed in the Current SEC Reports, the Company and its
Subsidiaries are in compliance with all applicable Laws and Orders, except
for
possible noncompliance which, individually or in the aggregate, (i) has not
had and could not reasonably be expected to have a Material Adverse Effect,
(ii) has not impaired and could not reasonably be expected to impair
the ability of the Company to perform its obligations under any of the
Transaction Documents in any material respect, and (iii) could not
reasonably be expected to delay in any material respect or prevent the
consummation of any of the transactions contemplated by any of the Transaction
Documents.
(c) No
investigation or review by any Governmental Entity with respect to the Company,
any of its Subsidiaries or the transactions contemplated by this Agreement
and
the other Transaction Documents is pending or, to the Knowledge of the Company,
threatened, nor has any Governmental Entity notified the Company or any of
its
Subsidiaries in writing or, to the Company’s Knowledge, otherwise of any
intention to conduct the same.
Section
3.10 Litigation. Except
as disclosed in the Current SEC Reports or Section 3.10 of the Company
Disclosure Schedule, there is no suit, action, proceeding or indemnification
claim, at law or in equity, pending before any Governmental Entity or
arbitrator, or, to the Knowledge of the Company, threatened, against or
affecting the Company, any Subsidiary of the Company or any of its Material
Contracts (“Litigation”), and neither the
Company nor any Subsidiary is a
10
party
to any Litigation, that (i) has had or could reasonably be expected to have
a Material Adverse Effect, (ii) has impaired or reasonably could be
expected to impair the ability of the Company to perform its obligations under
any of the Transaction Documents in any material respect, or
(iii) reasonably could be expected to delay in any material respect or
prevent the consummation of any of the transactions contemplated by any of
the
Transaction Documents, nor is there any Order of any Governmental Entity or
arbitrator outstanding against or binding upon the Company or any Subsidiary
of
the Company or any of its Material Contracts which (i) has had or could
reasonably be expected to have a Material Adverse Effect, (ii) has impaired
or reasonably could be expected to impair the ability of the Company to perform
its obligations under any of the Transaction Documents in any material respect,
or (iii) reasonably could be expected to delay in any material respect or
prevent the consummation of any of the transactions contemplated by any of
the
Transaction Documents.
Section
3.11 Certain
Agreements.
(a) Except
as disclosed in the Current SEC Reports and Section 3.11(a) of the Company
Disclosure Schedule, there are no Contracts, whether in oral or written form,
that are material to the Company and its Subsidiaries, taken as a whole, or
their respective business, (such Contracts disclosed or required to be disclosed
herein, in the Current SEC Reports or in the Company Disclosure Schedule, the
“Material
Contracts”). Each Material Contract is a valid and binding
obligation of the Company or one of its Subsidiaries and, to the Company’s
Knowledge, of each other party thereto, enforceable in accordance with its
terms, and is in full force and effect.
(b) The
Company or the relevant Subsidiary and, to the Company’s Knowledge, each other
party to the Material Contracts has performed in all material respects the
obligations required to be performed by it under the Material Contracts and
is
not (with or without lapse of time or the giving of notice, or both) in breach
or default thereunder. No party to any Material Contract has given
written or, to the Company’s Knowledge, oral notice of any action to terminate,
cancel, rescind or procure a judicial reformation thereof.
Section
3.12 Status
of
Shares. The
issuance and sale of the Shares and the reservation and issuance of the
Underlying Shares have been duly authorized by all necessary corporate action
on
the part of the Company (other than the filing of the Statement of Resolution
with the Secretary of State of the State of Texas) and the Shares, when
delivered to the Investors at the Closing, against payment therefor as provided
herein, and the Underlying Shares, when issued upon conversion of the Shares
in
accordance with the terms thereof, will be validly issued, fully paid and
non-assessable and the issuance and sale of the Shares and the issuance of
the
Underlying Shares are not and will not be subject to preemptive rights of any
Person.
Section
3.13 Intellectual
Property. The
Company and the Subsidiaries own, possess or license, or, to the Company’s
Knowledge can acquire on reasonable terms, adequate patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures), trademarks, service marks, trade names or other intellectual
property (collectively, “Intellectual Property”)
necessary to carry on the business now operated by them, and neither the Company
nor any of the Subsidiaries has received any notice or is otherwise aware of
any
infringement of
11
or
conflict with asserted rights of others with respect to any Intellectual
Property (including Intellectual Property which is licensed) or of any facts
or
circumstances which would render any Intellectual Property invalid or inadequate
to protect the interest of the Company or any of the Subsidiaries therein,
and
which infringement or conflict (if the subject of any unfavorable decision,
ruling or finding) or invalidity or inadequacy, singly or in the aggregate,
could reasonably be expected to result in a Material Adverse
Effect.
Section
3.14 Environmental
Matters. Except
for such matters as could not, singly or in the aggregate, reasonably be
expected to result in a Material Adverse Effect, (i) neither the Company
nor any of the Subsidiaries is in violation of any federal, state, local or
foreign statute, law, rule, regulation, ordinance, code, policy or rule of
common law or any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent, decree or judgment, relating
to
pollution or protection of human health, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata) or wildlife, including, without limitation, laws and regulations
relating to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum or
petroleum products (collectively, “Hazardous Materials”) or to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials (collectively, “Environmental Laws”),
(ii) the Company and the Subsidiaries have all permits, authorizations and
approvals required under any applicable Environmental Laws and are each in
compliance with their requirements, (iii) there are no pending or, to the
Company’s Knowledge or any of the Subsidiaries, threatened administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigation or proceedings relating
to
any Environmental Law against the Company or any of the Subsidiaries and
(iv) there are no events or circumstances known to the Company or any of
the Subsidiaries that might reasonably be expected to form the basis of an
order
for clean-up or remediation, or an action, suit or proceeding by any private
party or governmental body or agency, against or affecting the Company or any
of
the Subsidiaries relating to Hazardous Materials or Environmental
Laws.
Section
3.15 No
Brokers or
Finders. No
agent, broker, finder or investment or commercial banker, or other Person or
firm engaged by or acting on behalf of the Company or its Subsidiaries in
connection with the negotiation, execution or performance of this Agreement
is
or will be entitled to any brokerage or finder’s or similar fee or other
commission as a result of this Agreement, the other Transaction Documents or
the
transactions contemplated hereby or thereby, other than any such fees or
commissions that have been disclosed to the Investors and as to which the
Company shall have full responsibility.
Section
3.16 Vote. There
are no approvals required of the holders of Capital Stock of the Company
necessary to approve this Agreement or any other Transaction Documents and
the
transactions contemplated hereby or thereby.
Section
3.17 Related
Party
Transactions. No
relationship, direct or indirect, exists between or among any of the Company,
the Subsidiaries or any affiliate of the Company, on the one hand, and any
director, officer, stockholder, customer or supplier of any of them, on the
other hand, which would be required by the Exchange Act to be described in
the
Company’s proxy statement for the election of directors in 2006 which is not
described in the Current SEC Reports or Section 3.17 of the Company Disclosure
Schedule.
12
ARTICLE
IV
REPRESENTATIONS
AND
WARRANTIES OF THE INVESTORS
Each
of the Investors represents and warrants to the Company with respect to such
Investor as follows:
Section
4.1 Organization,
Standing and
Power. Such
Investor, if a corporation or other business entity, has all requisite power
and
authority to own, lease, and operate its properties and to carry on its business
as now being conducted and to execute and deliver this Agreement and the other
Transaction Documents to which such Investor is a party and consummate the
transactions contemplated hereby and thereby.
Section
4.2 Authority;
Approvals.
(a) (i) The
execution and delivery of this Agreement and the other Transaction Documents
to
which it is a party and the purchase of the Shares to be purchased by it have
been duly and properly authorized by all necessary action on the part of such
Investor, (ii) this Agreement and the other Transaction Documents to which
it is a party have been duly executed and delivered by it or on its behalf
and,
assuming the accuracy of the representations and warranties of the Company
in
Section 3.4 hereof, constitute the valid and legally binding obligations of
such
Investor, enforceable against it in accordance with their respective terms,
subject to bankruptcy, insolvency, reorganization, moratorium and other similar
laws of general applicability relating to or affecting creditors’ rights and to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law); (iii) the purchase of the
Shares to be purchased by such Investor does not conflict with or violate
(A) any material agreement to which it is a party or to which its
properties are subject or (B) assuming the approvals referred to in Section
4.2(b) are duly and timely made or obtained, any Law applicable to such
Investor, in each case in a manner that could reasonably be expected to
materially hinder or impair the completion of any of the transactions
contemplated hereby; and (iv) the purchase of Shares to be purchased by
such Investor does not impose any penalty or other onerous condition on
such Investor that could reasonably be expected to materially hinder or impact
the completion of any of the transactions contemplated hereby.
(b) No
Approval from any Governmental Entity is required by or with respect to such
Investor in connection with the execution and delivery by such Investor of
this
Agreement or any other Transaction Document to which it is a party or the
consummation by such Investor of the transactions contemplated hereby or
thereby, except for any such Approval the failure of which to be made or
obtained (i) has not impaired and could not reasonably be expected to
impair the ability of such Investor to perform its obligations under any of
the
Transaction Documents in any material respect and (ii) could not reasonably
be expected to delay in any material respect or prevent the consummation of
any
of the transactions contemplated by any of the Transaction
Documents.
13
Section
4.3 Investment
Intent. The
Shares to be acquired by such Investor hereunder and any Underlying Shares
to be
acquired upon the conversion of such Shares are being, or in the case of the
Underlying Shares, will be, acquired for such Investor’s own account for
investment and with no intention of distributing or reselling such Shares or
Underlying Shares or any part thereof or interest therein in any transaction
which would be in violation of the securities Laws of the United States of
America or any applicable state or any foreign country or
jurisdiction.
Section
4.4 Investor
Status. Such
Investor (i) at the time it was offered the Shares, was, (ii) at the
date hereof, is, and (iii) at the Closing Date, will be, an accredited
investor as defined in Rule 501(a) under the Securities Act, and has such
knowledge, sophistication and experience in business and financial matters
so as
to be capable of evaluating the Company and an investment in the Shares, and
is
able to bear the economic risk of such investment.
Section
4.5 No
Brokers or
Finders. No
agent, broker, finder or investment or commercial banker, or other Person or
firm engaged by or acting on behalf of such Investor in connection with the
negotiation, execution or performance of this Agreement is or will be entitled
to any brokerage or finder’s or similar fee or other commission as a result of
this Agreement, other than any such fees or commissions that have been disclosed
to the Company and as to which such Investor shall have full
responsibility.
ARTICLE
V
COVENANTS
Section
5.1 Affirmative
Covenants of the
Company. The
Company hereby covenants and agrees that, until the earlier of the Closing
or
the termination of this Agreement, unless otherwise expressly contemplated
by
this Agreement or consented to in writing by all of the Investors (such consent
not to be unreasonably withheld), the Company will and will cause each of its
Subsidiaries to operate its business in the usual and ordinary course consistent
with past practices except as contemplated by this Agreement and except as
set
forth in Section 5.1 of the Company Disclosure Schedule.
Section
5.2 Negative
Covenants of the
Company.
(a) Except
as expressly contemplated by this Agreement or otherwise consented to in writing
by all of the Investors, from the date of this Agreement until earlier of the
Closing or the termination of this Agreement, the Company shall not do, and
shall not permit any of its Subsidiaries to do, any of the
following:
(i) adopt
or propose to adopt any amendments to the Company’s Articles of Incorporation or
Bylaws, adopt resolutions authorizing a liquidation, dissolution, merger,
consolidation, restructuring, recapitalization, or other reorganization of
the
Company or any Subsidiary or make any other changes in the Company’s capital
structure;
(ii) declare
or pay any dividend or make any other distribution (whether in cash, stock
or
property) with respect to its Capital Stock, other than
dividends paid
by any Subsidiary to the Company or another Subsidiary in the ordinary and
usual
course of the Company’s business, or take any other action that, if taken after
the issuance of the Shares, would result in an adjustment to the number of
shares acquirable upon conversion of the Shares;
14
(iii) take
any action that will, or is reasonably likely to cause, the conditions in
Section 6.2 not to be satisfied; or
(iv) agree
in writing or otherwise to do any of the foregoing.
Section
5.3 Cooperation;
Approvals. Each
of the Company and each Investor agrees to cooperate and use all commercially
reasonable efforts to take, or cause to be taken, all action and to do, or
cause
to be done, all things necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement, including cooperating
fully with the other parties to obtain (and will promptly prepare all
registrations, filings and applications, requests and notices preliminary to)
all Approvals that may be necessary or which may be reasonably requested by
the
Company or the Investors to consummate the transactions contemplated by this
Agreement and the other Transaction Documents. In case at any time
after the date hereof any further action is necessary or desirable to carry
out
the purposes of this Agreement, the parties shall take all such necessary
action.
Section
5.4 Notification
of Certain
Matters. The
Company shall give prompt notice to the Investors, and the Investors shall
give
prompt notice to the Company, of (a) the occurrence, or failure to occur,
of any event that causes any representation or warranty contained in any
Transaction Document to be untrue or inaccurate in any material respect at
any
time from the date of this Agreement to the Closing Date and (b) any
failure of the Company or an Investor to comply with or satisfy, in any material
respect, any covenant, condition or agreement to be complied with or satisfied
by it under any Transaction Document. The provisions of this Section
5.4 shall survive for so long as any representation, warranty, covenant, or
agreement shall survive hereunder.
Section
5.5 Registration
Rights
Agreement. At
the Closing, the Company agrees to enter into a Registration Rights Agreement
with the Investors in substantially the form attached hereto as Exhibit
B.
Section
5.6 Transfer
Restrictions. (a)
If an Investor should decide to dispose of any of the Shares to be purchased
by
it or any Underlying Shares to be issued to it upon the conversion of such
Shares, such Investor understands and agrees that it may do so only pursuant
to
an effective registration statement under the Securities Act or pursuant to
an
exemption from registration under the Securities Act. In connection
with any offer, resale, pledge or other transfer (individually and collectively,
a “Transfer”) of any
Shares or Underlying Shares other than pursuant to an effective registration
statement, the Company may require that the transferor of such Shares or
Underlying Shares provide to the Company an opinion of counsel which opinion
shall be reasonably satisfactory in form and substance to the Company, to the
effect that such Transfer is being made pursuant to an exemption from, or in
a
transaction not subject to, the registration requirements of the Securities
Act
and any applicable state or foreign securities Laws.
15
Such
Investor agrees to the imprinting, so long as appropriate, of substantially
the
following legend on certificates representing the Shares and any Underlying
Shares:
THE
SECURITIES (THE “SECURITIES”) EVIDENCED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER AGREES THAT IT WILL
NOT OFFER, RESELL, PLEDGE OR OTHERWISE TRANSFER (INDIVIDUALLY AND COLLECTIVELY,
A “TRANSFER”) THE
SECURITIES EVIDENCED HEREBY, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT. IF THE PROPOSED TRANSFER IS TO
BE MADE OTHER THAN PURSUANT TO THE IMMEDIATELY PRECEDING SENTENCE, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY AND THE TRANSFER AGENT
SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THEY MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE
SECURITIES ACT OR ANY STATE OR FOREIGN SECURITIES LAW.
The
legend set forth above may be removed if and when the Shares or Underlying
Shares, as the case may be, represented by such certificate are disposed of
pursuant to an effective registration statement under the Securities Act or
the
opinion of counsel referred to above has been provided to the
Company. The Share certificates shall also bear any additional
legends required by applicable federal, state or foreign securities Laws, which
legends may be removed when, in the opinion of counsel to the Company, the
same
are no longer required under the applicable requirements of such securities
Laws. Each Investor agrees that, in connection with any Transfer of
Shares by it pursuant to an effective registration statement under the
Securities Act, it will comply with all prospectus delivery requirements of
the
Securities Act. The Company makes no representation, warranty or
agreement as to the availability of any exemption from registration under the
Securities Act with respect to any resale of Shares or Underlying
Shares.
Section
5.7 Stock
Exchange
Listing. Prior
to the time the Shares become convertible in accordance with their terms, the
Company shall, at its expense, procure the listing of the Underlying Shares
on
all stock exchanges on which the Common Stock is then listed.
Section
5.8 Access;
Confidentiality.
(a) At
all times during normal business hours from and after the date hereof until
all
of the outstanding Shares have been converted in accordance with their terms,
the Company shall afford the Investors and their counsel and other authorized
representatives reasonable access to the properties, employees and officers
of
the Company and to all books, accounts, tax returns, financial and other
records, including audit work papers, correspondence and contracts of every
kind
of the Company as the Investors may reasonably request.
16
(b) Each
Investor shall, and shall cause its representatives to, hold confidential all
information relating to the Company or its Subsidiaries it has received prior
to
the Closing from the Company or any of its representatives, or information,
if
any, it receives after the Closing from the Company or any of its
representatives as a result of or in connection with Section 5.10(a) hereof;
provided, however, that the foregoing shall not apply to (i) information
that is or becomes generally available to the public other than as a result
of a
disclosure by such Investor or any of its Affiliates or representatives in
violation of this Section 5.10(b), (ii) information that is or becomes
available to such Investor or any of its representatives on a nonconfidential
basis from a source other than the Company or its Affiliates or representatives,
provided that such source is not known by such Investor to be bound by a
confidentiality agreement with or other obligation of secrecy to the Company
or any other party, or (iii) information that is required to be
disclosed by such Investor or any of its representatives as a result of any
applicable Law. The provisions of this Section 5.10(b) shall
terminate on the first anniversary of the date that all of the outstanding
Shares have been converted in accordance with their terms.
Section
5.9 Indemnification.
(a) The
Company agrees to indemnify each Investor and its Affiliates and hold each
Investor and its Affiliates harmless from and against any and all liabilities,
losses, damages, costs and expenses of any kind (including, without limitation,
the reasonable fees and disbursements of each Investor’s counsel in connection
with any investigative, administrative or judicial proceeding), which may be
incurred by such Investor or such Affiliates as a result of any claims made
against such Investor or such Affiliates by any Person that relate to or arise
out of (i) any breach by the Company of any of its representations,
warranties or covenants contained in this Agreement or in the Transaction
Documents, or (ii) any litigation, investigation or proceeding instituted
by any Person with respect to this Agreement or the Shares or Underlying Shares
(excluding, however, any such litigation, investigation or proceeding which
arises solely from the acts or omissions of such Investor or its
Affiliates).
(b) Any
Person entitled to indemnification hereunder will (i) give prompt notice to
the Company of any claim with respect to which it seeks indemnification (but
omission of such notice shall not relieve the Company from liability hereunder
except to the extent it is actually prejudiced by such failure to give notice)
and (ii) unless in such indemnified party’s reasonable judgment a conflict
of interest may exist between such indemnified party and the Company with
respect to such claim, permit the Company to assume the defense of such claim
with counsel reasonably satisfactory to the indemnified party. If
such defense is not assumed by the Company, the Company will not be subject
to
any liability for any settlement made without its consent (but such consent
will
not be unreasonably withheld). The Company will not consent to entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of an unconditional release from all liability in respect
to
such claim or litigation. If the Company elects not to or is not
entitled to assume the defense of a claim, it will not be obligated to pay
the
fees and expenses of more than one counsel for all parties indemnified with
respect to such claim, unless an actual conflict of interest exists between
such
indemnified party and any other of such indemnified parties with respect to
such
claim, in which event the Company will be obligated to pay the fees and
expenses of such additional counsel or counsels.
17
ARTICLE
VI
CONDITIONS
PRECEDENT TO THE
CLOSING
Section
6.1 Conditions
Precedent to Each
Party’s
Obligation. The
respective obligations of the Investors and the Company to effect the
transactions contemplated hereby at the Closing are subject to the satisfaction
on or prior to the Closing Date of the following conditions:
(a) Approvals. All
Approvals of, or expirations of waiting periods imposed by, any Governmental
Entity necessary for the consummation of the transactions contemplated by this
Agreement at such Closing shall have been filed, occurred, or been obtained,
as
applicable.
(b) No
Injunctions or
Restraints. No temporary restraining order, preliminary or
permanent injunction, or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
of the transactions contemplated hereby shall be in effect.
(c) No
Action. No
action shall have been taken nor any statute, rule, or regulation shall have
been enacted by any Governmental Entity that makes the consummation of the
transactions contemplated hereby illegal.
Section
6.2 Conditions
Precedent to
Obligation of the Investors. The
obligation of the Investors to effect the transactions contemplated by this
Agreement at each Closing is subject to the satisfaction of the following
conditions unless waived, in whole or in part, by the Investors:
(a) Representations
and
Warranties. The representations and warranties of the Company
set forth in this Agreement that are qualified by a materiality standard or
a
Material Adverse Effect qualification shall be true and correct in all respects
and the representations and warranties of the Company set forth in this
Agreement that are not so qualified shall be true and correct in all material
respects, in each case as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date, and the Investors shall
have
received a certificate to the foregoing effect signed on behalf of the
Company and its Subsidiaries by the chief executive officer or by the chief
financial officer of the Company.
(b) Performance
of
Obligations. The Company and its Subsidiaries shall have
performed in all material respects all obligations required to be performed
by
it or them under this Agreement prior to the Closing Date, and the Investors
shall have received a certificate to such effect signed on behalf of the Company
and its Subsidiaries by the chief executive officer or by the chief financial
officer of the Company.
(c) No
Adverse Action or
Decision. There shall be no action, suit, investigation or
proceeding, pending or threatened, against or affecting the Company or any
of
its Subsidiaries or any of their respective properties or rights, or any of
their Affiliates, officers or directors, before any court, arbitrator or
administrative or governmental body which (i) seeks to restrain, enjoin or
prevent the consummation of or otherwise affect the transactions contemplated
by
this Agreement or the other Transaction Documents or (ii) questions the
validity or legality of any such transaction or seeks to recover damages or
to
obtain other relief in connection with any such transaction.
18
(d) Consents
Under
Agreements. The Investors shall have been furnished with
evidence of all consents or approvals required to be obtained by the Company
or
any of its Subsidiaries with respect to the consummation of each of the
transactions contemplated by this Agreement the failure of which to obtain
reasonably could be expected to result in a Material Adverse Effect, and each
such consent or approval shall be unconditional.
(e) Closing
Deliveries. The Company shall have delivered to the Investors
all documents, instruments, certificates or other items required to be delivered
by the Company pursuant to Section 7.2(b).
(f) Statement
of
Resolution. The Statement of Resolution shall have been filed
with and accepted by the Texas Secretary of State.
Section
6.3 Conditions
Precedent to
Obligations of Company. The
obligation of the Company to effect the transactions contemplated by this
Agreement at each Closing is subject to the satisfaction of the following
conditions unless waived, in whole or in part, by the Company:
(a) Representations
and
Warranties. The representations and warranties of the
Investors set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date, and the Company shall have received a
certificate to the foregoing effect signed by the Investors.
(b) Performance
of Obligations of the
Investors. The Investors shall have performed in all material
respects the obligations required to be performed by them under this Agreement
prior to the Closing Date, and the Company shall have received a certificate
to
such effect signed by the Investors.
(c) Closing
Deliveries. The Investors shall have delivered to the Company
all documents, instruments, certificates or other items required to be delivered
by the Investors pursuant to Section 7.2(a).
ARTICLE
VII
THE
CLOSING
Section
7.1 The
Closing.
(a) Subject
to the satisfaction or waiver of the conditions set forth in Article VI, the
purchase and sale of the Shares to be purchased by the Investors hereunder
(the
“Closing”) will take
place at the offices of Fulbright & ▇▇▇▇▇▇▇▇ L.L.P., ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m., local time, on such
date
as mutually agreed to by the parties hereto. The date on which the
Closing occurs is herein referred to as the “Closing Date.” All closing
transactions at the Closing shall be deemed to have occurred
simultaneously.
19
Section
7.2 Actions
to Occur at the
Closing.
(a) At
the Closing, the Investors shall deliver to the Company the
following:
(i) Purchase
Price. An amount equal to the Purchase Price for theShares in
accordance with Article II.
(ii) Certificates. The
certificates described in Sections 6.3(a) and6.3(b).
(iii) Registration
Rights
Agreement. The Registration RightsAgreement duly executed by
the Investors.
(b) At
the Closing, the Company shall deliver to the Investors the
following:
(i) Share
Certificates. Certificates representing the
Shares.
(ii) Certificates. The
certificates described in Sections 6.2(a) and6.2(b).
(iii) Registration
Rights
Agreement. The Registration RightsAgreement duly
executed.
(iv) Consents
Under
Agreements. The original of each consent orapproval, if any,
pursuant to Section 6.2(d).
ARTICLE
VIII
TERMINATION
Section
8.1 Termination. This
Agreement may be terminated prior to the Closing:
(a) by
mutual consent of the Investors and the Company;
(b) by
either the Investors or the Company:
(i) in
the event of a breach by the other party of any representation, warranty,
covenant or agreement contained in this Agreement which (A) would give rise
to the failure of a condition set forth in Section 6.2 or 6.3, and
(B) cannot be cured or, if curable, has not been cured within 20 days
following receipt by the breaching party of written notice of such
breach;
(ii) if
a court of competent jurisdiction or other Governmental Entity shall have issued
an order, decree, or ruling or taken any other action (which order, decree,
or
ruling the Investors and the Company shall use all commercially reasonable
efforts to lift), in each case permanently restraining, enjoining, or otherwise
prohibiting the transactions contemplated by this Agreement, and such order,
decree, ruling, or other action shall have become final and nonappealable;
provided, however, that the right to terminate this Agreement under this clause
(ii) shall not be available to any party whose breach of this Agreement has
been
the cause of, or resulted in, such order, decree, ruling or other action;
or
20
(iii) if
the Closing shall not have occurred by December 31, 2007; provided, however, that the
right to terminate this Agreement under this clause (iii) shall not be available
to any party whose breach of this Agreement has been the cause of, or resulted
in, the failure of the Closing to occur on or before such date.
The
right of any party hereto to terminate this Agreement pursuant to this Section
8.1 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, directors, employees,
accountants, consultants, legal counsel, agents, or other representatives
whether prior to or after the execution of this Agreement.
Section
8.2 Effect
of
Termination. In
the event of the termination of this Agreement, written notice thereof shall
forthwith be given to the other party specifying the provision hereof pursuant
to which such termination is made, and this Agreement shall forthwith become
null and void, except for liability of a party arising out of a willful breach
of, or misrepresentation under, this Agreement prior to such termination (but
in
no event shall any party hereto be entitled to recover punitive, consequential,
special or exemplary damages).
ARTICLE
IX
RECOVERY
OF
FEES
Any
party who shall obtain a final judgment in a court of competent jurisdiction
for
the payment of damages by another party for a breach of this Agreement or any
other Transaction Document shall be entitled to recover reasonable attorneys’
fees and court costs incurred in connection with the obtaining of such
judgment.
ARTICLE
X
MISCELLANEOUS
Section
10.1 Survival
of
Provisions.
(a) The
representations and warranties of the Company and the Investors made herein
or
in any other Transaction Document and the covenants of the Company and the
Investors to be complied with on or prior to the Closing shall remain operative
and in full force and effect pursuant to their terms, regardless of (i) any
investigation made by or on behalf of the Investors or the Company, as the
case
may be, or (ii) acceptance of any of the Shares and payment by the
Investors therefor, until the date which is 18 months following the Closing;
provided, that the
representations and warranties contained in Sections 3.1, 3.3, 3.4 and 3.12
shall survive until the sixth anniversary of the Closing; and provided, further, that such
21
representations
and warranties shall survive as to any claim or demand made prior to their
termination date until such claim or demand is fully paid or otherwise resolved
by the parties hereto in writing or otherwise.
(b) The
covenants and agreements of the Company and the Investors contained in this
Agreement that, by their terms, are to be performed or complied with after
either Closing Date will survive until the period specified herein with respect
to such covenant or agreement; and provided, further, that such covenants and
agreements shall survive as to any claim or demand made prior to their
termination date until such claim or demand is fully paid or otherwise resolved
by the parties hereto in writing or otherwise.
Section
10.2 No
Waiver; Modification in
Writing. No
failure or delay on the part of the Company or the Investors in exercising
any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or remedy preclude
any
other or further exercise thereof or the exercise of any other right, power
or
remedy. The provisions of this Agreement, including the provisions of
this sentence, may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given without
the
written consent of the Company and all of the Investors. Any
amendment, supplement or modification of or to any provision of this Agreement,
or any waiver of any provision of this Agreement, shall be effective only in
the
specific instance and for the specific purpose for which made or
given. Except where notice is specifically required by this
Agreement, no notice to or demand on any party hereto in any case shall entitle
the other party to any other or further notice or demand in similar or other
circumstances.
Section
10.3 Severability. If
any term or other provision of this Agreement is invalid, illegal, or incapable
of being enforced by any rule of applicable law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated herein 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 hereto 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 herein are consummated as originally
contemplated to the fullest extent possible.
Section
10.4 Fees
and
Expenses. Within
30 days after the Closing, the Company shall pay to the Investors an amount
equal to Investors’ Expenses through the Closing Date (the amount of such costs
and expenses shall have been furnished to the Company at least within 25 days
after the Closing Date).
Section
10.5 Parties
in
Interest. This
Agreement shall be binding upon and, except as provided below, inure solely
to
the benefit of each party hereto and their successors and assigns, and nothing
in this Agreement, express or implied, is intended to confer upon any other
Person any rights or remedies of any nature whatsoever under or by reason of
this Agreement.
Section
10.6 Notices. All
notices and other communications hereunder shall be in writing and shall be
deemed given if delivered personally or by facsimile or mailed by registered
or
certified mail (return receipt requested) or Federal Express or another
recognized overnight
22
courier
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) If
to the Investors, to:
To
the address set forth immediately below such Investor’s name on the signature
page to the Subscription Agreement delivered by such Investor to the Company
on
or prior to the date hereof.
with
a copy to:
Fulbright &
▇▇▇▇▇▇▇▇ L.L.P.
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Tele: (▇▇▇)
▇▇▇-▇▇▇▇
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
(b) If
to the Company, to:
Internet
America, Inc.
▇▇▇▇▇
▇. ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Tele: (▇▇▇)
▇▇▇-▇▇▇▇
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
with
a copy to:
▇▇▇▇▇
▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇. ▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
Tele: (▇▇▇)
▇▇▇-▇▇▇▇
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
Any
of the above addresses may be changed at any time by notice given as provided
above; provided, however, that any such notice of change of address shall be
effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date of delivery,
if hand delivered, on the date of receipt, if telecopied, three Business Days
after the date of mailing, if mailed by registered or certified mail, return
receipt requested, and one Business Day after the date of sending, if sent
by
Federal Express or other recognized overnight courier.
Section
10.7 Counterparts. This
Agreement may be executed and delivered (including by facsimile transmission)
in
one or more 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, it being
understood that all parties need not sign the same counterpart.
23
Section
10.8 Entire
Agreement;
Termination of Confidentiality Agreement. This
Agreement (which term shall be deemed to include the Exhibits and Schedules
hereto and the other certificates, documents and instruments delivered
hereunder) and the other Transaction Documents constitute the entire agreement
of the parties hereto with respect to the subject matter hereof and thereof
and
supersede all prior agreements, letters of intent and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and thereof. There are no representations or warranties, agreements,
or covenants of the parties with respect to the subject matter hereof and
thereof other than those expressly set forth in this Agreement and the other
Transaction Documents.
Section
10.9 Governing
Law. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE
STATE OF TEXAS, WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAW
PROVISIONS.
Section
10.10 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.
Section
10.11 Headings. The
headings of this Agreement are for convenience of reference only and are not
part of the substance of this Agreement.
[The
remainder of this page is intentionally left blank.]
24
IN
WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed by its duly authorized officer as of the date first written
above.
| Internet America, Inc. | |||
| By: | /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ | ||
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇
Chairman and Chief Executive Officer
|
|||
[Investor
Signature Pages
Follow]
| INVESTOR: | |||
| Name: | |||
| Signature | |||
Investor
Signature Page to Purchase
Agreement
SCHEDULE
TO PURCHASE AGREEMENT
INTENTIONALLY OMITTED.
Exhibit
A
STATEMENT
OF
RESOLUTION
OF
SERIES
A PREFERRED
STOCK
To
The Secretary of
State
of
The State of
Texas
Pursuant
to Article 2.13 of the Texas Business Corporation Act, Internet America, Inc.,
a
corporation organized and existing under the laws of the State of Texas (the
“Corporation”), submits
the following statement for the purpose of establishing and designating a series
of shares and fixing and determining the preferences, limitations and relative
rights thereof:
1.
The name of the Corporation is Internet America, Inc.
2. The
following resolution, establishing and designating a series of shares and fixing
and determining the preferences, limitations and relative rights thereof, was
duly adopted by the Board of Directors of the Corporation on October 11,
2007.
Whereas,
Article IV of the Articles of Incorporation, as amended, of the Corporation
(the
“Articles of
Incorporation”) provides for a class of authorized shares known as “Common Stock, comprising
45,000,000
shares, with a par value of $.01 per share (the “Common Stock”), issuable
from
time to time, and for a class of authorized shares known as “Preferred Stock”, comprising
5,000,000 shares, with a par value of $.01 per share, issuable from time to
time
in one or more series;
Whereas,
pursuant to Article IV of the Articles of Incorporation, the Board of Directors
of the Corporation is authorized to fix and determine the preferences,
limitations and relative rights of any wholly unissued series of Preferred
Stock, and to fix the number of shares constituting such series, and to increase
or decrease the number of shares of an such series (but not below the number
of
shares then outstanding); and
Whereas,
it is the desire of the Board of Directors of the Corporation, pursuant to
its
authority as aforesaid, to establish, designate and issue an additional series
of such Preferred Stock and to fix and determine the preferences, limitations
and relative rights relating thereto;
Now,
Therefore, Be It Resolved, that the Board of Directors does hereby establish
and
designate a series of Preferred Stock of the Corporation and does hereby fix
and
determine the preferences, limitations and relative rights relating to said
series of Preferred Stock, as follows:
A-1
Series
A Preferred
Stock
|
1.
|
Designation
and Number of
Shares. There shall be a series of preferred stock that
shall be designated as “Series A Preferred
Stock” and the number of shares constituting such series shall be
4,000,000. Such number of shares may be increased or decreased by
resolution of the Board; provided, however,
that no
decrease shall reduce the number of shares of the Series A Preferred
Stock
to less than the number of shares then issued and outstanding plus
the
number of shares issuable upon exercise of outstanding rights, options
or
warrants or upon conversion of outstanding securities issued by the
Corporation.
|
|
2.
|
Rank. The
Series A Preferred Stock shall rank senior to the Common Stock with
respect to the payment of dividends and as to the distribution of
assets
upon a liquidation, dissolution or winding up of the
Corporation.
|
|
3.
|
Dividends
and
Distribution.
|
|
(a)
|
The
holders of Series A Preferred Stock shall be entitled to receive
out of
the assets of the Corporation, when and if declared by the Board
out of
funds legally available for that purpose, cumulative preferred cash
dividends at a rate per annum of 10% for each share of the Series
A
Preferred Stock. Such dividends shall be cumulative from the date
the
Series A Preferred Stock is issued to the holder (the “Issue Date”) and shall
be payable in arrears, when and as declared by the Board, on March
31,
June 30, September 30 and December 31 of each year (each such date
being
referred to herein as a “Dividend Payment
Date”),
commencing on the first Dividend Payment Date following the Issue
Date;
provided, however,
that if any
Dividend Payment Date shall not be a Business Day, then the Dividend
Payment Date shall be on the next succeeding day that is a Business
Day.
The period from the Issue Date to the next Dividend Payment Date
and each
quarterly period between consecutive Dividend Payment Dates shall
hereinafter be referred to as “Dividend
Periods.” “Business
Day” means any
day except Saturday, Sunday and any day which shall be a legal holiday
or
a day which banking institutions in Houston, Texas generally are
authorized or required by law or other governmental actions to
close.
|
|
(b)
|
If,
on any Dividend Payment Date, the Corporation fails to pay dividends,
then
until the dividends that were scheduled to be paid on such date are
paid,
such dividends shall cumulate.
|
|
(c)
|
Dividends
on account of arrears for any past Dividend Periods may be declared
and
paid at any time, without reference to any Dividend Payment Date,
to
holders of record on a date designated by the Board, not exceeding
30 days
preceding the payment date thereof, as may be fixed by the
Board.
|
|
(d)
|
The
Corporation may not declare a dividend or distribution on the Common
Stock
unless it first declares a dividend or distribution on the Series
A
Preferred Stock.
|
A-2
|
(e)
|
The
Board may fix a record date for the determination of the holders
of shares
of Series A Preferred Stock entitled to receive payment of a dividend
or
distribution declared thereon, which record date shall be no more
than 60
days prior to the date fixed for the payment
thereof.
|
|
4.
|
Voting
Rights. The
holders of the Series A Preferred Stock shall vote (on an as-converted
basis) together with the Common Stock, and not as a separate class,
except:
|
|
(a)
|
as
provided under “Certain
Restrictions” below; or
|
|
(b)
|
as
required by law.
|
|
5.
|
Certain
Restrictions.
|
|
(a)
|
Whenever
quarterly dividends or other dividends or distributions payable on
the
Series A Preferred Stock are in arrears, thereafter and until all
accrued
and unpaid dividends and distributions, whether or not declared,
on shares
of the Series A Preferred Stock outstanding shall have been paid
in full,
the Corporation shall not:
|
|
(i)
|
Declare
or pay dividends on, make any other distributions on, or redeem or
purchase or otherwise acquire for consideration any shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution
or
winding up of the Corporation) to the Series A Preferred
Stock;
|
|
(ii)
|
Declare
or pay dividends on or make any other distributions on any shares
of stock
ranking on a parity (either as to dividends or upon the liquidation,
dissolution or winding up of the Corporation) with the Series A Preferred
Stock, except dividends paid ratably with the Series A Preferred
Stock and
all such parity stock on which dividends are payable or in arrears
in
proportional to the total amounts to which the holders of all such
shares
are then entitled; or
|
|
(iii)
|
Purchase
or otherwise acquire for consideration any shares of Series A Preferred
Stock, or any shares of stock ranking on a parity with the Series
A
Preferred Stock, except in accordance with a purchase offer made
in
writing or by publication (as determined by the Board) to all holders
of
Series A Preferred Stock, or to such holders and holders of any such
shares ranking on a parity therewith, upon such terms as the Board,
after
consideration of the respective annual dividend rates and other relative
rights and preferences of the respective series and classes shall
determine in good faith will result in fair and equitable treatment
among
the respective series or classes.
|
|
(b)
|
So
long as any shares of Series A Preferred Stock are outstanding, the
Corporation shall not, without the prior written consent of the holders
of
at least 66.66% of the Series A Preferred Stock, either directly
or by
amendment, merger, consolidation or
otherwise:
|
A-3
|
(i)
|
amend,
alter, or repeal any provision of the Articles of Incorporation or
Bylaws
of the Corporation relating to the Series A Preferred Stock;
or
|
|
(ii)
|
create
or authorize the creation of or issue any other security convertible
into
or exercisable for any equity security, having rights, preferences
or
privileges senior to or on parity with the Series A Preferred Stock,
or
increase the authorized number of shares of Series A Preferred
Stock.
|
|
6.
|
Liquidation
Preference.
|
|
(a)
|
In
the event of any liquidation of the Corporation, after payment or
provision by the Corporation of the debts and other liabilities of
the
Corporation, each holder shall be entitled to receive an amount in
case
for each share of the then outstanding Series A Preferred Stock held
by
such holder equal to $.586 per share, plus an amount equal to all
accrued
but unpaid dividends thereon, whether or not earnings are available
in
respect of such dividends or such dividends have been declared, to
and
including, the date full payment is tendered to the holders with
respect
to such liquidation, and no more (such amount being referred to herein
as
the “Liquidation
Preference”), before any distribution shall be made to the holders
of any Common Stock upon the liquidation of the
Corporation.
|
|
(b)
|
In
the case the assets of the Corporation available for payment to the
holders upon a liquidation are insufficient to pay the full Liquidation
Preference on all outstanding shares of the Series A Preferred Stock,
then
the entire assets of the Corporation available for payment to the
holders
will be distributed ratably.
|
|
(c)
|
Written
notice of any liquidation of the Corporation, stating a payment date
and
the place where the distributable amounts shall be payable, shall
be given
by mail, postage prepaid, not less than 30 days prior to the payment
date
stated therein, to the holders of record at their respective addresses
as
the same shall appear on the books of the
Corporation.
|
|
7.
|
Reacquired
Shares. Any shares of the Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired promptly upon the acquisition thereof.
All
such shares shall upon retirement become authorized but unissued
shares of
preferred stock and may be reissued as part of a new series of preferred
stock to be created by resolution or resolutions of the Board, subject
to
any conditions and restrictions on issuance set forth
herein.
|
|
8.
|
Conversion
Rights.
|
|
(a)
|
Optional
Conversion.
The Series A Preferred Stock shall be convertible, without the
payment of any additional consideration, into an equal number of
fully
paid and nonassessable shares of Common Stock, at the option of the
holder
at any time, subject to adjustments for stock dividends, splits,
combinations and similar events and as described below under “Anti-dilution
Provisions.”
|
A-4
|
(b)
|
Mandatory
Conversion. In the event that the per share trading
price of the Common Stock is equal to or greater than $3.00 per share
for
90 consecutive trading days, the Series A Preferred Stock shall convert,
automatically, without any further action on the part of the holders
thereof and whether or not the certificates representing such shares
are
surrendered to the Corporation or its transfer agent and without
the
payment of any additional consideration, into an equal number of
fully
paid and nonassessable shares of Common Stock, subject to adjustments
for
stock dividends, splits, combinations and similar events and as described
below under “Anti-dilution
Provisions.”
|
|
(c)
|
Conversion
Procedure. The holder of any shares of Series A
Preferred Stock may exercise the conversion right specified in Section
8(a) hereof, or may receive a certificate representing the shares
of
Common Stock into which such shares were converted automatically
pursuant
to Section 8(b) hereof, by surrendering to the Corporation or the
transfer
agent of the Corporation the certificate(s) representing the share(s)
of
Series A Preferred Stock to be converted, accompanied by written
notice
specifying the number of such shares to be converted. If the certificates
representing such shares of Series A Preferred Stock are to be issued
in a
name other than the name on the face of the certificates representing
such
shares of Series A Preferred Stock, such certificates shall be accompanied
by such evidence of assignment and such evidence of the signatory’s
authority with respect thereto. Conversions shall be deemed to have
been
effected with respect to conversions pursuant to (i) Section 8(a)
hereof
on the date when the notice of an election to convert pursuant to
Section
8(a) hereof and the certificates representing the shares being converted
are actually received by the Corporation or any transfer agent of
the
Corporation and (ii) Section 8(b) on the 90th
day
referred to therein. Such date that the conversion shall be deemed
to be
effective shall be referred to herein as the “Conversion
Date.”
|
|
(d)
|
As
promptly as possible after the Conversion Date, upon surrender by
the
holder thereof of the certificate(s) formerly representing the shares
of
Series A Preferred Stock, the Corporation shall issue and deliver
to or
upon the written order of such holder a certificate or certificates
for
the number of shares of Common Stock to which such holder is entitled
upon
such conversion. The person in whose name the certificate(s) for
shares of
Common Stock to be issued shall be deemed to have become a holder
of
record of such shares of Common Stock on the applicable Conversion
Date.
|
|
(e)
|
Upon
conversion of only a portion of the shares covered by a certificate
representing shares of Series A Preferred Stock surrendered for conversion
pursuant to Section 8(a) hereof, the Corporation shall issue and
deliver
to or upon the written order to the holder of the certificate so
surrendered for conversion, at the expense of the Corporation, a
new
certificate representing the number of shares of Series A Preferred
Stock
representing the unconverted portion of the certificate so
surrendered.
|
|
(f)
|
The
Corporation covenants and agrees
that:
|
A-5
|
(i)
|
The
shares of Common Stock issuable upon any conversion of any shares
of
Series A Preferred Stock will be deemed to have been issued to the
Person
exercising such conversion rights set forth herein on the Conversion
Date,
and the Person exercising such conversion rights will be deemed for
all
purposes to have become the record holder of such shares of Common
Stock
on the Conversion Date. “Person”
means an
individual or entity of any kind;
|
|
(ii)
|
All
shares of Common Stock which may be issued upon any conversion of
any
Series A Preferred Stock will, upon issuance, be fully paid and
non-assessable and free from all taxes, liens and charges with respect
to
the issue thereof;
|
|
(iii)
|
The
Corporation will take all such action as may be necessary to assure
that
all shares of Common Stock issuable upon conversion of shares of
Series A
Preferred Stock may be issued without violation of any applicable
law or
regulation or any requirements of any domestic securities exchange,
if
any, upon which the outstanding Common Stock is listed at the time
of such
delivery;
|
|
(iv)
|
The
Corporation will at all times reserve and keep available, out of
its
authorized but unissued shares of Common Stock or out of shares of
Common
Stock held in its treasury, the full number of shares of Common Stock
into
which all shares of the Series A Preferred Stock having conversion
privileges from time to time outstanding are convertible;
and
|
|
(v)
|
The
Corporation will at no time close its transfer books against the
transfer
of the Series A Preferred Stock or of any shares of Common Stock
issued or
issuable upon the conversion of the Series A Preferred Stock in any
manner
which interferes with the timely conversion of the Series A Preferred
Stock.
|
|
9.
|
Anti-Dilution
Provisions.
|
|
(a)
|
In
the event that the Corporation issues additional securities the conversion
price shall be adjusted in accordance with the following
formula:
|
CP2=
CP1 * (A+B) / (A+C)
CP2=
New Series A Conversion
Price
CP1=
Series A Conversion Price in
effect immediately prior to new issue
A=
Number of shares of Common Stock deemed to be outstanding immediately prior
to
new issue (includes all shares of outstanding common stock, all shares of
outstanding preferred stock on an as-converted basis, and all outstanding
options on an as-exercised basis; and does not include any convertible
securities converting into this round of financing)
A-6
B=
Aggregate consideration received by the Corporation with respect to the new
issue divided by CP1
|
|
C=
Number of shares of stock issued in the subject
transaction.
|
|
(b)
|
The
following issuances shall not trigger anti-dilution
adjustment:
|
|
(i)
|
securities
issuable upon conversion of any of the Series A Preferred Stock,
or as a
dividend or distribution on the Series A Preferred
Stock;
|
|
(ii)
|
securities
issued upon the conversion of any currently outstanding debenture,
warrant, option, or other convertible
security;
|
|
(iii)
|
Common
Stock issuable upon a stock split, stock dividend, or any subdivision
of
shares of Common Stock;
|
|
(iv)
|
shares
of Common Stock (or options to purchase such shares of Common Stock)
issued or issuable to employees or directors of, or consultants to,
the
Corporation pursuant to any plan approved by the Corporation’s Board,
including the Series A Director, but in no event exceeding 1,000,000
shares;
|
|
(v)
|
shares
of Common Stock issued or issuable to banks, equipment lessors pursuant
to
a debt financing, equipment leasing or real property leasing transaction
approved by the Board of the
Corporation;
|
|
(vi)
|
shares
of Common Stock issued or issuable pursuant to an acquisition of
another
corporation or other business entity by the Corporation, or formation
of a
joint venture, in each instance expressly approved by the Board of
the
Corporation; and
|
|
(vii)
|
shares
of Common Stock issued to suppliers of goods or services pursuant
to
transactions approved by the Board of the
Corporation.
|
|
10.
|
No
Redemption. Except as expressly set forth herein, the
shares of the Series A Preferred Stock shall not be subject to redemption
by the Corporation.
|
|
11.
|
Fractional
Shares. The Series A Preferred Stock may not be issued
in fractions of a share.
|
[REMAINDER
OF PAGE INTENTIONALLY LEFT
BLANK]
A-7
IN
WITNESS WHEREOF, the undersigned has executed this Statement of Resolution
on
behalf of the Corporation as of this 12th day of October, 2007.
| INTERNET AMERICA, INC. | |||
| By: | /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. | ||
| Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. | |||
| Title: Chairman and Chief Executive Officer | |||
A-8
Exhibit
B
Form
Of Registration Rights
Agreement
This
Registration Rights Agreement (the “Agreement”) is made and
entered into as of October 17, 2007 (the “Effective Date”) among
Internet America, Inc., a Texas corporation (the “Company”), the parties set
forth on Exhibit
A attached hereto (each, an “Investor” and collectively,
the “Investors”).
Recitals:
A. The
Investors have purchased the Shares pursuant to that certain Purchase Agreement
(the “Purchase
Agreement”) dated October 17, 2007 by and between the Company and each of
the Investors.
B. The
Company and the Investors desire to set forth the registration rights to be
granted by the Company to the Investors. The execution of this Agreement is
a
condition to the closing under the Purchase Agreement.
Now,
Therefore, in consideration of the mutual promises, representations, warranties,
covenants, and conditions set forth herein, in the Stock Purchase Agreements,
or
otherwise, the parties mutually agree as follows:
Agreement:
1. Certain
Definitions. As
used
in this Agreement, the following terms shall have the following respective
meanings:
“Blackout
Period” means, with
respect to a registration, a period in each case commencing on the day
immediately after the Company notifies the Investors that they are required,
pursuant to Section 4(f), to suspend offers and sales of Registrable Securities
during which the Company, in the good faith judgment of its Board of Directors,
determines (because of the existence of, or in anticipation of, any acquisition,
financing activity, or other transaction involving the Company, or the
unavailability for reasons beyond the Company’s control of any required
financial statements, disclosure of information which is in its best interest
not to publicly disclose, or any other event or condition of similar
significance to the Company) that the registration and distribution of the
Registrable Securities to be covered by such registration statement, if any,
would be seriously detrimental to the Company and its shareholders and ending
on
the earlier of (1) the date upon which the material non-public information
commencing the Blackout Period is disclosed to the public or ceases to be
material and (2) such time as the Company notifies the selling Holders that
the
Company will no longer delay such filing of the Registration Statement and
recommences taking steps to make such Registration Statement effective or allows
sales pursuant to such Registration Statement to resume.
B-1
“Business
Day” means any day of
the year, other than a Saturday, Sunday, or other day on which the Commission
is
required or authorized to close.
“Closing
Date” means such time
as is mutually agreed between the Company and the Investors for the closing
of
the sale referred to in Recital A above.
“Commission”
means
the
Securities and Exchange Commission or any other federal agency at the time
administering the Securities Act.
“Common
Stock” means the common
stock, $0.01 par value, of the Company and any and all shares of capital stock
or other equity securities of: (i) the Company which are added to or exchanged
or substituted for the Common Stock by reason of the declaration of any stock
dividend or stock split, the issuance of any distribution or the
reclassification, readjustment, recapitalization or other such modification
of
the capital structure of the Company; and (ii) any other corporation, now or
hereafter organized under the laws of any state or other governmental authority,
with which the Company is merged, which results from any consolidation or
reorganization to which the Company is a party, or to which is sold all or
substantially all of the shares or assets of the Company, if immediately after
such merger, consolidation, reorganization or sale, the Company or the
stockholders of the Company own equity securities having in the aggregate more
than 50% of the total voting power of such other corporation.
“Exchange
Act” means the
Securities Exchange Act of 1934, as amended, and the rules and regulations
of
the Commission promulgated thereunder.
“Family
Member” means (a) with
respect to any individual, such individual’s spouse, any descendants (whether
natural or adopted), any trust all of the beneficial interests of which are
owned by any of such individuals or by any of such individuals together with
any
organization described in Section 501(c)(3) of the Internal Revenue Code of
1986, as amended, the estate of any such individual, and any corporation,
association, partnership or limited liability company all of the equity
interests of which are owned by those above described individuals, trusts or
organizations and (b) with respect to any trust, the owners of the beneficial
interests of such trust.
“Form
S-1” means such form
under the Securities Act as in effect on the date hereof.
“Holder”
means
each Investor or
any successor or Permitted Assignee of a Investor, who acquires rights in
accordance with this Agreement with respect to the Registrable Securities
directly or indirectly from an Investor, including from any Permitted
Assignee.
“Inspector”
means
any attorney,
accountant, or other agent retained by a Investor for the purposes provided
in
Section 4(j).
“Permitted
Assignee” means
(a) with respect to a partnership, its partners or former partners in
accordance with their partnership interests, (b) with respect to a
corporation, its shareholders in accordance with their interest in the
corporation, (c) with respect to a limited liability company, its members
or former members in accordance with their interest in the limited liability
company, (d) with respect to an individual party, any Family Member of such
party, (e) an entity that is controlled by, controls, or is under common control
with a transferor, or (f) a party to this Agreement.
B-2
The
terms “register,” “registered,”
and
“registration”
refers
to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
“Registrable
Securities” means
the Underlying Shares as defined in the Purchase Agreement.
“Registration
Statement” means
the registration statement required to be filed by the Company pursuant to
Section 3(a).
“Securities
Act” means the
Securities Act of 1933, as amended, or any similar federal statute promulgated
in replacement thereof, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
“Shares”
means
all shares of
Series A Preferred Stock of the Company, par value $0.01 per share, that are
issued and sold pursuant to the Purchase Agreement.
“SEC
Effective Date” means the
date the Registration Statement is declared effective by the
Commission.
“Underlying
Shares” means all
Underlying Shares (as defined in the Purchase Agreement) issuable upon
conversion of the Shares.
2. Term.
This
Agreement shall continue in full force and effect for a period of two (2) years
from the Effective Date, unless terminated sooner hereunder.
3. Registration.
(a) Piggyback
Registration. If the Company shall determine to register for sale
for cash any of its Common Stock, for its own account or for the account of
others (other than the Holders), other than (i) a registration relating solely
to employee benefit plans or securities issued or issuable to employees,
consultants (to the extent the securities owned or to be owned by such
consultants could be registered on Form S-8) or any of their Family Members
(including a registration on Form S-8), (ii) a registration relating solely
to a
Commission Rule 145 transaction, a registration on Form S-4 in connection
with a merger, acquisition, divestiture, reorganization, or similar event,
or
(iii) a registration in which the only Common Stock being registered is Common
Stock issuable upon conversion of debt securities that are also being
registered, the Company shall promptly give to the Holders written notice
thereof (and in no event shall such notice be given less than 20 calendar days
prior to the filing of such registration statement), and shall, subject to
Section 3(b), include in such registration (and any related qualification under
blue sky laws or other compliance) (a “Piggyback Registration”), all
of the Registrable Securities specified in a written request or requests, made
within 10 calendar days after receipt of such written notice from the Company,
by any Holder or Holders. However, the Company may, without the consent of
the
Holders, withdraw such registration statement prior to its becoming effective
if
the Company or such other shareholders have elected to abandon the proposal
to register the securities proposed to be registered thereby.
B-3
(b) Underwriting.
If a Piggyback Registration is for a registered public offering involving
an underwriting, the Company shall so advise the Holders in writing or as a
part
of the written notice given pursuant to Section 3(a). In such event the
right of any Holder to registration pursuant to Section 3(a) shall be
conditioned upon such Holder’s participation in such underwriting and the
inclusion of such Holder’s Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company and any other
shareholders of the Company distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Company or
selling shareholders, as applicable. Notwithstanding any other provision of
this
Section 3(b), if the underwriter or the Company determines that marketing
factors require a limitation of the number of shares to be underwritten, the
underwriter may exclude some or all Registrable Securities from such
registration and underwriting. The Company shall so advise all Holders (except
those Holders who failed to timely elect to distribute their Registrable
Securities through such underwriting or have indicated to the Company their
decision not to do so), and the number of shares of Registrable Securities
that
may be included in the registration and underwriting, if any, shall be allocated
among such Holders as follows:
(i) In
the event of a Piggyback Registration that is initiated by the Company, the
number of shares that may be included in the registration and underwriting
shall
be allocated (i) first, to the Company, (ii) second, subject to obligations
and
commitments existing as of the date hereof, to the Holders, who have requested
to sell in the registration, on a pro rata basis according to the number of
shares requested to be included, and (iii) third, to all other selling
shareholders on a pro rata basis according to the number of shares requested
to
be included; and
(ii) In
the event of a Piggyback Registration that is initiated by the exercise of
demand registration rights by a shareholder or shareholders of the Company
(other than the Holders), then the number of shares that may be included in
the
registration and underwriting shall be allocated (i) first, to such selling
shareholders who exercised such demand, (ii) second, subject to obligations
and
commitments existing as of the date hereof, to the Holders, who have requested
to sell in the registration, on a pro rata basis according to the number of
shares requested to be included, and (iii) third, to all other selling
shareholders on a pro rata basis according to the number of shares requested
to
be included.
No
Registrable Securities excluded from the underwriting by reason of the
underwriter’s marketing limitation shall be included in such
registration. If any Holder disapproves of the terms of any such
underwriting, such Holder may elect to withdraw therefrom by written notice
to
the Company and the underwriter. The Registrable Securities and/or
other securities so withdrawn from such underwriting shall also be withdrawn
from such registration; provided, however, that, if
by the withdrawal of such Registrable Securities a greater number of Registrable
Securities held by other Holders may be included in such registration (up to
the
maximum of any limitation imposed by the underwriters), then the Company shall
offer to all Holders who have included Registrable Securities in the
registration the right to include additional Registrable Securities pursuant
to
the terms and limitations set forth herein in the same proportion used above
in
determining the underwriter limitation.
B-4
(c) Right
to Terminate
Registration. The Company shall have the right to terminate or
withdraw any registration initiated by it under this Section 3 prior to the
effectiveness of such registration whether or not any Holder has elected to
include securities in such registration. The registration expenses of such
withdrawn registration shall be borne by the Company in accordance with
Section 6 hereof.
4. Registration
Procedures. In the case of each registration, qualification, or
compliance effected by the Company pursuant to Section 3 hereof, the Company
will keep each Holder including securities therein reasonably advised in writing
(which may include e-mail) as to the initiation of each registration,
qualification, and compliance and as to the completion thereof. With respect
to
any registration statement filed pursuant to Section 3, the Company will use
its
commercially reasonable best efforts to:
(a) prepare
and file with the Commission with respect to such Registrable Securities, a
registration statement on Form S-1, or any other form for which the Company
then
qualifies or which counsel for the Company shall deem appropriate, and which
form shall be available for the sale of the Registrable Securities in accordance
with the intended method(s) of distribution thereof, and use its commercially
reasonable efforts to cause such registration statement to become and remain
effective at least for a period ending with the first to occur of (i) the sale
of all Registrable Securities covered by the registration statement, (ii) the
availability under Rule 144 for the Holder to immediately, freely resell without
restriction all Registrable Securities covered by the registration statement,
(iii) 90 days after a Piggyback Registration is declared effective by the
Commission (in each case, the”Effectiveness Period”); provided
that no later than
two business days before filing with the Commission a registration statement
or
prospectus or any amendments or supplements thereto, the Company shall (i)
furnish to one special counsel (“Holders Counsel”) selected by
the Company for the benefit of the Holders (which Holders Counsel initially
shall be ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ L.L.P.,
Houston, Texas), copies of all such documents proposed to be filed (excluding
any exhibits other than applicable underwriting documents), in substantially
the
form proposed to be filed, which documents shall be subject to the review of
such Holders Counsel, and (ii) notify each Holder of Registrable Securities
covered by such registration statement of any stop order issued or threatened
by
the Commission and take all reasonable actions required to prevent the entry
of
such stop order or to remove it if entered;
(b) if
a registration statement is subject to review by the Commission, promptly
respond to all comments and diligently pursue resolution of any comments to
the
satisfaction of the Commission;
(c) prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may
be
necessary to keep such registration statement effective during the Effectiveness
Period
B-5
(but
in any event at least until expiration of the 90-day period referred to in
Section 4(3) of the Securities Act and Rule 174, or any successor thereto,
thereunder, if applicable), and comply with the provisions of the Securities
Act
with respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended method(s) of
disposition by the sellers thereof set forth in such registration
statement;
(d) furnish,
without charge, to each Holder of Registrable Securities covered by such
registration statement (i) a reasonable number of copies of such registration
statement (including any exhibits thereto other than exhibits incorporated
by
reference), each amendment and supplement thereto as such Holder may request,
(ii) such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and any other prospectus filed
under Rule 424 under the Securities Act) as such Holders may request, in
conformity with the requirements of the Securities Act, and (iii) such other
documents as such Holder may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such Holder, but only during
the Effectiveness Period;
(e) use
its commercially reasonable best efforts to register or qualify such Registrable
Securities under such other applicable securities or blue sky laws of such
jurisdictions as any Holder of Registrable Securities covered by such
registration statement reasonably requests as may be necessary for the
marketability of the Registrable Securities (such request to be made by the
time
the applicable registration statement is deemed effective by the Commission)
and
do any and all other acts and things which may be reasonably necessary or
advisable to enable such Holder to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such Holder; provided that the
Company shall not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
paragraph (e), (ii) subject itself to taxation in any such jurisdiction, or
(iii) consent to general service of process in any such
jurisdiction;
(f) as
promptly as practicable after becoming aware of such event, notify each Holder
of such Registrable Securities at any time when a prospectus relating thereto
is
required to be delivered under the Securities Act of the happening of any event
which comes to the Company’s attention if as a result of such event the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and the
Company shall promptly prepare and furnish to such Holder a supplement or
amendment to such prospectus (or prepare and file appropriate reports under
the
Exchange Act) so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not contain an untrue statement
of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, unless suspension
of
the use of such prospectus otherwise is authorized herein or in the event of
a
Blackout Period, in which case no supplement or amendment need be furnished
(or Exchange Act filing made) until the termination of such suspension or
Blackout Period;
(g) comply,
and continue to comply during the period that such registration statement is
effective under the Securities Act, in all material respects with the Securities
Act and the Exchange Act and with all applicable rules and regulations of the
Commission with respect to the disposition of all securities covered by such
registration
B-6
statement,
and make available to its security holders, as soon as reasonably practicable,
an earnings statement covering the period of at least 12 months, but not more
than 18 months, beginning with the first full calendar month after the SEC
Effective Date, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act.
(h) as
promptly as practicable after becoming aware of such event, notify each Holder
of Registrable Securities being offered or sold pursuant to the Registration
Statement of the issuance by the Commission of any stop order or other
suspension of effectiveness of the Registration Statement at the earliest
possible time;
(i) permit
the Holders of Registrable Securities being included in the Registration
Statement and their legal counsel, at such Holders’ sole cost and expense
(except as otherwise specifically provided in Section 6) to review and have
a
reasonable opportunity to comment on the Registration Statement and all
amendments and supplements thereto at least two Business Days prior to their
filing with the Commission;
(j) make
available for inspection by any Holder and any Inspector retained by such
Holder, at such Holder’s sole expense, all Records as shall be reasonably
necessary to enable such Holder to exercise its due diligence responsibility,
and cause the Company’s officers, directors, and employees to supply all
information which such Holder or any Inspector may reasonably request for
purposes of such due diligence; provided, however, that such
Holder shall hold in confidence and shall not make any disclosure of any record
or other information which the Company determines in good faith to be
confidential, and of which determination such Holder is so notified at the
time
such Holder receives such information, unless (i) the disclosure of such record
is necessary to avoid or correct a misstatement or omission in the Registration
Statement and a reasonable time prior to such disclosure the Holder shall have
informed the Company of the need to so correct such misstatement or omission
and
the Company shall have failed to correct such misstatement of omission, (ii)
the
release of such record is ordered pursuant to a subpoena or other order from
a
court or governmental body of competent jurisdiction or (iii) the information
in
such record has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company shall
not be required to disclose any confidential information in such records to
any
Inspector until and unless such Inspector shall have entered into a
confidentiality agreement with the Company with respect thereto, substantially
in the form of this Section 4(j), which agreement shall permit such Inspector
to
disclose records to the Holder who has retained such Inspector. Each
Holder agrees that it shall, upon learning that disclosure of such Records
is
sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to the Company and allow the Company,
at
the Company’s expense, to undertake appropriate action to prevent disclosure of,
or to obtain a protective order for, the records deemed confidential. The
Company shall hold in confidence and shall not make any disclosure of
information concerning a Holder provided to the Company pursuant to this
Agreement unless (i) disclosure of such information is necessary to comply
with
federal or state securities laws, (ii) disclosure of such information to the
Staff of the Division of Corporation Finance is necessary to respond to comments
raised by the Staff in its review of the Registration Statement, (iii)
disclosure of such information is necessary to avoid or correct a misstatement
or omission in the Registration Statement, (iv) release of such information
is
ordered pursuant to a subpoena or other order from a court or governmental
body
of competent jurisdiction, or (v) such
B-7
information
has been made generally available to the public other than by disclosure in
violation of this or any other agreement. The Company agrees that it
shall, upon learning that disclosure of such information concerning a Holder
is
sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to such Holder and allow such Holder,
at
such Holder’s expense, to undertake appropriate action to prevent disclosure of,
or to obtain a protective order for, such information;
(k) use
its best efforts to cause all the Registrable Securities covered by the
Registration Statement to be listed or quoted on the principal securities market
on which securities of the same class or series issued by the Company are then
listed or traded;
(l) provide
a transfer agent and registrar, which may be a single entity, for the
Registrable Securities at all times;
(m) cooperate
with the Holders of Registrable Securities being offered pursuant to the
Registration Statement to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable
such
certificates to be in such denominations or amounts as the Holders may
reasonably request and registered in such names as the Holders may request;
and
(n) take
all other reasonable actions necessary to expedite and facilitate disposition
by
the Holders of the Registrable Securities pursuant to the Registration
Statement.
5. Suspension
of Offers and
Sales. Each Holder of Registrable Securities agrees that, upon
receipt of any notice from the Company of the happening of any event of the
kind
described in Section 4(f) hereof or of the commencement of an Blackout Period,
such Holder shall discontinue disposition of Registrable Securities pursuant
to
the registration statement covering such Registrable Securities until such
Holder’s receipt of the copies of the supplemented or amended prospectus
contemplated by Section 4(f) hereof or notice of the end of the Blackout Period,
and, if so directed by the Company, such Holder shall deliver to the Company
(at
the Company’s expense) all copies (including, without limitation, any and all
drafts), other than permanent file copies, then in such Holder’s possession, of
the prospectus covering such Registrable Securities current at the time of
receipt of such notice.
6. Registration
Expenses. The Company shall pay all expenses in connection with any
registration, including, without limitation, all registration, filing, stock
exchange and NASD fees, printing expenses, all fees and expenses of complying
with securities or blue sky laws, the fees and disbursements of counsel for
the
Company and of its independent accountants, and the reasonable fees and
disbursements of a Holders Counsel; provided that, in any underwritten
registration, each party shall pay for its own underwriting discounts and
commissions and transfer taxes. Except as provided above in this Section 6
and Section 9, the Company shall not be responsible for the expenses of any
attorney or other advisor employed by a Holder of Registrable
Securities.
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7. Assignment
of Rights.
No Holder may assign its rights under this Agreement to any party without
the prior written consent of the Company; provided, however, that a
Holder may assign its rights under this Agreement without such restrictions
to a
Permitted Assignee as long as (a) such transfer or assignment is effected in
accordance with applicable securities laws; (b) such transferee or assignee
agrees in writing to become subject to the terms of this Agreement; and (c)
the
Company is given written notice by such Holder of such transfer or assignment,
stating the name and address of the transferee or assignee and identifying
the Registrable Securities with respect to which such rights are being
transferred or assigned.
8. Information
by
Holder. The Holder or Holders of Registrable Securities included in
any registration shall furnish to the Company such information regarding such
Holder or Holders and the distribution proposed by such Holder or Holders as
the
Company may request in writing.
9. Indemnification.
(a) In
the event of the offer and sale of Registrable Securities held by Holders under
the Securities Act, the Company shall, and hereby does, indemnify and hold
harmless, to the fullest extent permitted by law, each Holder, its directors,
officers, partners, each other person who participates as an underwriter in
the
offering or sale of such securities, and each other person, if any, who controls
or is under common control with such Holder or any such underwriter within
the
meaning of Section 15 of the Securities Act, against any losses, claims, damages
or liabilities, joint or several, and expenses to which the Holder or any such
director, officer, partner or underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such shares were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances in which they were made not misleading, and the Company shall
reimburse the Holder, and each such director, officer, partner, underwriter
and
controlling person for any legal or any other expenses reasonably incurred
by
them in connection with investigating, defending or settling any such loss,
claim, damage, liability, action or proceeding; provided that the foregoing
shall not apply to, and the Company shall not be liable, in any such case (i)
to
the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement in or omission or alleged omission
from such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and
in
conformity with written information furnished to the Company through an
instrument duly executed by or on behalf of such Holder specifically stating
that it is for use in the preparation thereof, (ii) provided that the Company
has complied with its obligations hereunder to furnish such Holder with copies
of the applicable prospectus, if the person asserting any such loss, claim,
damage, liability (or action or proceeding in respect thereof) who
purchased the Registrable Securities that are the subject thereof did not
receive a copy of an amended preliminary prospectus or the final prospectus
(or
the final prospectus as amended or supplemented) at
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or
prior to the written confirmation of the sale of such Registrable Securities
to
such person because of the failure of such Holder or underwriter to so provide
such amended preliminary or final prospectus and the untrue statement or alleged
untrue statement or omission or alleged omission of a material fact made in
such
preliminary prospectus was corrected in the amended preliminary or final
prospectus (or the final prospectus as amended or supplemented), or (iii)
provided that the plan of distribution mechanics described in the applicable
prospectus are, in form and substance, reasonable and customary for transactions
of this type, to the extent that the Holders failed to comply with the terms
of
such plan of distribution mechanics. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Holders, or any such director, officer, partner, underwriter or controlling
person and shall survive the transfer of such shares by the Holder.
(b) As
a condition to including any Registrable Securities to be offered by a Holder
in
any registration statement filed pursuant to this Agreement, each such Holder
agrees to be bound by the terms of this Section 9 and to indemnify and hold
harmless, to the fullest extent permitted by law, the Company, its directors
and
officers, and each other person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act, legal counsel and accountants
for
the Company, any underwriter, any other Holder selling securities in such
registration statement and any controlling person within the meaning of the
Securities Act of any such underwriter or other Holder, against any losses,
claims, damages or liabilities, joint or several, to which the Company or any
such director or officer or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon (i) an untrue statement or
alleged untrue statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information about such Holder
as a
Holder of the Company furnished to the Company, (ii) provided that the Company
has complied with its obligations hereunder to furnish such Holder with copies
of the applicable prospectus, if the person asserting any such loss, claim,
damage, liability (or action or proceeding in respect thereof) who purchased
the
Registrable Securities that are the subject thereof did not receive a copy
of an
amended preliminary prospectus or the final prospectus (or the final prospectus
as amended or supplemented) at or prior to the written confirmation of the
sale
of such Registrable Securities to such person because of the failure of such
Holder or underwriter to so provide such amended preliminary or final prospectus
and the untrue statement or alleged untrue statement or omission or alleged
omission of a material fact made in such preliminary prospectus was corrected
in
the amended preliminary or final prospectus (or the final prospectus as amended
or supplemented), or (iii) provided that the plan of distribution mechanics
described in the applicable prospectus are, in form and substance, reasonable
and customary for transactions of this type, to the extent that the Holders
failed to comply with the terms of such plan of distribution mechanics. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Holders, or any such director, officer, partner,
underwriter or controlling person and shall survive the transfer of such shares
by the Holder, and such Holder shall reimburse the Company, and each such
director, officer, legal counsel and accountants, underwriter, other
Holder, and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating, defending, or settling and
such loss, claim, damage, liability,
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action,
or proceeding; provided,
however, that such indemnity agreement found in this Section 9(b) shall
in no event exceed the gross proceeds from the offering received by such Holder.
Such indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Company or any such director, officer
or controlling person and shall survive the transfer by any Holder of such
shares.
(c) Promptly
after receipt by an indemnified party of notice of the commencement of any
action or proceeding involving a claim referred to in Section 9(a) or (b) hereof
(including any governmental action), such indemnified party shall, if a claim
in
respect thereof is to be made against an indemnifying party, give written notice
to the indemnifying party of the commencement of such action; provided that
the
failure of any indemnified party to give notice as provided herein shall
not relieve the indemnifying party of its obligations under Section 9(a) or
(b)
hereof, except to the extent that the indemnifying party is actually prejudiced
by such failure to give notice. In case any such action is brought against
an
indemnified party, unless in the reasonable judgment of counsel to such
indemnified party a conflict of interest between such indemnified and
indemnifying parties may exist or the indemnified party may have
defenses not available to the indemnifying party in respect of such claim,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party
and, after notice from the indemnifying party to such indemnified party of
its
election so to assume the defense thereof, the indemnifying party shall not
be
liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof, unless in such
indemnified party’s reasonable judgment a conflict of interest between such
indemnified and indemnifying parties arises in respect of such claim after
the
assumption of the defenses thereof or the indemnifying party fails to defend
such claim in a diligent manner, other than reasonable costs of investigation.
Neither an indemnified nor an indemnifying party shall be liable for any
settlement of any action or proceeding effected without its consent. No
indemnifying party shall, without the consent of the indemnified party, consent
to entry of any judgment or enter into any settlement, which does not include
as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim
or
litigation. Notwithstanding anything to the contrary set forth herein, and
without limiting any of the rights set forth above, in any event any party
shall
have the right to retain, at its own expense, counsel with respect to the
defense of a claim.
(d) In
the event that an indemnifying party does or is not permitted to assume the
defense of an action pursuant to Section 9(c) or in the case of the expense
reimbursement obligation set forth in Section 9(a) and (b), the indemnification
required by Section 9(a) and (b) hereof shall be made by periodic payments
of
the amount thereof during the course of the investigation or defense, as and
when bills received or expenses, losses, damages, or liabilities are
incurred.
(e) If
the indemnification provided for in this Section 9 is held by a court of
competent jurisdiction to be unavailable to an indemnified party with respect
to
any loss, liability, claim, damage or expense referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall (i) contribute to the amount paid or payable by such indemnified party
as
a result of such loss, liability, claim, damage or expense as is appropriate
to
reflect the proportionate relative fault of the indemnifying party on the one
hand
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and
the indemnified party on the other (determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
omission relates to information supplied by the indemnifying party or the
indemnified party and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission), or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law or provides a lesser sum to the indemnified party
than the amount hereinafter calculated, not only the proportionate relative
fault of the indemnifying party and the indemnified party, but also the relative
benefits received by the indemnifying party on the one hand and the indemnified
party on the other, as well as any other relevant equitable considerations.
No
indemnified party guilty of fraudulent misrepresentation (within the meaning
of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any indemnifying party who was not guilty of such fraudulent
misrepresentation.
(f) Other
Indemnification. Indemnification similar to that specified in the
preceding subsections of this Section 9 (with appropriate modifications) shall
be given by the Company and each Holder of Registrable Securities with respect
to any required registration or other qualification of securities under any
federal or state law or regulation or governmental authority other than the
Securities Act.
10. Rule
144 Reporting.
With a view to making available to the Holders the benefits of certain
rules and regulations of the Commission which may permit the sale of the
Registrable Securities to the public without registration, the Company agrees
to
use its reasonable efforts to:
(a) Make
and keep public information available, as those terms are understood and defined
in Rule 144 or any similar or analogous rule promulgated under the
Securities Act, at all times after the effective date of the first registration
filed by the Company for an offering of its securities to the general
public;
(b) File
with the Commission, in a timely manner, all reports and other documents
required of the Company under the Exchange Act; and
(c) So
long as a Holder owns any Registrable Securities, furnish to such Holder
forthwith upon request: a written statement by the Company as to its compliance
with the reporting requirements of said Rule 144 of the Securities Act, and
of
the Exchange Act (at any time after it has become subject to such reporting
requirements); a copy of the most recent annual or quarterly report of the
Company; and such other reports and documents as a Holder may reasonably request
in availing itself of any rule or regulation of the Commission allowing it
to
sell any such securities without registration.
11. Miscellaneous.
(a) Governing
Law.
This Agreement shall be governed by and construed in accordance with
the
laws of the State of Texas and the United States of America, both substantive
and remedial. Any judicial proceeding brought against either of the parties
to
this agreement or any dispute arising out of this Agreement or any matter
related hereto shall be brought in the courts of the State of Texas, ▇▇▇▇▇▇
County, or in the United States District Court for the
▇-▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ and, by its execution and delivery of this agreement,
each party to this Agreement accepts the jurisdiction of such courts. The
foregoing consent to jurisdiction shall not be deemed to confer rights on any
person other than the parties to this Agreement.
(b) Successors
and
Assigns. Except as otherwise provided herein, the provisions hereof
shall inure to the benefit of, and be binding upon, the successors, Permitted
Assigns, executors and administrators of the parties hereto. In the event
the Company merges with, or is otherwise acquired by, a direct or indirect
subsidiary of a publicly traded company, the Company shall condition the merger
or acquisition on the assumption by such parent company of the Company’s
obligations under this Agreement.
(c) Entire
Agreement.
This Agreement constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereof.
(d) Notices,
etc. All
notices or other communications which are required or permitted under this
Agreement shall be in writing and sufficient if delivered by hand, by facsimile
transmission, by registered or certified mail, postage pre-paid, by electronic
mail, or by courier or overnight carrier, to the persons at the addresses set
forth below (or at such other address as may be provided hereunder), and shall
be deemed to have been delivered as of the date so delivered:
|
|
If
to the Company:
|
Internet
America, Inc.
▇▇▇▇▇
▇. ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
|
|
|
With
a copy to:
|
▇▇▇▇▇
▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇
▇. ▇▇▇▇, ▇▇.
Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
|
|
|
If
to an Investor:
|
To
the address set forth immediately below such Investor’s name on the
signature pages to the Subscription Agreement delivered by such Investor
to the Company on or prior to the date
hereof.
|
|
|
With
a copy to:
|
Fulbright
& ▇▇▇▇▇▇▇▇ L.L.P.
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
|
or
at such other address as any party shall have furnished to the other parties
in
writing.
(e) Delays
or Omissions.
No delay or omission to exercise any right, power or remedy accruing
to
any Holder of any Registrable Securities, upon any breach or default of the
Company under this Agreement, shall impair any such right, power or remedy
of
such Holder nor shall it be construed
B-13
to
be a waiver of any such breach or default, or an acquiescence therein, or of
or
in any similar breach or default thereunder occurring; nor shall any waiver
of
any single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of any Holder of any breach or
default under this Agreement, or any waiver on the part of any Holder of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, or by law or otherwise afforded to any
holder, shall be cumulative and not alternative.
(f) Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one
instrument.
(g) Severability.
In the case any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
(h) Amendments.
The
provisions of this Agreement may be amended at any time and from time to time,
and particular provisions of this Agreement may be waived, with and only with
an
agreement or consent in writing signed by the Company and by the holders of
a
majority of the number of shares of Registrable Securities outstanding as of
the
date of such amendment or waiver. The Investors acknowledge that by the
operation of this Section 10(h), the holders of a majority of the outstanding
Registrable Securities may have the right and power to diminish or eliminate
all
rights of the Investors under this Agreement.
[Signature
Pages
Follow]
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This
Registration Rights Agreement is hereby executed as of the date first above
written.
| COMPANY: | |||
| Internet America, Inc. | |||
| By: | /s/ ▇▇▇▇▇▇▇ ▇ . ▇▇▇▇▇ | ||
| Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ | |||
| Title: Chairman and Chief Executive Officer | |||
[Investor
Signature Pages
Follow]
| INVESTOR: | ||
| Name | ||
| Signature | ||
EXHIBIT
A TO THE REGISTRATION
RIGHTS
AGREEMENT
INTENTIONALLY
OMITTED.