SECURITIES PURCHASE AGREEMENT
EXHIBIT
4.1
This
SECURITIES PURCHASE AGREEMENT (the “Agreement”) dated as of December 10, 2007,
is made by and among Internet America, Inc., a Texas corporation, with
headquarters located at 00000 X. Xxx Xxxxxxx Xxxx., X. Xxxxx 000, Xxxxxxx,
Xxxxx
00000 (the “Company”), and the investors named on the signature pages hereto,
together with their permitted transferees (whether one or more, the
“Investors”).
RECITALS:
A. The
Company and the Investors are executing and delivering this Agreement in
reliance upon the exemptions from securities registration afforded by Section
4(2) of the Securities Act and Rule 506 under Regulation D.
B. Each
of
the Investors desires, upon the terms and conditions stated in this Agreement,
to purchase that number of shares of common stock, $0.01 par value (“Common
Stock”), of the Company indicated on their respective
signature
page hereto (the “Common Shares”) at the per share price indicated on
their
respective
signature page hereto.
C. Contemporaneously
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement under which the Company
has agreed to provide certain registration rights under the Securities Act,
the
rules and regulations promulgated thereunder, and applicable state securities
laws.
D. The
capitalized terms used herein and not otherwise defined have the meanings given
them in Article IX hereof.
In
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the Company and the Investors hereby agree as
follows:
ARTICLE
I
PURCHASE
AND SALE OF COMMON STOCK
1.1 Purchase
and Sale of Common Stock.
At the
Closing, subject to the terms of this Agreement and the satisfaction or waiver
of the conditions set forth in Articles VI and VII hereof, the Company will
issue and sell to each Investor, and each Investor will (on a several and not
a
joint basis) purchase from the Company, such number of Common Shares set forth
on the Investor’s signature page. The Company will add each
Investor’s
name and
number of shares purchased to Exhibit A and amend Exhibit A from time to time
to
add new Investors.
1.2 Payment.
Each
Investor will pay the purchase price for the Common Shares as is set forth
on
the Investor’s signature page. Each Investor will make payment by wire transfer
of immediately available funds in accordance with the Company’s written wire
instructions. At Closing the Company will deliver to each Investor, free and
clear of all restrictive and other legends (except as expressly provided
herein), one or more certificates representing the number of Common Shares
purchased by such Investor against delivery of the purchase price as described
above.
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1.3 Closing
Date.
Subject
to the satisfaction or waiver of the conditions set forth in Articles VI and
VII
hereof, the closing of the sale and purchase of the Common Shares (the
“Closing”) will take place at 8:00 a.m., Houston time, on or prior to December
10, 2007 as identified by one day prior notice from the Company, or at another
date or time agreed upon by the parties to this Agreement (the “Closing Date”).
The Closing will be held at the offices of the Company located
at 00000
X.
Xxx Xxxxxxx Xxxxxxx, X., Xxxxx 000, Xxxxxxx, Xxxxx 00000, or at such other
place
as the parties agree.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF INVESTORS
Each
Investor represents and warrants to the Company, severally and solely with
respect to itself and its purchase hereunder and not with respect to any other
Investor, that:
2.1 Investment
Purpose.
The
Investor is purchasing the Common Shares for its own account and not with a
present view toward the public sale or distribution thereof, except pursuant
to
sales registered or exempted from registration under the Securities Act;
provided, however, that by making the representations herein, such Investor
does
not agree to hold any of the Common Shares for any minimum or other specific
term and reserves the right to dispose of the Common Shares at any time in
accordance with or pursuant to a registration statement or an exemption from
the
registration requirements of the Securities Act. The Investor is not purchasing
the Common Shares with a view toward making a tender or exchange offer for
other
shares of outstanding Common Stock, and has no present intention of acquiring
a
majority of the outstanding shares of Common Stock of the Company.
2.2 Accredited
Investor Status.
The
Investor is an “accredited investor” as defined in Rule 501(a) of Regulation D
in that, if a trust, it has total assets in excess of $5,000,000 and was not
formed for the specific purpose of acquiring the Common Shares. The person
directing the purchase of the Common Shares for the Investor has experience
as
an investor in securities representing an investment decision like that involved
in the purchase of the Common Shares and acknowledges that he has the knowledge,
sophistication, and experience in financial and business matters as to be
capable of evaluating the merits and risks of an investment in the Common Shares
and that the Investor has the ability to bear the economic risks of an
investment in the Common Shares.
2.3 Reliance
on Exemptions.
The
Investor understands that the Common Shares are being offered and sold to it
in
reliance upon specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying upon
the truth and accuracy of, and the Investor’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings
of
the Investor set forth herein in order to determine the availability of such
exemptions and the eligibility of the Investor to acquire the Common
Shares.
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2.4 Information.
The
Investor and its advisors, if any, have reviewed the SEC Documents and
have
been
furnished with all materials relating to the business, finances, and operations
of the Company, and materials relating to the offer and sale of the Common
Shares, that have been requested by the Investor or its advisors, if any. The
Investor and its advisors, if any, have been afforded the opportunity to ask
questions of the Company. Neither such inquiries nor any other due diligence
investigation conducted by Investor or any of its advisors or representatives
modify, amend, or affect the Investor’s right to rely on the Company’s
representations and warranties contained in Article III below. The Investor
acknowledges and understands that its investment in the Common Shares involves
a
significant degree of risk, including the risks reflected in the SEC Documents,
and that the market price of the Common Stock has been and continues to be
volatile and that no representation is being made as to the future value of
the
Common Stock.
2.5 Governmental
Review.
The
Investor understands that no United States federal or state agency or any other
government or governmental agency has passed upon or made any recommendation
or
endorsement of the Common Shares or an investment therein.
2.6 Transfer
or Resale.
The
Investor understands that:
(a) except
as
provided in the Registration Rights Agreement, the Common Shares have not been
registered under the Securities Act or any applicable state securities laws
and,
consequently, the Investor may have to bear the risk of owning the Common Shares
for an indefinite period of time because the Common Shares may not be
transferred unless (i) the resale of the Common Shares is registered pursuant
to
an effective registration statement under the Securities Act; (ii) the Investor
has delivered to the Company an opinion of counsel (in form, substance and
scope
reasonably satisfactory to the Company) to the effect that the Common Shares
to
be sold or transferred may be sold or transferred pursuant to an exemption
from
such registration; (iii) the Common Shares are sold or transferred pursuant
to
Rule 144; or (iv) the Common Shares are sold or transferred to an affiliate
(as
defined in Rule 144) of the Investor;
(b) any
sale
of the Common Shares made in reliance on Rule 144 may be made only in accordance
with the terms of Rule 144 and, if Rule 144 is not applicable, any resale of
the
Common Shares under circumstances in which the seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the Securities Act) may require compliance with another exemption
under the Securities Act or the rules and regulations of the SEC
thereunder;
(c) except
as
set forth in the Registration Rights Agreement, neither the Company nor any
other person is under any obligation to register the Common Shares under the
Securities Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder; and
(d) notwithstanding
anything in this Agreement to the contrary, the Company agrees to
register
any
Common Shares issued to an Investor hereunder in the name of any partner of
such
Investor, and any such partner shall be deemed to be an Investor for all
purposes of this Agreement and the Registration Rights Agreement, provided
that
any such partner agrees in writing to be subject to the terms of this Agreement
and the Registration Rights Agreement to the same extent as if such partner
were
an original Investor hereunder and thereunder.
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2.7 Legends.
The
Investor understands that until (a) the Common Shares may be sold by the
Investor under Rule 144(k) or (b) such time as the resale of the Common Shares
has been registered under the Securities Act as contemplated by the Registration
Rights Agreement, the certificates representing the Common Shares will bear
a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such Common
Shares):
THE
SECURITIES (THE “SECURITIES”) EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY
ITS
ACQUISITION HEREOF, THE HOLDER AGREES THAT IT WILL NOT OFFER, RESELL, PLEDGE
OR
OTHERWISE TRANSFER (INDIVIDUALLY AND COLLECTIVELY, A “TRANSFER”) THE SECURITIES
EVIDENCED HEREBY, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT. IF THE PROPOSED TRANSFER IS TO BE MADE PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE COMPANY AND THE TRANSFER AGENT SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT
OR ANY STATE OR FOREIGN SECURITIES LAW. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
The
legend set forth above will be removed and the Company will issue a certificate
without the legend to the holder of any certificate upon which it is stamped,
in
accordance with the terms of Article V hereof.
2.8 Authorization;
Enforcement.
This
Agreement and the Registration Rights Agreement have been duly and validly
authorized, executed, and delivered on behalf of the Investor and are valid
and
binding agreements of the Investor, enforceable in accordance with their terms,
subject to the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting the rights of creditors generally and
the
application of general principles of equity.
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2.9 Residency.
The
Investor is a resident, or was organized under the laws, of the jurisdiction
set
forth immediately below such Investor’s name on the signature pages
hereto.
2.10 No
Intent to Effect a Change of Control.
The
Investor has no present intent to change or influence the control of the Company
within the meaning of Rule 13d-1 of the Exchange Act.
2.11 No
Hedging.
The
Investor has not established any hedge or other position in the Common Stock
that is outstanding on the Closing Date which is designed to or could reasonably
be expected to lead to or result in any sale of the Common Shares. For purposes
hereof, a “hedge or other position” would include effecting any short sale or
having in effect any short position or any purchase, sale or grant of any put
option, call option or prepaid forward contract with respect to the Common
Stock
of the Company or with respect to any security (other than a broad-based market
basket or index) that includes, relates to or derives any significant part
of
its value from the Common Stock.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company and each of its Subsidiaries, as applicable, represents and warrants
to
the Investors that:
3.1 Organization
and Qualification.
The
Company and its Subsidiaries are duly incorporated, validly existing, and in
good standing under the laws of the jurisdictions in which they are
incorporated, with full power and authority (corporate and other) to own, lease,
use and operate their properties, if any, and to carry on their businesses
as
and where now owned, leased, used, operated and conducted. The Company and
its
Subsidiaries are
duly
qualified to do business and
are in
good standing in every jurisdiction in which the nature of the business
conducted by them makes such qualification necessary, except where the failure
to be so qualified or in good standing would not have a Material Adverse Effect.
3.2 Authorization;
Enforcement.
(a) The
Company has all requisite corporate power and authority to enter into and to
perform its obligations under this Agreement and the Registration Rights
Agreement, to consummate the transactions contemplated hereby and thereby and
to
issue the Common Shares in accordance with the terms hereof and thereof; (b)
the
execution, delivery and performance of this Agreement and the Registration
Rights Agreement by the Company and the consummation by it of the transactions
contemplated hereby and thereby (including without limitation the issuance
of
the Common Shares) have been duly authorized by the Company’s Board of Directors
and no further consent or authorization of the Company, its Board or Directors,
or its stockholders is required; (c) this Agreement and the Registration Rights
Agreement have been duly executed by the Company; and (d) each of this Agreement
and the Registration Rights Agreement constitutes a legal, valid, and binding
obligation of the Company enforceable against the Company in accordance with
its
respective terms, except as may be limited by any applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the rights
of
creditors generally and the application of general principles of
equity.
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3.3 Capitalization.
As of
the date prior to the Closing Date, the authorized capital stock of the Company
consists of 40,000,000 shares of common stock and 5,000,000 shares of preferred
stock, $.01 par value per share, which may be divided into and issued in one
or
more series upon the creation thereof by the Board of Directors of the Company
(the “Board”). As of the date of this Agreement, (i) 12,857,031 shares of Common
Stock are issued and outstanding, (ii) 2,176,632 shares of Common Stock have
been authorized and reserved for issuance under Stock Plans; (iii) no shares
of
Common Stock are held by the Company in its treasury, (iv) 4,000,000 shares
of
preferred stock have been designated as Series A Preferred Stock (the “Preferred
Stock”) and 2,889,076 shares are issued and outstanding. All of such outstanding
shares of capital stock have been duly authorized and are validly issued, fully
paid, and nonassessable and issued in compliance with all applicable state
and
federal laws concerning the issuance of securities. Except as set forth in
the
Rights Agreement dated as of August 9, 2004 (the “Rights Agreement”) by and
between the Company and American Stock Transfer & Trust Company, as the
rights agent, no shares of capital stock of the Company, including the Common
Shares, are subject to preemptive rights or any other similar rights of the
other stockholders of the Company or any liens or encumbrances imposed through
the actions or failure to act of the Company. Except as set forth in the Rights
Agreement and pursuant to the terms of the Preferred Stock, there are no
outstanding options, warrants, scrip, rights to subscribe for, puts, calls,
rights of first refusal, agreements, understandings, claims, or other
commitments or rights of any character whatsoever relating to, or securities
or
rights convertible into, exercisable for, or exchangeable for any shares of
capital stock of the Company, or arrangements by which the Company is or may
become bound to issue additional shares of capital stock of the Company. The
Company’s Articles of Incorporation and the Company’s By-laws, each as in effect
on the date hereof, filed as exhibits to the Company’s SEC Documents, are true
and correct copies of each such document.
3.4 Issuance
of Common Shares.
The
Common Shares have been duly authorized and, upon issuance in accordance with
the terms of this Agreement, will be validly issued, fully paid, and
non-assessable, free from all taxes, liens, claims, encumbrances, and charges
with respect to the issuance thereof, will not be subject to preemptive rights
or other similar rights of stockholders of the Company, and will not impose
personal liability on the holders thereof.
3.5 Outstanding
Debt.
The
Company has no Indebtedness for Borrowed Money (as hereinafter defined) except
as otherwise set forth in the SEC Documents. The Company is not in default
in
the payment of the principal of or interest or premium on any such Indebtedness
for Borrowed Money, and no event has occurred or is continuing under the
provisions of any instrument, document or agreement evidencing or relating
to
any such Indebtedness for Borrowed Money which with the lapse of time or the
giving of notice, or both, would constitute an event of default
thereunder.
3.6 No
Conflicts; No Violation.
(a) The
execution, delivery, and performance of this Agreement and the Registration
Rights Agreement by the Company, and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation,
the
issuance of the Common Shares) do not and will not (i) conflict with or result
in a violation of any provision of the Articles of Incorporation or By-laws,
(ii) violate or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which with notice or lapse of time or both
could become a default) under, or give to others any rights of termination,
amendment (including without limitation, the triggering of any anti-dilution
provision), acceleration or cancellation of, any agreement, indenture, patent,
patent license, or instrument to which the Company is a party, or (iii) result
in a violation of any law, rule, regulation, order, judgment or decree
(including U.S. federal and state securities laws and regulations and
regulations of any self-regulatory organizations to which the Company or its
securities are subject) applicable to the Company or by which any property
or
asset of the Company is bound or affected (except for such conflicts, breaches,
defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a Material Adverse Effect).
6
(b) The
Company is not in violation of its Articles of Incorporation, By-laws or other
organizational documents and the Company is not in default (and no event has
occurred which with notice or lapse of time or both could put the Company in
default) under, and the Company has not taken any action or failed to take
any
action that (and no event has occurred which, without notice or lapse of time
or
both) would give to others any rights of termination, amendment, acceleration
or
cancellation of, any agreement, indenture or instrument to which the Company
is
a party or by which any property or assets of the Company is bound or affected,
except for possible defaults as would not, individually or in the aggregate,
have a Material Adverse Effect.
(c) The
Company is not conducting, and, so long as any Investor owns any of the Common
Shares, will not conduct, its business in violation of any law, ordinance or
regulation of any governmental entity, the failure to comply with which would,
individually or in the aggregate, have a Material Adverse Effect.
(d) Except
as
specifically contemplated by this Agreement and as required under the Securities
Act and any applicable state securities laws or any listing agreement with
any
securities exchange or automated quotation system, the Company is not required
to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory or self
regulatory agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or the Registration Rights Agreement, in each
case in accordance with the terms hereof or thereof, or to issue and sell the
Common Shares in accordance with the terms hereof.
3.7 SEC
Documents, Financial Statements.
Since
September 30, 2007, the Company has filed all reports, schedules, forms,
statements, and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the Exchange Act (all of the foregoing filed
prior to the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents (other than exhibits)
incorporated by reference therein, being hereinafter referred to herein as
the
“SEC Documents”). As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Exchange Act or the
Securities Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to
be
stated therein or necessary in order to make the statements therein, in light
of
the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with
respect thereto. Such financial statements are complete and correct in all
material respects and have been prepared in accordance with U.S. generally
accepted accounting principles, consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto, or (ii) in the case of unaudited interim statements,
to
the extent they may not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the financial position
of the Company as of the dates thereof and the results of its operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except as set forth in the
financial statements included in the SEC Documents, to the Company’s knowledge
the Company has no liabilities, contingent or otherwise, other than liabilities
incurred in the ordinary course of business subsequent to September 30, 2007,
and liabilities of the type not required under generally accepted accounting
principles to be reflected in such financial statements.
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3.8 Absence
of Certain Changes.
Except
as disclosed in the SEC Documents since September 30, 2007, there has not been,
to the Company’s knowledge:
(a) Any
change in the assets, liabilities, financial condition, prospects, or
operations of the Company from that reflected in the SEC Documents, other than
changes in the ordinary course of business, none of which individually or in
the
aggregate has had or is reasonably expected to have a Material Adverse Effect
or, to the knowledge of the Company, any development that could reasonably
be
expected to have such a Material Adverse Effect;
(b) Any
resignation or termination of any officer, key employee, or group of employees
of the Company; and the Company, to the best of its knowledge, does not know
of
the impending resignation or termination of employment of any such officer,
key
employee, or group of employees;
(c) Any
material change, except in the ordinary course of business, in the contingent
obligations of the Company by way of guaranty, endorsement, indemnity, warranty,
or otherwise;
(d) Any
damage, destruction, or loss, whether or not covered by insurance, materially
and adversely affecting the properties, business or prospects or financial
condition of the Company;
(e) Any
waiver by the Company of a valuable right or of a material debt owed to
it;
(f) Any
direct or indirect loans made by the Company to any stockholder, employee,
officer, or director of the Company, other than advances made in the ordinary
course of business;
8
(g) Any
material change in any compensation arrangement or agreement with any employee,
officer, director, or stockholder;
(h) Any
declaration or payment of any dividend or other distribution of the assets
of
the Company;
(i) Any
labor
organization activity related to the Company;
(j) Any
debt,
obligation, or liability incurred, assumed, or guaranteed by the Company, except
those for immaterial amounts and for current liabilities incurred in the
ordinary course of business;
(k) Any
sale,
assignment, or transfer of any patents, trademarks, copyrights, trade secrets,
or other intangible assets;
(l) Any
change in any material agreement to which the Company is a party or by which
it
is bound which materially and adversely affects the business, assets,
liabilities, financial condition, operations, or prospects of the
Company;
(m) Any
other
event or condition of any character that, either individually or cumulatively,
has materially and adversely affected the business, assets, liabilities,
financial condition, prospects, or operations of the Company; or
(n) Any
arrangement or commitment by the Company to do any of the acts described in
subsection (a) through (m) above.
3.9 Absence
of Litigation.
There
is no action, suit, claim, proceeding, inquiry, or investigation before or
by
any court, public board, government agency, self-regulatory organization, or
body pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its officers or directors acting as such that
could, individually or in the aggregate, have a Material Adverse Effect. The
Company is not aware of any facts or circumstances which would reasonably be
expected to give rise to any such action or proceeding. The foregoing includes,
without limitation, actions pending or, to the Company’s knowledge, threatened
or any basis therefor known by the Company involving the prior employment of
any
of the Company’s employees, their use in connection with the Company’s business
of any information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers.
3.10 Intellectual
Property Rights.
(a) The
Company owns or possesses the licenses or rights to use all patents, patent
applications, patent rights, inventions, know-how, trade secrets, trademarks,
trademark applications, service marks, service names, trade names, and
copyrights necessary to enable it to conduct its business as now operated (the
“Intellectual Property”). To the Company’s knowledge, no product or service
marketed or sold (or proposed to be marketed or sold) by the Company violates
or
will violate any license or infringe any intellectual property rights of any
other party.
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(b) There
is
no claim or action pending and the Company has not received any communications
alleging that the Company has violated any of the patents, trademarks, service
marks, trade names, copyrights, or trade secrets, or other proprietary rights
of
any other person or entity or that challenges the right of the Company with
respect to any Intellectual Property.
(c) The
Company has obtained and posseses valid licenses to use all of the software
programs present on the computers and other software-enabled electronic devices
that it owns or leases or that it has otherwise provided to its employees for
their use in connection with the Company’s business.
(d) The
Company is not aware that any of its employees is obligated under any contract
(including licenses, covenants, or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with their duties to the Company.
No
former or current employee, officer, or consultant of the Company has excluded
works or inventions made prior to his or her employment with the Company from
his or her assignment of inventions pursuant to such employee, officer or
consultant’s non-disclosure and invention agreement. To the Company’s
knowledge, it has or will not need to utilize any inventions, trade secrets,
or
proprietary information of any of its employees (or persons it currently intends
to hire) made prior to their employment by the Company, except for inventions,
trade secrets or proprietary information that have been assigned to the Company.
Each employee has assigned to the Company all intellectual property rights
he or
she owns that are related to the Company’s business as now
conducted.
(e) Neither
the execution, delivery, nor performance of this Agreement, nor the carrying
on
of the Company’s business by the employees of the Company, will, to the
Company’s knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant, or instrument under which any employee is now obligated.
3.11 Contracts.
All
material contracts to which the Company or its Subsidiaires are party are valid,
binding and enforceable and in full force and effect, except where such failures
to be so valid, binding and enforceable and in full force and effect would
not,
individually or in the aggregate, have a Material Adverse Effect,
except
for the following: (i) the Asset Purchase Agreement between the Company and
Blue
Wireless & Data, Inc. dated as of June 12, 2007 to the extent certain
creditors of the sellers have rights against the assets sold to the Company;
and
(ii) the Lease Agreement between the Company and Xxxxx Xxxxxxx for the property
located at 000 X. Xxxxxxxxx Xx., Xxxxxxxxx, Xxxxx extended as of September
27,
2006, is the subject of current litigation.
The
Company is not subject to any charter, corporate, or other legal restriction,
or
any judgment, decree, order, rule, or regulation which in the reasonable
judgment of the Company’s officers has or is expected in the future,
individually or in the aggregate, to have a Material Adverse Effect. The Company
is not a party to any contract or agreement which in the reasonable judgment
of
the Company’s officers has or is expected to have a Material Adverse
Effect.
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3.12 Tax
Status.
The
Company has made or filed all federal, state, and foreign income and all other
tax returns, reports, and declarations required by any jurisdiction to which
it
is subject (unless and only to the extent that the Company has set aside on
its
books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments
and
charges that are material in amount, shown or determined to be due on such
returns, reports, and declarations, except those being contested in good faith,
and has set aside on its books provisions reasonably adequate for the payment
of
all taxes for periods subsequent to the periods to which such returns, reports,
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the Company knows
of
no basis for any such claim. The Company has not executed a waiver with respect
to the statute of limitations relating to the assessment or collection of any
foreign, federal, state, or local tax. None of the Company’s tax returns is
presently being audited by any taxing authority, except that the Texas
Comptroller of the Currency is conducting a Sales and Use Tax Audit of the
Company for the period from January 2004 through September 2007.
3.13 Certain
Transactions.
Except
as disclosed in the SEC Documents and except for arm’s-length transactions
pursuant to which the Company makes payments in the ordinary course of business
upon terms no less favorable than the Company could obtain from third parties,
and other than the grant of stock options, employment agreements, or the
ownership of other securities and rights disclosed in filings under the Exchange
Act, none of the officers, directors, or employees of the Company is presently
a
party to any transaction with the Company (other than for services as employees,
officers and directors), including any contract, agreement, or other arrangement
providing for the furnishing of services to or by, providing for rental of
real
or personal property to or from, or otherwise requiring payments to or from
any
officer, director, or employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer, director,
or employee has a substantial interest or is an officer, director, trustee
or
partner.
3.14 Environmental
Laws.
The
Company (i) is in compliance with all applicable foreign federal, state, and
local laws and regulations relating to the protection of human health and
safety, the environment, or hazardous or toxic substances or wastes, pollutants
or contaminants (“Environmental Laws”), (ii) has received all permits, licenses,
or other approvals required of them under applicable Environmental Laws to
conduct its business and (iii) is in compliance with all terms and conditions
of
any such permit, license or approval where, in each of the three foregoing
clauses, the failure to so comply would have, individually or in the aggregate,
a Material Adverse Effect.
3.15 Disclosure.
The
Company has provided each Investor with all information requested by the
Investor in connection with its decision to purchase the Common Shares. No
information relating to or concerning the Company set forth in this Agreement
or
provided to the Investors pursuant to Section 2.4 hereof or otherwise provided
in connection with the transactions contemplated hereby, including without
limitation any oral or written statements made or given by the officers of
the
Company, or any of the Company’s agents, to any Investor, or any Investor’s
agent, taken as a whole, contained any untrue statement of a material fact
nor
omitted to state any material fact necessary in order to make the statements
made herein or therein, in light of the circumstances under which they were
made, not misleading. No event or circumstance has occurred or information
exists with respect to the Company or its business, properties, operations,
or
financial conditions, which, under applicable law, rule, or regulation, requires
public disclosure or announcement by the Company but which has not been so
publicly announced or disclosed (assuming for this purpose that the Company’s
reports filed under the Exchange Act are being incorporated into an effective
registration statement filed by the Company under the Securities Act). To the
Company’s knowledge, there are no facts which (individually or in the aggregate)
would have a Material Adverse
Effect
that have not been set forth in the Agreement, the exhibits hereto, or in other
documents delivered to the Investors, or their attorneys or agents in connection
herewith other than any adverse change, event, or effect that is directly
attributable to conditions affecting the United States economy generally unless
such conditions adversely affect the Company in a materially disproportionate
manner, and any adverse change, event, or effect that is directly attributable
to conditions affecting the Company’s industry generally, unless such conditions
adversely affect the Company in a materially disproportionate
manner.
11
3.16 Acknowledgment
Regarding Investors’ Purchase of Common Shares.
The
Company acknowledges and agrees that each Investor is acting solely in the
capacity of an arm’s length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no
Investor is acting as a financial advisor or fiduciary of the Company (or in
any
similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any statement made by any Investor or any of their
respective representatives or agents in connection with this Agreement and
the
transactions contemplated hereby is not advice or a recommendation and is merely
incidental to such Investor’s purchase of the Common Shares and has not been
relied on by the Company in any way. The Company further represents to each
Investor that the Company’s decision to enter into this Agreement has been based
solely on an independent evaluation by the Company and its
representatives.
3.17 No
Integrated Offering.
Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales in any security
or
solicited any offers to buy any security under circumstances that would require
registration under the Securities Act of the issuance of the Common Shares
to
the Investors.
3.18 No
Brokers.
The
Company has taken no action which would give rise to any claim by any person
for
brokerage commissions, finder’s fees or similar payments relating to this
Agreement or the transactions contemplated hereby.
3.19 Permits;
Compliance.
The
Company is in possession of all franchises, grants, authorizations, licenses,
permits, easements, variances, exemptions, consents, certificates, approvals
and
orders necessary to own, lease and operate its properties and to carry on its
business as it is now being conducted, except those the failure of which to
possess would not, individually or in the aggregate, have a Material Adverse
Effect (collectively, the “Company Permits”), and there is no action pending or,
to the knowledge of the Company, threatened regarding suspension or cancellation
of any of the Company Permits. The Company is not in conflict with, or in
default or violation of, any of the Company Permits, except for any such
conflicts, defaults or violations which, individually or in the aggregate,
would
not reasonably be expected to have a Material Adverse Effect. Since September
30, 2007, the Company has not received any notification with respect to possible
conflicts, defaults or violations of applicable laws, except for notices
relating to possible conflicts, defaults or violations, which conflicts,
defaults or violations would not have a Material Adverse Effect.
12
3.20 Title
to Property.
The
Company has good and marketable title in fee simple to all real property and
good and marketable title to all personal property owned by it which is material
to the business of the Company. Any real property and facilities held under
lease by the Company are held by it under valid and enforceable leases with
such
exceptions as would not have a Material Adverse Effect.
3.21 Insurance.
The
Company is insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as is prudent and customary in the
businesses in which the Company is engaged. The Company has no reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as
may
be necessary to continue its business at a cost that would not have a Material
Adverse Effect.
3.22 Xxxxxxxx-Xxxxx;
Internal
Accounting Controls.
The
Company is in material compliance with all provisions of the Xxxxxxxx-Xxxxx
Act
of 2002 that are applicable to it as of the Closing Date.
The
Company maintains a system of internal accounting controls sufficient, in the
judgment of the Company’s board of directors, to provide reasonable assurance
that (a) transactions are executed in accordance with management’s general or
specific authorizations, (b) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (c) access to assets
is permitted only in accordance with management’s general or specific
authorization, (d) the recorded accountability for assets is compared with
the
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences, and (e) financial reporting and the preparation
of
financial statements for external purposes in accordance with U.S. generally
accepted accounting principles are reliable. The
Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
disclosure controls and procedures to ensure that material information relating
to the Company, including its Subsidiaries, is made known to the certifying
officers by others within those entities, particularly during the period in
which the Company’s most recently filed periodic report under the Exchange Act,
as the case may be, is being prepared. The Company’s certifying officers have
evaluated the effectiveness of the Company’s controls and procedures as of the
date prior to the filing date of the most recently filed periodic report under
the Exchange Act (such date, the “Evaluation Date”). The Company presented in
its most recently filed periodic report under the Exchange Act the conclusions
of the certifying officers about the effectiveness of the disclosure controls
and procedures based on their evaluations as of the Evaluation Date. Since
the
Evaluation Date, there have been no significant changes in the Company’s
internal controls (as such term is defined in Item 307(b) of Regulation S-K
under the Exchange Act) or, to the knowledge of the Company, in other factors
that would materially affect the Company’s internal controls.
13
3.23 Employment
Matters.
The
Company is in compliance with all federal, state, local and foreign laws and
regulations respecting employment and employment practices, terms and conditions
of employment and wages and hours except where failure to be in compliance
would
not have a Material Adverse Effect. There are no pending investigations
involving the Company by the U.S. Department of Labor or any other governmental
agency responsible for the enforcement of such federal, state, local or foreign
laws and regulations. There is no unfair labor practice charge or complaint
against the Company pending before the National Labor Relations Board or any
strike, picketing, boycott, dispute, slowdown or stoppage pending or threatened
against or involving the Company. No representation question exists respecting
the employees of the Company, and no collective bargaining agreement or
modification thereof is currently being negotiated by the Company. No grievance
or arbitration proceeding is currently pending under any expired or existing
collective bargaining agreements of the Company. No material labor dispute
with
the employees of the Company exists or, to the knowledge of the Company, is
imminent.
3.24 Obligations
of Management.
Each
officer and key employee of the Company is currently devoting substantially
all
of his or her business time to the conduct of the business of the Company.
The
Company is not aware that any officer or key employee of the Company is planning
to work less than full time at the Company in the future. No officer or key
employee is currently working or, to the Company’s knowledge, plans to work for
a competitive enterprise, whether or not such officer or key employee is or
will
be compensated by such enterprise.
3.25 Registration
Rights.
Except
as
required pursuant to the Registration Rights Agreement and similar agreements
dated May 4, 2005 and October 17, 2007, the Company is presently not under
any
obligation, and has not granted any rights, to register any of the Company’s
presently outstanding securities or any of its securities that may hereafter
be
issued.
3.26 Investment
Company Status.
The
Company is not and upon consummation of the sale of the Common Shares will
not
be an “investment company,” a company controlled by an “investment company” or
an “affiliated person” of, or “promoter” or “principal underwriter” for, an
“investment company” as such terms are defined in the Investment Company Act of
1940, as amended.
3.27 No
General Solicitation.
Neither
the Company nor any distributor participating on the Company’s behalf in the
transactions contemplated hereby (if any) nor any person acting for the Company,
or any such distributor, has conducted any “general solicitation,” as such term
is defined in Regulation D, with respect to any of the Common Shares being
offered hereby. Assuming the accuracy of the representations and warranties
of
each Investor contained in Section 2.2 hereof, the offer, sale, and issuance
of
the Common Shares will be exempt from the registration requirements of the
Securities Act, and will have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit, or qualification
requirements of all applicable state securities laws.
3.28 Application
of Takeover Protections.
The
Company and its board of directors have taken all necessary action, if any,
in
order to render inapplicable any control share acquisition, business combination
or other similar anti-takeover provision under the laws of the state of its
incorporation,
the
Company’s organizational documents and any other agreement to which the Company
is bound,
which is
or could become applicable to the Investors as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company’s
issuance of the Common Shares and the Investors’ ownership of the Common
Shares.
14
3.29 Net
Operating Loss Carryforward. To
the
best of the Company’s knowledge after performing initial research and
calculating beneficial ownership of the Company’s securities by persons solely
on the basis of their Exchange Act filings, (i) the Company and each of its
Subsidiaries have not experienced, and will not experience after the issuance
of
stock pursuant to this Agreement, an “ownership change” within the meaning of
Section 382 of the Internal Revenue Code (an “Ownership Change”); (ii) the
ability of the Company and each of its Subsidiaries to use net operating losses
realized in the current taxable year, net operating loss carryforwards, tax
credits and other tax attributes is not, and will not after the issuance of
stock pursuant to this Agreement, be limited by Section 382 or otherwise for
Federal income tax purposes; (iii) the Company does not believe that it (or
any
of its Subsidiaries) is likely to experience an Ownership Change based upon
the
stock issuance pursuant to this Agreement and all other contemplated
transactions, including, for the avoidance of doubt, contemplated transactions
that are not yet subject to a legally binding agreement to which the Company
(or
any of its Subsidiaries) may be a party, including but not limited to any
contemplated transactions involving the issuance by the Company (or any of
its
Subsidiaries) of its stock, options or other securities.
ARTICLE
IV
COVENANTS
4.1 Best
Efforts.
Each
party will use its best efforts to satisfy in a timely fashion each of the
conditions to be satisfied by it under Articles VI and VII of this
Agreement.
4.2 Blue
Sky Laws.
The
Company will, on or before the Closing Date, take such action as it reasonably
determines to be necessary to qualify the Common Shares for sale to the
Investors under this Agreement under applicable securities (or “blue sky”) laws
of the states of the United States (or to obtain an exemption from such
qualification), and will provide evidence of any such action so taken to the
Investors on or prior to the date of the Closing. The Company will file with
the
SEC a Current Report on Form 8-K disclosing this Agreement and the transactions
contemplated hereby within four business days after the Closing Date and will
make any required notice filings with state securities law authorities on a
timely basis.
4.3 Reporting
Status.
The
Company’s Common Stock is registered under Section 12 of the Exchange Act.
Throughout the Registration Period (as defined in the Registration Rights
Agreement), the Company will use its best efforts to timely file all reports,
schedules, forms, statements and other documents required to be filed by it
with
the SEC under the reporting requirements of the Exchange Act, and the Company
will not terminate its status as an issuer required to file reports under the
Exchange Act even if the Exchange Act or the rules and regulations thereunder
would permit such termination.
15
4.4 Use
of
Proceeds.
The
Company will use the proceeds from the sale of the Common Shares to effect
acquisitions, to expand the Company’s wireless infrastructure and for general
working capital.
4.5 Financial
Statements.
The
financial statements of the Company will be prepared in accordance with United
States generally accepted accounting principles, consistently applied, and
will
fairly present in all material respects the consolidated financial position
of
the Company and results of its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).
4.6 .
Solvency;
Corporate Existence; Compliance with Law.
The
Company (both before and after giving effect to the transactions contemplated
by
this Agreement) is solvent (i.e., its assets have a fair market value in excess
of the amount required to pay its probable liabilities on its existing debts
as
they become absolute and matured) and currently the Company has no information
that would lead it to reasonably conclude that the Company would not have,
nor
does it intend to take any action that would impair, the ability to pay its
debts from time to time incurred in connection therewith as such debts mature.
The Company will conduct its business in compliance with all applicable laws,
rules and regulations of the jurisdictions in which it is conducting business,
including, without limitation, all applicable local, state and federal
environmental laws and regulations, where the failure to comply with such would
have a Material Adverse Effect.
4.7 Insurance.
The
Company will maintain liability, casualty, and other insurance (subject to
customary deductions and retentions) with responsible insurance companies
against such risk of the types and in the amounts customarily maintained by
companies of comparable size and in lines of business of the
Company.
4.8 Sales
by Investors.
Each
Investor will sell any Common Shares sold by it in compliance with applicable
prospectus delivery requirements, if any, or otherwise in compliance with the
requirements for an exemption from registration under the Securities Act and
the
rules and regulations promulgated thereunder. No Investor will make any sale,
transfer or other disposition of the Common Shares in violation of federal
or
state securities laws.
4.9 Pledge
of Common Shares.
The
Company acknowledges and agrees that the Common Shares may be pledged by an
Investor in connection with a bona fide margin agreement or other loan or
financing arrangement that is secured by the Common Shares. The pledge of Common
Shares shall not be deemed to be a transfer, sale or assignment of the Common
Shares hereunder, and no Investor effecting a pledge of Common Shares shall be
required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement; provided that an Investor
and its pledgee shall be required to comply with the provisions of Section
2.6
hereof in order to effect a sale, transfer or assignment of Common Shares to
such pledgee. The Company hereby agrees to execute and deliver such
documentation as a pledgee of the Common Shares may reasonably request in
connection with a pledge of the Common Shares to such pledgee by an Investor.
4.10 Disclosure
of Transactions and Other Material Information.
The
Company shall not, and shall cause each Subsidiary and each of its respective
officers, directors, employees and agents, not to, provide any Investor with
any
material nonpublic information regarding the Company or any Subsidiary from
and
after the Closing Date without the express written consent of such Investor.
In
the event of a breach of the foregoing covenant by the Company, any Subsidiary,
or each of its respective officers, directors, employees and agents, in addition
to any other remedy provided herein or in the Transaction Documents, such
Investor shall have the right to demand that the Company make a public
disclosure, and if the Company fails to do so within five business days, the
Investor may make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material nonpublic information without
the
prior approval by the Company, each Subsidiary, or each of its respective
officers, directors, employees or agents. In such event, such Investor shall
provide a copy of such public disclosure to the Company at least one day prior
to the dissemination of such disclosure to the public. No Investor shall have
any liability to the Company, any Subsidiary, or any of its or their respective
officers, directors, employees, stockholders or agents for any such disclosure
unless such Investor acts with negligence or willful misconduct. Subject to
the
foregoing, neither the Company nor any Investor shall issue any press releases
or any other public statements with respect to the transactions contemplated
hereby without the prior approval of the other party; which approval shall
not
be unreasonably withheld or delayed; provided, however, that the Company shall
be entitled, without the prior approval of any Investor, to make any press
release or other public disclosure with respect to such transactions in a
Current Report on Form 8-K in compliance with the requirements of the Exchange
Act, and as may otherwise be required by applicable law and regulations
(provided that each Investor shall be provided a copy of any proposed press
release to be issued by the Company at least one day prior to its release).
16
4.11 Amendment
to Rights Agreement. Without
the prior written consent of the Investors (which consent shall not be
unreasonably withheld), the Company shall not, from and after the Closing Date,
rescind, revoke or amend the Amendment to Rights Agreement (as defined below)
to
decrease the percentage of Common Shares of which Xxxxxx X. Mahaylo, together
with his Associates and Affiliates, can be the Beneficial Owner without becoming
an Acquiring Person (as such capitalized terms are defined therein).
4.12
Investors’
Filings.
Each
Investor will file all reports required to be filed by such Investor with the
Securities and Exchange Commission under the Exchange Act or related federal
or
state securities laws as a result of such Investor’s ownership of Common Shares,
including but not limited to Forms 3, 4 and 5, and will promptly provide copies
to the Company of any Schedule 13D or G filed by such Investor.
ARTICLE
V
TRANSFER
AGENT INSTRUCTIONS; REMOVAL OF LEGENDS
5.1 Issuance
of Certificates.
The
Company shall instruct its transfer agent to issue certificates, registered
in
the name of each Investor or its nominee, for Common Shares in such amounts
as
specified from time to time by each Investor to the Company. All such
certificates will bear the restrictive legend described in Section 2.7, except
as otherwise specified in this Article V. Nothing in this Section 5.1 will
affect in any way the Investors’ obligations and agreement set forth in Section
2.7 hereof to comply with all applicable prospectus delivery requirements,
if
any, upon resale of the Common Shares.
17
5.2 Unrestricted
Common Shares.
If,
unless otherwise required by applicable state securities laws, (a) the resale
of
the Common Shares represented by a certificate has been registered under an
effective registration statement filed under the Securities Act, (b) a holder
of
Common Shares provides the Company and the Transfer Agent with an opinion of
counsel, in form, substance and scope reasonably satisfactory to the Company,
to
the effect that a public sale or transfer of such Common Shares may be made
without registration under the Securities Act and such sale either has occurred
or may occur without restriction on the manner of such sale or transfer, (c)
such holder provides the Company and the Transfer Agent with reasonable
assurances that such Common Shares can be sold under Rule 144, or (d) the Common
Shares represented by a certificate can be sold without restriction as to the
number of securities sold under Rule 144(k), the Company will permit the
transfer of the Common Shares, and the Transfer Agent will issue one or more
certificates, free from any restrictive legend, in such name and in such
denominations as specified by such holder. Notwithstanding anything herein
to
the contrary, the Common Shares may be pledged as collateral in connection
with
a bona fide margin account or other lending arrangement; provided that such
pledge will not alter the provisions of this Article V with respect to the
removal of restrictive legends.
5.3 Enforcement
of Provision.
The
Company acknowledges that a breach by it of its obligations hereunder will
cause
irreparable harm to each Investor by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that
the
remedy at law for a breach of its obligations under this Article V will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section, that each Investor will be entitled,
in addition to all other available remedies, to an injunction restraining any
breach and requiring immediate transfer, without the necessity of showing
economic loss and without any bond or other security being
required.
ARTICLE
VI
CONDITIONS
TO THE COMPANY’S OBLIGATION TO SELL
The
obligation of the Company to issue and sell the Common Shares to each Investor
at the Closing is subject to the satisfaction by such Investor, on or before
the
Closing Date, of each of the following conditions. These conditions are for
the
Company’s sole benefit and may be waived by the Company at any time in its sole
discretion:
6.1 The
Investor will have executed this Agreement and the Registration Rights Agreement
and will have delivered those agreements to the Company.
6.2 The
Investor will have delivered the purchase price for the Common Shares to the
Company in accordance with this Agreement.
6.3 The
representations and warranties of the Investor must be true and correct in
all
material respects as of the Closing Date as though made at that time (except
for
representations and warranties that speak as of a specific date, which
representations and warranties must be correct as of such date).
18
6.4 The
Investor will have performed and complied in all material respects with the
covenants and conditions required by this Agreement to be performed or complied
with by the Investor at or prior to the Closing.
6.5 No
litigation, statute, rule, regulation, executive order, decree, ruling, or
injunction will have been enacted, entered, promulgated, or endorsed by or
in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
ARTICLE
VII
CONDITIONS
TO THE INVESTOR’S OBLIGATION TO PURCHASE
The
obligation of each Investor hereunder to purchase the Common Shares from the
Company at the Closing is subject to the satisfaction, on or before the Closing
Date, of each of the following conditions. These conditions are for each
Investor’s respective benefit and may be waived by any Investor at any time in
its sole discretion:
7.1 The
Company will have executed and delivered to the Investors this Agreement and
the
Registration Rights Agreement.
7.2
The
Company will have effected an amendment to the Rights Agreement (the “Amendment
to Rights Agreement”) in the form attached hereto as Exhibit B.
7.3
The
Company will have delivered to the Investors duly executed certificates
representing the Common Shares in the amounts and forms specified in Section
1.1
hereof.
7.4
The
representations and warranties of the Company must be true and correct in all
material respects as of the Closing as though made at that time (except for
representations and warranties that speak as of a specific date, which
representations and warranties must be true and correct as of such date), and
the Company must have performed and complied in all material respects with
the
covenants and conditions required by this Agreement to be performed or complied
with by the Company at or prior to the Closing. The Investor must have received
a certificate or certificates dated as of the Closing Date and executed by
the
Chief Executive Officer or the Chief Financial Officer of the Company certifying
as to the matters contained in this Section 7.3 and as to such other matters
as
may be reasonably requested by such Investor, including, but not limited to,
the
Company’s Articles of Incorporation, By-laws, Board of Directors’ resolutions
relating to the transactions contemplated hereby, and the incumbency and
signatures of each of the officers of the Company who may execute on behalf
of
the Company any document delivered at the Closing.
7.5
No
litigation, statute, rule, regulation, executive order, decree, ruling, or
injunction will have been enacted, entered, promulgated, or endorsed by or
in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
19
7.6
The
shares of Common Stock must be quoted on the OTCBB, and such quotation must
not
have been suspended by the SEC or the
FINRA.
7.7
The
Investors will have received an opinion of the Company’s counsel, dated as of
the Closing Date, in form, scope and substance reasonably satisfactory to the
Investors.
ARTICLE
VIII
INDEMNIFICATION
8.1 Indemnification
by Company.
In
consideration of each Investor’s execution and delivery of this Agreement and
its acquisition of the Common Shares hereunder, and in addition to all of the
Company’s other obligations under this Agreement and the Registration Rights
Agreement, the Company will defend, protect, indemnify and hold harmless each
Investor and each other holder of the Common Shares and all of their
stockholders, officers, directors, employees, advisors and direct or indirect
investors and any of the foregoing person’s agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the “Indemnitees”)
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (regardless of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred or
suffered by an Indemnitee as a result of, or arising out of, or relating to
(a)
any breach of any representation or warranty made by the Company herein or
in
any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
herein or in any other certificate, instrument or document contemplated hereby
or thereby, or (c) any cause of action, suit or claim brought or made against
such Indemnitee and arising out of or resulting from the execution, delivery,
performance, breach or enforcement of this Agreement or the Registration Rights
Agreement by the Company; provided, however, that, with respect to this clause
(c), the Company shall not be liable to the extent such Indemnified Liabilities
are finally determined by a court of competent jurisdiction to have resulted
primarily and directly from the Investors’ negligence or willful misconduct. To
the extent that the foregoing undertaking by the Company is unenforceable for
any reason, the Company will make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities that is permissible under
applicable law.
8.2
Indemnification by Investors.
In
consideration of the Company’s execution and delivery of this Agreement and its
sale of the Common Shares hereunder, each of the Investors will defend, protect,
indemnify and hold harmless the Company and each other holder of the Common
Shares and all of their Indemnitees from and against the Indemnified
Liabilities, incurred or suffered by an Indemnitee as a result of, or arising
out of, or relating to (a) any breach of any representation or warranty made
by
such Investor herein, (b) any breach of any covenant, agreement or obligation
of
such Investor contained herein, or (c) any cause of action, suit or claim
brought or made against such Indemnitee and arising out of or resulting from
the
execution, delivery, performance, breach or enforcement of this Agreement by
such Investor which Indemnified Liabilities are finally determined by a court
of
competent jurisdiction to have resulted primarily and directly from the
Investors’ gross negligence or willful misconduct. To the extent that the
foregoing undertaking by the Investors is unenforceable for any reason, the
Investors will make the maximum contribution to the payment and satisfaction
of
each of the Indemnified Liabilities that is permissible under applicable
law.
20
ARTICLE
IX
DEFINITIONS
9.1 “Closing”
means the closing of the purchase and sale of the Common Shares.
9.2 “Closing
Date” has the meaning set forth in Section 1.3.
9.3 “Common
Shares” has the meaning set forth in the recitals.
9.4 “Common
Stock” means the common stock, par value $0.01 per share, of the Company.
9.5 “Company”
means Internet America, Inc., a Texas corporation.
9.6 “Company
Permits” has the meaning set forth in Section 3.19.
9.7 “Environmental
Laws” has the meaning set forth in Section 3.14.
9.8 “Exchange
Act” means the Securities Exchange Act of 1934, as amended.
9.9
“FINRA” means the Financial Industry Regulatory Authority.
9.10
“Indebtedness for Borrowed Money” shall include only (i) indebtedness of the
Company and its Subsidiaries incurred as the result of a direct borrowing of
money, and (ii) guarantees by the Company and its Subsidiaries of indebtedness
of third parties, and shall not include any other indebtedness including, but
not limited to, indebtedness incurred with respect to trade accounts, equipment
leases, and intercompany loans.
9.11
“Indemnified
Liabilities” has the meaning set forth in Article VIII.
9.12
“Indemnitees”
has the meaning set forth in Article VIII.
9.13
“Intellectual
Property” has the meaning set forth in Section 3.10.
9.14
“Investors”
means the investors, whether one or more, whose names are set forth on the
signature pages of this Agreement, and their permitted transferees.
9.15
“Material
Adverse Effect” means a material adverse effect on (a) the assets, liabilities,
business, properties, operations, financial condition, prospects or results
of
operations of the Company and its Subsidiaries, taken as a whole, or (b) the
ability of the Company to perform its obligations pursuant to the transactions
contemplated by this Agreement or under the agreements or instruments to be
entered into or filed in connection herewith; in each case other than as a
result of any adverse change, event, or effect that is directly attributable
to
conditions affecting the United States economy generally unless such conditions
adversely affect the Company in a materially disproportionate manner, and any
adverse change, event, or effect that is directly attributable to conditions
affecting the Company’s industry generally, unless such conditions adversely
affect the Company in a materially disproportionate manner.
21
9.16 “Option
Plan” means, collectively, the Company’s 1998 Nonqualified Stock Option Plan,
Employee and Consultant Stock Option Plan, 2004 Non-Employee Director Plan,
and
the 2007 Stock Option Plan, including all amendments thereto.
9.17
“OTCBB”
means the OTC Bulletin Board operated by the
FINRA.
9.18 “Registration
Rights Agreement” means the Registration Rights Agreement, dated as of the date
of this Agreement and among the parties to this Agreement, in the form attached
hereto as Exhibit
C.
9.19 “Regulation
D” means Regulation D as promulgated by the SEC under the Securities
Act.
9.20 “Rule
144” and “Rule 144(k)” mean Rule 144 and Rule 144(k), respectively, promulgated
under the Securities Act, or any successor rule.
9.21 “SEC”
means the Securities and Exchange Commission.
9.22 “SEC
Documents” has the meaning set forth in Section 3.7.
9.23 “Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute.
9.24 “Subsidiaries”
means any entity in which the Company, directly or indirectly, owns capital
stock or holds an equity or similar interest.
9.25 “Transaction
Documents” shall have the meaning set forth in Section 10.17.
ARTICLE
X
GOVERNING
LAW; MISCELLANEOUS
10.1 Governing
Law; Jurisdiction.
This
Agreement will be governed by and interpreted in accordance with the laws of
the
State of Texas without regard to the principles of conflict of laws. The parties
hereto hereby submit to the jurisdiction of the United States federal and state
courts located in the State of Texas with respect to any dispute arising under
this Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby.
10.2 Counterparts;
Signatures by Facsimile.
This
Agreement may be executed in two or more counterparts, all of which are
considered one and the same agreement and will become effective when
counterparts have been signed by each party and delivered to the other parties.
This Agreement, once executed by a party, may be delivered to the other parties
hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
22
10.3 Headings.
The
headings of this Agreement are for convenience of reference only, are not part
of this Agreement and do not affect its interpretation.
10.4 Severability.
If any
provision of this Agreement is invalid or unenforceable under any applicable
statute or rule of law, then such provision will be deemed modified in order
to
conform with such statute or rule of law. Any provision hereof that may prove
invalid or unenforceable under any law will not affect the validity or
enforceability of any other provision hereof.
10.5 Entire
Agreement.
This
Agreement and the Registration Rights Agreement (including all schedules and
exhibits hereto and thereto) constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and thereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein or therein. This Agreement supersedes all prior agreements
and understandings among the parties hereto with respect to the subject matter
hereof.
10.6 Consents.
Except
as otherwise specifically provided herein, in each case in which approval of
the
Investors is required by the terms of this Agreement, such requirement shall
be
satisfied only upon receipt of the written consent of each Investor.
10.7 Changes,
Waivers, etc.
Neither
this Agreement nor any provision hereof may be
amended, changed, waived, discharged or terminated orally, but only by a
statement in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
10.8 Notices.
Any
notices required or permitted to be given under the terms of this Agreement
must
be sent by certified or registered mail (return receipt requested) or delivered
personally or by courier (including a recognized overnight delivery service)
or
by facsimile and will be effective five days after being placed in the mail,
if
mailed by regular U.S. mail, or upon receipt, if delivered personally, by
courier (including a recognized overnight delivery service) or by facsimile,
in
each case addressed to a party. The addresses for such communications
are:
|
If
to the Company:
|
Internet
America, Inc.
|
|
|
00000
X. Xxx Xxxxxxx Xxxx., X.
|
||
|
Xxxxx
000
|
||
|
Xxxxxxx,
Xxxxx, 00000
|
||
|
Attn:
Xxxxxxx X. Xxxxx, Xx.
|
||
|
Facsimile:
(000) 000-0000
|
||
|
With
a copy to:
|
|
Xxxxx & Ketchand |
|
Nine
Greenway Plaza, Suite 3100
|
||
|
Xxxxxxx,
Xxxxx 00000
|
||
|
Attention:
Xxxx X. Leader
|
||
| Fax: (000) 000-0000 |
If
to an
Investor: To the address set forth immediately below such Investor’s name on the
signature pages hereto.
|
With
a copy to:
|
|
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP |
|
000
Xxxxx Xxxxx Xxx., Xxxxx 0000
|
||
|
|
Xxx Xxxxxxx, XX 00000 | |
|
Xxxxxx
X. Xxxxxx
|
||
|
|
Facsimile: (000) 000-0000 |
Each
party will provide written notice to the other parties of any change in its
address.
23
10.9 Successors
and Assigns.
This
Agreement is binding upon and inures to the benefit of the parties and their
successors and assigns. The Company will not assign this Agreement or any rights
or obligations hereunder without the prior written consent of the Investors,
and
no Investor may assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Company. Notwithstanding the foregoing,
an Investor may assign all or part of its rights and obligations hereunder
to
any of its “affiliates,” as that term is defined under the Securities Act,
without the consent of the Company so long as the affiliate is an accredited
investor (within the meaning of Regulation D under the Securities Act) and
agrees in writing to be bound by this Agreement. This provision does not limit
the Investor’s right to transfer the Common Shares pursuant to the terms of this
Agreement or to assign the Investor’s rights hereunder to any such transferee
pursuant to the terms of this Agreement.
10.10 Expenses.
Each
party shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of the Agreement and the
Registration Rights Agreement.
10.11 Attorneys’
Fees.
In the
event that any suit or action is instituted to enforce any provision in this
Agreement, the prevailing party in such dispute shall be entitled to recover
from the losing party all fees, costs, and expenses of enforcing any right
of
such prevailing party under or with respect to this Agreement, including without
limitation, such reasonable fees and expenses of attorneys and accountants,
which shall include, without limitation, all fees, costs, and expenses of
appeals.
10.12 Third
Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
10.13 Survival.
All
representations and warranties contained herein shall survive the execution
and
delivery of this Agreement, any investigation at any time made by the Investors
or on their behalf, and the sale and purchase of the Common Shares and payment
therefor. All statements contained in any certificate, instrument or other
writing delivered by or on behalf of the Company pursuant hereto or in
connection with the transactions herein contemplated (other than legal opinions)
shall constitute representations and warranties by the Company
hereunder.
10.14 Further
Assurances.
Each
party will do and perform, or cause to be done and performed, all such further
acts and things, and will execute and deliver all other agreements,
certificates, instruments and documents, as another party may reasonably request
in order to carry out the intent and accomplish the purposes of this Agreement
and the consummation of the transactions contemplated hereby.
24
10.15 No
Strict Construction.
The
language used in this Agreement is deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict construction
will
be applied against any party.
10.16 Equitable
Relief.
The
Company recognizes that, if it fails to perform or discharge any of its
obligations under this Agreement, any remedy at law may prove to be inadequate
relief to the Investors. The Company therefore agrees that the Investors are
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving actual damages.
10.17 Independent
Nature of Investors’ Obligations and Rights.
The
obligations of each Investor under any of this Agreement or the Registration
Rights Agreement (collectively, the “Transaction Documents”) are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Common Shares pursuant to the Transaction Documents has been made
by
each Investor independently of any other Investor. Nothing contained herein
or
in any Transaction Document, and no action taken by any Investor pursuant
thereto, shall be deemed to constitute the Investors as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Document. Each Investor shall be entitled to independently protect
and enforce its rights, including without limitation the rights arising out
of
this Agreement or out of the other Transaction Documents, and it shall not
be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. Each Investor acknowledges that no other Investor
has acted as agent for the Investor in connection with making its investment
hereunder and that no other Investor will be acting as agent of the Investor
in
connection with monitoring its investment in the Common Shares or enforcing
its
rights under the Transaction Documents. Each Investor has been represented
by
its own separate legal counsel in its review and negotiation of the Transaction
Documents. The Company has elected to provide all Investors with the same terms
and Transaction Documents for the convenience of the Company and not because
it
was required or requested to do so by the Investors.
IN
WITNESS WHEREOF, the undersigned Investors and the Company have caused this
Agreement to be duly executed as of the date first above written.
|
COMPANY:
|
|
|
INTERNET
AMERICA, INC.
|
|
|
By:
|
/s/
Xxxxxxx X. Xxxxx, Xx.
|
|
Xxxxxxx
X. Xxxxx, Xx., CEO
|
|
| INVESTOR: | |
| INVESTOR’S NAME: Xxxxxx X. Xxxxxxx, Trustee of The Xxxxxx X. Xxxxxxx Trust Agreement (As Restated), as restated on December 13, 2001 | |
|
By:
|
/s/
Xxxxxx X. Xxxxxxx
|
|
Print
Name:
|
Xxxxxx
X. Xxxxxxx
|
|
Title:
|
Trustee
|
|
Number
of Shares:
|
4,000,000
|
|
Per
Share Price:
|
$1.00
|
|
Aggregate
Purchase Amount:
|
$
4,000,000.00
|
INVESTOR’S
ADDRESS:
Xxxxxx
X.
Xxxxxxx, Trustee for The Xxxxxx X. Xxxxxxx Trust
P.
O. Xxx
00000
Xxxx,
Xxxxxx 00000
(any
notice hereunder to this Investor shall include a copy to):
Skadden,
Arps, Slate, Xxxxxxx & Xxxx LLP
000
Xxxxx
Xxxxx Xxx., Xxxxx 0000
Xxx
Xxxxxxx, XX 00000
Attn:
Xxxxxx
X.
Xxxxxx
[Signature
Page to Securities Purchase Agreement]
25
EXHIBIT
A
SCHEDULE
OF INVESTORS
|
Investor
|
Common
Shares
|
Purchase
Price
|
|||||
|
Xxxxxx
X. Xxxxxxx, Trustee of
|
4,000,000
|
$
|
4,000,000.00
|
||||
|
The
Xxxxxx X. Xxxxxxx Trust Agreement
|
|||||||
|
(As
Restated), as restated on December 13, 2001
|
|||||||
|
Total:
|
4,000,000
|
$
|
4,000,000.00
|
||||
26
