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EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is entered into
as of September 25, 1996, between First Computer Services Corporation, a
Delaware corporation (the "Buyer"), and Internet America, Inc., a Texas
corporation (the "Company").
ARTICLE 1
PURCHASE AND SALE
1.1 Agreement to Purchase and Sell. Upon the basis of the
representations and warranties, for the consideration, and subject to the terms
and conditions set forth in this Agreement, the Company agrees to sell to the
Buyer, and the Buyer agrees to purchase from the Company (a) the Promissory
Note in the form of Exhibit A attached hereto (the "Senior Note") for
$1,767,713, and (b) 232,287 shares (the "Shares" and, together with the
Senior Note, the "Securities" ) of the Company's common stock, par value $.01
per share ("Common Stock"), for $232,287.
1.2 Closing. The closing of the transactions contemplated hereby
(the "Closing") shall take place at the offices of Xxxxx & XxXxxxxx, at 10:00
a.m., local time, on September 25, 1996, or at such other time and place and/or
on such other date as the Buyer and the Company may agree. The date on which
the Closing occurs is hereinafter referred to as the "Closing Date." At the
Closing, the Company shall deliver to the Buyer the Securities and the Buyer
shall deliver to the Company by wire transfer an amount equal to $2,000,000.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Buyer as follows:
2.1 Organization and Standing. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Texas and has full corporate power and authority to conduct its business as
presently conducted and as proposed to be conducted by it and to enter into and
perform and to carry out the transactions contemplated by this Agreement and
the agreements and documents executed and delivered herewith. The Company is
duly qualified to do business as a foreign corporation and is in good standing
in every jurisdiction in which the failure to so qualify would have a material
adverse effect on the operations or financial condition of the Company. The
Company has furnished to the Buyer true and complete copies of its Articles of
Incorporation and Bylaws, each as amended to date and presently in effect.
2.2 Capitalization. The authorized capital stock of the Company
consists of 15,000,000 shares of Common Stock and 5,000,000 shares of the
Company's preferred stock, $.01 par value per share ("Preferred Stock"), of
which 400,000 shares have been designated as Series A Preferred Stock (herein
so called) and 300,000 shares have been designated as Series B Preferred Stock
(herein so
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called). 1,333,865 shares of Common Stock, 379,672 shares of Series A
Preferred Stock and 73,667 shares of Series B Preferred Stock are issued and
outstanding, and 501,340 shares of Common Stock and no shares of Preferred
Stock are reserved for issuance upon the exercise of outstanding options and
warrants. All of the issued and outstanding shares of the Company's capital
stock have been duly authorized and validly issued and are fully paid and
nonassessable. Except as set forth in Section 2.2 of the schedule attached
hereto (the "Schedule"), (i) no subscription, warrant, option, convertible
security, or other right (contingent or otherwise) to purchase or acquire any
shares of capital stock of the Company is authorized or outstanding, (ii) the
Company has not committed to issue any subscription, warrant, option,
convertible security, or other such right or to issue or distribute to holders
of any shares of its capital stock any evidences of indebtedness or assets of
the Company, and (iii) the Company has no obligation (contingent or otherwise)
to purchase, redeem, or otherwise acquire any shares of its capital stock or
any interest therein or to pay any dividend or make any other distribution in
respect thereof. Except as provided in this Agreement, no person or entity is
entitled to (i) any preemptive or similar right with respect to the issuance of
any capital stock of the Company or (ii) any rights with respect to the
registration of any capital stock of the Company under the Securities Act of
1933, as amended (the "Securities Act"). All of the issued and outstanding
shares of capital stock of the Company have been offered, issued, and sold by
the Company in compliance with applicable Federal and state securities laws.
To the best of the Company's knowledge, no stockholder of the Company has
granted options or other rights to purchase any shares of capital stock of the
Company from such stockholder. The Fully Diluted Number of shares of Common
Stock outstanding is 2,288,544. As used herein, the "Fully Diluted Number"
means that number of shares of Common Stock that would be outstanding assuming
all convertible securities, warrants, options, and other rights to purchase
Common Stock that are outstanding at the time of determination of the Fully
Diluted Number had been converted and/or exercised as of such time.
2.3 Subsidiaries. The Company has no subsidiaries and does not
own or control, directly or indirectly, any interest in any other corporation,
association, or business entity.
2.4 Stockholder List and Agreements. Set forth in Section 2.4 of
the Schedule is a true and complete list of the stockholders of the Company,
showing the number of shares of Common Stock or other securities of the Company
held by each stockholder as of the date hereof and the consideration paid to
the Company for such shares. Except as set forth in Section 2.4 of the
Schedule, there are no agreements, written or oral, between the Company and any
holder of its capital stock, or, to the best knowledge of the Company, among
any holders of its capital stock, relating to the acquisition, disposition, or
voting of the capital stock of the Company.
2.5 Issuance of Securities. The issuance, sale, and delivery of
the Securities in accordance with this Agreement have been duly authorized by
all necessary corporate action on the part of the Company. Upon consummation
of the transactions contemplated hereby, the Securities will be validly issued,
fully paid, and nonassessable.
2.6 Authority for Agreement. The execution, delivery, and
performance by the Company of this Agreement and the agreements and documents
to be executed and delivered in accordance herewith have been duly authorized
by all necessary corporate action. This Agreement has been, and upon
consummation of the transactions contemplated hereby, the agreements and
documents to be
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executed and delivered in accordance herewith will have been, duly executed and
delivered by the Company. This Agreement constitutes, and upon consummation of
the transactions contemplated hereby, the agreements and documents to be
executed and delivered in accordance herewith will constitute, valid and
binding obligations of the Company enforceable in accordance with their
respective terms. Except as set forth in Section 2.6 of the Schedule, the
execution and performance of the transactions contemplated by this Agreement
and the agreements and documents to be executed and delivered in accordance
herewith and the compliance with their provisions by the Company will not
violate any provision of law and will not conflict with or result in any breach
of any of the terms, conditions, or provisions of, or constitute a default
under, its Articles of Incorporation or Bylaws, any indenture, lease,
agreement, or other instrument to which the Company is a party or by which it
or any of its properties is bound, or any decree, judgment, order, statute,
rule, or regulation applicable to the Company.
2.7 Governmental Consents. No consent, approval, order, or
authorization of, or registration, qualification, designation, declaration, or
filing with, any governmental authority is required on the part of the Company
in connection with (i) the execution and delivery of this Agreement and the
agreements and documents to be executed and delivered in accordance herewith,
(ii) the offer, issue, sale, and delivery of the Securities, or (iii) the other
transactions to be consummated in accordance with this Agreement, except such
filings as shall have been made prior to and shall be effective on and as of
the date first above written. The offer and sale of the Securities to the
Buyer is, and shall be, in compliance with applicable Federal and state
securities laws.
2.8 Litigation. There is no action, suit, proceeding, or
investigation pending, or, to the best of the Company's knowledge, any basis
therefor or threat thereof, which questions the validity of this Agreement or
the agreements and documents to be executed and delivered in accordance
herewith or the right of the Company to enter into this Agreement or the
agreements and documents to be executed and delivered in accordance herewith,
or which might result, either individually or in the aggregate, in any material
adverse change in the assets, condition (financial or otherwise), business, or
prospects of the Company, nor is there any litigation pending, or, to the best
of the Company's knowledge, any basis therefor or threat thereof, against the
Company by reason of the past employment relationships of any of the Company's
employees, the proposed activities of the Company, or negotiations by the
Company with possible investors in the Company.
2.9 Financial Statements. The Company has furnished to the Buyer
a complete and correct copy of the unaudited balance sheet of the Company as at
June 30, 1996, the related unaudited statements of operations and changes in
financial position of the Company for the year ended June 30, 1996, the
unaudited balance sheet of the Company as at July 31, 1996 (the "July Balance
Sheet"), and the unaudited statements of operations and changes in financial
position of the Company for the one month ended July 31, 1996 (collectively,
the "Financial Statements"). Except as set forth in Section 2.9 of the
Schedule, the Financial Statements are complete and correct in all material
respects, are in accordance with the books and records of the Company, present
fairly the financial condition and results of operations of the Company as at
the dates and for the periods indicated, and have been prepared in accordance
with generally accepted accounting principles consistently applied ("GAAP")
except as otherwise specifically set forth therein.
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2.10 Absence of Liabilities. Except as disclosed in Section 2.10
of the Schedule, the Company did not have, at July 31, 1996, any liabilities of
any type which in the aggregate exceeded $5,000, whether absolute or
contingent, which were not fully reflected on the July Balance Sheet, and,
since July 31, 1996, the Company has not incurred or otherwise become subject
to any such liabilities or obligations except those incurred in the ordinary
course of business which are not material in amount.
2.11 Taxes. The amount shown on the July Balance Sheet as
provision for taxes is sufficient in all material respects for payment by the
Company of all accrued and unpaid Federal, state, county, local, and foreign
taxes owed by the Company for the period then ended and all prior periods. The
Company has filed or has obtained presently effective extensions with respect
to all Federal, state, county, local, and foreign tax returns which are
required to be filed by it and such returns are true and correct. Except as
disclosed in Section 2.11 of the Schedule, all taxes shown on such returns to
be due have been timely paid with exceptions not material to the Company.
Federal income tax returns of the Company have not been audited by the Internal
Revenue Service, and no controversy with respect to taxes of any type is
pending or, to the knowledge of the Company, threatened.
2.12 Property and Assets. The Company has good title to all of its
material properties and assets, including all properties and assets reflected
in the July Balance Sheet, except those disposed of since the date thereof in
the ordinary course of business, and none of such properties or assets are
subject to any mortgage, pledge, lien, security interest, lease, charge, or
encumbrance other than those the material terms of which are described in
Section 2.12 of the Schedule.
2.13 Patents and Trademarks. The Company owns or possesses all of
the patents, trademarks, service marks, trade names, copyrights, proprietary
rights, trade secrets, and licenses or rights to the foregoing necessary for
the conduct of the Company's business as conducted and as proposed to be
conducted. The business conducted or proposed by the Company does not and will
not cause the Company to infringe or violate any of the patents, trademarks,
service marks, trade names, copyrights, licenses, trade secrets, or other
proprietary rights of any other person or entity. The Company is not aware
that any employee of the Company is obligated under any contract (including any
license, covenant, or commitment of any nature), or subject to any judgment,
decree, or order of any court or administrative agency, that would interfere
with the use of such employee's best efforts to promote the interests of the
Company or would conflict with the Company's business as proposed to be
conducted. To the best of the Company's knowledge, no prior employer of any
employee of the Company's has any right to or interest in any inventions,
improvements, discoveries, or other information ever assigned to the Company by
such employee.
2.14 Insurance. Section 2.14 of the Schedule sets forth a
description of all insurance policies maintained by or on behalf of the
Company.
2.15 Material Contracts and Obligations. Section 2.15 of the
Schedule sets forth a list of all material agreements of any nature to which
the Company is a party or by which it is bound, including without limitation
(a) each agreement which requires future expenditures by the Company in excess
of $25,000, (b) all employment and consulting agreements, employee benefit,
bonus,
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pension, profit-sharing, stock option, stock purchase, and similar plans and
arrangements, and distributor and sales representative agreements, and (c) any
agreement to which any stockholder, officer, or director of the Company, or any
Affiliate (as such term is defined in Rule 144 promulgated under the Securities
Act) of such persons, is presently a party, including without limitation any
agreement or other arrangement providing for the furnishing of services by,
rental of real or personal property from, or otherwise requiring payments to,
any such person or entity. All of such agreements and contracts are valid,
binding, and in full force and effect.
2.16 Compliance. The Company has complied in all material respects
with, is in compliance in all material respects with, and has not received
notice from any third party of any violation of the laws, regulations, and
orders applicable to its present and proposed business, including without
limitation, any federal, state, local, and foreign laws, regulations, codes,
plans, orders, decrees, judgments, injunctions, notices, or demand letters
issued, promulgated, or entered thereunder by any governmental authority or
subdivision thereof relating to pollution or protection of the environment,
including, without limitation, laws, regulations, and orders relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, chemicals, toxic or hazardous substances, wastes, or by-products
(collectively, the "Contaminants") into the environment or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of Contaminants, or otherwise relating to
worker health and safety or public health and safety; and has all material
permits and licenses required thereby. There is no term or provision of any
mortgage, indenture, contract, agreement, or instrument to which the Company is
a party or by which it is bound, or of any provision of any state or Federal
judgment, decree, order, statute, rule, or regulation applicable to or binding
upon the Company, or any conditions currently existing or likely to exist,
attributable to the operations of the Company which materially adversely affect
or, so far as the Company may now foresee, in the future is reasonably likely
to materially adversely affect, the business, prospects, condition, affairs, or
operations of the Company or any of its properties or assets. To the best of
the knowledge of the Company, no employee of the Company is in violation of any
term of any employment contract, patent, or other proprietary information
disclosure agreement or any other contract or agreement relating to the
employment of such employee by the Company.
2.17 Absence of Changes. Since July 31, 1996 and except as
expressly listed on the Schedule, there has not been:
(a) any change in the assets, liabilities, financial
condition, or operations of the Company from that reflected in the
Financial Statements, except changes in the ordinary course of
business that have not been, either individually or in the aggregate,
materially adverse to the Company;
(b) any material change, either individually or in the
aggregate, in the contingent obligations of the Company by way of
guaranty, endorsement, indemnity, warranty, or otherwise;
(c) any damage, destruction, or loss, whether or not
covered by insurance, materially and adversely affecting the
properties or business of the Company;
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(d) any waiver or compromise by the Company of a valuable
right or of a material debt owed to it;
(e) any loans made by the Company to its employees,
officers, or directors other than travel advances made in the ordinary
course of business;
(f) any extraordinary increases in the compensation of
any of the Company's employees, officers, or directors;
(g) any declaration or payment of any dividend or other
distribution of the assets of the Company;
(h) any issuance or sale by the Company of any shares of
its capital stock (except for the issuance or sale by the Company of
any of its capital stock pursuant to options or warrants outstanding
as of July 31, 1996 and described in Section 2.2 of the Schedule);
(i) any other event or condition of any character that
has materially and adversely affected the Company's business or
prospects; or
(j) any agreement or commitment by the Company to do any
of the things described in this Section 2.17.
2.18 ERISA. The Company has no employee benefit plan subject to
the Employee Retirement Income Security Act of 1974.
2.19 Brokers. No broker's, finder's, or similar fees (or expenses
of any broker or finder) have been, are, or will be payable by the Company in
connection with the transactions contemplated by this Agreement.
2.20 Disclosures. Neither this Agreement, nor any of the
agreements and documents to be executed and delivered in accordance herewith,
nor any exhibit hereto, nor any report, certificate, or instrument furnished or
to be furnished to the Buyer in connection with the transactions contemplated
by this Agreement, when read together, contain or will contain any material
misstatement of fact or omit or will omit to state a material fact necessary to
make the statements contained herein or therein not misleading. The Company
knows of no information or fact which has or would have a material adverse
effect on the financial condition, business, or prospects of the Company which
has not been disclosed to the Buyer. Each projection furnished to Buyer or its
agents was prepared with due care based on reasonable assumptions and
represents the Company's best estimate of future results based on information
available as of the date of the projections.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Company as follows:
3.1 Investment.
(a) The Buyer is an accredited investor as defined in
Rule 501(a)(3) of Regulation D under the Securities Act and, except as
contemplated hereby, the Buyer will acquire the Securities for
investment and not with a view to any distribution thereof in
violation of the Securities Act.
(b) The Buyer understands that it may have to bear the
economic risk of its investment in the Securities for an indefinite
period of time because, among other reasons, the Securities have not
been registered under the Securities Act or any state securities laws
and therefore cannot be disposed of unless such Securities are
subsequently registered or exemptions from such registration are
available.
(c) The Buyer understands that each instrument
representing the Securities will bear a legend substantially in the
following form:
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("THE
SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED, SOLD, PLEDGED, OR OTHERWISE TRANSFERRED OR DISPOSED
OF UNLESS AND UNTIL SUCH SECURITIES ARE REGISTERED UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
(d) The Buyer is capable of evaluating the merits and
risks of an investment in the Company and is able to bear the economic
risk of loss of its entire investment in the Company.
3.2 Authority. The execution, delivery, and performance by the
Buyer of this Agreement and the agreements and documents to be executed and
delivered by it in accordance herewith have been duly authorized by all
necessary corporate action and have been or, at the Closing, will have been,
duly executed and delivered by the Buyer. This Agreement constitutes, and the
agreements and documents to be executed and delivered by the Buyer in
accordance herewith shall constitute, valid and binding obligations of the
Buyer enforceable in accordance with their respective terms.
3.3 No Brokers. The Buyer does not and shall not owe any broker
or other person or entity any broker's or finder's fees as a result of its
execution, delivery, or consummation of this Agreement or the other agreements
and documents executed in connection herewith.
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ARTICLE 4
COVENANTS
From the date hereof to the Closing, the Company covenants and agrees
that:
4.1 Inspection. The Company shall give to the Buyer and its
officers, attorneys, accountants, and representatives free, full, and complete
access during reasonable business hours to all books, records, tax returns,
files, correspondence, personnel, facilities, and properties of the Company;
provide the Buyer and its officers, attorneys, accountants, and representatives
all information and material pertaining to the business and affairs of the
Company as the Buyer may deem necessary or appropriate; and use its best
efforts to afford Buyer and its officers, attorneys, accountants, and
representatives the opportunity to meet with the customers and suppliers of the
Company to discuss the business, condition (financial or otherwise),
operations, and prospects of the Company. Any investigation by the Buyer or
its officers, attorneys, accountants, or representatives shall not in any
manner affect the representations and warranties of the Company contained
herein.
4.2 Compliance. The Company shall not take or fail to take any
action which action or failure to take such action shall cause the
representations and warranties made by the Company herein to be untrue or
incorrect as of the Closing.
4.3 Satisfaction of All Conditions Precedent. The Company shall
use its best efforts to cause all conditions precedent to the obligations of
the Buyer hereunder to be satisfied by the Closing.
4.4 Notice of Developments. The Company shall notify the Buyer of
any material problems or developments with respect to the business, operations,
or prospects of the Company.
4.5 Notice of Breach. The Company shall, immediately upon
becoming aware thereof, give detailed written notice to the Buyer of the
occurrence of, or the impending or threatened occurrence of, any event which
would cause or constitute a breach, or would have caused or constituted a
breach had such event occurred or been known to the Company prior to the date
of this Agreement, of any of the Company's covenants, agreements,
representations, or warranties contained or referred to herein or in any
document delivered in accordance with the terms hereof.
4.6 Notice of Litigation. Immediately upon becoming aware
thereof, the Company shall notify the Buyer of (a) any suit, action, or
proceeding (including, without limitation, any tax claim, assessment, notice,
or audit or proceeding involving a labor dispute or grievance or union
recognition or any suit, action, or proceeding alleging the violation of any
environmental law, regulation, or code) to which the Company becomes a party or
which is threatened against the Company, (b) any order or decree or any
complaint praying for an order or decree restraining or enjoining the
consummation of this Agreement or the agreements and documents to be executed
and delivered in accordance herewith, or (c) any notice from any tribunal of
its intention to institute an investigation into, or to institute a suit or
proceeding to restrain or enjoin the consummation of, this Agreement or the
agreements and documents to be executed and delivered in accordance herewith or
to nullify or render ineffective this Agreement or the agreements and documents
to be executed and delivered in accordance herewith.
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ARTICLE 5
CONDITIONS TO CLOSING
5.1 Conditions to Obligations of Buyer. The obligations of the
Buyer to consummate the transactions contemplated hereby are subject to the
fulfillment of each of the following conditions:
(a) The representations and warranties of the Company
contained in this Agreement shall be true and correct at and as of the
Closing with the same effect as though such representations and
warranties had been made on and as of the Closing Date; the Company
shall have performed and complied with all agreements required by this
Agreement to be performed or complied with by the Company at or prior
to the Closing; and the Buyer shall have received a certificate, dated
as of the Closing Date, signed by the Company to the foregoing effect.
(b) No action or proceeding shall have been instituted or
threatened for the purpose or with the possible effect of enjoining or
preventing the consummation of this Agreement or seeking damages on
account thereof.
(c) The Buyer shall have received from the Company a
certificate of the Secretary of the Company certifying as to (i) the
Articles of Incorporation and Bylaws of the Company, (ii) resolutions
of the Company's Board of Directors authorizing the execution,
delivery, and performance of this Agreement and the agreements and
documents to be executed and delivered in accordance herewith, (iii)
the incumbency of the directors and officers of the Company, and (iv)
the signatures of the officers who execute documents on behalf of the
Company in connection herewith.
(d) The Buyer shall have received certificates and
instruments representing the Securities, each registered in the name
of the Buyer.
(e) Each of the Xxxxxxx Family Trust, the Xxxx X. Xxxxx
Trust, and Xxx Xxxxxx (the "Original Stockholders") shall have
executed and delivered to the Buyer a Pledge and Security Agreement
(herein so called) substantially in the form of Exhibit C attached
hereto and delivered to the Buyer the certificates evidencing the
shares of capital stock of the Company owned by such Original
Stockholders, together with appropriate stock powers and financing
statements, and Xxxxxx Xxxxxxx and Xxx Xxxxxx shall have terminated
that certain Transfer of Voting Rights Agreement, which termination
shall be irrevocable and effective upon the occurrence of an Event of
Default (as defined under the Pledge and Security Agreement to be
executed by Xxx Xxxxxx).
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(f) Pursuant to the Pledge and Security Agreements, the
Original Stockholders will have pledged that number of shares of
Common Stock that equals at least 40.87% of the Fully Diluted Number
of shares of Common Stock.
(g) The Company shall have executed and delivered to the
Buyer the Security Agreement in the form of Exhibit B attached hereto.
(h) All consents and approvals required in connection
with the execution, delivery, and performance of this Agreement and
the agreements and documents to be executed and delivered in
accordance herewith shall have been obtained, and the Buyer shall have
received a certificate, dated as of the Closing Date, signed by the
Company to the foregoing effect.
(i) X. X. Capital Partners, L.P. shall have executed and
delivered to the Buyer the Subordination and Intercreditor Agreement
in the form of Exhibit D attached hereto.
(j) Xxxxxxx X. Xxxx, his spouse, the Xxxxxxx Xxxx
Retirement Trust, B&G Partnership, Ltd. and BCG Partnership, Ltd.
shall have executed and delivered to the Buyer a Voting Agreement
(herein so called) in the form of Exhibit F attached hereto.
(k) All certificates, instruments, and other documents
required to be executed or delivered by or on behalf of the Company
and the Original Stockholders under the provisions of this Agreement,
and all other actions and proceedings required to be taken by or on
behalf of the Company and the Original Stockholders in furtherance of
the transactions contemplated hereby, shall be reasonably satisfactory
in form and substance to counsel for the Company.
The decision of the Buyer to consummate the transactions contemplated hereby
without the satisfaction of any of the preceding conditions shall not
constitute a waiver of any of the Company's representations, warranties,
covenants, or indemnities herein.
5.2 Conditions to Obligations of the Company. The obligations of
the Company to consummate the transactions contemplated hereby are subject to
the fulfillment of the following conditions:
(a) The Buyer's representations and warranties contained
in this Agreement shall be true and correct at and as of the Closing
with the same effect as though such representations and warranties had
been made as of the Closing; all agreements to be performed hereunder
by the Buyer at or prior to the Closing shall have been performed; and
the Company shall have received a certificate, dated as of the Closing
Date, signed by the Buyer to the foregoing effects.
(b) The Buyer shall have delivered to the Company the
consideration for the Securities provided for in Section 1.2 hereof.
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ARTICLE 6
TERMINATION
This Agreement may be terminated prior to the Closing by (a) the
mutual consent of the Buyer and the Company, (b) the Company upon the failure
of the Buyer to perform or comply with any of its covenants or agreements
contained herein prior to the Closing or if any representation or warranty of
the Buyer hereunder shall not have been true and correct as of the time at
which such was made, (c) the Buyer upon the failure of the Company to perform
or comply with any of its covenants or agreements contained herein or if any
representation or warranty of the Company hereunder shall not have been true
and correct as of the time at which such was made, or (d) either the Company or
the Buyer if the Closing does not occur by September 30, 1996; provided, that
no party may terminate this Agreement pursuant to (b) or (c) above if such
party is, at the time of any such attempted termination, in breach of any term
hereof.
ARTICLE 7
REGISTRATION RIGHTS
7.1 Demand Registration. If, at any time after the Closing Date,
the Buyer shall request the Company to effect the registration under the
Securities Act of the Shares or any other shares of Common Stock held by the
Buyer (collectively, the "Buyer Stock"), then the Company shall promptly use
its best efforts to effect the registration under the Securities Act of the
shares of Buyer Stock that the Company has been requested to register. The
Company shall not be obligated to effect more than one registration statement
pursuant to this Section 7.1 (provided, however, that if the Buyer is unable to
make any sales of Buyer Stock pursuant to any such registration statement
through no fault of its own, the Buyer shall not be deemed to have forfeited
its registration rights under this Section 7.1). No securities owned by any
person or entity other than the Buyer may be included in such registration
statement without the consent of the Buyer. Notwithstanding the foregoing, the
Company shall not be required to effect a registration pursuant to this Section
7.1 until the earlier to occur of (a) the date the Company has first sold any
securities pursuant to a registration statement filed with the Securities and
Exchange Commission (the "SEC") under the Securities Act or (b) the Company
otherwise becomes subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended.
7.2 Piggyback Registration. If the Company at any time proposes
for any reason to register any of its securities under the Securities Act
(other than pursuant to a registration statement on Form S-4 or Form S-8 or a
similar or successor form), it shall each such time promptly give written
notice to the Buyer of its intention so to do, and, upon the written request of
the Buyer given within 30 days after receipt of any such notice to register any
of its Buyer Stock (which request shall specify the Buyer Stock intended to be
sold or disposed of by the Buyer), the Company shall use its best efforts to
cause all such Buyer Stock to be registered under the Securities Act promptly
upon receipt of the written request of the Buyer for such registration, all to
the extent requisite to permit the sale or other disposition by the Buyer of
the Buyer Stock so registered. If the proposed registration by the Company is,
in whole or in part, an underwritten public offering of Common Stock, then any
request pursuant to this Section 7.2 to register the Buyer Stock may specify
that such
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shares are to be included in the underwriting on the same terms and conditions
as the shares of Common Stock otherwise being sold through underwriters under
such registration; provided, however, that if the managing underwriter or
underwriters of such offering shall advise the Company in writing that, because
of the size of the offering intended to be made, the success of the offering
would be materially and adversely effected by the inclusion of the Buyer Stock
requested to be included, then the amount of securities to be offered for the
account of the Buyer shall be reduced to the extent necessary to reduce the
total amount of securities to be included in such offering to the amount
recommended by such managing underwriter or underwriters; provided, further,
that the proportion by which the amount of Buyer Stock to be offered by the
Buyer is reduced shall not exceed the proportion by which the amount of Common
Stock intended to be offered by each other shareholder of the Company is
reduced.
7.3 Preparation and Filing. If and whenever the Company is under
an obligation pursuant this Article 7 to effect the registration of the Buyer
Stock, the Company shall, as expeditiously as practicable:
(a) prepare and file with the SEC a registration
statement with respect to such Buyer Stock and use its best efforts to
cause such registration statement to become and remain effective;
(b) prepare and file with the SEC 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 for at least nine months or until the Buyer Stock
is sold pursuant to such registration statement, whichever is earlier,
and to comply with the provisions of the Securities Act with respect
to the sale or other disposition of all the Buyer Stock covered by
such registration statement;
(c) furnish to the Buyer such number of copies of a
summary prospectus or other prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act,
and such other documents as the Buyer may reasonably request in order
to facilitate the public sale or other disposition of the Buyer Stock;
(d) use its best efforts to register or qualify the Buyer
Stock covered by such registration statement under the securities or
blue sky laws of such jurisdictions as the Buyer shall reasonably
request and do any and all other acts or things which may be necessary
or advisable to enable the Buyer to consummate the public sale or
other disposition of such securities in such jurisdictions, provided
that the Company will not be required to qualify as a foreign
corporation or to execute a general consent that would subject it to
service of process in suits, other than those arising out of the
offering or sale of the Common Stock, in any jurisdiction where it is
not now so subject;
(e) at any time when a prospectus covered by such
registration statement is required to be delivered under the
Securities Act within the appropriate period mentioned in clause (b)
of this Section 7.3, notify the Buyer of the happening of any event as
a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing, and at the request of
the Buyer, prepare and furnish to the Buyer a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
shares, such prospectus shall not include an
13
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing; and
(f) furnish, at the request of the Buyer pursuant to this
Article 7, on the date that the Buyer Stock is delivered to the
underwriters for sale in connection with a registration pursuant to
this Article 7, if such securities are being sold through
underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated such date,
of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Buyer and (ii) a comfort letter dated
such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Buyer.
7.4 Registration Expenses. The Company shall pay all expenses
incurred by the Company in complying with this Article 7 including, without
limitation, all registration and filing fees (including all expenses incident
to filing with the National Association of Securities Dealers, Inc.), all fees
and expenses of complying with securities and blue sky laws, all accounting
fees, all printing expenses, and all fees and disbursements of counsel,
including, with respect to each registration effected pursuant to Section 7.1
or 7.2, reasonable fees and disbursements of not more than one counsel for the
Buyer; provided, however, that all underwriting discounts and selling
commissions applicable to the Buyer Stock covered by registrations effected
pursuant to Sections 7.1 or 7.2 shall be borne by the Buyer in proportion to
the number of shares of Common Stock sold by the Buyer.
7.5 Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless the
Buyer, each of the Buyer's officers and directors, each person
controlling the Buyer, each underwriter, each of such underwriter's
officers and directors, and each person controlling such underwriter
against all claims, losses, damages, and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular, or other
document (including any related registration statement, notification,
or the like) incident to any registration, qualification, or compliance
pursuant to this Article 7, or based on any omission (or alleged
omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or
any violation by the Company of the Securities Act or other securities
laws or any rule or regulation thereunder applicable to the Company and
relating to action or inaction required of the Company in connection
with any such registration,
14
qualification, or compliance, and will reimburse the Buyer, each of the
Buyer's officers and directors, each person controlling the Buyer, each
such underwriter, each such underwriter's officers and directors, and
each person controlling such underwriter for any legal and any other
expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability, or action; provided,
however, that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability, or expense arises
out of or is based on any untrue statement or omission based upon
written information furnished to the Company by the Buyer or such
underwriter and stated to be specifically for use therein. Such
indemnity shall remain in full force and effect regardless of any
investigation made by the Buyer or other indemnified entity or person
and shall survive the transfer of the Buyer Stock by the Buyer.
(b) The Buyer shall indemnify and hold harmless the
Company, each of the Company's directors and officers, each person
controlling the Company, each underwriter, if any, of the securities
covered by such a registration statement, each person controlling such
underwriter, each other selling stockholder, each of such
stockholder's officers and directors, and each person controlling such
selling stockholder against all claims, losses, damages, and
liabilities (or actions in respect thereof) arising out of or based on
any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering
circular, or other document, or any omission (or alleged omission) to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will
reimburse the Company and such stockholders, directors, officers,
persons, underwriters, or control persons for any legal or any other
expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability, or action, in each
case to the extent, but only to the extent, that such untrue statement
or omission is made in such registration statement, prospectus,
offering circular, or other document in reliance upon and in
conformity with written information furnished to the Company by the
Buyer and stated to be specifically for use therein; provided,
however, that the obligations of the Buyer hereunder shall be limited
to an amount equal to the proceeds to the Buyer of the sale of the
Buyer Stock pursuant to the specific offering giving rise to such
claims, losses, damages, or liabilities.
(c) Each party entitled to indemnification under this
Section 7.5 (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party")
promptly after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought and shall permit the
Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified
Party (whose approval shall not unreasonably be withheld), and the
Indemnified Party shall have the right to employ separate counsel in
any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be paid by the Indemnified Party
unless (and such fees and expenses shall be paid by the Indemnifying
Party if) (i) the Indemnifying Party agrees to pay the same, (ii) the
Indemnifying Party fails to assume the defense of such action with
counsel reasonably satisfactory to the Indemnified Party, or (iii) the
named parties to any such action (including any impleaded parties)
have
15
been advised by counsel for the Indemnified Party that either (A)
representation of the Indemnified Party and the Indemnifying Party by
the same counsel would be inappropriate under applicable standards of
professional conduct or (B) there may be one or more legal defenses
available to the Indemnified Party which are different from or
additional to those available to the Indemnifying Party (in which case
the Indemnifying Party shall not have the right to assume the defense
of such action on behalf of such Indemnified Party), and provided
further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 7.5, except to the extent the
Indemnifying Party is materially prejudiced thereby. Each Indemnified
Party shall furnish such information regarding itself or the claim in
question as an Indemnifying Party may reasonably request in writing
and as shall be reasonably required in connection with defense of such
claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section
7.5 from the Indemnifying Party is unavailable to an Indemnified Party
hereunder in respect of any losses, claims, damages, liabilities, or
expenses referred to herein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such losses,
claims, damages, liabilities, or expenses in such proportion as is
appropriate to reflect the relative faults of the Indemnifying Party
and Indemnified Party in connection with the actions which resulted in
such losses, claims, damages, liabilities, or expenses, as well as any
other relevant equitable considerations. The relative faults of such
Indemnifying Party and Indemnified Party shall be determined by
reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact, has been made
by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent, knowledge, access
to information, and opportunity to correct or prevent such action.
The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities, and expenses referred to above shall be
deemed to include, subject to the limitations set forth in Subsection
7.5(c) above, any legal or other fees or expenses reasonably incurred
by such party in connection with any investigation or proceeding. The
parties hereto agree that it would not be just and equitable if
contribution pursuant to this Subsection 7.5(d) were determined by pro
rata allocation or by any other method of allocation which does not
take into account the equitable considerations referred to in this
Subsection 7.5(d).
7.6 Assignment of Registration Rights. The Company acknowledges
and agrees that, notwithstanding any limitations contained in Section 9.9 of
this Agreement, the rights to cause the Company to register the Buyer Stock
under this Article 7 may (but need not) be transferred or assigned to any
transferee(s) or assignee(s) of any Buyer Stock; provided, however, that in no
event may the holder(s) of less than 25% of the Buyer Stock outstanding at the
time of any demand or request for registration under Sections 7.1 or 7.2 hereof
require the Company to effect any such registration under either such section.
16
ARTICLE 8
ADDITIONAL POST-CLOSING COVENANTS
8.1 Post-Closing Inspection. For as long as any indebtedness
remains unpaid under the Senior Note or the Buyer and its Affiliates own at
least 10% of the Fully Diluted Number of shares of Common Stock, the Company
shall permit the Buyer, or any authorized representative thereof, to visit and
inspect the properties of the Company, including its corporate and financial
records, and to discuss its business and finances with officers of the Company,
during normal business hours following reasonable notice and as often as may be
reasonably requested.
8.2 Financial Statements and Other Information.
(a) For as long as any indebtedness remains unpaid under
the Senior Note or the Buyer and its Affiliates own at least 10% of
the Fully Diluted Number of shares of Common Stock, the Company shall
deliver to the Buyer:
(i) within 90 days after the end of each fiscal
year of the Company, an audited balance sheet of the Company as at the
end of such year and audited statements of income and of changes in
financial condition of the Company for such year, certified by
certified public accountants of established national reputation
selected by the Company that are reasonably satisfactory to the Buyer,
and prepared in accordance with GAAP;
(ii) within 45 days after the end of each fiscal
quarter of the Company, an unaudited balance sheet of the Company as
at the end of such quarter, and unaudited statements of income and of
changes in financial condition of the Company for such fiscal quarter
and for the current fiscal year to the end of such fiscal quarter;
(iii) within 30 days after the end of each month,
an unaudited balance sheet of the Company as at the end of such month
and unaudited statements of income and of changes in financial
condition of the Company for such month and for the current fiscal
year to the end of such month, setting forth in comparative form the
Company's projected financial statements for the corresponding periods
for the current fiscal year;
(iv) within ten days after the discovery or
notification that the Company is not in compliance with this
Agreement, the agreements and documents executed and delivered
herewith, or any other material agreement to which the Company is a
party, a detailed statement outlining such noncompliance or default;
and
(v) within ten days of delivery, such other
notices, information, and data with respect to the Company as the
Company delivers to the holders of its Common Stock, the SEC, or any
securities exchange on which capital stock of the Company may be
listed, and such other information and data as the Buyer may from time
to time reasonably request.
17
(b) The foregoing financial statements shall be prepared
on a consolidated basis if the Company then has any subsidiaries. The
financial statements delivered pursuant to clauses (ii) and (iii) of
paragraph (a) of this Section 8.2 shall be accompanied by a
certificate in the form of Exhibit G hereto, executed by the chief
financial officer of the Company (x) stating that such statements have
been prepared in accordance with GAAP and fairly present the financial
condition of the Company at the date thereof and for the periods
covered thereby and (y) certifying and confirming that as of such
date:
(A) no default or "Event of Default" (as defined
in the Senior Note) has occurred, or if any such matter
exists, stating the nature thereof, the period of existence
thereof, and what action the Company proposes to take with
respect thereto; and
(B) the Company has complied with all of the
terms, covenants and conditions set forth in this Agreement,
or if the Company has not so complied, stating the nature of
such non-compliance, the period of existence thereof, and what
action the Company proposes to take with respect thereto.
8.3 Additional Covenants. For as long as any
indebtedness remains unpaid under the Senior Note or the Buyer and its
Affiliates own at least 10% of the Fully Diluted Number of shares of
Common Stock:
(a) The Company shall promptly pay and discharge, or
cause to be paid and discharged, when due and payable, all taxes,
assessments, and governmental charges or levies of any kind, including
without limitation those imposed upon the income, profits, property,
or business of the Company or any subsidiary of the Company; provided,
however, that any such tax, assessment, charge, or levy need not be
paid if the validity thereof shall be contested in good faith by
appropriate proceedings and if the Company shall have set aside on its
books adequate reserves therefor; and provided, further, that the
Company shall pay all such taxes, assessments, charges, or levies
forthwith upon the commencement of proceedings to foreclose any lien
that may have attached as security therefor. The Company shall
promptly pay or cause to be paid when due, or in conformance with
customary trade terms or practices, all other indebtedness incident to
the operations of the Company.
(b) The Company shall keep its properties and those of
its subsidiaries in good repair, working order, and condition,
reasonable wear and tear excepted, and from time to time shall make
all needful and proper repairs, renewals, replacements, additions, and
improvements thereto; and the Company and its subsidiaries shall at
all times comply with the provisions of all material leases to which
any of them is a party or under which any of them occupies property so
as to prevent any loss or forfeiture thereof or thereunder.
(c) The Company shall keep its and its subsidiaries'
assets that are of an insurable character insured by financially sound
and reputable insurers against loss or damage by fire, extended
coverage, and explosion insurance in amounts customary for companies
in similar businesses similarly situated; and the Company shall
maintain, with financially sound and
18
reputable insurers, insurance against other hazards, risks, and
liabilities to persons and property to the extent and in the manner
customary for companies in similar businesses similarly situated. The
Buyer acknowledges that the insurance policies maintained by or on
behalf of the Company, as described in Section 2.14 of the Schedule,
provide adequate insurance coverage for the year ending one year from
the date hereof.
(d) The Company shall keep true records and books of
account in which full, true, and correct entries will be made of all
dealings or transactions in relation to its business and affairs in
accordance with GAAP.
(e) The Company shall comply in all material respects
with the requirements of all applicable laws, rules, regulations, and
orders of any governmental authority.
8.4 Negative Covenants. For as long as any indebtedness remains
unpaid under the Senior Note, the Company shall not, without the prior written
consent of the Buyer:
(a) issue or sell, or authorize for issuance or sale,
additional shares of any class of capital stock (except for the
issuance or sale by the Company of any of its capital stock pursuant
to the exercise of options or warrants outstanding as of the date
hereof and disclosed in Section 2.2 of the Schedule), or issue, grant,
or enter into any subscription, option, warrant, right, convertible
security, or other agreement or commitment of any character obligating
the Company to issue securities, if as a result of any such issuance,
grant, or sale (i) the sum of the number of shares of Common Stock and
Preferred Stock owned by the Buyer, Xxxx X. Xxxxxxxx, Xxxx Xxxxx and
Buyer's Affiliates, plus the number of shares of Common Stock pledged
to the Buyer pursuant to a Pledge and Security Agreement executed
pursuant hereto shall not equal or exceed 51% of the sum of the number
of shares of Common Stock and Preferred Stock outstanding, or (ii) the
shares of capital stock owned by the Buyer, Xxxx X. Xxxxxxxx, Xxxx
Xxxxx and Buyer's Affiliates, plus the shares of capital stock pledged
to the Buyer pursuant to the Pledge and Security Agreements executed
pursuant hereto shall not, upon the occurrence of a Payment Default
(as defined in the Voting Agreement), entitle the Buyer to a majority
of the voting power of all classes of capital stock of the Company;
(b) declare, set aside, make, or pay any dividend or
other distribution with respect to its capital stock, or redeem,
purchase, or otherwise acquire, directly or indirectly, any of its
capital stock;
(c) make any loan or advance to, or own any stock or
other securities of, any subsidiary or other corporation, partnership,
or other entity;
(d) make any loan or advance to any person, including,
without limitation, any employee or director of the Company or any
subsidiary, except advances and similar expenditures in the ordinary
course of business which, with respect to employees and related
parties, may not exceed $5,000 per individual and $50,000 in the
aggregate;
19
(e) guarantee, directly or indirectly, any indebtedness;
(f) merge with or into or consolidate with any other
corporation, or sell, lease, or otherwise dispose of all or
substantially all of the Company's properties or assets;
(g) voluntarily dissolve, liquidate, or wind up or carry
out any partial liquidation or distribution or transaction in the
nature of a partial liquidation or distribution;
(h) take any action to cause any amendment, alteration,
or repeal of any of the provisions of the Company's Articles of
Incorporation or Bylaws, or change the size of its Board of Directors
or the quorum requirements for meetings of its Board of Directors;
(i) recapitalize or reorganize;
(j) enter into, modify, amend, or terminate any agreement
between any of the Company's stockholders and the Company;
(k) pledge, mortgage, hypothecate, or xxxxx x xxxx or
security interest in, or permit or suffer the creation or existence of
any pledge, mortgage, hypothecation, lien, or security interest in,
any of the Company's assets, except (i) security interests and any
other liens in favor of Buyer, (ii) liens for taxes not yet due and
payable, (iii) mechanic's liens and materialman's liens for services
or materials for which payment is not yet due, (iv) landlord's liens
for rental not yet due and payable and which, to the extent the same
encumbers any of the collateral securing the Senior Note, is
subordinate to the security interests in favor of Buyer, (v) liens in
favor of Texas Commerce Bank National Association securing
indebtedness not to exceed $150,000 at any time evidenced by that
certain Revolving Promissory Note dated March 4, 1996, executed by
Company and payable to the order of Texas Commerce Bank National
Association, and (vi) liens created pursuant to that certain Security
Agreement dated March 31, 1996, executed by Company in favor of X.X.
Capital Partners, L.P., provided that such liens are subordinated to
the security interests and liens in favor of Buyer in the manner
provided in the Subordination and Intercreditor Agreement attached
hereto as Exhibit D;
(l) enter into any transaction, including, without
limitation, the purchase, sale, or exchange of property or the
rendering of any service, with any Affiliate except in the ordinary
course of, and pursuant to the reasonable requirements of, the
Company's business and upon fair and reasonable terms no less
favorable to the Company than would have been obtained in a comparable
arm's-length transaction with a person not an Affiliate;
(m) enter into any line of business other than the one in
which the Company is engaged on the date hereof;
(n) make any expenditures for fixed or capital assets if
such expenditures would cause the aggregate of all such expenditures
made by the Company after the date hereof to exceed $100,000 without
the prior written consent of the Buyer, which consent will not be
20
unreasonably withheld, provided that notwithstanding the foregoing the
Company may make capital expenditures for modem and peripheral
computer equipment with respect to new subscribers of the Company's
services (net of any subscribers who have canceled or failed to renew
the Company's services) in an amount not in excess of $50.00 for each
such new subscriber;
(o) assign or transfer, or attempt to assign or transfer,
any of the Company's rights, duties, or obligations under this
Agreement or any other agreement or document delivered and executed
herewith; or
(p) incur any indebtedness for money borrowed other than
bank debt not to exceed $150,000 in the aggregate.
8.5 Limitation on Issuances of Capital Stock. For as long as the
Buyer and its Affiliates own at least 10% of the Fully Diluted Number of shares
of Common Stock, the Company shall not, without the prior written consent of
the Buyer, issue shares of its Common Stock at, or securities convertible or
exercisable for shares of Common Stock with a conversion or exercise price
equal to, a price per share less than $3.75 (subject to appropriate and
equitable adjustment in the event of stock splits, dividends, subdivisions,
recapitalizations and similar transactions).
8.6 Payment of Taxes. On or before the expiration of fifteen (15)
days following the Closing Date, the Company shall pay in full all amounts
owing with respect to all unpaid payroll and sales taxes, including, without
limitation, the unpaid payroll and sales taxes disclosed in Section 2.11 of the
Schedule.
8.7 Subordination Agreement. On or before the expiration of ten
(10) days following the Closing Date, (i) Texas Commerce Bank National
Association ("TCB") shall have entered into a Subordination and Intercreditor
Agreement with Buyer in the form of Exhibit D attached hereto or otherwise in
form and substance satisfactory to Buyer, in its sole discretion, or (ii)
Company shall have indefeasibly paid in full all outstanding indebtedness owing
to TCB and terminated its loan commitment with TCB.
ARTICLE 9
MISCELLANEOUS
9.1 Survival of Representations, Warranties, and Covenants. All
representations, warranties, and covenants hereunder shall survive the Closing.
All statements contained in any certificate or other instrument delivered by
the Company pursuant to this Agreement or any agreement or document to be
executed and delivered in connection herewith shall constitute representations
and warranties by the Company under this Agreement.
9.2 Indemnification-General. The Company shall indemnify, defend,
and hold the Buyer harmless from and against all liabilities, losses, and
damages, together with all reasonable costs and expenses related thereto
(including legal and accounting fees and expenses), arising from the untruth,
21
inaccuracy, or breach of any representations, warranties, or covenants made by
the Company herein or in any other agreement or document executed or to be
executed in connection herewith.
9.3 Remedies. In case any one or more of the covenants and/or
agreements set forth in this Agreement shall have been breached by any party
hereto, any of the other parties hereto may proceed to protect and enforce its,
his, or their rights either by suit in equity and/or by action at law,
including, but not limited to, an action for damages as a result of any such
breach and/or an action for specific performance of any such covenant or
agreement contained in this Agreement.
9.4 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware.
9.5 Fees. The Company shall pay, and hold the Buyer harmless from
and against liability for the payment of, (a) all costs and other expenses
incurred prior to, on, or after the Closing Date in connection with the
Company's performance of and compliance with all agreements and conditions
contained herein on its part to be performed or complied with, and (b) all of
the fees and disbursements of Xxxxx & XxXxxxxx, counsel to the Buyer, for its
services in connection with this transaction, provided that the Buyer shall not
be responsible for the attorney fees referred to in this clause (b) to the
extent they exceed $25,000. The Company shall make such payments to Xxxxx &
XxXxxxxx and the Buyer by certified bank or cashier's checks upon request. The
Company further agrees that it shall pay and shall hold the Buyer harmless from
and against any and all liabilities with respect to any stamp or similar taxes
which may be determined to be payable in connection with the execution and
delivery of this Agreement or any modification, amendment, or alteration of the
terms or provisions of this Agreement and that it will similarly pay and hold
the Buyer harmless from and against all issue taxes in respect of the issuance
of the Securities purchased by the Buyer hereunder.
9.6 Exchanges; Lost, Stolen or Mutilated Certificates. Upon
surrender by the Buyer to the Company of certificates or instruments for
Securities purchased or acquired by the Buyer hereunder, the Company, at its
expense, shall issue in exchange therefor, and deliver to the Buyer, a new
certificate or instrument, as the case may be, in such denomination or
denominations as may be requested by the Buyer. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction, or mutilation of
any certificate or original instrument representing any Securities purchased or
acquired by the Buyer hereunder, and in case of any such loss, theft, or
destruction, upon delivery of any indemnity agreement satisfactory to the
Company, or in case of any such mutilation, upon surrender and cancellation of
such certificate or instrument, the Company at its expense shall issue and
deliver to the Buyer a new certificate or instrument, as the case may be, of
like tenor, in lieu of such lost, stolen, or mutilated certificate.
9.7 Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be deemed given (a) when
personally delivered or (b) on the third day following the day it is mailed, by
certified or registered mail, return receipt requested, in either case to the
appropriate address indicated below or such other address as the interested
recipient may have furnished to the other parties hereto:
22
(i) If to the Buyer:
First Computer Services Corporation
x/x Xxxx Xxxxxx
Xxx Xxxxxxxx Xxxxx, Xxxxx 000
00000 Xxxx Xxxx
Xxxxxx, Xxxxx 00000
(ii) If to the Company:
Internet America, Inc.
One Dallas Centre
000 X. Xx. Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxxxxx Xxxxxxx
Any party may change its address for notices hereunder by proper
notice to all other parties.
9.8 Amendments and Waivers. Except as may otherwise expressly be
provided herein, this Agreement may be amended, and compliance by the Company
with any provision hereof may be waived, by a written agreement or instrument
signed by the Company and the Buyer.
9.9 Parties in Interest; Assignment. All of the terms and
provisions of this Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns. There shall be no third
party beneficiaries of this Agreement. The Buyer may assign any or all of its
rights and privileges under this Agreement and the agreements and documents
executed and to be executed in connection herewith (provided that the Company
need only obtain the written agreement of the Buyer (and not such assignees) in
order to secure a waiver of any covenant set forth herein or therein); provided
that such assignee is an accredited investor (as defined in Regulation D under
the Securities Act) and the Buyer or such assignee provides the Company a
certificate to the foregoing effect. The Company may not assign any of its
rights, privileges, duties, or obligations hereunder without the prior written
consent of the Buyer. Any assignment in violation of the foregoing shall be
null and void.
9.10 Dealings Between the Company and the Buyer. The Company and
the Buyer hereby agree that so long as Xxxx Xxxxx is an Affiliate of Buyer,
Xxxx Xxxxx is designated as the Buyer's sole contact with the Company with
respect to the Buyer's dealings with the Company in connection with the
transactions contemplated by this Agreement.
9.11 Counterparts. This Agreement may be executed in counterparts,
and all parties need not execute the same counterpart. However, no party shall
be bound by this Agreement until all parties have executed a counterpart.
23
9.12 Severability. If any provision of this Agreement shall be
held to be unenforceable by a court of competent jurisdiction, such provision
shall be severed from this Agreement and the remainder of this Agreement shall
continue in full force and effect.
9.13 Complete Agreement. This Agreement and the agreements and
documents to be executed and delivered in connection herewith embody the
complete agreement and understanding among the parties and supersede and
preempt any prior understandings, agreements, or representations by or among
the parties, written or oral, which may have related to the subject matter
hereof in any way.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
THE BUYER:
FIRST COMPUTER SERVICES CORPORATION
By: /s/ Xxxx X. Xxxxxx
-------------------------------------
Its: President
THE COMPANY:
INTERNET AMERICA, INC.
By: /s/ Xxxxxx Xxxxxxx
-------------------------------------
Its: Chief Executive Officer
EXHIBITS
A - Promissory Note
B - Security Agreement
C - Pledge and Security Agreement
24
EXHIBIT A
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED,
SOLD, PLEDGED, OR OTHERWISE TRANSFERRED OR DISPOSED OF UNLESS AND UNTIL THIS
NOTE IS REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
PROMISSORY NOTE
$1,767,713.00 September 25, 1996
FOR VALUE RECEIVED, the undersigned, INTERNET AMERICA, INC., a Texas
corporation ("Maker"), promises to pay to the order of First Computer Services
Corporation, a Delaware corporation ("Payee"), by wire transfer to Chase
Manhattan Bank Delaware, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000-0000,
First Computer Services Corporation, Account Number 0000-000-000000 (or such
other place as Payee may from time to time designate), the sum of One Million
Seven Hundred Sixty-Seven Thousand Seven Hundred Thirteen and No/100 Dollars
($1,767,713.00), together with interest on the unpaid principal balance from
time to time outstanding at a rate per annum equal to 10.0% (calculated on the
basis of actual days elapsed, but computed as if each calendar year consisted
of 360 days); provided that, in no event shall the interest rate hereunder
exceed the Highest Lawful Rate (as hereinafter defined); "Highest Lawful Rate"
means, at any given time during which indebtedness shall be outstanding
hereunder, the maximum nonusurious interest rate, if any, that at any time or
from time to time may be contracted for, taken, reserved, charged, or received
on the indebtedness evidenced by this Note under the laws of the United States
and the State of Delaware applicable thereto which are presently in effect or,
to the extent allowed by law, under such applicable laws of the United States
and the State of Delaware which may hereafter be in effect and which allow a
higher maximum nonusurious interest rate than applicable laws now allow, in any
case after taking into account, to the extent required by applicable law, any
and all relevant payments or charges under this Note and any documents executed
in connection herewith.
Interest on this Note shall accrue from the date hereof. All
principal of and interest on this Note shall be paid on the first anniversary
of the date hereof.
All past due principal of and accrued interest on this Note shall bear
interest from maturity (stated, by acceleration, or otherwise) until
indefeasibly paid in full at the lesser of 18% and the Highest Lawful Rate.
1. Prepayments. The accrued but unpaid interest on this Note may
be prepaid in whole or in part at any time without penalty or premium. The
unpaid principal balance of this Note may be
25
prepaid in whole or in part at any time without premium or penalty, but only if
all accrued interest on the amount of each such prepayment is paid to the date
of such prepayment.
2. Events of Default and Remedies. Without notice or demand
(which are hereby waived), the entire unpaid principal balance of and all
accrued interest on this Note shall immediately become due and payable at the
option of the holder hereof upon the occurrence of any one or more of the
following events of default (individually or collectively, herein called an
"Event of Default"):
(a) the failure or refusal of Maker to pay all or any
part of the principal of or accrued interest on this Note as and when
the same becomes due and payable in accordance with the terms hereof;
(b) the occurrence of a breach, default, or event of
default under Sections 8.4, 8.6 or 8.7 of that certain Securities
Purchase Agreement dated as of September 25, 1996 (the "Securities
Purchase Agreement") between Payee and Maker;
(c) the occurrence of a breach, default, or event of
default under the Securities Purchase Agreement (other than as
specified in Section 2(b) above), and the continuation of such breach,
default, or event of default for a period of twenty days after (i)
written notice thereof is delivered by Payee to Maker or (ii) the
failure of Maker to deliver the compliance certificate required by
Section 8.2(b) of the Securities Purchase Agreement or (iii) the date
specified in the compliance certificate as the date of the occurrence
of such breach, default, or event of default, whichever is the
earliest to occur;
(d) any representation or warranty made by Pledgor (as
defined in those certain Pledge and Security Agreements (herein so
called), dated on or about the date hereof, executed by Payee and each
of the Xxxxxxx Family Trust, the Xxxx X. Xxxxx Trust, and Xxx Xxxxxx),
or any of such Pledgor's officers or trustees, under or in connection
with any of the Pledge and Security Agreements shall prove to have
been incorrect in any material respect when made;
(e) the occurrence of breach or event of default under
that certain Voting Agreement dated on or about the date hereof among
Xxxxxxx X. Xxxx, his spouse, the Xxxxxxx Xxxx Retirement Trust, B&G
Partnership, Ltd., BCG Partnership, Ltd. and Maker;
(f) Maker, Pledgor or any guarantor of this Note shall
(i) become insolvent within the meaning of the Bankruptcy Code of the
United States, as amended, (ii) admit in writing its or his inability
to pay or otherwise fail to pay its or his debts generally as they
become due, (iii) voluntarily seek, consent to, or acquiesce in the
benefit or benefits of any Debtor Relief Law (meaning the Bankruptcy
Code of the United States, as amended, and all other applicable
liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, or similar debtor relief
laws from time to time in effect affecting the rights of creditors
generally), or (iv) be made the subject of any proceeding provided for
by any Debtor Relief Law that could suspend or otherwise affect any of
the rights of the holder hereof;
26
(g) the nonpayment when due of any other material
indebtedness owed by Maker, or the occurrence of any event under any
document or instrument evidencing, securing, or executed in connection
with any such indebtedness which could give the holder thereof the
right to declare such indebtedness or any part thereof due prior to
its scheduled maturity;
(h) the discovery by the holder hereof that any
statement, representation, or warranty made by Maker in any writing,
document, or instrument ever delivered to the holder hereof in
connection herewith was at the time made false, misleading, or
erroneous in any material respect;
(i) the occurrence of a breach, default, or event of
default under any security agreement, deed of trust, mortgage,
assignment, or other collateral document or instrument executed and
delivered by Maker (other than as specified above in this Section 2),
any Pledgor or any guarantor in connection herewith and the
continuation of such default or event of default for a period of
twenty days after notice thereof from Payee to Maker;
(j) any guarantor or Pledgor that is an entity dissolves;
a final judgment is entered against Maker, Pledgor or any guarantor of
this Note for the payment of money in excess of $25,000 in the
aggregate and remains unsatisfied for thirty days after entry, or any
property of Maker or any such guarantor or Pledgor is attached,
garnished or otherwise made such to legal process; or
(k) Xxxxxx Xxxxxxx is no longer the Chief Executive
Officer of Maker.
Upon the occurrence of an Event of Default, the holder of this Note
may (a) offset against this Note any sum or sums owed by the holder hereof to
Maker or any guarantor of this Note, (b) foreclose any or all liens or security
interests given to secure the repayment of the indebtedness evidenced by this
Note, and (c) proceed to protect and enforce its rights either by suit in
equity and/or by action at law, or by other appropriate proceedings, whether
for the specific performance of any covenant or agreement contained in this
Note or any document or instrument executed and delivered by Maker or any
guarantor of this Note in connection with this Note or in aid of the exercise
of any power or right granted by this Note or any document or instrument
executed and delivered by Maker or any guarantor of this Note in connection
with this Note or to enforce any other legal or equitable right of the holder
of this Note.
3. Cumulative Rights. No delay on the part of the holder of this
Note in the exercise of any power or right under this Note, or under any
document or instrument executed in connection herewith, shall operate as a
waiver thereof, nor shall a single or partial exercise of any other power or
right. Enforcement by the holder of this Note of any security for the payment
hereof shall not constitute any election by it of remedies so as to preclude
the exercise of any other remedy available to it.
4. Waiver. Maker, and each surety, endorser, guarantor, and
other party ever liable for the payment of any sum of money payable on this
Note, jointly and severally waive demand,
27
presentment, protest, notice of nonpayment, notice of intention to accelerate,
notice of acceleration, notice of protest, and any and all lack of diligence or
delay in collection or the filing of suit hereon which may occur; agree that
their liability on this Note shall not be affected by any renewal or extension
in the time of payment hereof, by any indulgences, or by any release or change
in any security for the payment of this Note; and hereby consent to any and all
renewals, extensions, indulgences, releases, or changes hereof or hereto,
regardless of the number of such renewals, extensions, indulgences, releases,
or changes.
5. Attorneys' Fees and Costs. In the event an Event of Default
shall occur, and in the event that thereafter this Note is placed in the hands
of attorneys for collection, or in the event this Note is collected in whole or
in part through legal proceedings of any nature, then and in any such case
Maker promises to pay all costs of collection, including, but not limited to,
reasonable attorneys' fees, incurred by the holder hereof on account of such
collection.
6. NO ORAL AGREEMENTS. THIS NOTE (ALONG WITH THE SECURITIES
PURCHASE AGREEMENT AND THE OTHER DOCUMENTS AND INSTRUMENTS EXECUTED AND
DELIVERED PURSUANT THERETO) REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
7. Governing Law. This Note shall be governed by and construed
in accordance with the laws of the State of Delaware.
8. Severability. If any provision of this Note shall be held to
be unenforceable by a Court of competent jurisdiction, such provisions shall be
severed from this Note and the remainder of this Note shall continue in full
force and effect.
9. Assignment. This Note, or any portion hereof, may be assigned
by Payee without the consent of Maker. Any such assignment by Payee shall be
in compliance with the Securities Act and applicable state securities laws and
Maker shall have received a certificate to the foregoing effect from the Payee
or the assignee.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
day and year first above written.
INTERNET AMERICA, INC.
By: /s/ Xxxxxx Xxxxxxx
-------------------------------------
Its: Chief Executive Officer
28
EXHIBIT B
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is executed as of September 25, 1996, by
INTERNET AMERICA, INC., a Texas corporation (whether one or more, "Debtor"),
for the benefit of FIRST COMPUTER SERVICES CORPORATION, a Delaware corporation
("Secured Party").
FOR VALUABLE CONSIDERATION, the receipt and adequacy of which are
hereby acknowledged, Debtor hereby covenants and agrees with Secured Party as
follows:
1. Certain Definitions. Unless otherwise defined herein, or the
context hereof otherwise requires, each term defined in the UCC is used in this
agreement with the same meaning; provided that if any definition given a term
in Chapter 9 of the UCC conflicts with the definition given that term in any
other chapter of the UCC, the Chapter 9 definition shall prevail. As used
herein, the following terms have the meanings indicated:
Collateral has the meaning set forth in Paragraph 3.
Debtor Relief Law means the Bankruptcy Code of the United
States of America and all other applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, receivership, insolvency,
reorganization, suspension of payments, or similar debtor relief Laws from time
to time in effect affecting the rights of creditors generally.
Default has the meaning set forth in Paragraph 6.
Highest Lawful Rate means the maximum rate of interest (or, if
the context so requires, an amount calculated at such rate) which Secured Party
is allowed to contract for, charge, take, reserve, or receive under applicable
Law after taking into account, to the extent required by applicable Law, any
and all relevant payments or charges under the Related Papers.
Laws means all applicable statutes, laws, ordinances,
regulations, orders, writs, injunctions, or decrees of any state, commonwealth,
nation, territory, possession, county, parish, municipality, or Tribunal.
Lien means any lien, mortgage, security interest, charge, or
encumbrance of any kind, including, without limitation, the rights of a vendor,
lessor, or similar party under any conditional sales agreement or other title
retention agreement or lease substantially equivalent thereto, any production
payment, and any other right of or arrangement with any creditor to have his
claim satisfied out of any property or assets, or the proceeds therefrom, prior
to the general creditors of the owner thereof.
Note means that certain Promissory Note of even date herewith
in the original principal amount of $1,767,713.00 executed by Debtor and
payable to the order of Secured Party, as renewed, extended, amended or
otherwise modified from time to time.
29
Obligation means (a) the indebtedness evidenced by the Note,
(b) all other present and future indebtedness, obligations, and liabilities,
now or hereafter owed to Secured Party by Debtor whether such indebtedness,
obligations, and liabilities are direct, indirect, fixed, contingent,
liquidated, unliquidated, joint, several, or joint and several or were, prior
to acquisition thereof by Secured Party, owed to some other person or entity,
(c) all indebtedness, liabilities, and obligations of Debtor arising under this
agreement, (d) interest accruing on, and attorneys' fees, court costs, and
other costs of collection incurred in the collection or enforcement of, any of
the indebtedness, liabilities, or obligations described in clauses (a) through
(c) above, and (e) any and all renewals and extensions of, or amendments to,
any of the indebtedness, liabilities, and obligations described in clauses (a)
through (d) above.
Obligor means any person or entity obligated with respect to
any of the Collateral, whether as an account debtor, obligor on an instrument,
issuer of securities, or otherwise.
Permitted Liens means (a) the Security Interest and any other
Liens in favor of Secured Party, (b) Liens for taxes not yet due and payable,
(c) mechanic's Liens and materialman's Liens for services or materials for
which payment is not yet due, (d) landlord's Liens for rental not yet due and
payable and which, to the extent the same encumbers any of the Collateral, is
subordinate to the Security Interest, (e) Liens in favor of Texas Commerce Bank
National Association securing indebtedness not to exceed $150,000 at any time
evidenced by that certain Revolving Promissory Note dated March 4, 1996,
executed by Debtor and payable to the order of Texas Commerce Bank National
Association, and (f) Liens created pursuant to that certain Security Agreement
dated March 31, 1996, executed by Debtor in favor of X.X. Capital Partners,
L.P., provided that such Liens are subordinated to the Security Interest in the
manner provided in the Subordination and Intercreditor Agreement attached as
Exhibit D to the Securities Purchase Agreement.
Related Papers means (a) this agreement, (b) all present and
future agreements, documents, and instruments now or hereafter evidencing any
of the Obligation, or assuring or securing payment thereof, (c) all agreements,
documents, and instruments now or hereafter executed in connection herewith,
and (d) any and all future renewals and extensions or restatements of, or
amendments or supplements to, all or any part of the foregoing.
Securities Purchase Agreement means that certain Securities
Purchase Agreement dated the date hereof between Debtor and Secured Party.
Security Interest means the security interest granted and the
pledge and assignment made under Paragraph 2.
Tribunal means any court or governmental department,
commission, board, bureau, agency, or instrumentality of the United States or
of any state, commonwealth, nation, territory, possession, county, parish, or
municipality, whether now or hereafter constituted or existing.
UCC means the Uniform Commercial Code as enacted in the State
of Delaware or other applicable jurisdiction, as amended at the time in
question
30
2. Security Interest. In order to secure the full and complete
payment and performance of the Obligation when due, Debtor hereby grants to
Secured Party a security interest in the Collateral and pledges and assigns the
Collateral to Secured Party, all upon and subject to the terms and conditions
of this agreement. Such Security Interest is granted and pledge and assignment
are made as security only and shall not subject Secured Party to, or transfer
or in any way affect or modify, any obligation of Debtor with respect to any of
the Collateral or any transaction involving or giving rise thereto.
3. Collateral. As used herein, the term "Collateral" means the
following items and types of property:
(a) Whether now owned or hereafter acquired by Debtor,
wherever located, all other present and future accounts, general intangibles,
chattel paper, documents, instruments, inventory, equipment, fixtures, other
goods, minerals, money, and deposit accounts.
(b) The balance of every deposit account of Debtor and
any claim of Debtor against Secured Party, now or hereafter existing, whether
liquidated or unliquidated.
(c) All present and future increases, profits,
combinations, reclassifications, improvements, and products of, accessions,
attachments, and other additions to, tools, parts, and equipment used in
connection with, and substitutes and replacements for, all or part of the
Collateral heretofore described.
(d) All present and future accounts, general intangibles,
chattel paper, documents, instruments, cash and noncash proceeds, and other
rights arising from or by virtue of, or from the voluntary or involuntary sale
or other disposition of, or collections with respect to, or insurance proceeds
payable with respect to, or proceeds payable by virtue of warranty or other
claims against manufacturers of, or claims against any other person or entity
with respect to, all or any part of the Collateral heretofore described in this
subparagraph or otherwise.
(e) All present and future security for the payment to
Debtor of any of the Collateral heretofore described and goods which gave or
will give rise to any of such Collateral or are evidenced, identified, or
represented therein or thereby; provided that the description of Collateral
contained in this Paragraph 3 shall not be deemed to permit any action
prohibited by this agreement or by terms incorporated in this agreement.
4. Representations and Warranties. Debtor represents and warrants
to Secured Party that:
(a) Debtor is duly organized, validly existing, and in
good standing in the jurisdiction of its formation, possesses all requisite
authority, power, licenses, permits, and franchises to conduct its business and
execute, deliver, and comply with the terms of the Related Papers, which have
been duly authorized and approved by all necessary corporate or partnership
action and for which no approval or consent of any Tribunal or other person or
entity is required which has not been
31
obtained, and has not used or transacted business under any other corporate,
assumed, or trade name in the five-year period preceding the date hereof other
than "INTRNTUSA, INC."
(b) All financial statements of Debtor heretofore
furnished to Secured Party fairly present the financial condition of Debtor as
of the date thereof, Debtor has no material direct or indirect, fixed or
contingent liabilities not reflected therein or the notes thereto, and, except
for transactions heretofore disclosed to Secured Party in writing and
transactions contemplated by the Related Papers, there have been no material
adverse changes in the financial condition of Debtor since the date of the most
recent financial statement of Debtor furnished to Secured Party.
(c) The execution, delivery, and performance of and
compliance with the terms of the Related Papers will not cause Debtor to be in
violation of or default under (i) any applicable Laws, the articles of
incorporation and bylaws or partnership agreement of Debtor (if applicable), or
(ii) any material agreement, document, or instrument to which Debtor is a party
or by which any of its assets may be bound except to the extent any such
violation or default has been waived in writing.
(d) Debtor is not involved in, or aware of the threat of,
any material litigation, which, if determined adversely to Debtor, could have a
material and adverse effect on Debtor's financial condition, and there are no
unpaid or outstanding judgments against Debtor.
(e) All federal, state, foreign, and other tax returns of
Debtor required to be filed have been filed, and all federal, state, foreign,
and other taxes imposed upon Debtor which are due and payable have been paid,
other than taxes being contested in good faith.
(f) The proceeds of and loans which are part of the
Obligation have not and will not be used directly or indirectly for the purpose
of purchasing or carrying, or for the purpose of extending credit to others for
the purpose of purchasing or carrying, any "margin stock" as that term is
defined in Regulation U of the Board of Governors of the Federal Reserve
System, as amended.
(g) Debtor's place of business and chief executive
office is where Debtor is entitled to receive notices hereunder; the present
and foreseeable location of Debtor's books and records concerning any of the
Collateral that is accounts is as set forth on Schedule I hereto, and the
location of all other Collateral is as set forth on Schedule I hereto (but the
failure of such description to be accurate or complete shall not impair the
Security Interest in such Collateral); and, except as noted on Schedule I
hereto, all such books, records, and Collateral are in Debtor's possession.
(h) The Collateral that is or may be fixtures is located
on or affixed to the real property described on Annex A hereto (but the failure
of such description to be accurate or complete shall not impair the Security
Interest in such Collateral).
(i) All Collateral that is accounts, chattel paper,
instruments, or general intangibles is free from any claim for credit,
deduction, or allowance of an Obligor and free from any defense, dispute,
setoff, or counterclaim, and there is no extension or indulgence with respect
thereto.
32
(j) All Collateral that is accounts, chattel paper, or
instruments will be paid in full at maturity, and, if not paid, Debtor will,
upon demand, promptly pay the amount represented to be owing on any thereof to
Secured Party, or at Secured Party's option such unpaid amount may be deducted
from any payment then or thereafter due from Secured Party to Debtor, and
Secured Party may retain such account, chattel paper, or instrument as
Collateral for any outstanding portion of the Obligation.
(k) All Collateral that is an assigned contract or
assigned lease is in full force and effect; there have been no renewals or
extensions of, or amendments, modifications, or supplements to, any thereof
about which Secured Party has not been advised in writing; Debtor is in
possession of the property covered by each such assigned lease; and no default
or potential default has occurred and is continuing under any such assigned
contract or assigned lease.
(l) Debtor owns all presently existing Collateral, and
will acquire all hereafter-acquired Collateral, free and clear of all Liens
except Permitted Liens.
The delivery at any time by Debtor to Secured Party of Collateral or
of additional specific descriptions of certain Collateral shall constitute a
representation and warranty by Debtor to Secured Party hereunder that the
representations and warranties of this Paragraph 4 are true and correct with
respect to each item of such Collateral
5. Certain Covenants. Until the Obligation is paid and performed
in full, unless Debtor receives a prior written notification from Secured Party
that Secured Party does not object to a deviation, Debtor covenants and agrees
with Secured Party that Debtor will:
(a) Maintain, at the place where Debtor is entitled to
receive notices under the Related Loan Papers, a current record of where all
Collateral is located, permit representatives of Secured Party at any time
during normal business hours to inspect and make abstracts from such records,
and furnish to Secured Party, at such intervals as Secured Party may request,
such documents, lists, descriptions, certificates, and other information as may
be necessary or proper to keep Secured Party informed with respect to the
identity, location, status, condition, and value of the Collateral.
(b) Fully perform all of Debtor's duties under and in
connection with each transaction to which the Collateral, or any part thereof,
relates, so that the amounts thereof shall actually become payable in their
entirety to Secured Party.
(c) Promptly notify Secured Party of any change in any
fact or circumstances represented or warranted by Debtor with respect to any of
the Collateral or Obligation.
(d) Promptly notify Secured Party of any claim, action,
or proceeding affecting title to all or any of the Collateral or the Security
Interest and, at the request of Secured Party, appear in and defend, at
Debtor's expense, any such action or proceeding.
33
(e) Hold in trust for Secured Party all Collateral that
is chattel paper, instruments, or documents at any time received by Debtor and
promptly deliver same to Secured Party unless Secured Party at its option
(which may be evidenced only by a writing signed by Secured Party stating that
Secured Party elects to permit Debtor to so retain) permits Debtor to retain
the same, but any chattel paper, instruments, or documents so retained shall be
marked to state that they are assigned to Secured Party (but the failure of
same to be so marked shall not impair the Security Interest thereon).
(f) Not sell, lease, or otherwise dispose of, or permit
the sale, lease, or disposition of, any Collateral except for sales, leases,
and other dispositions except for dispositions in the ordinary course of
Debtor's business not in excess of $50,000 in the aggregate.
(g) Not create, incur, or suffer or permit to be created
or incurred or to exist any Lien upon or against any of the Collateral, except
for Permitted Liens.
(h) Keep the Collateral that is inventory or equipment
in good repair, working order, and condition and promptly make all necessary
repairs or replacements to that end.
(i) Pay, before delinquent, all taxes lawfully levied
against any of the Collateral.
(j) Keep the Collateral fully insured in such amounts,
against such risks, and with such insurers as may be approved by Secured Party.
(k) At Debtor's expense and Secured Party's request,
before or after a Default, file or cause to be filed such applications and take
such other actions as Secured Party may request to obtain the consent or
approval of any Tribunal to the Secured Party's rights hereunder, including,
without limitation, the right to sell all the Collateral upon a Default without
additional consent or approval from such Tribunal (and, because Debtor agrees
that Secured Party's remedies at law for failure of Debtor to comply with this
provision would be inadequate and that such failure would not be adequately
compensable in damages, Debtor agrees that its covenants in this provision may
be specifically enforced).
(l) From time to time promptly execute and deliver to
Secured Party all such other assignments, certificates, supplemental
documents, and financing statements, and do all other acts or things as Secured
Party may reasonably request in order to more fully create, evidence, perfect,
continue, and preserve the priority of the Security Interest.
(m) For any Collateral that is a fixture or an accession
which has been attached to real estate or other goods prior to the perfection
of the Security Interest, furnish Secured Party, upon demand, a disclaimer of
interest in each such fixture or accession and a consent in writing to the
Security Interest of Secured Party therein, signed by all persons and entities
having any interest in such fixture or accession by virtue of any interest in
the real estate or other goods to which such fixture or accession has been
attached.
34
(n) If certificates of title are issued or outstanding
with respect to any of the Collateral, cause the Security Interest to be
properly noted thereon.
(o) Not use any of the Collateral, or permit the same to
be used, for any unlawful purpose or in any manner inconsistent with the
provisions or requirements of any policy of insurance thereon.
(p) Not modify or substitute, or permit the modification
or substitution of, any contract to which any of the Collateral which is
accounts relates.
(q) Not relocate Debtor's principal place of business,
chief executive office, or place where Debtor's books and records related to
accounts are kept, or otherwise relocate any of the other Collateral to a
county, parish, or state other than as indicated above unless prior thereto
Debtor (i) gives Secured Party 30 days prior written notice of such proposed
relocation (such notice to include, without limitation, the name of the county
or parish and state into which such relocation is to be made) and (ii) (unless
the relocation is to a jurisdiction in which existing financing statements or
other required filings have previously been made to perfect the Security
Interest in such Collateral) executes and delivers all such additional
documents and performs all additional acts as Secured Party in its sole
discretion may request in order to continue or maintain the existence and
priority of the Security Interest in such Collateral.
6. Default. The term "Default," as used herein, means the
occurrence of any one or more of the following events (including the passage of
time, if any, specified therefor):
(a) The failure or refusal of Debtor to pay principal of
or interest on the Obligation, or any part thereof, or to pay any fees on or in
respect to all or any part of the Obligation, as the same become due in
accordance with the terms of the Related Papers.
(b) The occurrence of an "Event of Default" under the
Note.
(c) Any representation or warranty made by Debtor (or any
of its officers) under or in connection with this agreement which shall prove
to have been incorrect in any material respect when made, or any failure by
Debtor to perform or observe any term, covenant or agreement contained in this
agreement on its part to be performed or observed.
7. Remedies. Should a Default occur and be continuing, Secured
Party may, at its election, exercise any and all rights and remedies available
to a secured party under the UCC, in addition to any and all other rights and
remedies afforded by the Related Papers, at law, in equity, or otherwise,
including, without limitation, (a) declaring the entire unpaid balance of the
Obligation, or any part thereof, immediately due and payable, whereupon it
shall be due and payable (provided that, upon the occurrence of a Default under
Paragraph 6(c), the entire Obligation shall automatically become due and
payable without notice or other action of any kind whatsoever); (b) terminate
its commitment (if applicable) to lend under any of the Related Papers; (c)
reduce any claim to judgment; (d) exercise the rights of offset or banker's
Lien against the interest of Debtor in and to every account and other property
of Debtor which are in possession of Secured Party to the extent of the full
35
amount of the Obligation; (e) foreclose the Security Interest and any other
Liens Secured Party may have or otherwise realize upon any and all of the
rights Secured Party may have in and to the Collateral, or any part thereof;
(f) requiring Debtor to assemble all or part of the Collateral and make it
available to Secured Party at a place to be designated by Secured Party which
is reasonably convenient to Debtor and Secured Party; (g) surrendering any
policies of insurance on all or part of the Collateral and receiving and
applying the unearned premiums as a credit on the Obligation; (h) applying by
appropriate judicial proceedings for appointment of a receiver for all or part
of the Collateral (and Debtor hereby consents to any such appointment); (i)
applying to the Obligation any cash held by Secured Party under this agreement;
and (j) bringing suit or other proceedings before any Tribunal either for
specific performance of any covenant or condition contained in any of the
Related Papers or in aid of the exercise of any right granted to Secured Party
in any of the Related Papers.
(a) Notice. Reasonable notification of the time and
place of any public sale of the Collateral, or reasonable notification of the
time after which any private sale or other intended disposition of the
Collateral is to be made, shall be sent to Debtor and to any other Person
entitled to notice under the UCC; provided that if any of the Collateral
threatens to decline speedily in value or is of the type customarily sold on a
recognized market, Secured Party may sell or otherwise dispose of the
Collateral without notification, advertisement, or other notice of any kind.
It is agreed that notice sent or given not less than 10 calendar days prior to
the taking of the action to which the notice relates is reasonable notification
and notice for the purposes of this subparagraph.
(b) Application of Proceeds. Secured Party shall apply
the proceeds or any sale or other disposition of the Collateral under this
Paragraph 7 in the following order: First, to the payment of all its expenses
incurred in retaking, holding, and preparing any of the Collateral for sale(s)
or other disposition, in arranging for such sale(s) or other disposition, and
in actually selling or disposing of the same (all of which are part of the
Obligation); second, toward repayment of amounts expended by Secured Party
under Paragraph 8; third, toward payment of the balance of the Obligation in
such order and manner as Secured Party, in its discretion, may deem advisable.
Any surplus remaining shall be delivered to Debtor or as a court of competent
jurisdiction may direct. If the proceeds are insufficient to pay the
Obligation in full, Debtor shall remain liable for any deficiency.
8. Other Rights of Secured Party.
(a) Performance. In the event Debtor shall fail to keep
the Collateral in good repair, working order, and condition as required in this
agreement, or to pay when due all taxes on any of the Collateral, or to
preserve the priority of the Security Interest in any of the Collateral, or to
keep the Collateral insured as required by this agreement, or otherwise fail to
perform any of its obligations under the Related Papers with respect to the
Collateral, then Secured Party may, at its option, but without being required
to do so, make such repairs, pay such taxes, prosecute or defend any suits in
relation to the Collateral, or insure and keep insured the Collateral in any
amount deemed appropriate by Secured Party, or take all other action which
Debtor is required, but has failed or refused, to take under the Related
Papers. Any sum which may be expended or paid by Secured Party under this
subparagraph (including, without limitation, court costs and attorneys' fees)
shall bear interest from the dates of expenditure or payment at the Highest
Lawful Rate until paid and, together with such interest, shall be payable by
Debtor to Secured Party upon demand and shall be part of the Obligation.
36
(b) Collection. Upon notice from Secured Party, each
Obligor with respect to any payments on any of the Collateral (including,
without limitation, insurance proceeds payable by reason of loss or damage to
any of the Collateral) is hereby authorized and directed by Debtor to make
payment directly to Secured Party, regardless of whether Debtor was previously
making collections thereon. Subject to Paragraph 8(e), until such notice is
given, Debtor is authorized to retain and expend all payments made on
Collateral. Secured Party shall have the right in its own name or in the name
of Debtor to compromise or extend time of payment with respect to all or any
portion of the Collateral for such amounts and upon such terms as Secured Party
may determine; to demand, collect, receive, receipt for, xxx for, compound, and
give acquittance for any and all amounts due or to become due with respect to
Collateral; to take control of cash and other proceeds of any Collateral; to
endorse the name of Debtor on any notes, acceptances, checks, drafts, money
orders, or other evidences of payment on Collateral that may come into the
possession of Secured Party; to sign the name of Debtor on any invoice or xxxx
of lading relating to any Collateral, on any drafts against Obligors or other
persons or entities making payment with respect to Collateral, on assignments
and verifications of accounts or other Collateral and on notices to Obligors
making payment with respect to Collateral; to send requests for verification of
obligations to any Obligor; and to do all other acts and things necessary to
carry out the intent of this agreement. If any Obligor fails or refuses to make
payment on any Collateral when due, Secured Party is authorized, in its sole
discretion, either in its own name or in the name of Debtor, to take such
action as Secured Party shall deem appropriate for the collection of any
amounts owed with respect to Collateral or upon which a delinquency exists.
Regardless of any other provision hereof, however, Secured Party shall never be
liable for its failure to collect, or for its failure to exercise diligence in
the collection of, any amounts owed with respect to Collateral, nor shall it be
under any duty whatever to anyone except Debtor to account for funds that it
shall actually receive hereunder. Without limiting the generality of the
foregoing, Secured Party shall have no responsibility for ascertaining any
maturities, calls, conversions, exchanges, offers, tenders, or similar matters
relating to any Collateral, or for informing Debtor with respect to any of such
matters (irrespective of whether Secured Party actually has, or may be deemed
to have, knowledge thereof). The receipt of Secured Party to any Obligor shall
be a full and complete release, discharge, and acquittance to such Obligor, to
the extent of any amount so paid to Secured Party. The rights granted Secured
Party under this subparagraph may be exercised at any time, whether or not a
Default has occurred and is continuing.
(c) Certain Proceeds. Any cash proceeds of Collateral
which come into the possession of Secured Party (including, without limitation,
insurance proceeds) may, at Secured Party's option, be applied in whole or in
part to the Obligation (to the extent then due), be released in whole or in
part to or on the written instructions of Debtor for any general or specific
purpose, or be retained in whole or in part by Secured Party as additional
Collateral. Any cash Collateral in the possession of Secured Party may be
invested by Secured Party in certificates of deposit issued by Secured Party
(if Secured Party issues such certificates) or by any state or national bank
having combined capital and surplus greater than $10,000,000, or in securities
issued or guaranteed by the United States of America or any agency thereof.
Secured Party shall never be obligated to make any such investment and shall
never have any liability to Debtor for any loss which may result therefrom.
37
All interest and other amounts earned from any investment of Collateral may be
dealt with by Secured Party in the same manner as other cash Collateral. The
provisions of this subparagraph shall be applicable whether or not a Default
has occurred and is continuing.
(d) Use and Operation of Collateral. Should any
Collateral come into the possession of Secured Party, Secured Party may use or
operate such Collateral for the purpose of preserving it or its value pursuant
to the order of a court of appropriate jurisdiction or in accordance with any
other rights held by Secured Party in respect of such Collateral. Debtor
covenants to promptly reimburse and pay to Secured Party, at Secured Party's
request, the amount of all reasonable expenses (including, without limitation,
the cost of any insurance and payment of taxes or other charges) incurred by
Secured Party in connection with its custody and preservation of Collateral,
and all such expenses, costs, taxes, and other charges shall bear interest at
the Highest Lawful Rate until repaid and, together with such interest, shall be
payable by Debtor to Secured Party upon demand and shall become part of the
Obligation. However, the risk of accidental loss or damage to, or diminution
in value of, Collateral is on Debtor, and Secured Party shall have no liability
whatever for failure to obtain or maintain insurance, nor to determine whether
any insurance ever in force is adequate as to amount or as to the risks
insured. With respect to Collateral that is in the possession of Secured Party,
Secured Party shall have no duty to fix or preserve rights against prior
parties to such Collateral and shall never be liable for any failure to use
diligence to collect any amount payable in respect of such Collateral, but
shall be liable only to account to Debtor for what it may actually collect or
receive thereon. The provisions of this subparagraph shall be applicable
whether or not a Default has occurred and is continuing.
(e) Purchase Money Collateral. To the extent that
Secured Party has advanced or will advance funds to or for the account of
Debtor to enable Debtor to purchase or otherwise acquire rights in Collateral,
Secured Party, at its option, may pay such funds (i) directly to the Person
from whom Debtor will make such purchase or acquire such rights, or (ii) to
Debtor, in which case Debtor covenants to promptly pay the same to such Person,
and forthwith furnish to Secured Party evidence satisfactory to Secured Party
that such payment has been made from the funds so provided by Secured Party for
such payment.
(f) Subrogation. If any of the Obligation is given in
renewal or extension or applied toward the payment of indebtedness secured by
any Lien, Secured Party shall be, and is hereby, subrogated to all of the
rights, titles, interests, and Liens securing the indebtedness so renewed,
extended, or paid.
(g) Indemnification. Debtor hereby assumes all liability
for the Collateral, for the Security Interest, and for any use, possession,
maintenance, and management of, all or any of the Collateral, including,
without limitation, any taxes arising as a result of, or in connection with,
the transactions contemplated herein, and agrees to assume liability for, and
to indemnify and hold Secured Party harmless from and against, any and all
claims, causes of action, or liability, for injuries to or deaths of Persons
and damage to property, howsoever arising from or incident to such use,
possession, maintenance, and management, whether such Persons be agents or
employees of Debtor or of third parties, or such damage be to property of
Debtor or of others. Debtor agrees to indemnify, save, and hold Secured Party
harmless from and against, and covenants to defend Secured Party
38
against, any and all losses, damages, claims, costs, penalties, liabilities,
and expenses, including, without limitation, court costs and attorneys' fees,
howsoever arising or incurred because of, incident to, or with respect to
Collateral or any use, possession, maintenance, or management thereof.
9. Miscellaneous.
(a) Term. Upon full and final payment and performance of
the Obligation, this agreement shall thereafter terminate upon receipt by
Secured Party of Debtor's written notice of such termination; provided that no
Obligor, if any, on any of the Collateral shall ever obligated to make inquiry
as to the termination of this agreement, but shall be fully protected in making
payment directly to Secured Party.
(b) Actions Not Releases. The Security Interest and
Debtor's obligations and Secured Party's rights hereunder shall not be
released, diminished, impaired, or adversely affected by the occurrence of any
one or more of the following events: (i) the taking or accepting of any other
security or assurance for any or all of the Obligation; (ii) any release,
surrender, exchange, subordination, or loss of any security or assurance at any
time existing in connection with any or all of the Obligation; (iii) the
modification of, amendment to, or waiver of compliance with any terms of any of
the other Related Papers without the notification or consent of Debtor, except
as required therein (the right to such notification and consent being herein
specifically waived by Debtor); (iv) the insolvency, bankruptcy, or lack of
corporate or trust power of any party at any time liable for the payment of any
or all of the Obligation, whether now existing or hereafter occurring; (v) any
renewal, extension, or rearrangement of the payment of any or all of the
Obligation, either with or without notice to or consent of Debtor, or any
adjustment, indulgence, forbearance, or compromise that may be granted or given
by Secured Party to Debtor; (vi) any neglect, delay, omission, failure, or
refusal of Secured Party to take or prosecute any action in connection with any
other agreement, document, guaranty, or instrument evidencing, securing, or
assuring the payment of all or any of the Obligation; (vii) any failure of
Secured Party to notify Debtor of any renewal, extension, or assignment of the
Obligation or any part thereof, or the release of any security, or of any other
action taken or refrained from being taken by Secured Party against Debtor or
any new agreement between Secured Party and Debtor, it being understood that
Secured Party shall not be required to give Debtor any notice of any kind under
any circumstances whatsoever with respect to or in connection with the
Obligation, including, without limitation, notice of acceptance of this
security agreement or any Collateral ever delivered to or for the account of
Secured Party hereunder; (viii) the illegality, invalidity, or unenforceability
of all or any part of the Obligation against any party obligated with respect
thereto by reason of the fact that the Obligation, or the interest paid or
payable with respect thereto, exceeds the amount permitted by Law, the act of
creating the Obligation, or any part thereof, is ultra xxxxx, or the officers,
partners, or trustees creating same acted in excess of their authority, or for
any other reason; or (ix) if any payment by any party obligated with respect
thereto is held to constitute a preference under applicable Laws or for any
other reason Secured Party is required to refund such payment or pay the amount
thereof to someone else.
(c) Waivers. Except to the extent expressly otherwise
provided herein or in other Related Papers, Debtor waives (i) any right to
require Secured Party to proceed against any other Person, to exhaust its
rights in Collateral, or to pursue any other right which Secured Party may
have;
39
(ii) with respect to the Obligation, presentment and demand for payment,
protest, notice of protest and nonpayment, and notice of the intention to
accelerate; and (iii) all rights of marshaling in respect of any and all of the
Collateral.
(d) Financing Statement. Secured Party shall be entitled
at any time to file this agreement or a carbon, photographic, or other
reproduction of this agreement, as a financing statement, but the failure of
Secured Party to do so shall not impair the validity or enforceability of this
agreement.
(e) Captions; Arrangements; References. The headings,
captions, and arrangements used herein are, unless specified otherwise, for
convenience only and shall not be deemed to limit, amplify, or modify the terms
hereof nor affect the meaning thereof. Whenever herein the singular number is
used, the same shall include the plural where appropriate, and vice versa; and
words of any gender herein shall include each other gender where appropriate.
The words "herein," "hereof," and "hereunder," and other words of similar
import refer to this agreement as a whole and not to any particular part or
subdivision hereof. Reference herein to "Paragraphs" and "Subparagraphs" are
to paragraphs and subparagraphs of this agreement.
(f) Communications. Unless specifically otherwise
provided, whenever this agreement requires or permits any consent, approval,
notice, request, or demand from one party to another, such communication must
be in writing (which may be by cable or tested Telex) to be effective and shall
be deemed to have been given on the day actually delivered or, if mailed, on
the third banking business day in Delaware after it is enclosed in an envelope,
addressed to the party to be notified at the address stated below, properly
stamped, sealed, and deposited in the appropriate official postal service.
Until changed by written notice pursuant hereto, the address and Telex number
for each party for purposes hereof is as follows:
(i) If to the Debtor:
Internet America, Inc.
One Dallas Centre
000 X. Xx. Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxxxxx Xxxxxxx
(ii) If to Secured Party:
First Computer Services Corporation
x/x Xxxx Xxxxxx
Xxx Xxxxxxxx Xxxxx, Xxxxx 000
00000 Xxxx Xxxx
Xxxxxx, Xxxxx 00000
(g) Form and Number of Documents. Each agreement,
document, instrument, or other writing to be furnished to Secured Party under
any provision of this agreement must be in form and substance and in such
number of counterparts as may be satisfactory to Secured Party and its counsel.
40
(h) Exceptions to Covenants. Debtor shall not be deemed
to be permitted to take any action or fail to take any action which is
permitted as an exception to any of the covenants contained herein if such
action or omission would result in the breach of any other covenant contained
herein.
(i) Survival. All covenants, agreements,
undertakings, representations, and warranties may herein shall survive all
closings hereunder and, except as otherwise indicated, shall not be affected by
any investigation made by any party.
10. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY THE LAW OF
THE STATE OF DELAWARE.
11. Maximum Interest Rate. Regardless of any provision contained
in any of the Related Papers, Secured Party shall never be entitled to receive,
collect, or apply, as interest on the Obligation, any amount in excess of the
Highest Lawful Rate, and, in the event Secured Party ever receives, collects,
or applies as interest, any such excess, such amount which would be excessive
interest shall be deemed a partial prepayment of principal and treated
hereunder as such; and, if the principal of the Obligation is paid in full, any
remaining excess shall forthwith be paid to Debtor.
12. Invalid Provisions. If any provision hereof is held to be
illegal, invalid, or unenforceable under present or future Laws effective
during the term hereof, such provision shall be fully severable; this agreement
shall be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part hereof; and the remaining provisions
hereof shall remain in full force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its severance herefrom.
Furthermore, in lieu of such illegal, invalid, or unenforceable provision there
shall be added automatically as a part hereof a provision as similar in terms
to such illegal, invalid, or unenforceable provision as may be possible and be
legal, valid, and enforceable.
13. Entirety and Amendments. This instrument and the Related
Papers embody the entire agreement between the parties, supersede all prior
agreements and understandings, if any, relating to the subject matter hereof,
and may be amended only by an instrument in writing executed jointly by an
authorized officer of each party hereto and supplemented only by documents
delivered or to be delivered in accordance with the express terms hereof.
14. Multiple Counterparts. This agreement has been executed in a
number of identical counterparts, each of which shall be deemed an original for
all purposes and all of which constitute, collectively, one agreement; but, in
making proof of this agreement, it shall not be necessary to produce or account
for more than one such counterpart.
15. Parties Bound; Assignment. This agreement shall be binding on
Debtor and Debtor's successors and assigns and shall inure to the benefit of
Secured Party and Secured Party's successors and assigns. If there is more
than one Debtor, their obligations and agreements hereunder are joint
41
and several and shall be binding upon their respective heirs, legal
representatives, successors, and assigns, and delivery or other accounting of
Collateral to any one or more of them shall discharge Secured Party of all
liability therefor. The Secured Party may assign any or all of its rights and
privileges under this agreement (provided that Debtor need only obtain the
written agreement of the Secured Party (and not such assignees) in order to
secure a waiver of any covenant set forth herein). Any such assignment by
Secured Party shall be in compliance with the Securities Act and applicable
state securities laws and Debtor shall have received a certificate to the
foregoing effect from Secured Party or such assignee. Debtor may not, without
the prior written consent of Secured Party, assign any rights, duties, or
obligations hereunder. In the event of an assignment of all or part of the
Obligation, the Security Interest and other rights and benefits hereunder, to
the extent applicable to the part of the Obligation so assigned, may be
transferred therewith.
EXECUTED as of the day and year first herein set forth.
INTERNET AMERICA, INC.
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
(Title) Chief Executive Officer
42
SCHEDULE I
LOCATION WITH RESPECT TO COLLATERAL
The failure of any of the Collateral to be located as represented
below shall not impair or limit the Security Interest therein.
A. LOCATION OF BOOKS AND RECORDS AS TO ACCOUNTS:
One Dallas Centre
000 X. Xx. Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
B. LOCATION OF OTHER COLLATERAL:
Description - City, County (or Parish), and State
000 Xxxxxxxx
Xx. Xxxxx, Xxxxx
000 X. Xxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
000 X. Xxxxxx
Xxxxxx, Xxxxx 00000
0000 Xxxxxxxx Xxx, Xxxxx X
Xxx Xxxxxx, Xxxxx 00000
000 Xxxxx Xxxx Xxxxxx
Xxxxxxxxxxx, Xxxxx
000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
000 Xxxxxxxx Xxxx., Xxxxx 000
Xxxxxxx Xxxxx, Xxxxx 00000
000 Xxxxx 00xx Xxxxxx
Xxxxxxxxx, Xxxxx 00000
43
EXHIBIT C
PLEDGE AND SECURITY AGREEMENT
(STOCK AND SECURITIES, ETC.)
PLEDGE AND SECURITY AGREEMENT, dated as of the 25th day of September,
1996, by ______________ ("Pledgor"), with [its] [his] principal residence at
______________________, to and in favor of First Computer Services
Corporation, a Delaware corporation ("Pledgee").
W I T N E S S E T H:
PRELIMINARY STATEMENT. Pledgor is now the direct legal and beneficial
owner of ______ shares of the issued and outstanding shares of capital stock of
Internet America, Inc., a Texas corporation ("Issuer"), as more particularly
described on Exhibit A hereto (the "Pledged Securities"). In order to induce
Pledgee to loan (the "Loan") to Issuer the moneys contemplated by that certain
Securities Purchase Agreement dated September 25, 1996 between Issuer and
Pledgee, Pledgor has agreed to secure the payment and performance of the
Obligations (as hereinafter defined) and to accomplish same by (i) executing
and delivering to Pledgee this Pledge and Security Agreement, (ii) delivering
to Pledgee such of the Pledged Securities as Pledgee shall now or hereafter
have in its possession from time to time, together with appropriate powers
and/or endorsements duly executed in blank by Pledgor, and (iii) delivering to
Pledgee any and all other documents which Pledgee deems necessary to protect
Pledgee's interests hereunder or with respect to the Obligations.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, receipt of which is hereby acknowledged, Pledgor
hereby agrees as follows:
1. Definitions
(a) "Note" shall mean that certain Promissory Note of
even date herewith in the original principal amount of $1,767,713
executed by Issuer and payable to the order of Pledgee, as renewed,
extended, amended or otherwise modified from time to time.
(b) "Obligations" shall mean and include all present and
future obligations, indebtedness and liabilities of Issuer to Pledgee
under the Note and all costs, expenses and reasonable attorneys' fees
incurred or paid by Pledgee in enforcing or attempting to enforce its
rights with respect to this Pledge Agreement, the Other Agreements,
and the Pledged Property (each as herein defined) and in preserving,
maintaining, protecting, selling, foreclosing or otherwise disposing
of the Pledged Property.
(c) "Other Agreements" shall mean any agreement,
document, guaranty, note or instrument executed by Issuer or Pledgor
with or in favor of Pledgee.
(d) "Pledge Agreement" shall mean and include this Pledge
and Security Agreement, as amended, modified or supplemented from time
to time.
44
(e) "Pledged Property" shall mean and include (i) the
Pledged Securities, together with all investment property, cash
dividends, stock dividends, interest, profits, redemptions, warrants,
subscription rights, stock, securities options, substitutions,
exchanges and other distributions now or hereafter distributed by
Issuer or which may hereinafter be acquired by or delivered to the
possession of Pledgor or Pledgee with respect to the Pledged
Securities, (ii) Pledgor's records with respect to the foregoing and
(iii) the proceeds of all of the foregoing.
(f) All other terms hereinbefore or hereinafter defined
in this Pledge Agreement shall have the meanings herein assigned to
such terms.
(g) All capitalized terms not specifically defined herein
which are defined in the Uniform Commercial Code (the "Code") as
presently in effect in the State of Delaware shall be construed in
accordance with the definitions set forth in the Code.
2. Grant of Security Interest
As collateral security for the prompt and unconditional payment and
performance when due of each and every one of the Obligations, Pledgor hereby
assigns, mortgages, pledges, hypothecates, transfers and sets over to Pledgee
and grants to Pledgee a security interest in and lien upon all of the Pledged
Property.
3. Representations, Warranties, Covenants and Waiver
Pledgor hereby covenants, represents and warrants, with and to
Pledgee that (all of such covenants, representations and warranties being
continuing in nature so long as any of the Obligations are outstanding):
(a) The Pledged Securities are duly authorized, validly
issued, fully paid and non-assessable securities of the Issuer,
constitute Pledgor's entire interest in the Issuer and are not
registered, nor has Pledgor authorized the registration thereof, in
the name of any person or entity other than Pledgor or Pledgee.
(b) The Pledged Property is directly, legally and
beneficially owned by Pledgor free and clear of all claims, liens,
pledges and encumbrances of any kind, nature or description except for
the first and prior pledge and security interest with respect thereto
in favor of Pledgee.
(c) The Pledged Property is not subject to any
restrictions relative to the transfer thereof, and Pledgor has the
right to transfer and hypothecate the Pledged Property free and clear
of any liens, encumbrances or restrictions, except as otherwise
provided herein.
(d) The Pledged Property is duly and validly pledged to
Pledgee, and no consent or approval of any governmental or regulatory
authority or of any securities exchange or the
45
like, nor any consent or approval of any other third party was or is
necessary to the validity and enforceability of this Pledge Agreement.
(e) Pledgee is authorized, but not required, to (i)
store, deposit and safeguard the Pledged Property, (ii) perform any
and all other acts which Pledgee in good xxxxx xxxxx reasonable and/or
necessary for the protection and preservation of the Pledged Property
or its value or Pledgee's security interest therein, including without
limitation, transferring, registering or arranging for the transfer or
registration of the Pledged Property to or in Pledgee's own name and
receiving the income therefrom as additional collateral for the
Obligations and (iii) pay any charges or expenses which Pledgee deems
necessary for the foregoing purposes. Any obligation of Pledgee for
reasonable care for the Pledged Property in Pledgee's possession shall
be limited to the same degree of care which Pledgee uses for similar
property owned by Pledgee.
(f) Pledgor will pay all charges and assessments of any
nature against the Pledged Property or with respect thereto prior to
said charges and/or assessments being delinquent.
(g) Pledgor shall promptly reimburse Pledgee on demand,
together with interest at the rate provided in the Other Agreements,
for any charges, assessments or expenses paid or incurred by Pledgee
in Pledgee's discretion for the protection and preservation and
maintenance of the Pledged Property and the enforcement of Pledgee's
rights hereunder, including, without limitation, reasonable attorneys'
fees and legal expenses incurred by Pledgee in seeking to protect,
collect or enforce Pledgee's rights in the Pledged Property or
otherwise hereunder.
(h) During the term of this Pledge Agreement, if Pledgor
shall receive, have registered in its name or become entitled to
receive or acquire or have registered in its name any stock
certificate, option or right with respect to the securities of Issuer
(including without limitation, any certificate representing a dividend
on or a distribution or exchange of or in connection with any
reclassification of the Pledged Securities) whether as an addition to,
in substitution of, or in exchange for any of the Pledged Property or
otherwise, Pledgor agrees to accept same as Pledgee's agent, to hold
same in trust for Pledgee and to deliver same forthwith to Pledgee or
Pledgee's agent or bailee in the form received, with the
endorsement(s) of Pledgor where necessary and/or duly executed
appropriate powers and/or assignments, to be held by Pledgee or
Pledgee's agent or bailee subject to the terms hereof, or, if any of
the foregoing is uncertificated, register same with the Pledgee's
security interest noted therein, as further security for the
Obligations.
(i) During the term of this Pledge Agreement, Pledgor
shall not directly or indirectly sell, assign, transfer, or otherwise
dispose of, or grant any option with respect to the Pledged Property,
nor shall Pledgor create, incur or permit any further pledge,
hypothecation, encumbrance, lien, mortgage or security interest with
respect to the Pledged Property.
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(j) So long as no Event of Default (as hereinafter
defined) has occurred, Pledgor shall have the right to vote and
exercise all corporate rights with respect to the Pledged Securities,
except as expressly prohibited herein.
(k) Pledgee may notify Issuer or the appropriate transfer
agent of the Pledged Property to register the security interest and
pledge granted herein and honor the rights of Pledgee with respect
thereto.
(l) Pledgor waives (i) all rights to require Pledgee to
proceed against any other person, entity or collateral or to exercise
any remedy, (ii) the defense of the statute of limitations in any
action upon any of the Obligations, (iii) any rights as a guarantor or
surety, including, without limitation, the right to be informed of
additional credit extended by Pledgor, any financial information
relating to Issuer, the value of the Pledged Property, any
deterioration thereof, or of any other matter, unless specifically
required by applicable law and non-waivable and (iv) to the extent
permissible, its rights under Section 9-112 and 9-207 of the Code.
Pledgor agrees that the Pledged Property, other collateral, Issuer or
any other guarantor or endorser may be released, substituted or added
with respect to the Obligations, in whole or in part, without
releasing or otherwise affecting the liability of Pledgor, the pledge
and security interests granted hereunder, or this Pledge Agreement.
(m) Pledgor shall not relocate Pledgor's principal
residence to a state other than as indicated in the preface above
unless prior thereto Pledgor (i) gives Pledgee 30 days prior written
notice of such proposed relocation (such notice to include, without
limitation, the name of the county or parish and state into which such
relocation is to be made) and (ii) (unless the relocation is to a
jurisdiction in which existing financing statements or other required
filings have previously been made to perfect the Pledgee's security
interest in the Pledged Property) executes and delivers all such
additional documents and performs all additional acts as Pledgee in
its sole discretion may request in order to continue or maintain the
existence and priority of the security interest in the Pledged
Property.
4. Events of Default
The occurrence of any one or more of the following events of default
(individually or collectively, herein called an "Event of Default"):
(a) the failure or refusal of Issuer to pay all or any
part of the principal of or accrued interest on the Note as and when
the same becomes due and payable (whether at maturity, by
acceleration, or otherwise) in accordance with the terms thereof;
(b) Issuer, Pledgor or any guarantor of the Note shall
(i) become insolvent within the meaning of the Bankruptcy Code of the
United States, as amended, (ii) admit in writing its or his inability
to pay or otherwise fail to pay its or his debts generally as they
become due, (iii) voluntarily seek, consent to, or acquiesce in the
benefit or benefits of any Debtor Relief Law (meaning the Bankruptcy
Code of the United States, as amended, and all other applicable
liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership,
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insolvency, reorganization, or similar debtor relief laws from time to
time in effect affecting the rights of creditors generally), or (iv)
be made the subject of any proceeding provided for by any Debtor
Relief Law that could suspend or otherwise affect any of the rights of
the holder hereof; or
(c) any representation or warranty made by Pledgor (or
any of its officers or trustees) under or in connection with this
Pledge Agreement which shall prove to have been incorrect in any
material respect when made, or any failure by Pledgor to perform or
observe any term, covenant or agreement contained in this Pledge
Agreement on its part to be performed or observed.
5. Remedies After Default
Subsequent to the occurrence and during the continuance of an Event of
Default:
(a) Pledgee, at its option, shall be empowered to
exercise its continuing right to instruct Issuer (or the appropriate
transfer agent of the Pledged Securities) to register any or all of
the Pledged Securities and/or other Pledged Property in the name of
Pledgee or in the name of Pledgee's nominee and Pledgee may complete,
in any manner Pledgee may deem expedient, any and all stock powers,
assignments or other documents heretofore or hereafter executed in
blank by Pledgor and delivered to Pledgee. After said instruction,
and without further notice, Pledgee, in its discretion, shall have the
exclusive right to exercise all voting and corporate rights with
respect to the Pledged Securities and other Pledged Property and
exercise any and all rights of conversion, redemption, exchange,
subscription or any other rights, privileges, or options pertaining to
any shares of the Pledged Securities or the other Pledged Property as
if Pledgee were the absolute owner thereof, including without
limitation, the right to exchange, in its discretion any and all of
the Pledged Securities and other Pledged Property upon any merger,
consolidation, reorganization, recapitalization or other readjustment
with respect to Issuer. Upon the exercise of any such rights,
privileges or options by Pledgee, Pledgee shall have the right to
deposit and deliver any and all of the Pledged Securities and other
Pledged Property to any committee, depository, transfer agent,
registrar or other designated agency upon such terms and conditions as
Pledgee may determine, all without liability, except to account for
property actually received by Pledgee. However, Pledgee shall not
have any duty to exercise any of the aforesaid rights, privileges or
options (all of which are exercisable in the sole discretion of
Pledgee) and shall not be responsible for any failure to do so or
delay in doing so.
(b) In addition to all the rights and remedies of a
secured party under applicable law, Pledgee shall have the right, at
any time and without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below
of time and place of public or private sale) to or upon Pledgor or any
other person (all and each of which demands, advertisements and/or
notices are hereby expressly waived to the extent permitted by law),
to proceed forthwith to collect, redeem, receive, appropriate, sell,
or otherwise dispose of and deliver the Pledged Property or any part
thereof in one or more lots at public or private sale or sales at any
exchange, brokers board or at any of Pledgee's offices or
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elsewhere at such prices and on such terms as Pledgee may deem best.
The foregoing disposition(s) may be for cash or on credit or for
future delivery without assumption of any credit risk by Pledgee, with
Pledgee having the right to purchase all or any part of said Pledged
Property so sold at any such sale or sales, public or private, free of
any right or equity of redemption in Pledgor, which right or equity is
hereby expressly waived or released by Pledgor. In connection with
any sale or other disposition of the Pledged Property, Pledgee is
hereby authorized by Pledgor to complete the appropriate
instruments(s) of transfer executed and delivered by Pledgor with
respect to the Pledged Property in such manner as Pledgee shall deem
appropriate to effectuate such sale or other disposition. All of
Pledgee's rights and remedies, including, but not limited to, the
foregoing, shall be cumulative and not exclusive and shall be
enforceable alternatively, successively or concurrently, as Pledgee
may deem expedient. The proceeds of any such collection, redemption,
recovery, receipt, appropriation, realization, sale or other
disposition, after deducting all costs and expenses of every kind
incurred relative thereto or incidental to the care, safekeeping or
otherwise of any and all Pledged Property or in any way relating to
the rights of Pledgee hereunder (including, without limitation,
reasonable attorneys' fees and legal expenses) shall be applied first
to the satisfaction of the Obligations (in such order as Pledgee may
elect) and then to the payment of any other amounts required by
applicable law. Any surplus then remaining shall be delivered to
Pledgor or its successors or assigns or as a court of competent
jurisdiction may direct. Pledgor agrees that ten (10) calendar days
prior notice by Pledgee, sent by certified mail, postage prepaid,
designating the date after which a private sale may take place or a
public auction may be held, is reasonable notification of such
matters.
(c) Pledgor recognizes that Pledgee may be unable to
effect a public sale of all, or part of the Pledged Property by reason
of certain prohibitions contained in the Securities Act of 1933, as
amended, as now or hereafter in effect or in applicable Blue Sky or
other state securities law, as now or hereafter in effect, but may be
compelled to resort to one or more private sales to a restricted group
of purchasers who will be obliged to agree, among other things, to
acquire such Pledged Property for their own account for investment and
not with a view to the distribution or resale thereof. If at the time
of any sale of the Pledged Property or any part thereof the same shall
not, for any reason whatsoever, be effectively registered (if
required) under the Securities Act of 1933 (or other applicable state
securities law), as then in effect, Pledgee in its sole and absolute
discretion is authorized to sell such Pledged Property or such part
thereof by private sale in such manner and under such circumstances as
Pledgee or its counsel may deem necessary or advisable in order that
such sale may legally be effected without registration. Pledgor
agrees that private sales so made may be at prices and on terms less
favorable to the seller than if such Pledged Property were sold at
public sale, and that Pledgee has no obligation to delay the sale of
any such Pledged Property for the period of time necessary to permit
Issuer, even if Issuer would agree, to register such Pledged Property
for public sale under such applicable securities laws. Pledgor agrees
that any private sales made under the foregoing circumstances shall be
deemed to have been made in a commercially reasonable manner.
(d) All of the Pledgee's rights and remedies, including
but not limited to the foregoing and those otherwise arising under
this Pledge Agreement, the Other Agreements,
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the instruments and securities comprising the Pledged Property,
applicable law or otherwise, shall be cumulative and not exclusive and
shall be enforceable alternatively, successively or concurrently as
Pledgee may deem expedient. No failure or delay on the part of
Pledgee in exercising any of Pledgee's options, powers or rights or
partial or single exercise thereof, shall constitute a waiver of such
option, power or right.
6. Further Assurances
Pledgor agrees that at any time and from time to time upon the written
request of Pledgee, Pledgor will execute and deliver such further documents,
including but not limited to irrevocable proxies or stock powers, in form
satisfactory to counsel for Pledgee, and will take or cause to be taken such
further acts as Pledgee may reasonably request in order to effect the purposes
of this Pledge Agreement and perfect or continue the perfection of the security
interest in the Pledged Property granted to Pledgee hereunder.
7. Miscellaneous
(a) Beyond the exercise of reasonable care to assure the
safe custody of the Pledged Property while held by Pledgee hereunder,
as provided in Section 3(e) hereof, Pledgee or Pledgee's agent or
bailee shall have no duty or liability to protect or preserve any
rights pertaining thereto and shall be relieved of all responsibility
for the Pledged Property upon surrendering it to Pledgor or
foreclosure with respect thereto. Pledgee shall not have any
obligation or duty to return or release its security interest in the
Pledged Property, except upon the written request of Pledgor, at the
sole expense of Pledgor and only after all Obligations are
indefeasibly paid in full.
(b) No course of dealing between Pledgor and Pledgee, nor
any failure or delay by Pledgee to exercise any right, power or
privilege under the Pledge Agreement, the Other Agreements or under
any other agreements, instruments and documents executed and delivered
in connection therewith, shall operate as a waiver hereof or thereof;
nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege. No waiver of any provision of this Pledge Agreement shall
be effective unless the same shall be in writing and signed by
Pledgee, and then such waiver shall be effective only in the specific
instance and for the purpose for which given.
(c) This Pledge Agreement may not be changed, modified or
amended, in whole or in part, except by a writing signed by Pledgor
and Pledgee.
(d) The provisions of this Pledge Agreement and the Other
Agreements are severable, and if any clause or provision hereof or
thereof shall be held invalid or unenforceable in whole or in part in
any jurisdiction, then such invalidity or unenforceability shall
attach only to such clause or provision in any such jurisdiction or
part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision
in this Pledge Agreement or the Other Agreements in any jurisdiction.
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(e) THE PARTIES HERETO WAIVE TRIAL BY JURY IN ANY ACTION
OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT WHETHER ARISING OUT
OF, UNDER OR BY REASON OF THIS PLEDGE AGREEMENT, THE PLEDGED PROPERTY,
THE OTHER AGREEMENTS OR ANY MATTER OR PROCEEDING RELATING THERETO.
(f ) This Pledge Agreement shall inure to the benefit of
Pledgor and Pledgee and their respective successors and assigns, and
shall be binding upon Pledgor and its successors and assigns.
(g) Pledgee shall be entitled at any time to file this
Pledge Agreement or a carbon, photographic, or other reproduction of
this Pledge Agreement, as a financing statement, but the failure of
Pledgee to do so shall not impair the validity or enforceability of
this Pledge Agreement.
8. Counterparts
This Pledge Agreement may be signed in any number of counterparts with
the same effect as if the signatures were upon the same instrument.
9. Joint and Several Liability
If there are one or more Pledgors, the Obligations of the Pledgor
shall be several and also joint, each with all and also each with any one or
more of the others, and may be enforced at the option of the Pledgee against
each severally, any two or more jointly, or some severally and some jointly.
10. Governing Law
THIS PLEDGE AGREEMENT AND ANY OTHER AGREEMENT, INSTRUMENT OR DOCUMENT
DELIVERED IN CONNECTION HEREWITH, AND THE OBLIGATIONS OF THE PARTIES HEREUNDER
OR THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF DELAWARE.
IN WITNESS WHEREOF, the undersigned has caused these presents to be
duly executed and delivered on the day and year first above written.
----------------------------------------
[NAME]
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EXHIBIT A
PLEDGED SECURITIES
All of Pledgor's now owned or hereafter acquired right, title and
interest in and to the securities described below:
[Description of Securities]
All investment property, stocks, bonds or other securities and
personal property, cash, proceeds, increases, and profits now existing
or hereafter arising therefrom or relating thereto, together with any
passbook or certificates which may from time to time evidence the
same, and together with all moneys now or hereafter on deposit
therein, both principal and interest, all proceeds and products
thereof, and all of Pledgor's right, title and interest therein.
