1
EXHIBIT 1.1
2,300,000 Shares
Internet America, Inc.
Common Stock
UNDERWRITING AGREEMENT
, 1998
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▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & CO.
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, INCORPORATED
As Representatives of the several Underwriters
c/▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co.
One Galleria Tower
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
SECTION 1. Introductory. Internet America, Inc., a Texas corporation
(the "Company"), proposes to issue and sell to the several underwriters named
in Schedule A (the "Underwriters") an aggregate of 1,700,000 shares of its
authorized but unissued Common Stock, $.01 par value per share (the "Common
Stock"), and the shareholders of the Company who are named in Schedule B
annexed hereto (the "Selling Shareholders") propose to sell 600,000 shares of
issued and outstanding Common Stock to the Underwriters. Said shares,
aggregating a total of 2,300,000 shares, are herein referred to as the "Firm
Common Shares." In addition, the Selling Shareholders propose to grant to the
Underwriters options to purchase up to 345,000 additional shares of Common
Stock (such 345,000 shares being referred to as the "Optional Common Shares"),
as provided in Section 5 hereof. The Firm Common Shares and, to the extent
such option is exercised, the Optional Common Shares, are hereinafter
collectively referred to as the "Common Shares." ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co.
and [Co-Manager] have agreed to act as representatives of the several
Underwriters (in such capacity, the "Representatives") in connection with the
offering and sale of the Common Shares.
You have advised the Company and the Selling Shareholders that the
Underwriters propose to make a public offering of the Common Shares on the
effective date of the registration statement hereinafter referred to, or as
soon thereafter as in their judgment is advisable.
The Underwriters, the Company and the Selling Shareholders hereby
confirm their respective agreements with respect to the purchase of the Common
Shares by the Underwriters as follows:
SECTION 2. Representations and Warranties of the Company. The
Company hereby represents and warrants to the Underwriters that:
(a) A registration statement on Form SB-2 (File No.
333-59527) with respect to the Common Shares has been prepared by the
Company in conformity with the requirements of the Securities Act of
1933, as amended (the "Act"), and the rules and regulations (the
"Rules and Regulations") of the Securities and Exchange Commission
(the "Commission") thereunder, and has been filed with the Commission.
The Company has met all of the eligibility requirements for the use of
a registration statement on Form SB-2. There have been delivered to
each Representative two signed copies of such registration statement
and amendments, together with two copies of each exhibit filed
therewith. Conformed copies of such registration statement and
amendments (but without exhibits) and of the related preliminary
prospectus have been delivered to each Representative in such
reasonable quantities as each of them has requested. The Company will
next file with the Commission one of the following: (i) prior to
effectiveness of such registration statement, a further amendment
thereto, including the form of final prospectus, or (ii) a final
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prospectus in accordance with Rules 430A and 424(b) of the Rules and
Regulations. As filed, such amendment and form of final prospectus,
or such final prospectus, shall include all Rule 430A Information (as
hereinafter defined) and, except to the extent that the
Representatives shall agree in writing to a modification, shall be in
all substantive respects in the form furnished to the Representatives
prior to the date and time that this Agreement was executed and
delivered by the parties hereto, or, to the extent not completed at
such date and time, shall contain only such specific additional
information and other changes (beyond that contained in the latest
Preliminary Prospectus) as the Company shall have previously advised
the Representatives would be included or made therein.
The term "Registration Statement" as used in this Agreement
shall mean such registration statement at the time such registration
statement becomes effective and, in the event any post-effective
amendment thereto becomes effective prior to the First Closing Date
(as hereinafter defined), shall also mean such registration statement
as so amended; provided, however, that such term shall also include
all Rule 430A Information deemed to be included in such registration
statement at the time such registration statement becomes effective as
provided by Rule 430A of the Rules and Regulations. Any registration
statement filed by the Company pursuant to Rule 462(b) under the
Securities Act is called the "Rule 462(b) Registration Statement", and
from and after the date and time of filing of the Rule 462(b)
Registration Statement, the term "Registration Statement" shall
include the Rule 462(b) Registration Statement. The term "Preliminary
Prospectus" shall mean any preliminary prospectus referred to in the
preceding paragraph and any preliminary prospectus included in the
Registration Statement at the time it becomes effective that omits
Rule 430A Information. The term "Prospectus" as used in this
Agreement shall mean the prospectus relating to the Common Shares in
the form in which it is first filed with the Commission pursuant to
Rule 424(b) of the Rules and Regulations or, if no filing pursuant to
Rule 424(b) of the Rules and Regulations is required, shall mean the
form of final prospectus included in the Registration Statement at the
time such registration statement becomes effective. The term "Rule
430A Information" means information with respect to the Common Shares
and the offering thereof permitted to be omitted from the Registration
Statement when it becomes effective pursuant to Rule 430A of the Rules
and Regulations. All references in this Agreement to the Registration
Statement, the Rule 462(b) Registration Statement, a Preliminary
Prospectus, or the Prospectus, or any amendments or supplements to any
of the foregoing, shall refer to the copy thereof filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and
Retrieval System.
(b) To the knowledge of the Company, the Commission has not
issued any order preventing or suspending the use of any Preliminary
Prospectus. Each Preliminary Prospectus has conformed in all material
respects to the requirements of the Act and the Rules and Regulations
and, as of its date, has not included any untrue statement of a
material fact or omitted to state a material fact necessary to make
the statements therein, in the light of the circumstances under which
they were made, not misleading; and at the time the Registration
Statement becomes effective, and at all times subsequent thereto up to
and including each Closing Date hereinafter mentioned, the
Registration Statement and the Prospectus, and any amendments or
supplements thereto, will contain all material statements and
information required to be included therein by the Act and the Rules
and Regulations and will in all material respects conform to the
requirements of the Act and the Rules and Regulations, and neither the
Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, will include any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of
circumstances under which they were made; provided, however, no
representation or warranty contained in this subsection 2(b) shall be
applicable to information contained in any Preliminary Prospectus, the
Registration Statement, the Prospectus or any such amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Representatives or the
Selling Shareholders pursuant to Item 7 of Form SB-2 specifically for
use in the preparation thereof.
(c) The Company does not own or control, directly or
indirectly, any corporation, association or other entity. The Company
has been duly incorporated and is validly existing as a corporation in
good
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standing under the laws of the State of Texas, with full corporate
power and authority (corporate and other) to own and lease its
properties and conduct its business as described in the Prospectus;
the Company is in possession of and is operating in compliance with
all authorizations, licenses, permits, consents, certificates and
orders material to the conduct of its business, except where
noncompliance would not have a material adverse effect on the business
or financial condition of the Company; the Company is duly qualified
to do business and is in good standing as a foreign corporation in
each jurisdiction in which the ownership or leasing of properties or
the conduct of its business requires such qualification, except for
jurisdictions in which the failure to so qualify would not have a
material adverse effect upon the Company; and no proceeding has been
instituted in any such jurisdiction revoking, limiting or curtailing,
or seeking to revoke, limit or curtail, such power and authority or
qualification.
(d) The Company has an authorized and outstanding capital
stock as set forth under the heading "Capitalization" in the
Prospectus as of the date of the Prospectus; the issued and
outstanding shares of Common Stock have been duly authorized and
validly issued, will be fully paid and nonassessable, will have been
issued in compliance with all federal and state securities laws, will
have not been issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase securities, and
will conform to the description thereof contained under the heading
"Description of Securities" in the Prospectus. On the thirtieth day
following the First Closing Date all outstanding shares of the
Company's preferred stock (the "Preferred Stock") shall automatically
convert into 1,575,000 shares of Common Stock, without any further
action on the part of any party, and no party will have any legal
right, authority or ability to prevent or hinder such conversion in
any way. The holders of the Preferred Stock shall have no right,
whether accrued, due or payable, to receive anything of value with
respect to such preferred shares other than the aforementioned shares
of Common Stock and cash in lieu of fractional shares. Except as
disclosed in or contemplated by the Prospectus and the financial
statements of the Company, and the related notes thereto, included in
the Prospectus, the Company has no outstanding options to purchase, or
any preemptive rights or other rights to subscribe for or to purchase,
any securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any such
options, rights, convertible securities or obligations. The
description of the Company's outstanding warrants, stock options, and
other stock plans or arrangements, and the options or other rights
granted and exercised thereunder, set forth in the Prospectus,
accurately and fairly presents in all material respects the
information required to be shown with respect to such warrants,
options, plans, arrangements, and rights.
(e) The Common Shares to be sold by the Company have been
duly authorized and, when issued, delivered and paid for in the manner
set forth in this Agreement, will be duly authorized, validly issued,
fully paid and nonassessable, and will conform to the description
thereof contained in the Prospectus; and when duly countersigned by
the Company's transfer agent and registrar, and delivered to the
Underwriters in accordance with the provisions of this Agreement, good
and valid title thereto will pass to the Underwriters free and clear
of any liens, claims, equities or other encumbrances of any kind or
character. No preemptive rights or other rights to subscribe for or
purchase exist with respect to the issuance and sale of the Common
Shares by the Company pursuant to this Agreement. There are no
persons with registration or other similar rights to have any equity
or debt securities registered for sale under the Registration
Statement or included in the offering contemplated by this Agreement
with respect to the Common Shares included in the Registration
Statement other than the Selling Shareholders and other persons whose
rights have been duly waived in writing.
(f) The Company has full legal right, power and authority to
enter into this Agreement and perform the transactions contemplated
hereby. This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms, except to the extent that (i) the validity
and binding effect and enforcement of this Agreement may be limited by
any applicable bankruptcy, reorganization, moratorium, or similar laws
of general application, (ii) the availability of equitable remedies
may be limited by principles of equity, whether considered in a
proceeding at law or in equity, and (iii) the terms thereof
(including, without limitation, indemnity) may be limited by
applicable securities laws and the policies
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embodied therein. The making and performance of this Agreement by the
Company and the consummation of the transactions herein contemplated
by the Company or the performance by the Company of the transactions
contemplated hereby does not: require any consent, approval,
authorization or order of or registration or filing with any court,
regulatory body, administrative agency or other governmental body,
agency or official (except such as may be required for the
registration of the Common Shares under the Act and compliance with
the securities or Blue Sky laws and the clearance of the public
offering of the Common Shares by the National Association of
Securities Dealers, Inc. (the "NASD")); or conflict with, or
constitute a breach of, or a default under, the Articles of
Incorporation or Bylaws of the Company; or conflict with or constitute
a breach of or a default under any agreement, indenture, lease or
other instrument to which the Company is a party or by which any of
its properties may be bound where such conflict or breach could have a
material adverse effect on the Company's financial condition or
results of operation, taken as a whole (except for such conflicts,
breaches or defaults for which waivers or consents have been
obtained); or violate any statute, law, regulation or filing or
judgment, injunction, order or decree applicable to the Company or any
of its properties; or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company
pursuant to the terms of any agreement or instrument to which the
Company is a party or by which it may be bound or to which any of the
property or assets of the Company is subject, except, in each case for
such conflicts, breaches, defaults, violations, or encumbrances that
would not singly or in the aggregate have a material adverse effect on
the ability of the Company to fulfill its obligations hereunder.
(g) Deloitte & Touche LLP ("Deloitte"), who have expressed
their opinion with respect to the financial statements filed with the
Commission as a part of the Registration Statement and included in the
Prospectus, are independent accountants as required by the Act and the
Rules and Regulations.
(h) Financial Statements; Financial Data and Statistical
Data.
(i) The audited financial statements and the related
notes thereto of the Company included in the Registration Statement
and the Prospectus (such financial statements being herein referred to
as the "Financial Statements") present fairly the financial condition
of the Company as of the respective dates of such Financial
Statements, and present fairly the results of operations and changes
in financial position of the Company covered by such Financial
Statements for the respective periods covered thereby. Such Financial
Statements and the related notes thereto have been prepared in
accordance with the generally accepted accounting principles applied
on a consistent basis, except as otherwise stated therein, and have
been certified by Deloitte, the Company's independent accountants.
(ii) The audited selected financial data for the
fiscal years ended June 30, 1996, 1997 and 1998 and the unaudited
quarterly financial data set forth in the Prospectus under the
captions "Management's Discussion and Analysis of Financial Condition
and Results of Operations-Selected Quarterly Results of Operations"
and "Selected Financial and Operating Data" have been prepared in
accordance with generally accepted accounting principles (subject to
normal year-end adjustments) applied on a consistent basis and present
fairly the financial condition of the Company, as of such dates.
(iii) No financial statements, schedules or
financial data, other than as included in the Registration Statement,
are required to be included in the Registration Statement.
(iv) The financial and statistical data set forth in
the Prospectus under the captions "Prospectus Summary," "Risk
Factors," "Use of Proceeds," "Capitalization," "Dilution," "Selected
Financial and Operating Data," "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Business,"
"Management," "Certain Transactions," "Principal and Selling
Shareholders" and "Shares Eligible for Future Sale" fairly present the
information set forth therein on the basis stated in the Registration
Statement.
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(i) The Company is not in violation or default of any
provision of its Articles of Incorporation; the Company is not in
violation or default of any provision of its Bylaws or in breach of or
default with respect to any provision of any judgment, decree or
order, or in breach of or default with respect to any provision of any
material agreement, mortgage, deed of trust, lease, loan agreement,
security agreement, license, indenture, permit or other instrument to
which it is a party or by which it or any of its properties is bound;
and there does not exist any state of facts which constitutes an event
of default on the part of the Company as defined in such documents or
which, with notice or lapse of time or both, would constitute such an
event of default, except for conflicts, breaches, defaults, violations
or encumbrances that would not have a material adverse effect on the
Company's financial condition or results of operations, taken as a
whole.
(j) There are no contracts or other documents required to be
described in the Registration Statement or to be filed as exhibits to
the Registration Statement by the Act or by the Rules and Regulations
which have not been described or filed as required. The contracts so
described in the Prospectus are in full force and effect on the date
hereof; and neither the Company, nor to the best of the Company's
knowledge any other party, is in breach of or default under any
material provision of any such contract which would have a material
adverse effect on the Company.
(k) There are no legal or governmental actions, suits or
proceedings pending or, to the best of the Company's knowledge,
threatened to which the Company is or may be a party or with respect
to which property owned or leased by the Company is or may be the
subject, or related to environmental, employment of aliens or
discrimination matters, which actions, suits or proceedings might,
individually or in the aggregate, prevent or adversely affect the
transactions contemplated by this Agreement or result in a material
adverse change in the condition (financial or otherwise), properties,
business, results of operations or prospects of the Company and no
labor disturbance by the employees of the Company exists or, to the
knowledge of the Company is imminent which might be expected to result
in a material adverse change in the condition (financial or
otherwise), properties, business, results of operations or prospects
of the Company. The Company is not a party to, or subject to the
provisions of, any material injunction, judgment, decree or order of
any court, regulatory body, administrative agency or other
governmental body.
(l) 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 in the financial statements hereinabove described
(or as reflected or described elsewhere in the Prospectus), subject to
no lien, mortgage, pledge, charge or encumbrance of any kind except
(i) those, if any, reflected in such financial statements (or
elsewhere in the Prospectus), or (ii) those which do not materially
adversely affect the use made and proposed to be made of such property
by the Company. The Company holds its leased properties under valid
and binding leases, with such exceptions as are not materially
significant in relation to the business of the Company. Except as
disclosed in the Prospectus, the Company owns or leases all such
properties as are necessary to its operations as now conducted.
(m) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as
described in or specifically contemplated by the Prospectus, (i) the
Company has not incurred any liabilities or obligations, direct,
indirect or contingent, or entered into any verbal or written
agreement or other transaction which is not in the ordinary course of
business and which reasonably could be expected to result in a
material reduction in the future earnings of the Company; (ii) the
Company has not sustained any material loss or interference with
respect to its business or properties from fire, flood, windstorm,
accident or other calamity, whether or not covered by insurance; (iii)
the Company has not paid or declared any dividends or other
distributions with respect to its capital stock, and the Company is
not in default in the payment of principal or interest on any
outstanding debt obligations; (iv) there has not been any change in
the capital stock of the Company (other than upon the sale of the
Common Shares hereunder) or indebtedness material to the Company; and
(v) there has not been any material adverse change in the condition
(financial or otherwise), business, properties or results of
operations of the Company.
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(n) The Company has sufficient trademarks, trade names,
patent rights, mask works, copyrights, licenses, approvals and
governmental authorizations to conduct its business as now conducted;
the Company has no knowledge of any infringement by it of trademarks,
trade name rights, trade dress, patent rights, mask works, copyrights,
licenses, trade secret or other similar rights of others; and except
as disclosed in the Prospectus, the Company has no knowledge of any
infringement by others of the Company's trademarks, trade name rights,
trade dress, patent rights, mask works, copyrights, licenses, trade
secrets or other similar rights that would be material to the business
or financial condition of the Company; and there is no claim being
made against the Company regarding trademark, trade name, trade dress,
patent right, mask work, copyright, license, trade secret or other
infringement which could have a material adverse effect on the
condition (financial or otherwise), business, results of operations or
prospects of the Company.
(o) The Company has not been advised, and has no reason to
believe, that either it is not conducting 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 telecommunications, employment,
truth-in-advertising, franchising, immigration and environmental laws
and regulations, except where failure to be so in compliance would not
materially adversely affect the condition (financial or otherwise),
business, results of operations or prospects of the Company.
(p) The Company has filed all federal, state and foreign
income and franchise tax returns or extensions therefor required to be
filed and have paid all taxes shown as due thereon; and the Company
has no knowledge of any tax deficiency which has been or might be
asserted or threatened against the Company which could materially and
adversely affect the business, operations or properties of the
Company.
(q) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) sales
and other business transactions are executed in accordance with
management's general or specific authorizations; (ii) sales and other
business transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; and
(iii) the recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(r) The Company is not required to make, and following
receipt of the proceeds from the sale of the Common Shares will not be
required to make, any filing or to register under the Investment
Company Act of 1940, as amended.
(s) There is no proceeding pending or threatened which may
lead to the revocation, suspension, termination or nonrenewal or any
certificate, order, license, permit, easement, consent, waiver,
approval, franchise, grant, authorization or concession required to
conduct the business of the Company as now conducted and as proposed
to be conducted and which are material to the Company.
(t) There is no proceeding pending or threatened which may
lead to the disqualification, delisting or suspension from trading of
the Common Stock on the Nasdaq National Market.
(u) Neither the Company nor any subsidiary of the Company
conducts business with the Government of Cuba, or in Cuba, or with any
Cuban business entity or enterprise.
(v) No transfer taxes are required to be paid under the laws
of the State of Texas in connection with the sale and delivery of the
Common Shares to the Underwriters hereunder.
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SECTION 3. Representations, Warranties and Covenants of the Selling
Shareholders.
(a) Each Selling Shareholder severally represents and
warrants to, and agrees with, the several Underwriters that:
(i) Such Selling Shareholder has good and valid
title to the Common Shares proposed to be sold by such Selling
Shareholder hereunder and the full right, power and authority
to enter into this Agreement and to sell, assign, transfer and
deliver such Common Shares hereunder, free and clear of all
liens, claims, equities or other encumbrances of any kind or
character, other than those pursuant to this Agreement and
those which will be waived or terminated prior to the First
Closing Date or the Second Closing Date, as the case may be;
and upon delivery of and payment for such Common Shares
hereunder, the Underwriters will acquire good and valid title
thereto, free and clear of all liens, claims, equities or
other encumbrances of any kind or character.
(ii) Such Selling Shareholder has executed and
delivered a Custody Agreement and Power of Attorney
(hereinafter referred to as the "Shareholder Agreement") and,
in connection herewith, such Selling Shareholder further
represents, warrants and agrees that it has deposited in
custody, under the Shareholder Agreement with the agent named
therein (the "Agent") as custodian, certificates in negotiable
form for the Common Shares to be sold hereunder by such
Selling Shareholder for the purpose of further delivery
pursuant to this Agreement. Such Selling Shareholder agrees
that the Common Shares owned by such Selling Shareholder and
to be sold on deposit with the Agent are subject to the
interests of the Company and the Underwriters, that the
arrangements made for such custody are in that extent
irrevocable, and that the obligations of such Selling
Shareholder hereunder shall not be terminated, except as
provided in this Agreement or in the Shareholder Agreement, by
any act of such Selling Shareholder, by operation of law, by
the death or incapacity of such Selling Shareholder or by the
occurrence of any other event. If such Selling Shareholder
should die, become incapacitated, or if any other event should
occur before the delivery of the Common Share owned by such
Selling Shareholder and hereunder, the certificates and
documents evidencing Common Shares owned by such Selling
Shareholder then on deposit with the Agent shall be delivered
by the Agent in accordance with the terms and conditions of
this Agreement as if such death, incapacity or other event had
not occurred, regardless of whether the Agent shall have
received notice thereof. This Agreement and the Shareholder
Agreement have been duly executed and delivered by or on
behalf of such Selling Shareholder.
(iii) The performance of this Agreement and the
Shareholder Agreement and the consummation of the transactions
contemplated hereby and by the Shareholder Agreement will not
result in a breach or violation by such Selling Shareholder of
any of the terms or provisions of, or constitute a default by,
such Selling Shareholder under any indenture, mortgage, deed
of trust, trust (constructive or other), loan agreement,
lease, franchise, license or other agreement or instrument to
which such Selling Shareholder is a party or by which such
Selling Shareholder or any of its properties is bound, or any
statute, judgment, decree, order, rule or regulation of any
court or governmental agency or body applicable to such
Selling Shareholder or any of its properties.
(iv) Such Selling Shareholder has not taken and
will not take, directly or indirectly, any action designed to,
or which has constituted or which might reasonably be expected
to cause or result in, stabilization or manipulation of the
price of any security of the Company to facilitate the sale or
resale of the Common Shares.
(v) The information pertaining to such Selling
Shareholder in each Preliminary Prospectus, Prospectus and
Registration Statement in response to Item 507 of Regulation
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promulgated under the Act is complete and accurate in all
material respects. Such Selling Shareholder has reviewed the
Preliminary Prospectus and will review the Prospectus and the
Registration Statement. To the best knowledge of such Selling
Shareholder, each Preliminary Prospectus has not included any
untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein not
misleading in light of the circumstances under which they were
made; and, to the best knowledge of such Selling Shareholder,
neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto will include any untrue
statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading.
(vi) To the best knowledge of such Selling
Shareholder, the representations and warranties of the Company
set forth in Section 2 above are true and correct in all
material respects.
SECTION 4. Representations and Warranties of the Underwriters.
(a) The Underwriters represent and warrant to the Company
and the Selling Shareholders that the information set forth (i) on the
cover page of the Prospectus with respect to price, underwriting
discount and terms of the offering; and (ii) under "Underwriting" in
the Prospectus furnished to the Company by the Representatives for use
in connection with the preparation of the Registration Statement and
the Prospectus is true, accurate and correct in all material respects
and contains all information required to be included therein by
applicable laws, rules and regulations. The Company and the Selling
Shareholders acknowledge that this information is the sole information
furnished to the Company by the Representatives for inclusion in the
Registration Statement, any Preliminary Prospectus, any Prospectus, or
any amendment or supplement thereto.
(b) The Underwriters are registered as broker/dealers
with the Commission and the NASD. Each of the Representatives is a
corporation validly existing and in good standing in its jurisdiction
of incorporation and has the full legal right, power and authority to
enter into this Agreement and perform the transactions contemplated
hereby. This Agreement has been duly authorized, executed and
delivered by the Representatives and constitutes a valid and binding
obligation of the Underwriters, enforceable against the Underwriters
in accordance with its terms, except to the extent that (i) the
validity and binding effect and enforcement of this Agreement may be
limited by any applicable bankruptcy, reorganization, moratorium, or
similar law of general application, (ii) the availability of equitable
remedies may be limited by principles of equity, whether considered in
a proceeding at law or in equity, and (iii) the terms thereof
(including, without limitation, indemnity) may be limited by
applicable securities laws and the policies embodied therein. The
Representatives have obtained clearance of the Underwriters'
compensation by the NASD and have taken all action deemed necessary in
their judgment to register or qualify the sale of the Firm Common
Shares and the Optional Common Shares in each state in which such Firm
and/or Optional Common Shares are to be offered and sold and each
Underwriter is registered and qualified to offer and sell the Common
Shares in each state in which such Common Shares will be offered and
sold by such Underwriters. There is not now pending nor overtly
threatened against either Representative any material action or
proceeding before the Commission, the NASD, any state securities
commission, the Commodities Futures Trading Commission or any state or
federal court prohibiting or attempting to prohibit, or penalizing it
from or for acting as an underwriter, broker, dealer, salesman or
agent for the sale of securities.
SECTION 5. Purchase, Sale and Delivery of Common Shares. On the
basis of the representations, warranties and agreements herein contained, but
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Underwriters 1,700,000 Firm Common Shares, and the
Selling Shareholders agree to sell to the Underwriters 600,000 Firm Common
Shares, and the Underwriters agree, severally and not jointly, to purchase from
the Company and the Selling Shareholders the number of Firm Common Shares set
forth opposite their respective names in Schedule A hereto. The purchase price
per share to be paid by the Underwriters to the Company and the Selling
Shareholders shall be $_______ per share.
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Delivery of certificate(s) for the Firm Common Shares to be purchased
by the Underwriters shall be made by or on behalf of the Company and the
Selling Shareholders to the Underwriters or to the account of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & Co. at the Depositary Trust Corporation, New York, New York ("DTC"),
as the Representatives may direct, for the respective accounts of the
Underwriters against payment of the purchase price. In the event certificates
are delivered to the Underwriters other than through DTC, such delivery shall
be made on the First Closing Date (as hereinafter defined) or the Second
Closing Date (as hereinafter defined), as applicable, at the offices of ▇▇▇▇▇▇▇
▇▇▇▇▇▇ L.L.P., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (or such other
place as may be agreed upon by the Company, the Selling Shareholders and the
Representatives). Delivery of certificates, whether through DTC or otherwise,
shall be made at such time and date, not later than the third (or, if the Firm
Common Shares are priced, as contemplated by Rule 15cb-1(c) promulgated under
the Securities Exchange Act of 1934, as amended, after 4:30 p.m., Washington,
D.C. time, the fourth) full business day following the first day that any of
Common Shares are released by the Underwriters for sale to the public, as the
Representatives shall designate (the "First Closing Date"); provided, however,
that if the Prospectus is at any time prior to the First Closing Date
recirculated to the public, the First Closing Date shall occur upon the later
of the third or fourth, as the case may be, full business day following the
first date that any of the Common Shares are released by the Underwriters for
sale to public or the date that is 48 hours after the date that the Prospectus
has been so recirculated. The certificates for the Firm Common Shares shall be
registered in such names and denominations as the Representatives shall have
requested at least two full business days prior to the First Closing Date and
shall be made available for checking and packaging on the business day
preceding the First Closing Date at a location in New York, New York, as may be
designated by the Representatives. Time shall be of the essence, and delivery
at the time and place specified in this Agreement is a further condition to the
obligations of the Underwriters. Payment by the Underwriters for the purchase
price for the Firm Common Shares shall be made by wire transfer to such
accounts as designated in writing by the Company and the Selling Shareholders.
In addition, on the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Selling Shareholders hereby grant an option to the Underwriters to
purchase up to the number of Optional Common Shares indicated on the first page
of this Agreement at the purchase price per share to be paid for the Firm
Common Shares, for use solely in covering any over-allotments made by the
Underwriters in the sale and distribution of the Firm Common Shares. The
option granted hereunder may be exercised at any time within 30 days after the
first date that any of the Firm Common Shares are released by the Underwriters
for sale to the public upon notice by the Underwriters to the Company and the
Selling Shareholders setting forth the aggregate number of Optional Common
Shares as to which the Underwriters are exercising the option, the names and
denominations in which the certificates for such shares are to be registered
and the time and place at which such certificates will be delivered. Such time
of delivery (which may not be earlier than the First Closing Date), being
herein referred to as the "Second Closing Date," shall be determined by the
Underwriters, but if at any time other than the First Closing Date shall not be
earlier than three nor later than five full business days after delivery of
such notice of exercise. The number of Optional Common Shares to be purchased
by each Underwriter shall be determined by multiplying the aggregate number of
Optional Common Shares with respect to which are the options are exercised
pursuant to such notice of exercise by a fraction, the numerator of which is
the number of Firm Common Shares to be purchased by such Underwriter as set
forth opposite its name in Schedule A and the denominator of which is the total
number of Firm Common Shares (subject to such adjustments to eliminate any
fractional share purchases as the Underwriters in their discretion may make).
Certificates for the Optional Common Shares will be made available for checking
and packaging on the business day preceding the Second Closing Date at a
location in New York, New York, designated by you. The manner of payment for
and delivery of the Optional Common Shares shall be the same as for the Firm
Common Shares purchased, as specified in this Section 5. At any time before
lapse of the option, the Underwriters may cancel such option by giving written
notice of such cancellation to the Company. If the option is canceled or
expires unexercised in whole or in part, the Company will deregister under the
Act the number of Optional Common Shares as to which the option has not been
exercised.
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Subject to the terms and conditions hereof, the Underwriters propose
to make a public offering of their respective portions of the Firm Common
Shares, and of the Optional Common Shares if and to the extent that the
Underwriters exercise their option to purchase Optional Common Shares, as soon
after the effective date of the Registration Statement as in the judgment of
the Underwriters is advisable and at the public offering price set forth on the
cover page of and on the terms set forth in the Prospectus.
Not later than 12:00 p.m. on the second business day following the
date the Common Shares are released by the Underwriters for sale to the public,
the Company shall deliver or cause to be delivered copies of the Prospectus in
such quantities and at such places as the Representatives shall request.
SECTION 6. Covenants of the Company. The Company covenants and
agrees that:
(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at
the time and date that this Agreement is executed and delivered by the
parties hereto, to become effective. If the Registration Statement
has become or becomes effective pursuant to Rule 430A of the Rules and
Regulations, or the filing of the Prospectus is otherwise required
under Rule 424(b) of the Rules and Regulations, the Company will file
the Prospectus, properly completed, pursuant to the applicable
paragraph of Rule 424(b) of the Rules and Regulations within the time
period prescribed and will provide evidence satisfactory to the
Representatives of such timely filing. The Company will promptly
advise the Representatives in writing (i) of the receipt of any
comments of the Commission; (ii) of any request of the Commission for
amendment of or supplement to the Registration Statement (either
before or after it becomes effective), any Preliminary Prospectus or
the Prospectus or for additional information; (iii) when the
Registration Statement shall have become effective; and (iv) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of the institution of
any proceedings for that purpose. If the Commission shall enter any
such stop order at any time, the Company will use its best efforts to
obtain the lifting of such order at the earliest possible moment. The
Company will not file any amendment or supplement to the Registration
Statement (either before or after it becomes effective), any
Preliminary Prospectus or the Prospectus of which the Representatives
have not been furnished with a copy a reasonable time prior to such
filing or to which the Representatives reasonably object in writing or
which is not in compliance with the Act and the Rules and Regulations.
(b) The Company will prepare and file with the Commission,
promptly upon the Representatives' request, any amendments or
supplements to the Registration Statement or the Prospectus which in
the Representatives' judgment may be necessary or advisable to enable
the Underwriters to continue the distribution of the Common Shares and
will use its best efforts to cause the same to become effective as
promptly as possible. The Company will fully and completely comply
with the provisions of Rule 430A of the Rules and Regulations with
respect to information omitted from the Registration Statement in
reliance upon such Rule.
(c) If at any time within the nine-month period referred to
in Section 10(a)(3) of the Act during which a prospectus relating to
the Common Shares is required to be delivered under the Act any event
occurs as a result of which the Prospectus, including any amendments
or supplements, would include an untrue statement of a material fact,
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, or if it is
necessary at any time to amend the Prospectus, including any
amendments or supplements, to comply with the Act or the Rules and
Regulations, the Company will promptly advise the Representatives
thereof and will promptly prepare and file with the Commission, at its
own expense, an amendment or supplement which will correct such
statement or omission or an amendment or supplement which will effect
such compliance and will use its best efforts to cause the same to
become effective as soon as possible; and, in case any Underwriter is
required to
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deliver a prospectus after such nine-month period, the Company, upon
request, but at the expense of such Underwriter, will promptly prepare
such amendment or amendments to the Registration Statement and such
Prospectus or Prospectuses as may be necessary to permit compliance
with the requirements of Section 10(a)(3) of the Act.
(d) As soon as practicable, but not later than 45 days after
the end of the first quarter ending after one year following the
"effective date of the Registration Statement" (as defined in Rule
158(c) of the Rules and Regulations), the Company will make generally
available to its security holders an earnings statement (which need
not be audited) covering a period of 12 consecutive months beginning
after the effective date of the Registration Statement which will
satisfy the provisions of the last paragraph of Section 11(a) of the
Act.
(e) During such period as a prospectus is required by law to
be delivered in connection with sales by an Underwriter or dealer, the
Company, at its expense, but only for the nine-month period referred
to in Section 10(a)(3) of the Act, will furnish to the Underwriters or
mail copies of the Registration Statement, the Prospectus, the
Preliminary Prospectus and all amendments and supplements to any such
documents, in each case as soon as available and in such quantities as
the Representatives may request, for the purposes contemplated by the
Act.
(f) The Company shall cooperate with the Representatives and
their counsel in order to qualify or register the Common Shares for
sale under (or obtain exemptions from the application of) the Blue Sky
laws of such jurisdictions as the Representatives designate, will
comply with such laws and will continue such qualifications,
registrations and exemptions in effect so long as reasonably required
for the distribution of the Common Shares. The Company shall not be
required to qualify as a foreign corporation or to file a general
consent to service of process in any such jurisdiction where it is not
presently qualified or where it would be subject to taxation as a
foreign corporation. The Company will advise the Representatives
promptly of the suspension of the qualification or registration of (or
any such exemption relating to) the Common Shares for offering, sale
or trading in any jurisdiction or any initiation or overt threat of
any proceeding for any such purpose, and in the event of the issuance
of any order suspending such qualification, registration or exemption,
the Company, with the Representatives' cooperation, will use its best
efforts to obtain the withdrawal thereof.
(g) During the period of five years hereafter, the Company
will furnish to each of the Representatives: (i) as soon as
practicable after the end of each fiscal year, copies of the Annual
Report to Shareholders of the Company containing the balance sheet of
the Company as of the close of such fiscal year and statements of
income, shareholders' equity and cash flows for the year then ended
and the opinion thereon of the Company's independent public
accountants; (ii) as soon as practicable after the filing thereof,
copies of each proxy statement, Annual Report on Form 10-K, Quarterly
Report on Form 10-Q, Report on Form 8-K or other report filed by the
Company with the Commission, the NASD or any securities exchange; and
(iii) as soon as available, copies of any report or communication of
the Company mailed generally to holders of its Common Stock.
(h) During the period of 180 days from the date of the
Prospectus, without the prior written consent of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & Co. (the giving or withholding of such written consent
being in the sole discretion of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co.), the
Company will not issue, offer, sell, grant options to purchase or
otherwise dispose of any of the Company's equity securities or any
other securities convertible into or exchangeable with its Common
Stock or other equity security, except for securities used as
consideration in acquisitions of the assets, stock or business of
another person or entity, securities issued upon exercise or
conversion of securities outstanding on the date of this Agreement,
and the grant of options
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in the ordinary course of business pursuant to the Company's 1996
Incentive Stock Option Plan and 1998 Nonqualified Stock Option Plan,
as described in the Prospectus.
(i) The Company will deliver on or prior to the date hereof
lock-up agreements, in a form reasonably satisfactory to you, from all
officers, directors and Selling Shareholders, and their respective
affiliates.
(j) The Company will apply the net proceeds of the sale of
the Common Shares sold by it substantially in accordance with its
statements under the caption "Use of Proceeds" in the Prospectus.
(k) The Company will qualify or register its Common Stock for
sale in non-issuer transactions under (or obtain exemptions from the
application of) the Blue Sky laws of the State of California (and
thereby permit market making transactions and secondary trading in the
Common Stock in California), will comply with such Blue Sky laws and
will use its best efforts to maintain such qualifications,
registrations and exemptions in effect for a period of three years
after the date hereof.
The Representatives may, in their sole discretion, waive in writing
the performance by the Company of any one or more of the foregoing covenants or
extend the time for their performance.
SECTION 7. Payment of Expenses. Whether or not the transactions
contemplated hereunder are consummated or this Agreement becomes effective or
is terminated, the Company agrees to pay all costs, fees and expenses incurred
in connection with the performance of its and the Selling Shareholders'
obligations hereunder, including without limiting the generality of the
foregoing, (i) all expenses incident to the issuance and delivery of the Common
Shares (including all printing and engraving costs), (ii) all fees and expenses
of the registrar and transfer agent of the Common Stock, (iii) all necessary
issue, transfer and other stamp taxes in connection with the issuance and sale
of the Common Shares to the Underwriters, (iv) all fees and expenses of the
Company's counsel, Selling Shareholders' counsel and the Company's independent
accountants, (v) all costs and expenses incurred in connection with the
preparation, printing, filing, shipping and distribution to the Underwriters
and dealers of the Registration Statement, each Preliminary Prospectus and the
Prospectus (including all exhibits and financial statements) and all amendments
and supplements provided for herein, this Agreement, the Agreement Among
Underwriters, the Selected Dealers Agreement, the Underwriters' Questionnaire,
the Underwriters' Power of Attorney and the preliminary Blue Sky memorandum and
final Blue Sky memorandum, (vi) all filing fees, attorneys' fees and expenses
incurred by the Company or the Underwriters in connection with qualifying or
registering (or obtaining exemptions from the qualification or registration of)
all or any part of the Common Shares for offer and sale under the Blue Sky
laws, not to exceed $10,000 plus reasonable and documented out-of-pocket
expenses, (vii) the filing fee of the NASD and attorneys fees and expenses
incurred by the Company in obtaining a letter of no objection from the NASD,
and (viii) all other fees, costs and expenses referred to in Item 25 of the
Registration Statement; provided, however, that the Selling Shareholders shall
pay their own underwriting discounts and commissions for the Common Shares sold
by them. Except as provided in this Section 7 and in Section 9 and Section 11
hereof, the Underwriters shall pay all of their own costs and expenses,
including the fees and disbursements of their counsel (excluding those relating
to qualification, registration or exemption under the Blue Sky laws and the
Blue Sky memoranda), travel, general advertising expenses associated with the
offering and related out-of-pocket expenses).
SECTION 8. Conditions of the Obligations of the Underwriters. The
obligations of the Underwriters to purchase and pay for the Firm Common Shares
on the First Closing Date and the Optional Common Shares on the Second Closing
Date shall be subject to the accuracy of the representations and warranties on
the part of the Company and the Selling Shareholders herein set forth as of the
date hereof and as of the First Closing Date or the Second Closing Date, as the
case may be, to the accuracy of the statements of Company officers and the
Selling
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Shareholders made pursuant to the provisions of this Agreement, to the
performance by the Company and the Selling Shareholders of their respective
obligations hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become effective;
if the filing of the Prospectus, or any supplement thereto, is
required pursuant to Rule 424(b) of the Rules and Regulations, the
Prospectus shall have been filed in the manner and within the time
period required by Rule 424(b) of the Rules and Regulations; and prior
to such Closing Date, no stop order suspending the effectiveness of
the Registration Statement, any Rule 462(b) Registration Statement or
any post-effective amendment to the Registration Statement shall have
been issued and no proceedings for that purpose shall have been
instituted or shall be pending or, to the knowledge of the Company,
the Selling Shareholders or the Representatives, shall be contemplated
by the Commission; and any request of the Commission for inclusion of
additional information in the Registration Statement, or otherwise,
shall have been complied with to the Representatives' satisfaction.
(b) The Representatives shall be satisfied that since the
respective dates as of which information is given in the Registration
Statement and Prospectus, (i) there shall not have been any change in
the capital stock of the Company or any material change in the
indebtedness of the Company, except as contemplated by the Prospectus;
(ii) except as set forth in or contemplated by the Registration
Statement or the Prospectus, no material verbal or written agreement
or other transaction shall have been entered into by the Company which
is not in the ordinary course of business and which reasonably could
be expected to result in a material reduction in the future earnings
of the Company; (iii) no loss or damage (whether or not insured) to
the property of the Company shall have been sustained which materially
and adversely affects the condition (financial or otherwise),
business, results of operations or prospects of the Company; (iv) no
legal or governmental action, suit or proceeding affecting the Company
which could have a material adverse effect upon the Company, or which
affects or may affect the transactions contemplated by this Agreement
shall have been instituted or threatened; and (v) there shall not have
been any material change in the condition (financial or otherwise),
business, management, results of operations or prospects of the
Company which makes it impractical or inadvisable in the judgment of
the Representatives to proceed with the public offering or purchase of
the Common Shares as contemplated hereby. For all purposes of this
Agreement, the "prospects" of the Company shall refer to the business
outlook and the potential or foreseeable opportunities available to
the Company.
(c) There shall have been furnished to the Representatives on
each Closing Date, in form and substance satisfactory to the
Representatives, such documents and certificates as the
Representatives shall reasonably request, including the following:
(i) An opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ L.L.P., counsel for
the Company and for the Selling Shareholders, addressed to the
Representatives and dated the First Closing Date, or the
Second Closing Date, as the case may be, to the effect that:
(1) The Company has been duly incorporated
and is validly existing as a corporation in good
standing under the laws of its jurisdiction of
incorporation, is duly qualified to do business as a
foreign corporation and is in good standing in all
other jurisdictions where, to the knowledge of such
counsel, the ownership or leasing of properties or
the conduct of its business requires such
qualification, except for jurisdictions in which the
failure to so qualify would not have a material
adverse effect on the Company, and it has full
corporate power to own its properties and conduct its
business as described in the Registration Statement;
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(2) The authorized capital stock of the
Company is as set forth under the caption
"Capitalization" in the Prospectus as of the date set
forth under such caption, and the number of shares of
Common Stock that will be issued and outstanding
after the consummation of the transactions
contemplated hereby is as set forth under the caption
"Prospectus Summary - The Offering" (assuming the
Underwriters do not elect to purchase any of the
Optional Common Shares, and after giving effect to
the conversion of all outstanding shares of Preferred
Stock into the indicated number of shares of Common
Stock); all necessary and proper corporate
proceedings have been taken in order to validly
authorize such authorized Common Stock and to validly
issue such issued and outstanding Common Stock; all
outstanding shares of Common Stock (including the
Firm Common Shares and Optional Common Shares, if
any) have been duly and validly authorized and
issued, are, to the knowledge of such counsel after
due inquiry, fully paid and nonassessable, were not,
to the knowledge of such counsel after due inquiry,
issued in violation of any preemptive rights or other
rights to subscribe for or purchase any securities
and conform to the description thereof contained in
the Prospectus; without limiting the foregoing, to
the knowledge of such counsel after due inquiry,
there are no preemptive or other rights to subscribe
for or purchase any of the Common Shares to be sold
by the Company hereunder; neither the Articles of
Incorporation nor Bylaws of the Company, nor, to the
knowledge of such counsel after due inquiry, does any
contract contain any restriction upon the voting or
transfer of any of the shares of capital stock of the
Company (including the Firm Common Shares and the
Optional Common Shares), except such restrictions as
may be imposed by federal and state securities laws
or as may be expressly described in the Prospectus
and except for a Voting Agreement which will
terminate upon consummation of this offering;
(3) To the best of such counsel's knowledge,
the Company does not own or control, directly or
indirectly, any interest in any corporation,
association or other entity.
(4) The certificate(s) evidencing the Common
Shares to be delivered hereunder and sold by the
Company are in due and proper form under Texas law,
and when duly countersigned by the Company's transfer
agent and registrar, and delivered to the
Underwriters or to the order of the Underwriters
against payment of the agreed consideration therefor
in accordance with the provisions of this Agreement,
the Common Shares represented by such certificate(s)
will be duly authorized and validly issued, fully
paid and nonassessable, will pass to the Underwriters
free and clear of any liens, claims, equities or
other encumbrances of any kind or character, to the
knowledge of such counsel after due inquiry, will not
have been issued in violation of or subject to any
preemptive rights or other rights to subscribe for or
purchase securities, and will conform to the
description thereof contained in the Prospectus;
(5) Except as disclosed in the Prospectus,
to the knowledge of such counsel after due inquiry,
there are no outstanding options, warrants or other
rights calling for the issuance of, and no
commitments or obligations to issue, any shares of
capital stock of the Company or any security
convertible into or exchangeable for capital stock of
the Company;
(6) Assuming no amendment to the Certificate
of Designations of the Company, on the thirtieth day
following the First Closing Date all shares of
Preferred Stock will automatically convert into
1,575,000 shares of Common Stock, without any
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further required action on the part of any party,
and, to the best knowledge of such counsel after due
inquiry, no party will have any legal right,
authority or ability to prevent or hinder such
conversion in any way. To the best knowledge of such
counsel after due inquiry, the holders of the
Preferred Stock have no right, whether accrued, due
or payable, to receive anything of value with respect
to such preferred shares other than the
aforementioned shares of Common Stock;
(7) (a) The Registration Statement has
become effective under the Act, and, to such
counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement or
preventing the use of the Prospectus has been issued
and no proceedings for that purpose have been
instituted or are pending or overtly threatened by
the Commission; any required filing of the Prospectus
and any supplement thereto pursuant to Rule 424(b) of
the Rules and Regulations has been made in the manner
and within the time period required by such Rule
424(b);
(b) The Registration Statement, the
Prospectus and each amendment or supplement thereto
(except for the financial statements and schedules
and other statistical financial data and schedules
included therein, as to which such counsel need
express no opinion), as of their respective effective
or issue dates, comply as to form in all material
respects with the requirements of the Act and the
Rules and Regulations; and
(c) To such counsel's knowledge, there
are no franchises, leases, contracts, agreements or
documents of a character required to be disclosed in
the Registration Statement or Prospectus or to be
filed as exhibits to the Registration Statement which
are not disclosed or filed, as required;
(d) The description of the Company's
capital stock as set forth under the caption
"Description of Securities" in the Registration
Statement and Prospectus is true and correct in all
material respects.
(8) The Company has full corporate power and
authority to enter into this Agreement and to sell
and deliver the Common Shares to be sold by it to the
Underwriters; this Agreement has been duly and
validly authorized by all necessary corporate action
by the Company, has been duly and validly executed
and delivered by and on behalf of the Company, and is
a valid and binding agreement of the Company
enforceable against the Company in accordance with
its terms, except to the extent that (i) the validity
and binding effect and enforcement of this Agreement
may be limited by any applicable bankruptcy,
reorganization, moratorium, or similar laws of
general application, (ii) the availability of
equitable remedies may be limited by principles of
equity, whether considered in a proceeding at law or
in equity, and (iii) the terms hereof (including,
without limitation, indemnity) may be limited by
applicable securities laws and the policies embodied
therein; and no approval, authorization, order,
consent, registration, filing, qualification, license
or permit of or with any court, regulatory,
administrative or other governmental body is required
for the execution and delivery of this Agreement by
the Company or the consummation of the transactions
contemplated by this Agreement, except such as have
been obtained and are in full force and effect under
the Act and such as may be required under applicable
Blue Sky laws in connection with the purchase and
distribution of the Common Shares by the Underwriters
and the obtaining of a letter of
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no objection from the NASD with respect to such
offering, provided that such counsel shall not be
required to express any opinion as to the
requirements of any Blue Sky laws;
(9) The execution and performance of this
Agreement, the issuance, sale and delivery of the
Common Shares and the consummation of the
transactions herein contemplated will not violate any
of the provisions of the Articles of Incorporation or
Bylaws of the Company, in each case as amended, or
conflict with, result in the breach of, or
constitute, either by itself or upon notice or the
passage of time or both, a default under any
agreement, mortgage, deed of trust, lease, franchise,
license, indenture, permit or other instrument filed
as an exhibit to the Registration Statement or
otherwise identified on an exhibit attached to the
letter of opinion that is acceptable to the
Representatives to which the Company is a party or by
which the Company or any of its property may be bound
or affected, or violate any statute, judgment,
decree, order, rule or regulation of any court or
government body having jurisdiction over the Company
or any of its property (other than state securities
or Blue Sky laws and regulations as to which counsel
need not express any opinion);
(10) To the best of such counsel's knowledge
after due inquiry, the Company is not in violation of
its Articles of Incorporation or Bylaws and is not in
breach of or default with respect to any provision of
any agreement, mortgage, deed of trust, lease, loan
agreement, security agreement, license, indenture,
permit or other instrument to which the Company is a
party or by which the Company or any of its
properties may be bound or affected, except where
such default would not materially adversely affect
the Company; and, to such counsel's knowledge, the
Company is in compliance with all laws, rules,
regulations, judgments, decrees, orders and statutes
of any court or jurisdiction to which they are
subject, except where noncompliance would not
materially adversely affect the Company;
(11) To such counsel's knowledge, there are
no legal actions, suits or governmental proceedings
pending or threatened before any court or
governmental agency, authority or body which, if
determined adversely to the Company would have a
material adverse effect on the financial position,
shareholders' equity or results of operations of the
Company;
(12) To such counsel's knowledge, no holders
of securities of the Company have rights to the
registration of shares of Common Stock or other
securities which would be required to be included in
the Registration Statement filed by the Company or
included in the offering contemplated thereby which
have not been duly waived in writing;
(13) No transfer taxes are required to be
paid under the laws of the State of Texas in
connection with the sale and delivery of the Common
Shares to the Underwriters hereunder;
(14) The Company has Federal registrations
of the service marks "Internet America" and
"1-800-BE-A-GEEK" (the "Registered Marks"). Based
solely on a trademark search conducted by such
counsel and a certificate of the Company, except for
a Company in Michigan using the "Internet America"
name, to such counsel's knowledge, the Registered
Marks do not infringe the rights of any other person
or entity and no claims of any infringement or
violation are pending or have been threatened or
asserted against the Company with respect to the
Registered Marks. To such counsel's
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knowledge after due inquiry, the Company has not
entered into any license, release, order or other
agreement that restricts the right of the Company to
use the Registered Marks in any way.
(15) Each Selling Shareholder which is not a
natural person has full right, power and authority to
enter into and to perform its obligations under this
Agreement and the Shareholders Agreement to be
executed and delivered by it in connection with the
transactions contemplated in this Agreement; this
Agreement and the Shareholders Agreements have been
duly authorized, executed and delivered by the
Selling Shareholders; the performance of this
Agreement and the Shareholder Agreements and the
consummation of the transactions herein contemplated
by the Selling Shareholders will not result in a
breach of, or constitute a default under, any
indenture, mortgage, deeds of trust, trust
(constructive or other), loan agreement, lease,
franchise, license or other agreement or instrument
known to such counsel after due inquiry to which any
of the Selling Shareholders is a party or by which
any of the Selling Shareholders or any of their
properties may be bound, or violate any statute,
judgment, decree, order, rule or regulation known to
such counsel of any court or governmental body having
jurisdiction over the Selling Shareholders or any of
the properties of the Selling Shareholders; and to
such counsel's knowledge, no approval, authorization,
order or consent of any court, regulatory body,
administrative agency or other governmental body is
required for the execution and delivery of this
Agreement or the consummation by the Selling
Shareholders of the transactions contemplated by this
Agreement, except such as have been obtained and are
in full force and effect under the Act and such as
may be required under the rules of NASD, applicable
Blue Sky laws;
(16) The Selling Shareholders have the full
right, power and authority to enter into this
Agreement and the Shareholder Agreements and to sell,
transfer and deliver the Common Shares to be sold by
the Selling Shareholders on the Closing Date, and, to
the knowledge of such counsel offer due inquiry,
valid marketable title to such Common Shares so sold,
free and clear of all liens, claims, equities or
other encumbrances of any kind or character, will be
transferred to the Underwriters who have purchased
such Common Shares hereunder; and
(17) This Agreement and the Shareholder
Agreements are valid and binding agreements of the
Selling Shareholders and are enforceable against the
Selling Shareholders in accordance with their terms
except to the extent that (i) the validity and
binding effect and enforcement of this Agreement and
the Shareholder Agreements may be limited by any
applicable bankruptcy, reorganization, moratorium, or
similar laws of general application; (ii) the
availability of equitable remedies may be limited by
principles of equity, whether considered in a
proceeding at law or in equity; and (iii) the
indemnification provisions contained in this
Agreement may be limited by applicable securities
laws and the policies embodied therein.
In rendering such opinion, such counsel may rely, as
to matters of fact, on certificates of the Selling
Shareholders and of officers of the Company and of
governmental officials, in which case their opinion shall
state that they are so doing and that the Underwriters are
justified in relying on such certificates and copies of such
certificates are to be attached to the opinion. The opinion
shall be furnished to the Representatives and shall expressly
state that the Underwriters may rely on such opinion as if it
were addressed to them.
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In addition, such counsel shall state that they have
participated in conferences with officers, employees and other
representatives of the Company, counsel for the Underwriters,
representatives of the independent public accountants for the
Company and representatives of the Underwriters at which the
contents of the Registration Statement and Prospectus and
related matters were discussed and, although such counsel is
not passing upon and does not assume any responsibility for,
the accuracy, completeness or fairness of the statements
contained in the Registration Statement and Prospectus and has
not made any independent check or verification thereof, on the
basis of the foregoing (relying as to materiality to a large
extent upon the statements of officers, employees and other
representatives of the Company), no facts have come to such
counsel's attention that lead them to believe that either the
Registration Statement at the time such Registration Statement
became effective contained an untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein in light
of the circumstances in which they were made, not misleading,
or the Prospectus as of its date contained an untrue statement
of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading,
except, in each case, that such counsel need express no
opinion with respect to the financial statements, schedules
and other statistical and financial data included in the
Registration Statement or Prospectus.
In addition, such counsel may state that its opinion
is limited to matters governed by the federal laws of the
United States of America and the corporate laws of the State
of Texas. Subject to the opinions set forth in paragraphs
(2), 7(b) and 7(d) and to the statements in the immediately
preceding paragraph, the opinions of such counsel may be
qualified by a statement to the effect that such counsel does
not assume any responsibility for the accuracy, completeness
or fairness of the statements contained in the Registration
Statement or Prospectus.
(ii) Such opinion or opinions of ▇▇▇▇▇ ▇▇▇▇▇▇▇ Rain
▇▇▇▇▇▇▇ (A Professional Corporation), counsel for the
Underwriters, dated the First Closing Date or the Second
Closing Date, as the case may be, with respect to such matters
as the Representatives may reasonably require, and the Company
and the Selling Shareholders shall have furnished to such
counsel such documents and shall have exhibited to them such
papers and records as they reasonably may request for the
purpose of enabling them to pass upon such matters. In
connection with such opinions, such counsel may rely on
representations or certificates of the Selling Shareholders
and of officers of the Company and governmental officials.
(iii) A certificate of the Company executed by the
Chief Executive Officer and the Chief Financial Officer of the
Company, dated the First Closing Date or the Second Closing
Date, as the case may be, to the effect that as of such date:
(1) The representations and warranties of
the Company set forth in Section 2 of this Agreement
are true and correct as of the date of this Agreement
and as of the First Closing Date or the Second
Closing Date, as the case may be, and the Company has
complied with all the agreements and satisfied all
the conditions on its part to be performed or
satisfied on or prior to such Dates, respectively;
(2) The Commission has not issued any order
preventing or suspending the use of the Prospectus or
any Preliminary Prospectus filed as a part of the
Registration Statement or any amendment thereto; no
stop order suspending the effectiveness of the
Registration Statement has been issued; and to the
best of the knowledge of the respective
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signers, no proceedings for that purpose have been
instituted or are pending or overtly threatened under
the Act;
(3) Each of the respective signers of the
certificate has carefully examined the Registration
Statement and the Prospectus; in his opinion and to
the best of his knowledge, the Registration Statement
and the Prospectus and any amendments or supplements
thereto contain all statements required to be stated
therein regarding the Company, and neither the
Registration Statement nor the Prospectus nor any
amendment or supplement thereto includes any untrue
statement of a material fact or omits to state any
material fact required to be stated therein or
necessary to make the statements therein not
misleading in light of the circumstances under which
they were made;
(4) Since the initial date on which the
Registration Statement was filed, no agreement,
written or oral, transaction or event has occurred
which should have been set forth in an amendment to
the Registration Statement or in a supplement to or
amendment of any Prospectus which has not been
disclosed in such a supplement or amendment;
(5) Since the respective dates as of which
information is given in the Registration Statement
and the Prospectus, and except as disclosed in or
contemplated by the Prospectus, there has not been
any material adverse change or a development
involving a material adverse change in the condition
(financial or otherwise), business, properties,
results of operations, management or prospects of the
Company; and no legal or governmental action, suit or
proceeding is pending or, to the best knowledge of
the respective signors, threatened against the
Company which is material to the Company, whether or
not arising from transactions in the ordinary course
of business, or which may adversely affect the
transactions contemplated by this Agreement; the
Company has not entered into any verbal or written
agreement or other transaction which is not in the
ordinary course of business or which reasonably could
be expected to result in a material reduction in the
future earnings of the Company, or incurred any
material liability or obligation, direct, contingent
or indirect, made any change in its capital stock,
made any material change in its short-term debt or
long-term debt or repurchased or otherwise acquired
any of the Company's capital stock; and the Company
has not declared or paid any dividend, or declared or
made any other distribution, with respect to its
outstanding capital stock payable to shareholders of
record, except as disclosed in the Prospectus, on a
date prior to the First Closing Date or Second
Closing Date, as the case may be; and
(6) Since the respective dates as of which
information is given in the Registration Statement
and the Prospectus and except as disclosed in or
contemplated by the Prospectus, the Company has not
sustained a material loss or damage by strike, fire,
flood, windstorm, accident or other calamity (whether
or not insured).
(iv) On the First Closing Date, a certificate, dated
such Closing Date and addressed to the Underwriters, signed by
or on behalf of each Selling Shareholder to the effect that
the representations and warranties of such Selling Shareholder
set forth in Section 3 of this Agreement are true and correct
as if made at and as of such Closing Date, and such Selling
Shareholder has complied with all the agreements and satisfied
all the conditions to be performed or satisfied prior to the
First Closing Date.
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(v) On the date before this Agreement is executed
and also on the First Closing Date and the Second Closing
Date, a letter addressed to the Representatives from Deloitte,
independent accountants, the first letter to be dated the day
before the date of this Agreement, the second letter to be
dated the First Closing Date and the third letter (in the
event of a Second Closing) to be dated the Second Closing
Date, in form and substance satisfactory to you.
All such opinions, certificates, letters and documents shall
be in compliance with the provisions hereof only if they are
reasonably satisfactory to the Representatives and to ▇▇▇▇▇ ▇▇▇▇▇▇▇
Rain ▇▇▇▇▇▇▇ (A Professional Corporation), counsel for the
Underwriters. The Company and the Selling Shareholders shall furnish
the Representatives with such manually signed or conformed copies of
such opinions, certificates, letters and documents as the
Representatives request. Any certificate signed by any officer of the
Company and delivered to the Representatives shall be deemed to be a
representation and warranty by the Company to the Underwriters as to
the statements made therein.
If any condition to the Underwriters' obligations hereunder to
be satisfied prior to or at the First Closing Date is not so
satisfied, this Agreement at the election of the Representatives will
terminate upon notification by the Representatives to the Company
without liability on the part of any Underwriter or the Company,
except for the expenses to be paid or reimbursed by the Company
pursuant to Sections 7 and 9 hereof and except to the extent provided
in Section 12 hereof.
SECTION 9. Reimbursement of Underwriters' Expenses. If this Agreement
shall be terminated by the Representatives pursuant to Section 8, or if the
sale to the Underwriters of the Common Shares at the First Closing Date is not
consummated because of any refusal, inability or failure on the part of the
Company or Selling Shareholders to perform any agreement herein or to comply
with any provision hereof, the Company agrees to reimburse the Representatives
and the other Underwriters (or such Underwriters as have terminated this
Agreement with respect to themselves), severally, upon demand for all
out-of-pocket expenses that shall have been reasonably incurred by the
Representatives and the Underwriters in connection with the proposed purchase
and the sale of the Common Shares, including but not limited to fees and
disbursements of Underwriters' counsel, printing expenses, travel expenses,
postage, telecopy charges and telephone charges relating directly to the
offering contemplated by the Prospectus. Any such termination shall be without
liability of any party to any other party, except that the provisions of this
Section, Section 7 and Section 11 shall at all times be effective and shall
apply.
SECTION 10. Effectiveness of Registration Statement. The
Representatives and the Company will use their respective best efforts to cause
the Registration Statement to become effective, to prevent the issuance of any
stop order suspending the effectiveness of the Registration Statement and, if
such stop order be issued, to obtain as soon as possible the lifting thereof.
SECTION 11. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of the Act against any losses, claims, damages,
liabilities or expenses, joint or several, to which such Underwriter
or such controlling person may become subject, under the Act, the
Exchange Act, or other federal or state statutory law or regulation,
or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of
the Company), insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof as contemplated below) arise
out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state in any of them a material fact
required to be stated therein or necessary to make
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the statements in any of them not misleading in light of the
circumstances under which they were made, or arise out of or are based
in whole or in part on any inaccuracy in the representations and
warranties of the Company contained herein or any failure of the
Company to perform its obligations hereunder or under law; and will
reimburse each Underwriter and each such controlling person for any
legal and other expenses as such expenses are reasonably incurred by
such Underwriter or such controlling person in connection with
investigating, defending, settling, compromising or paying any such
loss, claim, damage, liability, expense or action; provided, that the
Company will not be liable in any such case to the extent that any
such loss, claim, damage, liability or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement
thereto in reliance upon and in conformity with the information
furnished to the Company by the Representatives pursuant to Section 4
hereof; and provided further, that with respect to any untrue
statement or omission or alleged untrue statement or omission made in
any Preliminary Prospectus, the indemnity agreement contained in this
paragraph shall not inure to the benefit of any Underwriter from whom
the person asserting any such losses, claims, damages, liabilities or
expenses purchased the Common Shares concerned (or to the benefit of
any person controlling such Underwriter) to the extent that any such
loss, claim, damage, liability or expense of such Underwriter or
controlling person results from the fact that a copy of the Prospectus
was not sent or given to such person at or prior to the written
confirmation of sale of such Common Shares to such person as required
by the Act, and if the untrue statement or omission has been corrected
in the Prospectus, unless such failure to deliver the Prospectus was a
result of noncompliance by the Company with its obligations under
Section 6(e) hereof.
(b) Each Selling Shareholder severally agrees to indemnify
and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of the Act against any
losses, claims, damages, liabilities or expenses, to which such
Underwriter or such controlling person may become subject, under the
Act, the Exchange Act, or other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of
any litigation, if such settlement is effected with the written
consent of such Selling Shareholder), insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based in whole or in part on
any inaccuracy in the representations and warranties of such Selling
Shareholder contained herein or any failure of such Selling
Shareholder to perform its obligations hereunder or under law; and
will reimburse each Underwriter and each such controlling person for
any legal and other expenses as such expenses are reasonably incurred
by such Underwriter or such controlling person in connection with
investigating, defending, settling, compromising or paying any such
loss, claim, damage, liability, expense or action; provided, that such
Selling Shareholder will not be liable in any such case to the extent
that any such loss, claim, damage, liability or expense arises out of
or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement
thereto in reliance upon and in conformity with the information
furnished by the Representatives pursuant to Section 4 hereof; and
provided further, that with respect to any untrue statement or
omission or alleged untrue statement or omission made in any
Preliminary Prospectus, the indemnity agreement contained in this
paragraph shall not inure to the benefit of any Underwriter from whom
the person asserting any such losses, claims, damages, liabilities or
expenses purchased the Common Shares concerned (or to the benefit of
any person controlling such Underwriter) to the extent that any such
loss, claim, damage, liability or expense of such Underwriter or
controlling person results from the fact that a copy of the Prospectus
was not sent or given to such person at or prior to the written
confirmation of sale of such Common Shares to such person as required
by the Act, and if the untrue statement or omission has been corrected
in the Prospectus, unless such failure to deliver the Prospectus was a
result of noncompliance by the Company with its obligations under
Section 6(e) hereof; and, provided further, that the aforesaid
liability of each Selling Shareholder under this Section 11(b) shall
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not exceed the sum of the net proceeds received by such Selling
Shareholder from the Common Shares sold by such Selling Shareholder
pursuant hereto.
(c) In addition to their other obligations under this Section
11, the Company and the Selling Shareholders jointly and severally
agree that, as an interim measure during the pendency of any claim,
action, investigation, inquiry or other proceeding arising out of or
based upon any statement or omission, or any alleged statement or
omission, or any inaccuracy in the representations and warranties of
the Company or the Selling Shareholders herein or failure to perform
the respective obligations of the Company and the Selling Shareholders
hereunder, all as described in Section 11(a) and (b), the Company and
the Selling Shareholders will reimburse each Underwriter on a
quarterly basis for all reasonable legal or other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the
absence of a judicial determination as to the propriety and
enforceability of the Company's or the Selling Shareholders'
obligations to reimburse each Underwriter for such expenses and the
possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. To the extent that any
such interim reimbursement payment is so held to have been improper,
each Underwriter shall promptly return such payment to the Company and
the Selling Shareholders, pro rata, together with interest, compounded
daily, determined on the basis of the prime rate (or other commercial
lending rate for borrowers of the highest credit standing) announced
from time to time by The Chase Manhattan Bank (the "Prime Rate"). Any
such interim reimbursement payments which are not made to an
Underwriter within 30 days of a request for reimbursement shall bear
interest at the Prime Rate from the date of such request. This
indemnity agreement will be in addition to any liability which the
Company and the Selling Shareholders may otherwise have.
Notwithstanding anything set forth in this Section 11(c), under no
circumstances shall any Selling Shareholder be obligated to make any
interim reimbursement payments to the Underwriters under this Section
11(c) unless and until the Underwriters shall have made a written
demand on the Company for such payments and such demand shall not have
been paid by the Company within sixty (60) days after the receipt of
such demand by the Company.
(d) Each Underwriter will severally indemnify and hold
harmless the Company and the Selling Shareholders, each of their
respective directors, each of their respective officers who signed the
Registration Statement, and each person, if any, who controls the
Company or any Selling Shareholder within the meaning of the Act,
against any losses, claims, damages, liabilities or expenses to which
the Company, any Selling Shareholder, or any such director, officer,
or controlling person may become subject under the Act, the Exchange
Act, or other federal or state statutory law or regulation, or at
common law or otherwise (including in settlement of any litigation, if
such settlement is effected with the written consent of such
Underwriter), insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof as contemplated below) arise
out of or are based upon any untrue or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in
the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, in reliance upon
and in conformity with the information furnished to the Company
pursuant to Section 4 hereof (which information is the sole
information furnished to the Company by the Underwriters for inclusion
in the Registration Statement, any Preliminary Prospectus, any
Prospectus, or any amendment or supplement thereto); and will
reimburse the Company, or any such director, officer, Selling
Shareholder, or controlling person for any legal and other expense
reasonably incurred by the Company, or any such director, officer,
Selling Shareholder or controlling person in connection with
investigating, defending, settling, compromising or paying any such
loss, claim, damage, liability, expense or action. In addition to its
other obligations under this Section 11(d),
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each Underwriter severally agrees that, as an interim measure during
the pendency of any claim, action, investigation, inquiry or other
proceeding arising out of or based upon any statement or omission, or
any alleged statement or omission, described in this Section 11(d)
which relates to information furnished to the Company pursuant to
Section 4 hereof, it will reimburse the Company (and, to the extent
applicable, each officer, director, Selling Shareholder or controlling
person) on a quarterly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any
such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the Underwriters' obligation to
reimburse the Company (and, to the extent applicable, each officer,
director, Selling Shareholder or controlling person) for such expenses
and the possibility that such payments might later be held to have
been improper by a court of competent jurisdiction. To the extent
that any such interim reimbursement payment is so held to have been
improper, the Company (and, to the extent applicable, each officer,
director, Selling Shareholder or controlling person) shall promptly
return such payment to the Underwriters, together with interest,
compounded daily, determined on the basis of the Prime Rate. Any such
interim reimbursement payments which are not made within 30 days of a
request for reimbursement, shall bear interest at the Prime Rate from
the date of such request. This indemnity agreement will be in
addition to any liability which such Underwriter may otherwise have.
(e) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section, notify the indemnifying party
in writing of the commencement thereof; but the omission so to notify
the indemnifying party will not relieve it from any liability which it
may have to any indemnified party for contribution or otherwise
hereunder to the extent it is not materially prejudiced as a proximate
result of such failure. In case any such action is brought against
any indemnified party and such indemnified party seeks or intends to
seek indemnity from an indemnifying party, the indemnifying party will
be entitled to participate in, and, to the extent that it may wish,
jointly with all other indemnifying parties similarly notified, to
assume the defense thereof with counsel reasonably satisfactory to
such indemnified party; provided, however, if the defendants in any
such action include both the indemnified party and the indemnifying
party and the indemnified party shall have reasonably concluded that
there may be a conflict between the positions of the indemnifying
party and the indemnified party in conducting the defense of any such
action and that it would be inappropriate under applicable standards
of professional conduct to have the same counsel represent both
parties, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of its election so to
assume the defense of such action and approval by the indemnified
party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section for any legal expenses
subsequently incurred by such indemnified party in connection with the
defense thereof unless (i) the indemnified party shall have employed
such counsel in connection with the assumption of legal defenses in
accordance with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be liable
for the expenses of more than one separate counsel, approved by the
Underwriters in the case of Section 11(a) or (b), representing the
indemnified parties who are parties to such action) or (ii) the
indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of the
action, in each of which cases the fees and expenses of counsel shall
be at the expense of the indemnifying party.
(f) If the indemnification provided for in this Section 11 is
required by its terms, but for any reason is held to be unavailable to
or otherwise insufficient to hold harmless any indemnified party under
paragraphs (a), (b), (c) or (d) in respect of any losses, claims,
damages, liabilities or expenses as referred to herein, then each
applicable indemnifying party shall contribute to the amount paid or
payable by such
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indemnified party as a result of any losses, claims, damages,
liabilities or expenses referred to herein (i) in such proportion as
is appropriate to reflect the relative benefits received by the
Company, the Selling Shareholders and the Underwriters from the
offering of the Common Shares or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, then such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the
Company, the Selling Shareholders and the Underwriters in connection
with the statements or omissions or inaccuracies in their
representations and warranties herein which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The respective relative benefits
received by the Company, the Selling Shareholders and the Underwriters
shall be deemed to be in the same proportion, in the case of the
Company and the Selling Shareholders as the total price paid to the
Company and the Selling Shareholders, respectively for the Common
Shares sold by them to the Underwriters (before deducting expenses),
and in the case of Underwriters as the underwriting commissions
received by them, bears to the total of such amounts paid to the
Company and the Selling Shareholders and the amounts received by the
Underwriters as underwriting commissions. The relative fault of the
Company, the Selling Shareholders and the Underwriters shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission of a material fact or the inaccurate or the alleged
inaccurate representations and/or warranty relates to the information
supplied by the Company, the Selling Shareholders or the Underwriters
and the parties relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in subsection (e) of
this Section 11, any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending
any action or claim. The provisions set forth in subsection (e) of
this Section 11 with respect to notice of commencement of any action
shall apply if a claim for contribution is to be made under this
subsection (f); provided, however, that no additional notice shall be
required with respect to any action for which notice has been given
under subsection (d) for the purposes of indemnification. The
Company, the Selling Shareholders, and the Underwriters agree that it
would not be just inequitable if contribution pursuant to this Section
11 were determined solely by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the
equitable considerations referred to in this subsection (f).
Notwithstanding the provisions of this Section 11, no Underwriter
shall be required to contribute any amount in excess of the amount of
the total underwriting commissions received by such Underwriter in
connection with the Common Shares underwritten by it and distributed
to the public, and no Selling Shareholder shall be required to
contribute any amount in excess of the amount of the net proceeds
received by such Selling Shareholder from the Common Shares sold by
such Selling Shareholder pursuant hereto. No person guilty of
fraudulent misrepresentation (within a meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute pursuant to this Section 11 are several in
proportion to their respective underwriting commitments and not joint.
(g) It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in this
Section 11, including the amounts of any requested reimbursement
payments and the method of determining such amounts, shall be settled
by arbitration conducted under the provisions of the Code of
Arbitration Procedure of the NASD. Any such arbitration must be
commenced by service of a written demand for arbitration or written
notice of intention to arbitrate, therein electing the arbitration
tribunal. In the event the party demanding arbitration does not make
such designation of an arbitration tribunal in such demand or notice,
then the party responding to said demand or notice is authorized to do
so. Such an arbitration would be limited to the operation of the
interim reimbursement provisions contained in this Section 11 and
would not resolve the ultimate propriety or enforceability of the
obligation to reimburse expenses which is created by the provisions of
this Section 11.
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(h) The Company and the Selling Shareholders may agree, as
among themselves and without limiting the rights of the Underwriters
under this Agreement, as to their respective amounts of
indemnification liability for which they each shall be responsible,
and this Agreement shall not modify or supersede any agreements now in
effect between the Company and the Selling Shareholders with respect
thereto.
SECTION 12. Default of One or More of the Several Underwriters. If,
on the First Closing Date or the Second Closing Date, as the case may be, any
one or more of the several Underwriters shall fail or refuse to purchase Common
Shares that it or they have agreed to purchase hereunder on such date, and the
aggregate number of Common Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase does not exceed 10% of
the aggregate number of the Common Shares to be purchased on such date, the
other Underwriters shall be obligated, severally, in the proportions that the
number of Firm Common Shares set forth opposite their respective names on
Schedule A bears to the aggregate number of Firm Common Shares set forth
opposite the names of all such non-defaulting Underwriters, or in such other
proportions as may be specified by the Representatives with the consent of the
nondefaulting Underwriters, to purchase the Common Shares which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date. If, on the First Closing Date or the Second Closing Date, as the case
may be, any one or more of the Underwriters shall fail or refuse to purchase
Common Shares and the aggregate number of Common Shares with respect to which
such default occurs exceeds 10% of the aggregate number of Common Shares to be
purchased on such date, and arrangements satisfactory to the Representatives
and the Company with respect to the First Closing Date or the Second Closing
Date for the purchase of such Common Shares are not made within 48 hours, the
Agreement shall terminate without liability of any party to any other party
except that the provisions of Section 7 and Section 11 shall at all times be
effective and survive such termination. In any such case either the
Representatives or the Company, acting jointly, shall have the right to
postpone the First Closing Date and the Second Closing Date, as the case may
be, but in no event for longer than seven days in order that the required
changes, if any, to the Registration Statement and the Prospectus or any other
documents or arrangements may be effected.
As used in this Agreement, the term "Underwriter" shall be deemed to
include any person substituted for a defaulting Underwriter under this Section
12. Any action taken under this Section 12 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
SECTION 13. Effective Date. This Agreement shall become effective at
such time as the Registration Statement has become effective and you shall have
released the Firm Common Shares for sale to the public; provided, however, that
the provisions of Sections 7, 9, 11, 14 and 15 hereof shall at all times be
effective. For the purposes of this Section 13, the Firm Common Shares shall
be deemed to have been so released upon the release by the Underwriters for
publication, at any time after the Registration Statement has become effective,
of any newspaper advertisement relating to any of the Common Shares, or upon
the release by the Underwriters of any of the Common Shares for sale to the
public, whichever may occur first.
SECTION 14. Termination. Without limiting the right to terminate
this Agreement pursuant to any other provision hereof:
(a) This Agreement may be terminated by the Company and the
Selling Shareholders by notice to the Representatives or by the
Representatives by notice to the Company and the Selling Shareholders
at any time prior to the time this Agreement shall become effective as
to all its provisions, and any such termination shall be without
liability on the part of the Company or the Selling Shareholders to
the Underwriters (except for the expenses to be paid or reimbursed by
the Company pursuant to Sections 7 and 9 hereof and except to the
extent provided in Sections 11 and 15 hereof) or of any Underwriter to
the Company (except to the extent provided in Sections 7 and 11
hereof).
-25-
26
(b) This Agreement may also be terminated by the
Representatives prior to the First Closing Date or prior to the Second
Closing Date, as the case may be, by notice to the Company and the
Selling Shareholders (i) if additional material governmental
restrictions not in force and effect on the date hereof shall have
been imposed upon trading in securities generally or minimum or
maximum prices shall have been generally established on the New York
Stock Exchange or on the American Stock Exchange or in the Nasdaq
National Market or in the over the counter market by the NASD, or
trading in securities generally shall have been suspended on either
such Exchange or in the Nasdaq National Market or in the over the
counter market by the NASD or the Commission, or a general banking
moratorium shall have been established by federal, New York or Texas
authorities, (ii) if an outbreak of hostilities or other national or
international calamity or any material change in political, financial
or economic conditions shall have occurred or shall have accelerated
to such an extent that the effect on the financial markets shall, in
the judgment of the Representatives, affect adversely the
marketability of the Common Shares, (iii) if any adverse event shall
have occurred or shall exist which makes untrue or incorrect in any
material respect any statement or information contained in the
Registration Statement or Prospectus or which is not reflected in the
Registration Statement or Prospectus but should be reflected therein
in order to make the statements or information contained therein not
misleading in any material respect, or (iv) if there shall be any
action, suit or proceeding pending or threatened, or there shall have
been any development or prospective development involving particularly
the business or properties or securities of the Company or the
transactions contemplated by this Agreement, which, in the judgment of
the Representatives, may materially and adversely affect the business
or earnings of the Company or makes it impracticable to offer or sell
the Common Shares. Any termination pursuant to this subsection (b)
shall be without liability on the part of the Underwriters to the
Company or the Selling Shareholders or on the part of the Company or
the Selling Shareholders to the Underwriters (except for expenses to
be paid or reimbursed by the Company or the Selling Shareholders
pursuant to Sections 7 or 11 hereof and except to the extent provided
in Sections 11 and 15).
SECTION 15. Failure of the Selling Shareholders to Sell and Deliver.
If the Selling Shareholders fail to sell and deliver to the Underwriters the
Common Shares to be sold and delivered by the Selling Shareholders at the First
Closing Date or the Second Closing Date under the terms of this Agreement, then
the Representatives may at their option, by written notice to the Company and
the Selling Shareholders, either (i) terminate this Agreement without any
liability on the part of any Underwriter or, except as provided in Sections 7,
9, and 11 hereof, the Company or the Selling Shareholders, or (ii) purchase the
shares which the Company has sold and delivered to the Underwriters in
accordance with the terms hereof. In the event of a failure by the Selling
Shareholders to sell and deliver as referred to in this Section, either the
Representatives or the Company shall have the right to postpone the Closing
Date for a period not exceeding seven (7) business days in order that the
necessary changes in the Registration Statement, Prospectus and any other
documents, as well as any other arrangements, may be effective.
SECTION 16. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company and its officers, the Selling Shareholders and of the
Underwriters set forth in or made pursuant to this Agreement will remain in
full force and effect, regardless of any investigation made by or on behalf of
the Underwriters or the Company, or the Selling Shareholders, or any of their
partners, officers or directors or any controlling person, as the case may be,
and will survive delivery of and payment for the Common Shares sold hereunder
and any termination of this Agreement.
SECTION 17. Notices. All communications hereunder shall be in
writing and, if sent to the Underwriters, shall be mailed, delivered or
telecopied or telegraphed and confirmed to the Underwriters at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & Co., One Galleria Tower, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, with a copy to ▇▇▇▇▇ ▇▇▇▇▇▇▇ Rain
▇▇▇▇▇▇▇ (A Professional Corporation), ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇; and if sent to the Company or the
Selling ▇▇▇▇▇▇▇▇▇▇▇▇
-▇▇-
▇▇
▇▇▇▇▇ ▇▇ mailed, delivered or telecopied or telegraphed and confirmed to the
Company at One Dallas Center, ▇▇▇ ▇. ▇▇. ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President, with a copy to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
L.L.P, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇. The Company, the Selling Shareholders or the Underwriters may change
the address for receipt of communications hereunder by giving notice to the
others.
SECTION 18. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 12 hereof, and to the benefit of the officers and directors
and controlling persons referred to in Section 11, and in each case their
respective successors, personal representatives and assigns, and no other
person will have any right or obligation hereunder. No such assignment shall
relieve any party of its obligations hereunder. The term "successors" shall
not include any purchaser of the Common Shares as such from any of the
Underwriters merely by reason of such purchase.
SECTION 19. Partial Unenforceability. The invalidity or
unenforceability of any Section, subsection, paragraph or provision of this
Agreement shall not affect the validity or enforceability of any other Section,
paragraph or provision hereof. If any Section, subsection, paragraph or
provision of this Agreement is for any reason determined to be invalid or
unenforceable, there shall be deemed to be made such minor changes (and only
such minor changes) as are necessary to make it valid and enforceable.
SECTION 20. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the laws pertaining to
conflicts of laws) of the State of Texas.
SECTION 21. General. This Agreement constitutes the entire agreement
of the parties to this Agreement and supersedes all prior written or oral and
all contemporaneous oral agreements, understandings and negotiations with
respect to the subject matter hereof. This Agreement may be executed in
several counterparts, each one of which shall be an original, and all of which
shall constitute one and the same document.
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be
amended or modified, and the observance of any term of this Agreement may be
waived, only by a writing signed by the Company, the Selling Shareholders and
the Underwriters.
If the foregoing is in accordance with the Underwriters' understanding
of our agreement, kindly sign and return to us the enclosed copies hereof,
whereupon it will become a binding agreement among the Company, the Selling
Shareholders and the Underwriters, all in accordance with its terms.
Very truly yours,
INTERNET AMERICA, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
-▇▇-
▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇ PARTNERSHIP, LTD.
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, General Partner
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ RETIREMENT TRUST
By:
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Trustee
--------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
The foregoing Underwriting Agreement
is hereby confirmed and accepted by
the Representatives as of the date
first above written, acting as
Representatives of the several
Underwriters named in the attached
Schedule ▇.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & CO.
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, INCORPORATED
By: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & CO.
By:
-----------------------
Name:
---------------------
Title:
-------------------
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SCHEDULE A
Number of Firm Common
Name of Underwriter Shares to be Purchased
------------------- ----------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co.
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Incorporated
[NAMES OF OTHER UNDERWRITERS]
---------------
Total 2,300,000
===============
30
SCHEDULE B
Number of Common Shares
Name of Selling Shareholder to be Sold by Selling Shareholder
--------------------------- ---------------------------------
Firm Common Option Common
Shares Shares
-------------- -------------
BCG Partnership, Ltd. 200,000 --
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Retirement Trust -- 120,000
▇▇▇▇ ▇. ▇▇▇▇▇ 60,000 25,000
▇▇▇▇ ▇▇▇▇▇▇▇▇ 340,000 200,000
-------------- -------------
Total 600,000 345,000
