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EXHIBIT 10.3
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is entered into
effective this 26th day of November, 1997 by and between WHY?
TELECOMMUNICATIONS, INC., a Texas corporation ("Seller"), and INTERNET AMERICA,
INC., a Texas corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller is in the business of providing internet access
services to its customers (the "Business"); and
WHEREAS, the parties hereto desire to enter into this Agreement for the
purchase of the Business and to establish the parties ongoing business
relationship regarding other matters; and
WHEREAS, certain defined terms as utilized in this Agreement are set
forth in Article 7 of this Agreement and such terms shall have the meanings set
forth therein;
NOW, THEREFORE, for and in consideration of the mutual understandings,
promises and covenants contained herein (including the recitals set forth
above), the parties hereto agree as follows:
1. TERMS OF PURCHASE AND SALE; CLOSING.
1.1 Purchase and Sale of Certain Assets of the Seller. Upon the basis
of the representations and warranties and subject to the terms and conditions of
this Agreement, Buyer agrees to purchase and acquire from Seller, and Seller
agrees to sell, convey, transfer, assign, and deliver to Buyer, on or before the
Closing Date (as defined in Section 1.6 hereto) the Assets, free and clear of
any pledge, lien, claim or other encumbrance of any kind whatsoever, against
receipt on the Closing Date and thereafter of the Purchase Price as specified in
Section 1.3 hereof. The term "Assets" shall mean:
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(a) all of Seller's right, title and interest in and to the
list of its Subscribers including all pertinent customer information for each
Subscriber and all pertinent credit and/or other billing information for each
Subscriber and the expiration date of each Subscriber's service agreement;
(b) all of Seller's right, title and interest in and to all
service agreements for each Subscriber relating to the provision of internet
access services; and
(c) all related goodwill with regard to any of the foregoing.
1.2 Excluded Assets. Buyer shall not purchase from Seller, and Seller
shall not sell to Buyer, any assets which are not described on Section 1.1 (the
"Excluded Assets").
1.3 Purchase Price. The purchase price (the "Purchase Price") for the
Assets shall be calculated and paid as follows:
(a) on the Closing Date, Buyer will pay to Seller an advance
(the "Advance") of $50,000 which shall be credited against the first amounts due
to Seller representing Adjusted Monthly Payments; and
(b) on the tenth day of each month following the calculation
of any Adjusted Monthly Payment, Buyer will pay to Seller seventy five percent
(75%) of the Adjusted Monthly Payment then due after deduction of any amount of
the Advance not previously deducted. The parties recognize that the calculation
of Adjusted Monthly Payments shall be cumulative so that, in the event the
calculation of the Adjusted Monthly Payment for any month is negative, no
amounts shall be due for the following months until the cumulative amounts
(including such negative amount) shall be positive and then only up to such
positive amount;
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(c) in addition to the Adjusted Monthly Payment, on the tenth
day of each month following the calculation of the Bonus Amount, Buyer will pay
to Seller seventy-five percent (75%) of the Bonus Amount then due after
deduction of any amount of the Advance not previously deducted against the
Adjusted Monthly Payment contemplated in Section 1.3(b), above. The parties
shall treat payments of Bonus Amounts on a cumulative basis in the same fashion
as the Adjusted Monthly Payments; and
(d) on January 10, 1999 Buyer shall pay to Seller an amount
not to exceed the cumulative Adjusted Monthly Payments and Bonus Amounts
previously withheld from Seller less the Advance and all Adjusted Monthly
Payments and Bonus Amounts actually paid.
On or before the tenth day of each month during which any payments
under this Agreement may be due and payable, Buyer shall provide Seller a
written calculation of all Accepted Subscribers and Rejected Subscribers for the
immediately preceding calendar month.
Seller shall have the right to inspect such books and records of Buyer,
not more often than once every three months, upon reasonable notice to the Buyer
and during the normal business hours of the Buyer, in order to allow Seller to
audit the calculations made by Buyer under this Section 1.3.
1.4 Liabilities Assumed. In exchange for the Payment Credit Buyer
agrees to provide the Buyer's standard internet access services to the
Subscribers for the balance of their original prepaid service agreement provided
(i) no such service agreement shall have a term in excess of twelve (12) months
from the date of this Agreement and (ii) each Subscriber complies with the
acceptable use policies of Buyer. Buyer does not assume any other obligation or
liability of Seller including, but not limited to, any obligation of Seller to
maintain web pages for any Subscriber
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or the obligation of Seller to provide any refunds, rebates, commissions, fees
or payments to any Subscriber of other Person, all of which shall remain with
Seller.
1.5 Instruments of Transfer and Conveyance.
(a) The sale, conveyance, transfer, assignment and delivery of
the Assets, as herein provided, shall be effected by delivery by Seller on the
Closing Date of such bills of sale, endorsements, assignments, certificates,
drafts, checks or other instruments of transfer and conveyance as Buyer shall
reasonably deem necessary to vest in Buyer good and marketable title to the
Assets. Such instruments of transfer and conveyance shall contain warranties as
to marketable title and that such Assets are free and clear of all pledges,
liens, options, security interests, mortgages, claims, charges or other
encumbrances of any kind whatsoever.
(b) Seller agrees that it will from time to time after the
Closing Date, upon the request of Buyer, promptly do, execute, acknowledge and
deliver, and will cause to be done, executed, acknowledged and delivered, all
such further instruments, certificates, assignments, transfers, conveyances,
powers of attorney, assurances and other documents, as may be reasonably
necessary or advisable to assure or confirm Buyer's free and clear title to and
interest in, or to enable Buyer to deal with and dispose of, any of the Assets.
(c) Seller agrees to provide, and continue paying all monthly
amounts relating to, and make available to Buyer, all telecommunication charges
relating to Seller's Dallas Dial-Up, Ft. Worth Dial-Up and Business Line
Services through December 8, 1997 and thereafter until December 31, 1997 Seller
agrees to use its best efforts to maintain such lines in service.
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1.6 Closing. The closing hereunder (the "Closing") shall be held at the
offices of Buyer as of the effective date of this Agreement, or at such other
time and place as the parties may agree upon (the "Closing Date"). At the
Closing:
(a) Seller will execute and deliver to Buyer the following: a
General Xxxx of Sale and Conveyance in the form acceptable to Buyer and such
other instruments of transfer and conveyance as are required pursuant to Section
1.5 above;
(b) Buyer will execute and deliver to Seller an Assumption of
Liabilities relating to the liabilities set forth in Section 1.4 above; and
(c) Each party will execute and deliver to the others such
other agreements, certificates, assignments, consents and other documents as are
required or specified in this Agreement or as may reasonably be requested by the
other party to evidence compliance with the terms hereof.
Simultaneously with the deliveries contemplated herein, Seller will use
its best efforts and take all such other action as may be reasonably necessary
to put Buyer in possession and control of the Assets.
1.7 License. In addition to the Assets purchased hereunder, Seller
hereby grants to Seller a one-year, paid-up, nontransferable, exclusive license
to use Seller's domain name "Xxx.xxx." Following the expiration of one-year, all
right, title and interest in and to such domain name shall revert back to Seller
without further action by either party hereto.
2. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to Buyer as follows:
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2.1 Corporate Status. Seller is a corporation duly organized, validly
existing and in good standing under the laws of Texas and has all necessary
corporate power and authority to carry on its business as now conducted and to
own or lease and operate its properties, and to execute, deliver and perform its
obligations hereunder.
2.2 Authority for Agreement. This Agreement constitutes the valid and
legally binding obligation of Seller and the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary action on the part of the board of directors
(listed on Schedule 2.2) and all shareholders (listed on Schedule 2.2) of
Seller, will not conflict with or result in any violation of, or default under,
any provisions of the charter or bylaws of Seller, will not conflict with or
result in any violation of, or default with respect to, any mortgage, indenture,
lease, agreement or other instrument affecting the Assets, or to which Seller or
its affiliates is a party, or by which Seller or its affiliates is bound and
will not require the consent or approval or notice to any Person or any
governmental agency.
2.3 Properties. Seller has good, valid and marketable title to the
Assets subject to no liens, encumbrances, security interests or mortgages
whatsoever. The legal and beneficial interests in the Assets are owned
exclusively by Seller.
2.4 Taxes. Seller has paid all federal, state and local income, sales,
use, value-added, payroll, franchise and withholding taxes due and owing as a
result of the operation of the Business prior to the Closing.
2.5 Litigation. There is no pending or threatened litigation or
governmental or administrative proceeding to which the Seller is a party or by
which the Business or the Assets may be adversely affected.
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2.6 Brokers, Finders, etc. No broker, finder or other financial
consultant has acted on behalf of Seller or its affiliates in connection with
the transactions contemplated by this Agreement and all negotiations relative to
this Agreement have been carried on directly without the intervention of any
such third party.
3. REPRESENTATIONS AND WARRANTIES OF BUYER.
3.1 Corporate Status. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas. Buyer has
full power and authority to execute and deliver this Agreement on Buyer's
behalf, and to perform its obligations hereunder.
3.2 Authority for Agreement. Buyer has all necessary power and
authority to execute and deliver this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of Buyer. No notice, consent, approval, order or authorization of, or
registration, declaration or filing with, any person or entities, or with any
governmental authority is required in connection with the execution and delivery
of this Agreement or the consummation by Buyer of the transactions contemplated
hereby or thereby.
3.3 Brokers, Finders, etc. No broker, finder or other financial
consultant has acted on behalf of Buyer or its affiliates in connection with the
transactions contemplated by this Agreement and all negotiations relative to
this Agreement have been carried on directly without the intervention of any
such third party.
4. INDEMNIFICATION.
4.1 Indemnification. Seller covenants and agrees to indemnify and hold
Buyer harmless from and against any and all losses, liabilities, damages,
demands, claims, suits, actions,
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judgments or causes of action, assessments, costs and expenses, including,
without limitation, interest, penalties, attorneys' fees, any and all expenses
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, in writing or any other claim, and any and all amounts
paid in settlement of any claim asserted in writing or litigation (each a
"Loss") asserted against, resulting to, imposed upon, or incurred or suffered by
Buyer, directly or indirectly, as a result of or arising from the operation of
the Seller or Business prior to the Closing Date, other than as otherwise
contemplated herein. To the extent Buyer suffers any Loss under this Section
4.1(a), or has identified a loss but has not quantified the dollar value
thereof, Buyer may withhold and off-set any payments due to Seller under this
Agreement to compensate (to the extent of any such payment due) Seller for any
such Loss.
5. POST CLOSING COVENANTS.
5.1 Covenant Not to Compete. In exchange for the representations and
warranties and fulfillment of the agreements contained herein by Buyer, Seller,
and by their signature hereto each of Sellers' shareholders, directors and
officers agrees not to compete, either directly or indirectly, for a period of
one (1) year commencing with the Closing Date in the Territory, in any endeavor
competitive with the Business. For purposes of this Section 5.1 the term
"Territory" shall mean the State of Texas. Additionally, Seller agrees during
the one year period following the Closing Date to forward any and all sales
leads for the provision of consumer dial-up and dedicated internet access
services generated from the Territory to Buyer.
6. MISCELLANEOUS PROVISIONS.
6.1 Entire Agreement. This Agreement, together with all the schedules
and exhibits hereto, constitutes the entire agreement among the parties hereto
pertaining to the subject matter
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hereof and supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether oral or written, of the parties, and there
are no warranties, representations or other agreements between the parties in
connection with the subject matter hereof except as specifically set forth
herein.
6.2 Amendment. This Agreement may be amended by the parties hereto at
any time, but only by an instrument in writing duly executed and delivered on
behalf of each of the parties hereto.
6.3 Headings. The section headings are not to be considered part of
this Agreement and are included solely for convenience and are not intended to
be full or accurate descriptions of the contents thereof. References to Sections
are to portions of this Agreement unless the context requires otherwise.
6.4 Exhibits, etc. Exhibits and schedules referred to in this Agreement
are an integral part of and are incorporated in this Agreement by reference.
6.5 Assignment; Successors and Assigns. All of the terms and provisions
of this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective transferees, successors and assigns.
6.6 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered or sent Federal Express or other reputable overnight courier, postage
prepaid or by certified mail, return receipt requested:
(a) if to the Seller:
000 X. Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxx 00000
Attn: President
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(b) if to the Buyer:
One Dallas Center
000 X. Xx. Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: President
6.7 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas.
6.8 Severability. The provisions of this Agreement are severable, and
in the event that any one or more provisions are deemed illegal or
unenforceable, the remaining provisions shall remain in full force and effect.
6.9 Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
6.10 Publicity and Disclosures. Seller and its officers and directors
agree not to issue or cause the publication of any press release or other
announcement with respect to this Agreement or the other transactions
contemplated hereby without the prior written consent of Buyer except to the
extent disclosure by Seller is required by any applicable law or regulation, by
an authorized administrative or governmental agency.
7. DEFINITIONS.
The following capitalized terms as used in this Agreement shall have
the following meanings:
7.1 "Accepted Subscriber" shall mean a Subscriber who purchases
internet access services from Buyer pursuant to one of Buyer's standard internet
access service offerings on or before the calendar month during which such
Subscriber's original prepaid service agreement with Seller shall expire.
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7.2 "Adjusted Monthly Payment" shall mean an amount for each calendar
month following the Closing equal to the Unadjusted Monthly Payment less an
amount equal to $100 multiplied by the Rejected Subscribers for such month. The
Adjusted Monthly Payment may be a negative number.
7.3 "Base Price" means an amount equal to (i) the Subscribers
Transferred multiplied by $100 less (ii) $350,000 (the "Payment Credit").
7.4 "Bonus Amount" means an amount calculated each month equal to $20
multiplied by that number of Accepted Subscribers in excess of fifty percent
(50%) of the Subscribers whose original prepaid service agreement expired during
such month.
7.5 "Person" means an individual, corporation, partnership, trust,
joint venture or other legal entity.
7.6 "Per Subscriber Price" means an amount equal to the Base Price
divided by the number of Subscribers Transferred.
7.7 "Rejected Subscriber" shall mean a Subscriber who does not purchase
internet access services from Buyer pursuant to one of Buyer's standard internet
access service offerings before the expiration of calendar month during which
such Subscriber's original prepaid service agreement with Seller shall expire.
7.8 "Subscriber" shall mean a Person to whom Seller provides internet
access services prior to the date of this Agreement pursuant to a prepaid
service agreement with a term not to exceed twelve (12) months from the
initiating date of such services.
7.9 "Subscribers Transferred" means 8,213 Subscribers who are given
notice by Seller to commence utilizing the internet access services of Buyer
pursuant to a transfer notice posted by Seller to the Subscribers prior to the
date of this Agreement.
7.10 "Unadjusted Monthly Payment" shall mean an amount calculated each
calendar month following the effective date of this Agreement equal to the
number of Subscribers whose
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original prepaid service agreement with Seller shall expire during such month
multiplied by the Per Subscriber Price. The parties acknowledge that each
Subscriber may only be counted once for purposes of this calculation, and that
Subscribers whose original prepaid service agreement with Seller extends beyond
twelve (12) months from the effective date of this Agreement shall not be
counted.
IN WITNESS WHEREOF, the parties hereby have duly executed this
Agreement as of the day and year first above written.
WHY? TELECOMMUNICATIONS, INC.
a Texas corporation
By: /s/ XXXX XXXXXX
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Its: President
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INTERNET AMERICA, INC.
a Texas corporation
By: /s/ XXXX XXXXXX
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Its: CEO
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By their signature hereto each of the following agree to be
individually bound by the provisions of Section 5.1 and 6.10 of this
Agreement.
/s/ XXXXXXX X. XXXXXX
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Xxxxxxx X. Xxxxxx
/s/ XXXX X. XXXXXX
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Xxxx X. Xxxxxx
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