STOCK PURCHASE AGREEMENT
Exhibit
99.1
THIS
STOCK
PURCHASE AGREEMENT
(this
“Agreement”) entered into as of the 27th day of July, 2007, by and among
INTERNET
AMERICA, INC.,
a Texas
corporation (“IA”), and XXXX
XXXXX
and
XXXXXXX
X. XXXXX,
each an
individual residing in Crosby, Texas (collectively the “Shareholders”)
W
I T N E S S E T H:
WHEREAS,
the
Shareholders own an aggregate of 1,000 shares of common stock, $1.00 par value
per share, constituting all the outstanding shares of common stock of Teleshare
Communications Services, Inc., a Texas corporation (the “Company”) which
operates an internet service and messaging company in Texas (the “Business”);
and
WHEREAS,
the
Shareholders have agreed to sell 990 shares of common stock of the Company
(the
“Shares”) to IA, with the remaining 10 shares of Company common stock to be
retained by Xxx. Xxxxx, and IA has agreed to purchase the Shares on the terms
and conditions and for the consideration set forth herein;
NOW,
THEREFORE,
for and
in consideration of the payment of the purchase price, the mutual promises,
covenants and obligations contained herein, the receipt and sufficiency of
which
are hereby acknowledged and confessed, and as an inducement to IA to purchase
the Shares, IA and the Shareholders agree as follows:
ARTICLE
I
SALE
OF SHARES, PURCHASE PRICE AND CLOSING
1.1 Sale
of Shares.
Upon
the terms and subject to the conditions of this Agreement, the Shareholders
shall sell, convey, assign, transfer and deliver to IA, and IA will purchase
from the Shareholders, the Shares.
1.2 Closing.
The
closing contemplated by this Agreement (the "Closing") shall take place at
the
offices of Xxxxx & Ketchand, Nine Xxxxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx
00000 at 10:00 a.m. Houston time, on Monday, July 26, 2007 (the "Closing Date"),
or such other date that the parties may agree to, which shall be no later than
the second business day following satisfaction or waiver of the conditions
set
forth in Article V hereof.
1.3. Purchase
Price.
As
consideration for the purchase of the Shares and the performance by the
Shareholders of various other matters as provided herein, IA shall pay to the
Shareholders the sum of One Million Eight Hundred Fifty Thousand Dollars
($1,850,000)(the “Initial Purchase Price”), adjusted as described in Section 1.4
below (such net amount, the “Purchase Price”). The Purchase Price shall be paid
to the Shareholders by delivery of:
(i) 50,000
shares of IA Common Stock, valued at $25,000, at the Closing (the “Closing
Shares”);
(ii) an
interest bearing promissory note (the “Cash Account Note”) in the form attached
hereto as Exhibit A, in the principal amount of the aggregate current cash
balance in all bank and certificates of deposit accounts of the Company at
the
Closing Date, but not including the balance in the Pledged Deposit Account
at
Anahuac National Bank, account no. 00000000 (the “PDA”), adjusted for
outstanding transactions entered into prior to that date but not yet reflected
in the bank balances; and
(iii) that
number of shares of IA Common Stock equal to (a) the difference between the
Purchase Price less $25,000 and less the principal amount of the Cash Account
Note, (b) divided by $2.50 per share (the “Escrowed Shares”), with any
fractional shares to be paid in cash.
The
Escrowed Shares will be issued to the Shareholders within ten (10) business
days
after the final determination of the number of Escrowed Shares in the manner
provided in Section 1.4.B hereto, and delivered to counsel for IA (the “Escrow
Agent”) to be held in escrow for the benefit of the Shareholders until the
second anniversary of the Closing Date (the “Escrow Date”) pursuant to the terms
of the Escrow Agreement. On the Escrow Date, the Shareholders will have the
option to either receive the Escrowed Shares out of escrow or tender the
Escrowed Shares to IA in exchange for a promissory note in substantially the
form set forth in Exhibit B hereto (the “Escrow Shares Note”) in the amount of
the difference between the Purchase Price less $25,000 and less the principal
amount of the Cash Account Note. The Shareholders shall give written notice
to
IA of the option they elect to exercise on or before the Escrow Date or, in
the
absence of such notice, IA shall be entitled to make such election.
1.4 Adjustments
to Purchase Price.
A. The
following adjustments shall be made to the Initial Purchase Price (collectively,
the “Adjustments”). Attached as Schedule
1.4
is an
estimate of the amount of the Adjustments at May 31, 2007 for illustrative
purposes in identifying the components of the Adjustments as described below:
(i)
the
amount shall be decreased by (W) the outstanding balance under the Loan and
Security Agreement with the U.S. Department of Agriculture Rural Utilities
Service dated as of June 8, 2005 (“RUS Loan”), less the balance in the PDA, on
the Closing Date, (X) the amount of all payments made by IA (or for which the
Company is liable to pay) to vendors, suppliers, lessors or other creditors
of
the Company attributable to operations of the Company prior to the Closing
Date,
but excluding payables to IA, (Y) the amount of sales tax liability for accounts
collected prior to the Closing Date, and (Z) the amount of prepaid customer
accounts made prior to the Closing Date for goods or services to be delivered
or
performed after the Closing Date;
(ii)
the
amount shall be increased by (A) the principal amount of the Cash Account Note,
(B) receivables recorded prior to the Closing Date for which payment will be
received not later than 90 days after that date, but excluding receivables
from
IA, and (C) the amount by which the value of inventory as of the Closing Date
exceeds $30,000; and (D) the amount of prepaid items as of the Closing Date;
and
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(iii)
the
amount shall be increased by $450 for each wireless subscriber of the Company
on
the Closing Date in excess of 1,200 who is current within sixty (60) days in
its
payments to the Company.
B.
On the
date which is ninety (90) days after the Closing Date (the “Adjustment Date”),
IA shall deliver to the Shareholders a detailed calculation of the Adjustments
and shall certify in writing the accuracy of such Adjustments. Within five
business days after receipt of such certification, the Shareholders shall either
agree with such determination or provide to IA in writing any differences they
have with the calculation thereof and the basis therefor. Both parties shall
use
all reasonable efforts to resolve such differences promptly and, upon the
satisfactory resolution of any differences, the amount of the Cash Account
Note
and the number of Escrowed Shares shall be determined based on the adjusted
Purchase Price. Promptly after such determination is made, IA shall issue a
final executed Cash Account Note and cause its transfer agent to issue the
Escrowed Shares in the name of the Shareholders and to deliver the certificates
for the Escrowed Shares to the Escrow Agent to be held in escrow by
it.
1.5
Title
to Shares and Risk of Loss.
Title
to the Shares and risk of loss or damage to the Business by casualty (whether
or
not covered by insurance) will pass to IA immediately upon completion of the
Closing.
ARTICLE
IIREPRESENTATIONS AND WARRANTIES OF
THE
SHAREHOLDERS
Each
of
the Shareholders hereby jointly and severally represents and warrants to IA
that
the statements contained in this Article II are true and correct on the date
of
this Agreement and will be true and correct as of the Closing Date, except
as
expressly set forth herein or in the schedules delivered by the Shareholders
herewith.
2.1 Organization
and Qualification.
The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Texas, has all requisite corporate
power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted, and is duly qualified and in good standing
to
do business in each jurisdiction in which the nature of the business conducted
by it or the ownership, lease or operation of its properties makes such
qualification necessary. The Shareholders have delivered or have cause to be
delivered to IA complete and accurate copies of the Articles of Incorporation
and Bylaws of the Company, and the Company is not in violation of any provision
of its Articles of Incorporation or Bylaws.
2.2 Subsidiaries.
The
Company has no Subsidiaries, nor does it directly or indirectly own any equity,
membership, partnership or similar interest in, any corporation, partnership,
joint venture, limited liability company or other business association or
entity. As used in this Agreement, the term “Subsidiary” means, with respect to
a party, any corporation, partnership, joint venture, limited liability company
or other business association or entity, whether incorporated or unincorporated,
of which (i) such party or any other Subsidiary of such party is a general
partner or a managing member (excluding partnerships, the general partnership
interests of which are held by such party and/or one or more of its Subsidiaries
do not have a majority of the voting interest in such partnership),
(ii) such party and/or one or more of its Subsidiaries holds voting power
to elect a majority of the board of directors or other governing body performing
similar functions, or (iii) such party and/or one or more of its Subsidiaries
directly or indirectly owns or controls more than 50% of the equity, membership,
partnership or similar interests.
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2.3 Capitalization. The
authorized capital stock of the Company consists of 1,000 shares of Common
Stock, $1.00 par value, of which all shares that are issued and outstanding
are
held by the Shareholders. After the Closing Date, the Company shall have 1,000
shares of Common Stock issued and outstanding, of which 990 will be held by
IA
and 10 will be held by Xxx. Xxxxx. All of the Shares have been duly authorized
and validly issued, are fully paid and nonassessable, and not subject to or
issued in violation of any purchase option, call option, right of first refusal,
preemptive right, subscription right or any similar right under any provision
of
the Texas Business Corporation Act, the Company’s Articles of Incorporation or
Bylaws, or any agreement to which the Company is a party or is otherwise bound.
There are no options, warrants or other rights, agreements, arrangements or
commitments to which the Company or either of the Shareholders is a party
relating to the issued or unissued capital stock or other equity interests
of
the Company, or obligating the Company to grant, issue or sell any shares of
its
capital stock or other equity interests or obligating the Company to grant,
extend, accelerate the vesting of, otherwise modify or amend or enter into
any
such option, warrant, equity security, call, right, commitment or
agreement.
There
are no equity securities of any class of the Company, or any security
exchangeable into or exercisable for such equity securities, issued, reserved
for issuance or outstanding.
2.4 Title
to Shares.
The
Shareholders own of record and beneficially the Shares, free and clear of all
mortgages,
pledges, liens, security interests, restrictions, conditional sales agreements,
charges, encumbrances and claims of every kind (collectively, the "Liens")
The
Shares are not subject to any voting trust or shareholders’ or other similar
agreement. The Shares were offered, issued, sold and delivered by the Company
in
compliance with all applicable state and federal securities laws, and none of
such Shares was issued in violation of the preemptive rights of any person.
Upon
consummation of the Closing, IA shall own good and indefeasible title to 990
of
the issued and outstanding shares of Common Stock of the Company free and clear
of all Liens.
2.5
Authority.
Each of
the Shareholders has all requisite power and authority to execute and deliver
this Agreement and each of the other documents contemplated hereby (the
“Ancillary Agreements”) to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. This Agreement constitutes, and each of the Ancillary Agreements
to
which either of the Shareholders is a party, when duly executed and delivered
by
the Shareholders, will constitute, the valid and binding obligation of such
Shareholder, enforceable against them in accordance with their respective terms
except that such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights generally and (ii) equitable principles which may limit the availability
of certain equitable remedies (such as specific performance) in certain
instances.
2.6 Consents
and Approvals.
Except
as provided in Schedule
2.6,
no
consent, approval or authorization of, or filing or registration with, any
governmental or regulatory authority, or any other person or entity, is required
to be made or obtained by the Company, or either of the Shareholders in
connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby by any of
them.
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2.7 Title
to Assets; Liens.
A
complete and asccurate list of all subscribers and subscriber contracts as
of
July 25, 2007 is contained on Schedule
2.7.
Except
as provided in Schedule
2.7,
the
Company has good and indefeasible title to all of the assets and interests
in
assets owned by it (collectively, the “Assets”) free and clear of any Liens. The
Company is in possession of all Assets leased to it from others. The Assets
constitute all of the material property, whether real, personal, mixed,
tangible, or intangible, that is used in the Business by the Company. The
Shareholders shall deliver, or cause to be delivered, to IA on the Closing
Date,
possession of and/or control or dominion over all of the Assets. No officer,
director or employee or affiliate of the Company or any spouse, child or other
relative of any of these persons, owns or has any interest, directly or
indirectly, in any of the real or personal property owned, leased or used by
the
Company in the Business.
2.8 Financial
Statements.
The
Company has previously provided to IA (i) its unaudited balance sheet as of
May
31, 2007 (the “Interim Balance Sheet,” and such date, the “Interim Balance Sheet
Date”), and (ii) its audited Balance Sheet, Statement of Income and Statement of
Cash Flows as of December 31, 2006, and the notes thereto (collectively, the
“Financial Statements”). The Financial Statements are true and correct in all
respects and fully and fairly present the financial position of the Company
as
of the dates indicated, and the results of its operations for the periods
indicated, in accordance with accounting principles generally accepted in the
United States of America, consistently applied, except as
otherwise stated therein. As of the Interim Balance Sheet Date, there are no
liabilities and no assets of the Company that are not reflected in the Interim
Balance Sheet.
2.9 Tax
Returns.
Within
the times and in the manner prescribed by law, including extensions permitted
thereunder, the Company has filed all federal, state and local tax returns
required by law. The Company has either paid all taxes, assessments and
penalties due and payable through and including the Closing Date, or reflected
and reserved on its Balance Sheet the amounts owing therefor, and there are
no
present disputes as to taxes of any nature payable by the Company.
2.10 Contracts. Schedule
2.10
sets
forth a complete and accurate list of all contracts and agreements
(collectively, the “Contracts”), that are material to the business, assets,
liabilities, capitalization, condition (financial or otherwise) or results
of
operations of the Company. The Company has made all the Contracts available
at
the Company’s offices for inspection by IA. Each of the Contracts is valid and
in full force and effect, and there has not been any default by the Company
or,
to the Shareholders’ knowledge, any other party to any of the Contracts, or any
event that with notice or lapse of time or both, would constitute a default
by
the Company or, to the Shareholders’ knowledge, any other party to any of the
Contracts, which might reasonably be expected to have a material adverse effect
on the financial condition or operations of the Business. Neither the
Shareholders nor the Company has received notice that any party to any of the
Contracts intends to cancel or terminate any of the Contracts or exercise or
not
exercise any options that they might have under any of the Contracts.
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2.11 Equipment. Schedule
2.11
sets
forth a complete and accurate list of all the machinery, equipment, towers
and
tower equipment, automobiles, furniture, office supplies, spare parts related
to
the machinery and equipment, other supplies and parts, and all computer
hardware, computer software, trade fixtures, data processing equipment and
all
other tangible personal property owned or used in connection with the Business
(collectively, the "Equipment"). All of the Equipment is in good operating
condition and repair, ordinary wear and tear excepted. Except as described
in
Schedule
2.11,
all the
equipment is owned by the Company, and none of the equipment will be, at the
Closing Date, held under any security agreement, conditional sales contract,
or
other title retention or security arrangement or located other than in the
possession of the Company.
2.12 Licenses.
Schedule
2.12 sets forth a complete and accurate list of all governmental and other
licenses, permits, franchises, approvals and certificates owned or utilized
in
connection with the conduct of the Business or in which the Company has any
rights (“Licenses”). The Company has not infringed nor is it now infringing, on
any license belonging to any other person, firm or corporation. The Company
owns
or holds adequate licenses or other rights to use all Licenses necessary for
the
Business as now conducted by the Company, and that use does not, and will not,
conflict with, infringe on or otherwise violate any rights of others.
2.13 Compliance
with Laws.
The
Company has complied with, and is not in violation of, applicable federal,
state
or local statutes, laws and regulations (including, without limitation, any
applicable building or other law, ordinance or regulation) that affect, or
are
likely to affect, directly or indirectly, any of the Assets or the Business,
and
there are not any uncured violations of federal, state or municipal laws,
ordinances, orders, regulations or requirements affecting any portion of the
Assets or the Business.
2.14 Litigation.
Except
as disclosed in Schedule
2.14,
there
is no suit, action, arbitration or legal, administrative or other proceeding
or
governmental investigation pending or threatened against or affecting the
Company, the Assets or the Business.
2.15 No
Breach or Violation.
The
consummation of the transactions contemplated by this Agreement will not result
in or constitute any of the following: (i) a default or an event that, with
notice or lapse of time or both, would be a default, breach or violation except
for third party consents described in this Agreement or any schedule prepared
and delivered in connection herewith, of any lease, license, promissory note,
conditional sales contract, commitment, indenture, mortgage, deed of trust,
security agreement or other agreement, instrument or arrangement by which the
Assets, the Business or the Company may be affected, or to which the Assets,
the
Business or the Company may be bound, (ii) an event that would permit any party
to terminate any Contract, License or other arrangement with the Company, (iii)
the creation or imposition of any lien, charge or encumbrance on any of the
Assets or the Business, or (iv) a breach of any term or provision of this
Agreement. The Company has complied with all applicable laws, ordinances,
regulations, statutes, rules and restrictions pertaining to and affecting the
Business or the Assets. There has been no breach or alleged breach of any of
Sections 5 through 9 of the Consulting and Noncompetition Agreement entered
into
between Xx. Xxxxx and IA on February 26, 2007 (the “Consulting Agreement”), and
such Consulting Agreement is in full force and effect.
6
2.16 Personnel;
Employment Contracts. Schedule
2.16
contains
a complete and accurate list of all employees who work in the Business. At
or
after Closing, the Company shall deliver such additional information as IA
shall
reasonably request with respect to the employees’ employment with the Company.
The Company does not have any employment contracts, collective bargaining
agreements, pension, bonus or profit sharing plans providing for employee
remuneration or benefits with respect to employees that by their terms or by
law
will become binding upon or the obligations of IA. The Company is in compliance
with, and upon the Closing will remain in compliance with, all of its
obligations under such agreements or other compensation or benefit arrangements.
2.17 Intellectual
Property; General Intangibles. Schedule
2.17
sets
forth a complete and accurate list of all of the Company’s domain names, service
marks, trademarks, trade and assumed names. The Company is the sole owner of
all
of the items listed on Schedule 2.17 and all inventions, trade secrets and
royalty rights and other proprietary intangibles, licenses and sublicenses
of
the Company granted and obtained with respect thereto and all technical data,
written specifications, work standards, assembling and process information,
operating manuals, operating data and plans, confidential information and
know-how used in connection with the Business, together with rights to recover
for infringement thereon and rights to protection of interests therein under
the
laws of all jurisdictions (collectively, the "Intellectual Property"). Also
listed on Schedule
2.17
are all
general intangibles, claims, rights of recoupment and goodwill, going concern
value, insurance refunds, rights of set-off and all other intangible properties
owned by the Company or used in the Business, and remedies against infringements
thereof, and rights to protection of interests therein under the laws of all
jurisdictions (collectively, the "General Intangibles"). There are no liens,
encumbrances, restrictions, or legal or equitable claims of others against
the
Intellectual Property or the General Intangibles, nor have any adverse claims
been asserted against the Intellectual Property or the General Intangibles,
the
Company or the Business with respect thereto. None of such Intellectual Property
or the General Intangibles infringes upon any patents, trade or assumed names,
trademarks, service marks or copyrights belonging to any other person, firm
or
corporation. The Company is not a party to any license, agreement or
arrangement, whether as licensor, licensee or otherwise, with respect to any
of
the Intellectual Property or the General Intangibles.
2.18 Employee
Benefits.
Each
"employee benefit plan" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended, that is maintained or
sponsored by the Company or any affiliate for the benefit of any employee (the
"Plan") is in full force and effect, and neither the Company nor any other
party
is in default under such Plan. There have been no claims of default, and, to
Company’s knowledge, there are no facts or conditions which if continued, or on
notice, will result in a default under any Plan. No Plan will, by its terms
or
under applicable law, become binding upon or become an obligation of IA. No
assets of the Plan shall be transferred to IA or to any plan of IA.
2.19 Accounts.
Schedule
2.19
sets
forth a complete and accurate list of all of the accounts receivable on the
books and financial records of the Company (collectively, the “Accounts
Receivables”) as of the Closing Date. All such Accounts Receivable, and all
papers and documents relating thereto, are genuine and in all respects what
they
purport to be, and each Account Receivable is valid and subsisting and arises
out of a bona fide sale and delivery of services theretofore actually rendered
by the Company to, the account debtor named in the Account Receivable. The
amount of each Account Receivable represented as owing is the correct amount
actually and unconditionally owing, except for normal cash discounts, and is
not
subject to any set-offs, credits, defenses, deductions or countercharges. The
Company is the owner of each Account Receivable free and clear of any charges,
liens, security interests, adverse claims and encumbrances of any and every
nature whatsoever.
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2.20 Absence
of Certain Changes or Events.
Since
the Interim Balance Sheet Date there has been no:
(a)
adverse change in the financial condition, liabilities, assets or prospects
of
the Business;
(b)
waiver or release of any right of or claim held by the Company;
(c)
loss,
destruction or damage to any property of the Company, whether or not
insured;
(d)
material change in the personnel of the Company or the terms or conditions
of
their compensation or employment or any pending or threatened labor trouble
involving the Company;
(e)
acquisition or disposition of any assets (or any contract or arrangement
therefor), nor any other transaction by the Company otherwise than for value
and
in the ordinary course of business;
(f)
transaction by the Company except in the ordinary course of
business;
(g)
change in accounting methods or practices (including, without limitation, any
change in depreciation or amortization policies or rates) by the
Company;
(h)
revaluation by the Company of any of its assets or liabilities;
(i)
amendment or termination of any contract, agreement, permit or license to which
the Company is a party, except in the ordinary course of business;
(j)
sale,
transfer, mortgage, pledge or other encumbrance of any asset of
Company;
(k)
other
event or condition of any character that has or might reasonably be expected
to
have a material adverse effect on the financial condition, assets or prospects
of the Business; or
(l)
agreement by the Company to do any of the things described in the preceding
clauses (a) through (k).
2.21 Suppliers
and Subscribers.
Neither
of the Shareholders is aware of any facts indicating that any of the Company’s
suppliers intends to cease doing business with the Company, or that a number
of
subscribers intends to cancel their subscriptions with the Company to the extent
that it would materially alter the amount of revenues of the Business.
8
2.22 Insurance
Policies.
Attached
hereto as Schedule
2.22
is a
list of all insurance policies maintained by the Company related to the
Business. The Company maintains (i) insurance on all its assets and businesses
of a type customarily insured by similar companies in the same industry,
covering property damage and loss of income by fire or other casualty, and
(ii)
adequate insurance protection against all liabilities, claims and risks against
which it is customary to insure, including but not limited to, product liability
insurance.
2.23 Environmental Matters.
The
Company is in compliance with all applicable environmental laws, statutes,
ordinances, rules, regulations, orders or determinations pertaining to the
environment in all jurisdictions in which the Company operates. There are no
past, existing, pending or threatened actions, suits, investigations, inquiries,
proceedings or clean-up obligations relating to any environmental laws with
respect to the Company.
2.24 Investment
Representations.
The
Closing Shares and the Escrowed Shares (collectively, the “IA Shares”) are being
acquired solely for the account of the Shareholders, for investment, and not
with a view to or for the resale, distribution, subdivision or fragmentation
thereof. None of the Shareholders has a contract, understanding, undertaking,
agreement or arrangement with any person to sell, transfer or pledge any of
the
IA Shares to any person, nor any present plans to enter into any such contract,
undertaking, agreement or arrangement. The Shareholders have such knowledge
and
experience in financial and business matters that each is capable of evaluating
the merits and risks of acquiring the IA Shares, and acknowledges that the
acquisition of the IA Shares involves a high degree of risk.
2.25 Securities
Compliance.
Each of
the Shareholders understands and agrees that (i) no sale, distribution, transfer
or other disposition of the IA Shares, or any portion thereof, can be made
by
either of the Shareholders unless the IA Shares have been registered under
the
Securities Act of 1933, as amended (the "Act"), and applicable securities laws
of any other relevant jurisdiction, or exemptions from such registrations are
available, as evidenced by an opinion of counsel, satisfactory to IA, with
respect to the proposed sale, distribution, transfer or other disposition or
such sale, distribution, transfer or other disposition is otherwise exempt
under
the Act, and (ii) an appropriate legend will be endorsed on the reverse side
of
each stock certificate representing the IA Shares to evidence such
restrictions.
2.26 Shareholder
Sophistication.
Each of
the Shareholders has such knowledge and experience in financial and business
matters and investments in general, and the business of the Company and IA
specifically, that he or she is capable of evaluating the information available
with respect to the IA Shares and the merits and risks of such investment and
of
making an informed investment decision to accept the IA Shares
hereunder.
2.27 Access
to Information.
The
Shareholders have been given access for a reasonable amount of time to or
furnished, and have reviewed, the documents with respect to IA and its business
filed with the Securities and Exchange Commission, have had an opportunity
to
ask questions and receive answers concerning the actual and proposed business
and affairs of IA and are satisfied with the results thereof, have been given
access to all other documents with respect to IA or this transaction, as well
as
such other information that the Shareholders have requested, and have relied
solely on investigations conducted by them in making the decision to acquire
the
IA Shares.
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2.28 Full
Disclosure.
Each of
the Shareholders has made available to IA true, complete and correct copies
of
all Contracts, documents concerning all litigation and administrative
proceedings, Plans, Licenses, insurance policies, lists of suppliers and
subscribers, books and records relating to the Business, and such information
covers all commitments and liabilities of the Company relating to the Business.
Neither of the Shareholders has knowingly failed to disclose to IA any facts
material to the business, results of operations, assets, liabilities, financial
condition or prospects of the Business or of the Company. To the knowledge
of
each of the Shareholders, none of the representations and warranties of the
Shareholders contained in this Agreement and no statement contained in any
document, certificate or other writing furnished or to be furnished by the
Shareholders to IA or any of its representatives pursuant to the provisions
hereof or in connection with the transactions contemplated hereby, contains
or
will contain any untrue statement of material fact or omits or will omit to
state any material fact necessary, in light of the circumstances under which
it
was made, in order to make the statements herein or therein not
misleading.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF IA
IA
represents and warrants to the Shareholders that the statements contained in
this Article III are true and correct on the date of this Agreement and will
be
true and correct as of the Closing Date.
3.1 Organization.
IA is a
corporation duly organized, validly existing and in good standing under the
laws
of the State of Texas and has all the necessary power and authority to execute,
deliver and perform this Agreement and the Ancillary Agreements to which IA
is
party, and no approval or consent of any person other than those of its board
of
directors is necessary in connection therewith. The execution, delivery and
performance of this Agreement and the Ancillary Agreements to which IA is a
party have been duly authorized by IA.
3.2 Valid
and Binding Obligations.
Upon
execution and delivery of this Agreement and each of the Ancillary Agreements
to
which IA is a party, such agreements will constitute the legal, valid, and
binding obligation of IA, enforceable in accordance with their respective terms,
except as limited by bankruptcy laws, insolvency laws and other similar laws
affecting the rights of creditors generally. No approvals or consents of any
persons or other entities are necessary in connection herewith.
3.3 Full
Disclosure.
This
Agreement and all other documents and written information furnished by IA to
the
Shareholders pursuant hereto or in connection herewith, are true, complete
and
correct, and do not include any untrue statement of a material fact or omit
to
state any material fact necessary to make the statements made herein and therein
not misleading.
3.4 No
Conflict.
Neither
the execution and delivery by IA of this Agreement and the Ancillary Agreements
to which IA is a party, nor the performance of its obligations hereunder and
thereunder, will violate or conflict with any provision of the governing
documents of IA or with any provision of any state or federal laws applicable
to
IA.
10
3.5Authorization
for Shares.
The IA
Shares have been duly authorized for issuance to the Shareholders and, upon
delivery thereof at the times and under the conditions described in Section
1.3
hereof, will be the duly authorized, validly issued, fully paid and
nonassessable shares of IA Common Stock.
ARTICLE
IV
COVENANTS
4.1 Operation
and Maintenance.
The
Shareholders jointly and severally represent, warrant, covenant and agree that
from the date hereof through the Closing Date, they will use their respective
best efforts to:
(a)
preserve the Business intact, to keep available to the Company its present
employees engaged in the Business, and to preserve its present relationship
with
subscribers, suppliers and others having business relationships with
it;
(b)
maintain and operate the Business in a good and businesslike manner in
accordance with good and prudent business practices, and not commit or permit
to
be committed, any waste thereto;
(c)
not
enter into any agreement or instrument which would bind IA or the Company after
Closing, or which would be outside the normal scope of maintaining and operating
the Business in the ordinary course;
(d)
not
remove any personal property from the Company unless such personal property
is
replaced with an item of at least equal value that is properly suited for its
intended purpose;
(e)
afford IA and its representatives the continuing right to review and inspect
the
Assets at reasonable hours, and any and all books, records, contracts, and
other
documents or data pertaining to the ownership, use, insurance, operation,
renovation and maintenance of the Business;
(f)
provide IA and its representatives free and open access to the employees during
regular business hours, to assist IA in the contemplated due diligence review,
and to allow IA to gather information to make employment decisions to be
effective after Closing;
(g)
pay
all bills and other payments due with respect to the ownership, use, insurance,
operation and maintenance of the Business;
(h)
take
all action necessary or prudent to prevent liens or other claims for the same
from being filed or asserted against any part of the Business;
(i)
maintain in good condition all of the Assets; and
11
(j)
not
make any material changes in the operations or business practices of the
Business.
4.2 Consents. The
Shareholders shall obtain and
deliver to IA on or prior to the Closing Date all necessary agreements and
consents of any parties, including without limitation the lender under the
RUS
Loan, to the consummation of the transactions contemplated by this Agreement,
or
otherwise pertaining to matters covered by this Agreement.
4.3 Access
to Information.
Each of
IA and the Shareholders shall afford to the other party’s officers, employees,
accountants, counsel and other representatives,
reasonable access, during normal business hours during the period prior to
the
Closing Date, to all its properties, financial records, books, contracts,
commitments, personnel and records and, during such period, each of IA and
the
Shareholders shall furnish promptly to each other all information concerning
its
business, properties, financial statements, assets and personnel
as the other party may reasonably request to audit or confirm the information
provided by the other parties hereunder. Each of the Shareholders will hold
any
such information which is nonpublic in confidence
and not disclose such information to others, trade or tip others to trade in
IA
stock. No
information or knowledge obtained in any investigation pursuant to this Section
or otherwise shall affect or be deemed to modify any representation
or warranty contained in this Agreement or the conditions to the obligations
of
the parties to consummate the Closing.
4.4 Satisfaction
of Conditions to Closing.
Subject
to the terms hereof, the Shareholders and IA shall each use their reasonable
best efforts to take, or cause to be taken, all actions, and do, or cause to
be
done, and to assist and cooperate with each other in doing, all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated hereby as promptly as practicable. The
Shareholders shall give or cause to be given any notices to third parties and
use their reasonable best efforts to obtain any third party
consents necessary to consummate the transactions contemplated
hereby.
IA
shall give prompt notice to the Shareholders, and the Shareholders shall give
prompt notice to IA, of the occurrence, or failure to
occur,
of any event, which occurrence or failure to occur would be reasonably likely
to
cause any representation or warranty of such party contained in this Agreement
to be untrue or inaccurate in any respect or any material failure of any of
the
parties to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement. Notwithstanding
the above, the delivery of any notice pursuant to this Section will not limit
or
otherwise affect the remedies available hereunder to the party receiving such
notice or the conditions to such party’s obligation to consummate the Closing.
4.5 Ancillary
Agreements.
Xxx.
Xxxxx shall enter into a (i) Noncompetition Agreement with IA in the form of
Exhibit C (the “Noncompetition Agreement”), and (ii) a Service Agreement (the
“Service Agreement”) with IA pursuant to which she agrees to operate the telex
business of the Company as a consultant to the Company in exchange for a
percentage of the revenues received therefrom, such Service Agreement to be
on
terms and conditions mutually satisfactory to Xxx. Xxxxx and IA.
4.6 Name
Change.
Each of
the Shareholders agrees not to use the name “Teleshare Communications Services,
Inc.” or any derivative or abbreviation thereof or name similar thereto in any
of their future businesses or in other capacity after the Closing Date, except
when acting on behalf of IA. Each of the Shareholders agrees that within ten
(10) days after the Closing Date the appropriate filing will be made with the
Secretary of State of Texas to change the name of Teleshare Communications,
Inc.
to a name submitted to and approved by IA, which approval shall not be
unreasonably withheld. The Shareholders agree to provide a copy of the
certificate issued by the Secretary of State in response to such filing upon
receipt thereof by the Shareholders.
12
ARTICLE
V
CLOSING
CONDITIONS
5.1 Deliveries
by the Shareholders.
The
obligation of IA to consummate the transactions contemplated at the Closing
shall be subject to the satisfaction at or prior to such date of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by applicable law, by IA. At the Closing, the Shareholders
shall deliver or cause to be delivered to IA the following:
(a) certificates
evidencing the Shareholders’ ownership of the Shares, duly endorsed in blank by
each Shareholder or accompanied by duly executed stock powers in blank, in
proper form for transfer to IA;
(b)
the
Escrow Agreement executed by the Shareholders;
(c)
resignations, effective immediately prior to the Closing, of each director
and
executive officer of the Company;
(d)
the
Noncompetition Agreement and the Service Agreement executed and delivered by
Xxx. Xxxxx;
(e)
the
consents of all third parties identified in Schedule
2.6
hereto,
including the consent of the lender under the RUS Loan to the sale of the Shares
to IA, as required in connection with the execution, delivery and performance
of
this Agreement and the consummation of the transactions contemplated hereby,
each in form and substance acceptable to IA;
(f) all
the
representations and warranties of the Shareholders set forth herein shall be
true, correct and complete in all material respects on the Closing Date, as
though made on such date (except to the extent expressly made as of a specific
date, in which case, to such date), and all the covenants and agreements of
either of the Shareholders set forth herein shall have been performed or
complied with in all material respects as of the Closing Date, and each of
the
Shareholders shall deliver a Certificate certifying to that effect;
and
(g) all
other
documents, certificates, instruments and writings required to be delivered
by
the Shareholders at or prior to the Closing pursuant to this Agreement or
otherwise required in connection herewith.
13
5.2 Deliveries
by IA.
A. The
obligations of the Shareholders to consummate the transactions contemplated
at
the Closing shall be subject to the satisfaction at or prior to such date of
the
following conditions, any or all of which may be waived, in whole or in part,
to
the extent permitted by applicable law, by the Shareholders. At the Closing,
IA
shall deliver or cause to be delivered to the Shareholders the
following:
(a) the
Closing Shares issued in the name of the Shareholders;
(b) the
Escrow Agreement executed by IA and the Escrow Agent;
(c) the
Cash
Account Note executed by IA;
(d)
the
Noncompetition Agreement and the Service Agreement executed by IA;
(e) certified
resolutions of the Board of Directors of IA approving the purchase of the Shares
from the Shareholders, the execution and delivery of the Ancillary Agreements
to
which it is a party and the other transactions contemplated hereby and
thereby;
(f) all
the
representations and warranties of IA set forth herein and in any Ancillary
Agreements to which IA is a party shall be true, correct and complete in all
material respects on the Closing Date, as though made on such date (except
to
the extent expressly made as of a specific date, in which case, to such date),
and all the covenants and agreements of IA set forth herein have been performed
or complied with in all material respects as of the Closing Date, and IA shall
deliver an Officer’s Certificate certifying to that effect; and
(g) all
other
documents, certificates, instruments and writings required to be delivered
by IA
at or prior to the Closing pursuant to this Agreement or otherwise required
in
connection herewith.
B.
Within
ten (10) business days after the final determination of the number of Escrowed
Shares in accordance with Section 1.4.B hereto, IA shall deliver or cause to
be
delivered to the Escrow Agent the Escrowed Shares to be held in escrow for
the
benefit of the Shareholders until the Escrow Date.
5.3 No
Material Adverse Changes.
The
obligation of IA to consummate the transactions contemplated at the Closing
shall be further subject to there not having occurred since the date hereof
any
material adverse change in the business, assets, results of operations,
condition (financial or otherwise) or prospects of the Business (a “Material
Adverse Change”), and there not having occurred any event or development which
is reasonably likely to result in a Material Adverse Change in the business,
assets, results of operations, condition (financial or otherwise) or prospects
of the Business.
14
ARTICLE
VI
TERMINATION
6.1 Termination.
This
Agreement may be terminated by giving written notice at any time prior to the
Closing as follows:
(a) by
mutual
consent of IA and the Shareholders;
(b) by
IA, if
either of the Shareholders shall have breached or violated in any material
respect any of his, her or its representations, warranties or covenants set
forth in this Agreement, or if the conditions to closing specified in Section
5.1 are not met by the date that is six months after the execution date of
this
Agreement; or
(c) by
the
Shareholders if IA shall have breached or violated in any material respect
any
of its covenants set forth in this Agreement or if the conditions to closing
specified in Section 5.2.A are not met by the date that is six months after
the
execution date of this Agreement.
6.2 Effect
of Termination.
In the
event of the termination of this Agreement pursuant to Section 6.1, this
Agreement shall forthwith become null and void, except as provided in Section
6.3, there shall be no liability on the part of IA, the Shareholders any of
their respective partners, officers, directors or affiliates to any other party,
and all rights and the obligations of any party hereto shall cease, except
that
nothing herein shall relieve any party from liability for any willful breach
of
this Agreement or from the provisions of the Consulting Agreement.
6.3 Fees,
Expenses and Other Payments.
Each
party shall bear its own expenses incurred in connection with this Agreement.
ARTICLE
VII
SURVIVAL
OF REPRESENTATIONS; INDEMNIFICATION
7.1 Survival
of Representations.
The
representations, warranties, covenants and agreements made in this Agreement,
the Ancillary Agreements and in any other document executed and delivered in
connection herewith shall survive the Closing and shall terminate on the third
anniversary date of the Closing.
15
7.2 Indemnification
by the Shareholders.
Upon the
terms and subject to the conditions of this Article VII, each of the
Shareholders, jointly and severally, agrees to indemnify, defend and hold
harmless IA, its officers, partners, employees, agents, representatives and
affiliates (collectively, the "IA Group"), at any time after consummation of
the
Closing, from and against all demands, claims, actions or causes of action,
assessments, losses, damages, taxes, liabilities, costs and expenses, including,
without limitation, interest, penalties and reasonable attorneys’ fees and
expenses (collectively, "Damages”) asserted against, resulting to, imposed upon
or incurred by any member of IA Group, directly or indirectly, by reason of
or
resulting from a breach of any representation, warranty, covenant or agreement
of the Shareholders contained in or made pursuant to this Agreement or the
Ancillary Agreements or any facts or circumstances constituting such a breach
(collectively, "Claims").
7.3 Indemnification
by IA.
Upon
the terms and subject to the conditions of this Article VII, IA agrees to
indemnify,
defend and hold harmless the Shareholders and their respective agents,
representatives and affiliates (collectively, the "Shareholder Group"), at
any
time after consummation of the Closing, from and against all Damages asserted
against, resulting to, imposed upon or incurred by any member of the Shareholder
Group, directly or indirectly, by reason of or resulting from any
representation, warranty, covenant or agreement of the IA Group contained in
or
made pursuant to this Agreement or the Ancillary Agreements or any facts or
circumstances constituting such a breach.
7.4 Conditions
of Indemnification.
In the
event any indemnified party has a reasonable good faith basis for asserting
a
Claim for Damages, such party shall give prompt written notice to the other
parties hereto, briefly setting forth the basis of the Claim and the amount
thereof (or, if not then determinable, a reasonable good faith estimate of
the
amount thereof) in reasonable detail. The indemnifying party shall have the
right to undertake the defense of any Claim by representatives chosen by it.
If
the indemnifying party, within a reasonable time after notice of any such Claim,
fails to defend the indemnified party against which such Claim has been
asserted, the indemnified party shall (upon further notice to the indemnifying
party) have the right to undertake the defense, compromise or settlement of
such
Claim on behalf of and for the account and risk of the indemnifying party
subject to the right of the indemnifying party to assume the defense of such
Claim at any time prior to settlement, compromise or final determination
thereof. If, in the opinion of the indemnified party’s legal counsel, a conflict
of interest with respect to any Claim exists between the indemnified party
against which a Claim has been asserted and the indemnifying party, then such
indemnified party shall have the right to retain its own counsel with respect
to
such Claim; provided
that the
reasonable fees and expenses of such counsel shall be at the expense of the
indemnifying party.
7.5
Right
of Set-Off.
IA may
set-off any amount to which it may be entitled under this Article VII against
the Escrowed Shares or, if after the Escrow Date, the amount otherwise payable
under the Escrow Shares Note. The exercise of such right of set-off by IA in
good faith, whether or not ultimately determined to be justified, will not
constitute an event of default under the Escrow Shares Note. Neither the
exercise of nor the failure to exercise such right of set-off will constitute
an
election of remedies or limit IA in any manner in the enforcement of any other
remedies that may be available to it.
16
ARTICLE
VIII
MISCELLANEOUS
PROVISIONS
8.1 Notices.
All
notices and other communications hereunder shall be in writing and shall be
deemed duly delivered (a) four business days after being sent by registered
or
certified mail,
return receipt requested, postage prepaid, or (b) one business day after being
sent for next business day delivery, fees prepaid, via a reputable nationwide
overnight courier service, in each case to the intended recipient as set forth
below:
|
if
to IA, to:
|
Internet
America, Inc.
|
00000
X.
Xxx Xxxxxxx Xxxx, X., Xxxxx 000
Xxxxxxx,
Xxxxx 00000
Attention:
Chief Executive Officer
Fax:
(000) 000-0000
|
With
a copy to:
|
Xxxxx
& Ketchand
|
Nine
X.
Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxx 00000
Attention:
Xxxx X. Leader
Fax:
(000) 000-0000
|
If
to the Shareholders to:
|
Xxxx
and Xxxxxxx Xxxxx
|
00000
Xxxxx Xxxx
Xxxxxx,
XX 00000
|
With
a copy to:
|
Johnson,
Deluca, Xxxxxxx & Kurisky, P.C.
|
0000
Xxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxx 00000
Attention:
Xxx Xxxxxxxx
Fax:
(000) 000-0000
Any
party
to this Agreement may give any notice or other communication hereunder using
any
other means (including personal delivery, messenger service, telecopy, telex,
ordinary mail or electronic mail), but no such notice or other communication
shall be deemed to have been duly given unless and until it actually is received
by the party for whom it is intended. Any party to this Agreement may change
the
address to which notices and other communications hereunder are to be delivered
by giving the other parties notice in the manner herein set forth.
8.2 Entire
Agreement.
This
Agreement (including the Schedules and Exhibits hereto and the documents and
instruments referred to herein that are to be delivered at the Closing)
constitutes the entire agreement among the parties and supersedes any
prior understandings,
agreements or representations by or among the parties, or any of
them, written
or oral, with respect to the subject matter hereof.
8.3 No
Third Party Beneficiaries.
This
Agreement is not intended, and shall not be deemed, to confer any rights or
remedies upon any person
other than the parties and their respective successors and permitted assigns,
to create
any agreement of employment with any person or to otherwise create any
third-party beneficiary hereto.
17
8.4 Assignment.
Neither
this Agreement nor any of the rights, interests or obligations under this
Agreement may be assigned or delegated by any of the parties without the prior
written consent of the other parties, and any such assignment without such
prior
written consent shall be null and void, except that IA may assign this Agreement
to any direct or indirect subsidiary
of IA without consent of the Shareholders. Subject to the preceding sentence,
this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and permitted
assigns.
8.5 Severability.
Any term
or provision of this Agreement that is invalid or unenforceable in any situation
in any jurisdiction shall not affect the validity or enforceability of the
remaining terms and provisions hereof or the validity or enforceability of
the
offending term or provision in any other situation or in any other jurisdiction.
If the final judgment of a court of competent jurisdiction declares that any
term or provision hereof is invalid or unenforceable, the parties agree that
the
court making such determination shall have the power to limit the term
or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid
or
unenforceable term or provision, and this Agreement shall be enforceable as
so
modified. In the event such court does not exercise the power granted to it
in
the prior sentence, the parties agree to replace such invalid or unenforceable
term or
provision with a valid and enforceable term or provision that will achieve,
to
the extent possible, the economic, business and other purposes of such invalid
or unenforceable term.
8.6 Counterparts
and Signature.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original but all of which together shall be considered one and the
same agreement and shall become effective when counterparts have
been signed
by
each of the parties and delivered to the other parties, it being understood
that
all parties need not sign the same counterpart. This Agreement may be executed
and delivered by facsimile transmission.
8.7 Interpretation.
The
language used in this Agreement shall be deemed to be the language chosen by
the
parties to express their mutual intent, and no rule of strict construction
shall
be applied against any party.
8.8 Governing
Law; Arbitration.
This
Agreement shall be governed by and construed and interpreted in accordance
with
the laws of the State of Texas without regard to conflict of law rules thereof.
Any dispute, controversy or claim arising out of or relating to this Agreement,
or the breach thereof, shall be determined by arbitration administered by the
American Arbitration Association (“AAA”) under its Commercial Arbitration Rules.
The arbitration shall be conducted by an arbitrator who shall be selected using
a listing process whereby the AAA administrator shall provide each party with
a
list of proposed arbitrators who are generally familiar with the underlying
subject matter made the basis of the dispute. Thereafter, each party shall
be
given ten days to strike any unacceptable names from the list and number the
remaining names in order of preference. The AAA administrator shall select
the
arbitrators from the list, in the designated order of mutual preference. The
arbitration shall be conducted in Houston, Xxxxxx County, Texas. It is
understood and agreed that the arbitrators shall have no authority to award
punitive or other damages not measured by the prevailing party’s actual damages,
except as may be required by statute. Each party shall bear its own cost and
expenses and an equal share of the arbitrators’ and administrative fees of
arbitration.
18
8.9 Remedies.
Except
as otherwise provided herein, any and all remedies herein expressly conferred
upon a party will be deemed cumulative with and not exclusive of any other
remedy conferred hereby, or by law or equity upon such party, and the exercise
by a party of any one
remedy will not preclude the exercise of any other remedy. The parties agree
that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction to prevent breaches of this Agreement and to enforce specifically
the
terms and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at law or in equity.
IN
WITNESS WHEREOF,
the
parties have caused this Agreement to be signed by their respective officers
thereunto duly authorized as of the date first written above.
INTERNET
AMERICA, INC.
By:
/s/Xxxxxxxx
X.
XxXxxxx
Xxxxxxxx X. XxXxxxx, Chief Financial Officer
SHAREHOLDERS:
/s/
Xxxx Xxxxx
Xxxx
Xxxxx
/s/
Xxxxxxx Xxxxx
Xxxxxxx
Xxxxx
19
