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EXHIBIT 10.3
April 20, 1999
Internet America, Inc.
One Dallas Centre
000 X. Xx. Xxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxx, Chief Executive Officer
Gentlemen:
By this letter agreement (the "Agreement"), Internet America, Inc. (the
"Company") retains Xxxx Xxxxxxxx LLC ("Xxxxxxxx") as its non-exclusive financial
advisor, on the terms and subject to the conditions set forth herein, in
connection with one or more transaction (individually the "Transaction")
generally described as the purchase of one or more companies engaged in the
business of providing Internet services (individually, the "Target"). This
Agreement confirms the understanding between the Company and Xxxxxxxx with
respect to the services Xxxxxxxx will provide and confirm the parties'
understanding concerning fees and expenses, indemnification obligations and
other matters. Xxxxxxxx will provide and confirms the parties' understanding
concerning fees and expenses, indemnification obligations and other matters. The
appointment of Xxxxxxxx hereunder shall commence on the date hereof and shall
continue until terminated by either party upon at least thirty (30) days prior
written notice to the other party (the "Appointment Period").
1. Services Provided. In undertaking this assignment,
Xxxxxxxx will, as appropriate and requested, provide the following services:
i) assisting the Company in identifying and/or contacting
potential Targets, including Targets that the Company may have
previously identified;
ii) evaluating and valuing the Target businesses and/or assets to
be acquired;
iii) assisting in the structuring of Transaction proposals;
iv) analyzing the economic effects of various Transaction
structures on the Company;
v) developing strategies for consummating a Transaction
successfully;
vi) preparing and presenting a transaction proposal, and assisting
in the negotiation of changes to such proposal;
vii) assisting in the due diligence process for the Transaction
viii) preparing and negotiating documents related to the
Transaction; and
ix) completing other matters related to closing the Transaction.
2. Compensation and Expense Reimbursement. As
compensation for rendering the above services, the Company shall pay Xxxxxxxx a
fee (the " Fee") equal to two percent (2%) of the Acquired Revenues (as defined
below) of each Acquired Company (as defined below); provided, however, that in
no event shall the Fee for any be less than $25,000 nor more than $75,000.
Additionally, during the Appointment Period, the Company shall reimburse
Xxxxxxxx for all
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reasonable and necessary out-of-pocket travel and other expenses incurred by
Xxxxxxxx in performing the above services, such reimbursement to be on a monthly
basis, within thirty (30) days after submission of a detailed monthly statement
and reasonable supporting documentation.
The term "Acquired Company" shall mean any business entity acquired by
the Company under an agreement directly attributable to the performance by
Xxxxxxxx of the above services, but does not include any business entity
acquired by the Company in a transaction closing more than six months after the
termination of the Appointment Period. The terms "acquire," "acquired," or
"acquisition" refer to any transaction in which the Company or any of its
subsidiaries purchases all or substantially all of the assets or securities of
another business entity, whether by asset purchase, securities purchase, merger
or otherwise. The term "Acquired Revenues" shall mean the estimated annual
revenue of an Acquired Company for the twelve-month period immediately following
the closing of the Company's acquisition of the Acquired Company, with such
estimate to be made by the Chief Financial Officer of the Company and agreed to
by Xxxxxxxx; provided, however, in the event that the Chief Financial Officer of
the Company and Xxxxxxxx are unable to reach agreement regarding any such
estimate, the Company's independent accountants shall determine such estimate,
which determination shall be final and binding upon the parties hereto.
The compensation set forth in this Section 2 will be the sole
compensation payable to Xxxxxxxx for performing the above services and no
additional compensation or fee will be payable by the Company to Xxxxxxxx by
reason of any benefit gained by the Company directly or indirectly through
Xxxxxxxx'x performing the above services, nor shall the Company be liable in any
way for any additional compensation or fee for performing the above services
unless the Company shall have expressly agreed thereto in writing.
3. Indemnification. The Company agrees to indemnify and
hold Xxxxxxxx harmless in accordance with the terms and conditions of Exhibit A
attached hereto and made a part hereof.
4. Certain Agreements of the Company. The Company agrees
to make available to Xxxxxxxx all information relating to the Company and, to
the extent in the Company's possession, the Targets as Xxxxxxxx reasonably
requests in connection with providing its services hereunder. The Company
acknowledges that Xxxxxxxx may rely on the completeness and accuracy of the
information furnished to it by the Company or any other party or potential party
to a Transaction without undertaking independent verification.
5. Survival. The provisions of Sections 2, 3,5 and 6
through 8, and Exhibit A shall survive the termination of this Agreement.
6. Governing Law. This Agreement is governed by the
laws of the State of Texas, without regard to principles of conflicts of laws.
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7. Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof and, except as otherwise explicitly provided, supersedes all prior
understandings, written or oral, with respect to the subject matter hereof. This
Agreement may be amended by an agreement in writing signed by Xxxxxxxx and the
Company.
8. Miscellaneous. Any determination that any provision
of this Agreement may be or is unenforceable shall not affect the enforceability
of the remaining provisions of this Agreement. The Section headings in this
Agreement are for convenience of reference and are not to be deemed to be a part
if this Agreement. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same instrument.
If the terms set forth in this Agreement are acceptable to you, please
sign the enclosed copy of this letter and return it to Xxxxxxxx.
XXXX XXXXXXXX, LLC
By: /s/ XXXX XXXXXXXX
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Title: Manager
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Agreed and accepted
as of the date first above written
INTERNET AMERICA, INC.
By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx,
Chief Executive Officer
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EXHIBIT A
Recognizing that transactions of this type contemplated in this
Agreement sometimes result in litigation and that Xxxxxxxx'x role is advisory,
the Company agrees to indemnify and hold harmless Xxxxxxxx, its partners,
employees, agents, affiliates and persons deemed to be in control of Xxxxxxxx
within the meaning of either Section 15 of the Securities At of 1933, as
amended, or Section 20 of the Securities Exchange Act of 1934, as amended
(collectively, the "Indemnified Parties"), from and against any claims, damages
and liabilities, joint or several, related to or arising in any manner our of
any transaction, proposal or any other matter (the "Matters") contemplated by
the engagement of Xxxxxxxx hereunder. The Company also agrees that neither
Xxxxxxxx nor any other Indemnified Party shall have any liability to the Company
for any losses, claims or expenses related to or arising out of any Matters. The
Company will promptly reimburse any preparation for or defense of any pending or
threatened claim related to or arising in any manner out of any Matter
contemplated by the engagement of Xxxxxxxx hereunder, or any action or
proceeding arising therefrom; provided, however, that each Indemnified Party so
reimbursed shall repay such expenses in the event that it is ultimately
determined that such Indemnified Party is not entitled to indemnification for
such Matter pursuant to the provisions of this Agreement.
The Company may assume the defense of any litigation or proceeding in
respect of which indemnity may be sought hereunder, including the employment of
counsel and experts reasonably satisfactory to Xxxxxxxx and the payment of the
fees and expenses of such counsel and experts, in which event, except as
provided below, the Company shall not be liable for the fees and expenses of any
other counsel or expert retained by any Indemnified Party in connection with
such litigation or proceeding. In any such litigation or proceeding the defense
of which the Company shall have so assumed, any Indemnified Party shall have the
right to participate in such litigation or proceedings and to retain its own
counsel and experts, but the fees and expenses of such counsel and experts shall
be at the expense of such Indemnified Party unless (i) the Company and such
Indemnified Party shall have mutually agreed in writing to the retention of such
counsel or experts, (ii) the Company shall have failed in a timely manner to
assume the defense of, and employ counsel or experts reasonably satisfactory to
Xxxxxxxx in, such litigation or proceeding, or (iii) the named parties to any
such litigation or proceeding (including any impleaded parties) include the
Company and such Indemnified Party and representation of the Company and any
Indemnified Party by the same counsel or experts would, in the reasonable
opinion of Xxxxxxxx, be inappropriate due to actual or potential differing
interests between the Company and any such Indemnified Party. Notwithstanding
the foregoing, in no event shall the Company be obligated to reimburse the fees
or expenses of more than one counsel for any Indemnified Party.
The Company shall not be liable, and the Indemnified Parties shall not
be exculpated, in respect of any claims, damages, liabilities or expenses that
are finally judicially determined to have resulted directly from the gross
negligence or willful misconduct of an Indemnified Party. The Company agrees
that the exculpation, indemnification and reimbursement commitments set forth in
this engagement letter shall apply whether or not such Indemnified Party is a
formal party to any such claim, action or proceeding. Neither the Company nor an
Indemnified Party shall be liable for
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any settlement of any litigation or proceeding effected without its written
consent, unless such settlement, compromise or consent includes an unconditional
release of the Company or each Indemnified Party, as the case may be, from all
liability arising out of such claim, action, suit or proceeding.
The Company agrees that if any exculpation, indemnification or
reimbursement sought pursuant to this Agreement were for any reason not to be
available to any Indemnified Party or insufficient to hold it harmless as and to
the extent contemplated by this Agreement, then the Company shall contribute to
the amount paid or payable by the Indemnified Party as a result of the claims,
damages and liabilities in such proportion as is appropriate to reflect the
relative benefits to the Company on the one hand, and Xxxxxxxx on the other
hand, in connection with the transaction to which such exculpation,
indemnification or reimbursement relates and, to the extent required by
applicable law, the relative faults of such parties as well as any other
equitable considerations. The Company and Xxxxxxxx agree that it would not be
just and equitable if the contribution provided for herein were determined by
pro rata allocation or any other method which does not take into account the
equitable considerations referred to above. It is hereby agreed that the
relative benefits to the Company, on the one hand, and Xxxxxxxx, on the other
hand, with respect to this engagement shall be deemed to be in the same
proportion as (i) the aggregate transaction value of the Transaction (whether or
not consummated) for which Xxxxxxxx is engaged to render financial advisory
services bears to (ii) the Fee paid to Xxxxxxxx in connection with such
Transaction. In no event shall Xxxxxxxx contribute in excess of the amount
actually received by Xxxxxxxx pursuant to the terms of the Agreement.
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